VOYAGEUR MUTUAL FUNDS III INC /MN/, 485BPOS, 1998-06-29

VOYAGEUR MUTUAL FUNDS III INC /MN/
485BPOS, 1998-06-29

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
File No. 2-95928
File No. 811-4547

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No.
-------
Post-Effective Amendment No. 33 X
-------
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 33
------

VOYAGEUR MUTUAL FUNDS III, INC
- --------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

1818 Market Street, Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (215) 255-2923
-----------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
- --------------------------------------------------------------------------
(Name and Address of Agent for Service)

Approximate Date of Public Offering: June 29, 1998
----------------
It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
- -----------------
X on June 29, 1998 pursuant to paragraph (b)
- -----------------
60 days after filing pursuant to paragraph (a)(1)
- -----------------
on (date) pursuant to paragraph (a)(1)
- -----------------
75 days after filing pursuant to paragraph (a)(2)
- -----------------
on (date) pursuant to paragraph (a)(2) of Rule 485
- -----------------

Title of Securities Being Registered
------------------------------------
Tax-Efficient Equity Fund A Class, Tax-Efficient Equity Fund B Class,
Tax-Efficient Equity Fund C Class, Tax-Efficient Equity Fund
Institutional Class, Aggressive Growth Fund A Class, Aggressive Growth
Fund B Class, Aggressive Growth Fund C Class, Aggressive Growth Fund
Institutional Class, Growth Stock Fund A Class, Growth Stock Fund B
Class, Growth Stock Fund C Class, Growth Stock Fund Institutional Class

--- C O N T E N T S ---

This Post-Effective Amendment No. 33 to Registration File No.
2-95928 includes the following:

1. Facing Page

2. Contents Page

3. Cross-Reference Sheet

4. Part A - Prospectuses

5. Part B - Statement of Additional Information

6. Part C - Other Information

7. Signatures

CROSS-REFERENCE SHEET
PART A

Item No.
Description Location in Prospectus
-----------------------
Tax-Efficient Equity Fund
A Class
B Class Institutional
C Class Class

1 Cover Page Cover Cover

2 Synopsis Synopsis; Summary Synopsis; Summary
of Expenses of Expenses

3 Condensed
Financial
Information Financial Highlights Financial Highlights

4 General
Description of
Registrant Investment Objective Investment Objective
and Policies; Classes and Policies; Classes
of Shares of Shares

5 Management of
the Fund Management of Management of
the Fund the Fund

6 Capital Stock
and Other
Securities The Delaware Dividends and
Difference; Dividends Distributions;
and Distributions; Taxes; Classes
Taxes; Classes of Shares
of Shares

7 Purchase of
Securities Being
Offered Cover; How to Buy Cover; How to Buy
Shares; Calculation of Shares; Calculation
Offering Price and Net of Net Asset Value
Asset Value Per Share; Per Share; Management
Management of the Fund of the Fund

8 Redemption or
Repurchase How to Buy Shares; How to Buy Shares;
Redemption and Redemption and
Exchange Exchange

9 Legal
Proceedings None None

CROSS-REFERENCE SHEET
PART A

Item No.
Description Location in Prospectus
------------------------
Aggressive Growth Fund/
Growth Stock Fund
A Class
B Class Institutional
C Class Class

1 Cover Page Cover Cover

2 Synopsis Synopsis; Summary Synopsis; Summary
of Expenses of Expenses

3 Condensed Financial Financial
Financial Highlights Highlights
Information

4 General Investment Objectives Investment Objectives
Description and Policies; Classes and Policies; Classes
of Registrant of Shares of Shares

5 Management of Management of the Management of the
the Fund Funds Funds

6 Capital Stock The Delaware Dividends and
and Other Difference; Dividends Distributions; Taxes;
Securities and Distributions; Classes of Shares
Taxes; Classes of
Shares

7 Purchase of Cover; How to Buy Cover; How to Buy
Securities Shares; Calculation Shares; Calculation
Being Offered of Offering Price of Net Asset Value
and Net Asset Value Per Share; Management
Per Share; Management of the Funds
of the Funds

8 Redemption or How to Buy Shares; How to Buy Shares;
Repurchase Redemption and Redemption and
Exchange Exchange

9 Legal None None
Proceedings

CROSS-REFERENCE SHEET
PART B

Item No. Description Location in Statement of
Additional Information
----------------------
Aggressive Growth Fund/
Growth Stock Fund/
Tax-Efficient Equity Fund

10 Cover Page Cover

11 Table of Contents Table of Contents

12 General Information
and History General Information

13 Investment Objectives Investment Policies
and Policy and Restrictions

14 Management of the Registrant Officers and Directors

15 Control Persons and Officers and Directors
Principal Holders
of Securities

16 Investment Advisory Officers and Directors;
and Other Services Investment Management
Agreements and Sub-Advisory
Agreement; General
Information; Financial
Statements

17 Brokerage Allocation Trading Practices

18 Capital Stock and Capitalization and
Other Securities Noncumulative Voting
(under General
Information)

19 Purchase, Redemption Purchasing Shares; Offering Price
and Pricing of Securities Redemption; Exchange
Being Offered Privilege

20 Tax Status Taxes

21 Underwriters Purchasing Shares

22 Calculation of Performance Performance Information
Data

23 Financial Statements Financial Statements

CROSS-REFERENCE SHEET
PART C

Item No. Description Location in Part C

24 Financial Statements Item 24
and Exhibits

25 Persons Controlled by Item 25
or under Common Control
with Registrant

26 Number of Holders of Securities Item 26

27 Indemnification Item 27

28 Business and Other Item 28
Connections of Investment
Adviser

29 Principal Underwriters Item 29

30 Location of Accounts Item 30
and Records

31 Management Services Item 31

32 Undertakings Item 32

[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]

A Class

B Class

C Class

TAX-EFFICIENT EQUITY FUND

PROSPECTUS JUNE 29, 1998

TABLE OF CONTENTS

COVER PAGE 1

SYNOPSIS 2

SUMMARY OF EXPENSES 4

FINANCIAL HIGHLIGHTS 6

INVESTMENT OBJECTIVE AND POLICIES

SUITABILITY 7

INVESTMENT STRATEGY 7

THE DELAWARE DIFFERENCE

PLANS AND SERVICES 9

CLASSES OF SHARES 11

HOW TO BUY SHARES 17

REDEMPTION AND EXCHANGE 20

DIVIDENDS AND DISTRIBUTIONS 25

TAXES 26

CALCULATION OF OFFERING PRICE AND

NET ASSET VALUE PER SHARE 28

MANAGEMENT OF THE FUND 29

OTHER INVESTMENT POLICIES AND

SPECIAL RISK CONSIDERATIONS 32

1818 MARKET STREET, PHILADELPHIA, PA 19103
FOR PROSPECTUS AND PERFORMANCE:
NATIONWIDE 800-523-1918

INFORMATION ON EXISTING ACCOUNTS:
(SHAREHOLDERS ONLY)
NATIONWIDE 800-523-1918

DEALER SERVICES:
(BROKER/DEALERS ONLY)
NATIONWIDE 800-362-7500

REPRESENTATIVES OF FINANCIAL INSTITUTIONS:
NATIONWIDE 800-659-2265

This Prospectus describes the Tax-Efficient Equity Fund series (the
"Fund") of Voyageur Mutual Funds III, Inc. ("Mutual Funds III, Inc."), a
professionally-managed mutual fund of the series type. The Fund offers
the Tax-Efficient Equity Fund A Class, the Tax-Efficient Equity Fund B
Class and the Tax-Efficient Equity Fund C Class. Each class is referred
to individually as a "Class" and collectively as the "Classes" or "Class
A Shares," Class B Shares" or "Class C Shares."

The objective of the Fund is to obtain for taxable investors a high
total return on an after-tax basis. The Fund will attempt to achieve
this objective by seeking to provide a high long-term after-tax total
return through managing its portfolio in a manner that will defer the
realization of accrued capital gains and minimize dividend income. See
Investment Objective and Policies.

This Prospectus sets forth information that you should read and
consider before you invest. Please retain it for future reference. The
Statement of Additional Information ("Part B") of Mutual Funds III,
Inc.'s registration statement dated June 29, 1998, as it may be amended
from time to time, contains additional information about the Fund and
has been filed with the Securities and Exchange Commission ("SEC"). Part
B is incorporated by reference into this Prospectus and is available,
without charge, by writing to Delaware Distributors, L.P. at the above
address or by calling the above telephone numbers. The Fund's financial
statements appear in its Annual Report for the fiscal year ended April
30, 1998, which will accompany any response to requests for Part B. The
SEC also maintains a Web site (http://www.sec.gov) that contains Part B,
material we incorporated by reference and other information regarding
registrants that electronically file with the SEC.

The Fund also offers Tax-Efficient Equity Fund Institutional Class,
which is available for purchase only by certain investors. A prospectus
for Tax-Efficient Equity Fund Institutional Class can be obtained by
writing to Delaware Distributors, L.P. at the above address or by
calling the above number.

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

BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS.
MUTUAL FUNDS CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER,
SHARES OF THE FUND ARE NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY
ANY BANK OR ANY CREDIT UNION, ARE NOT OBLIGATIONS OF ANY BANK OR ANY
CREDIT UNION, AND INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS
OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF THE FUND ARE NOT BANK OR
CREDIT UNION DEPOSITS.

SYNOPSIS

INVESTMENT OBJECTIVE

The investment objective of the Fund is to obtain for taxable
investors a high total return on an after-tax basis. The Fund will
attempt to achieve this objective by seeking to provide a high long-term
after-tax total return through managing its portfolio in a manner that
will defer the realization of accrued capital gains and minimize
dividend income. For further details, see Investment Objective and
Policies and Other Investment Policies and Special Risk Considerations.

RISK FACTORS AND SPECIAL CONSIDERATIONS

As a mutual fund investing primarily in common stocks, the Fund is
subject to market risk, that is the possibility that common stock prices
will decline over short or even extended periods.

The Fund has the ability to enter into options and futures
transactions. There are risks that result from the use of options and
futures and the investor should review the description of these risks in
this Prospectus. See Futures and Options under Other Investment Policies
and Special Risk Considerations.

The Fund may invest up to 10% of its total assets directly or
indirectly in securities of issuers domiciled in foreign countries. Such
investments involve certain risk and opportunity considerations not
typically associated with investing in United States companies. See
Investment Objective and Policies and Other Investment Policies and
Special Risk Considerations.

INVESTMENT MANAGER, DISTRIBUTOR AND TRANSFER AGENT

Delaware Management Company (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and
direction of Mutual Funds III, Inc.'s Board of Directors. The Manager
also provides investment management services to certain of the other
funds in the Delaware Investments family. Delaware Distributors, L.P.
(the "Distributor") is the national distributor for the Fund and for all
of the other mutual funds in the Delaware Investments family. Delaware
Service Company, Inc. (the "Transfer Agent") is the shareholder
servicing, dividend disbursing, accounting services and transfer agent
for the Fund and for all of the other mutual funds in the Delaware
Investments family. See Summary of Expenses and Management of the Fund
for further information regarding the Manager and the fees payable under
the Fund's Investment Management Agreement.

SALES CHARGES

The price of Class A Shares includes a maximum front-end sales charge
of 4.75% of the offering price. The front-end sales charge is reduced on
certain transactions of at least $100,000 but under $1,000,000. For
purchases of $1,000,000 or more, the front-end sales charge is
eliminated; if a dealer's commission is paid in connection with those
sales, a contingent deferred sales charge ("Limited CDSC") of 1% will be
imposed if shares are redeemed during the first year after purchase and
0.50% will be imposed if shares are redeemed during the second year
after purchase. See Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange. Class A Shares are subject to annual 12b-1 Plan
expenses for the life of the investment.

Class B Shares are subject to a contingent deferred sales charge
("CDSC") of: (i) 4% if shares are redeemed within two years of purchase;
(ii) 3% if shares are redeemed during the third or fourth year following
purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; (iv) 1% if shares are redeemed during the sixth year
following purchase; and (v) 0% thereafter. Class B Shares are subject to
annual 12b-1 Plan expenses for approximately eight years after purchase.
See Deferred Sales Charge Alternative-- Class B Shares and Automatic
Conversion of Class B Shares under Classes of Shares.

The price of Class C Shares is equal to the net asset value per
share. Class C Shares are subject to a CDSC of 1% if shares are redeemed
within 12 months of purchase. Class C Shares are subject to annual 12b-1
Plan expenses for the life of the investment.

See Classes of Shares and Distribution (12b-1) and Service under
Management of the Fund.

PURCHASE AMOUNTS

Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments must generally be at least $100.

Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an
amount that is less than $1,000,000. An investor may exceed these
maximum purchase limitations for Class B Shares and Class C Shares by
making cumulative purchases over a period of time. An investor should
keep in mind, however, that reduced front-end sales charges apply to
investments of $100,000 or more in Class A Shares, and that Class A
Shares are subject to lower annual 12b-1 Plan expenses than Class B and
Class C Shares and generally are not subject to a CDSC. The minimum and
maximum purchase amounts for retirement plans may vary. See How to Buy
Shares.

REDEMPTION AND EXCHANGE

Class A Shares of the Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange
request. Neither the Fund nor the Distributor assesses a charge for
redemptions or exchanges of Class A Shares, except for certain
redemptions of shares purchased at net asset value, which may be subject
to a CDSC if a dealer's commission was paid in connection with such
purchases. See Front-End Sales Charge Alternative--Class A Shares under
Classes of Shares.

Class B Shares and Class C Shares may be redeemed or exchanged at
the net asset value calculated after receipt of the redemption or
exchange request subject, in the case of redemptions, to any applicable
CDSC. Neither the Fund nor the Distributor assesses any charges other
than the CDSC for redemptions or exchanges of Class B or Class C Shares.
There are certain limitations on an investor's ability to exchange
shares between the various classes of shares that are offered. See
Redemption and Exchange.

OPEN-END INVESTMENT COMPANY

Mutual Funds III, Inc., which was organized as a Minnesota
corporation in January 1985, is an open-end management investment
company. The Fund's portfolio of assets is diversified as defined by the
Investment Company Act of 1940 (the "1940 Act"). The Fund is one of
several series of Mutual Funds III, Inc. See Shares under Management of
the Fund.

SUMMARY OF EXPENSES

A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares follows:

CLASS A CLASS B CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES SHARES
- ------------------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as a
percentage of offering price) None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds,
whichever is lower) None 1 4.00% 2 1.00% 3
Redemption Fees None 4 None 4 None 4

ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF CLASS A CLASS B CLASS C
AVERAGE DAILY NET ASSETS) SHARES SHARES SHARES
- -------------------------------------------------------------------------
Management Fees
(after voluntary waivers) 0.23% 7 0.23% 7 0.23% 7
12b-1 Plan Expenses
(including service fees) 0.25% 5,6 1.00% 5 1.00% 5
Other Operating Expenses 0.97% 7 0.97% 7 0.97% 7
-------- -------- --------
Total Operating Expenses
(after voluntary waivers) 1.45% 7 2.20% 7 2.20% 7
======== ======== ========
1 Class A purchases of $1 million or more may be made at net
asset value. However, if in connection with any such purchase a
dealer commission is paid to the financial adviser through whom
such purchase is effected, a Limited CDSC of 1% will be imposed
on certain redemptions made during the first year after purchase
and 0.50% will be imposed on certain redemptions made during the
second year after purchase. Additional Class A purchase options
involving the imposition of a CDSC may be permitted as described
in this Prospectus from time to time. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased
at Net Asset Value under Redemption and Exchange.

2 Class B Shares of the Fund are subject to a CDSC of: (i) 4%
if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following
purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; (iv) 1% if shares are redeemed during the
sixth year following purchase; and (v) 0% thereafter. See
Deferred Sales Charge Alternative--Class B Shares under Classes
of Shares.

3 Class C Shares of the Fund are subject to a CDSC of 1% if
shares are redeemed within 12 months of purchase. See Level
Sales Charge Alternative--Class C Shares under Classes of
Shares.

4 CoreStates Bank, N.A. currently charges $7.50 per
redemption for redemptions payable by wire.

5 Class A Shares, Class B Shares and Class C Shares are
subject to separate 12b-1 Plans. Long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales
charges permitted by rules of the National Association of
Securities Dealers, Inc. (the "NASD"). See Distribution (12b-1)
and Service under Management of the Fund.

6 The Distributor has elected voluntarily to waive its right
to receive 12b-1 Plan fees with respect to Class A Shares of the
Fund to the extent necessary to ensure that 12b-1 Plan expenses
for such Class do not exceed 0.25% for the period from February
1, 1998 through December 31, 1998. The Class A Shares 12b-1
Expenses set forth above have been restated to reflect this
waiver. In the absence of this waiver and during the period from
the commencement of the public offering of Class A Shares of the
Fund through December 31, 1998, 12b-1 Plan expenses would have
been equal to 0.30% for Class A Shares. See Distribution (12b-1)
and Service under Management of the Fund.

7 The Manager has elected voluntarily to waive that portion,
if any, of the annual management fees payable by the Fund and to
pay certain expenses of the Fund to the extent necessary to
ensure that the Total Operating Expenses (exclusive of 12b-1
Plan expenses, taxes, interest, brokerage commissions and
extraordinary expenses) do not exceed, on an annualized basis,
1.20% of the average daily net assets of each Class of the Fund
from the commencement of the public offering of Classes through
December 31, 1998. Without the Manager's voluntary fee waivers
(and the Distributor's voluntary waiver of a portion of the
12b-1 Plan expenses for Class A Shares of the Fund through
December 31, 1998), the Total Operating Expenses would have been
1.99%, 2.72% and 2.72%, respectively, for Class A Shares, Class
B Shares and Class C Shares of the Fund, including Management
Fees of 0.75%.

For expense information about Tax-Efficient Equity Fund Institutional
Class, see the separate prospectus relating to that class.

Investors utilizing the Asset Planner asset allocation service also
typically incur an annual maintenance fee of $35 per Strategy. However,
the annual maintenance fee is waived until further notice. Investors who
utilize the Asset Planner for an Individual Retirement Plan ("IRA") will
pay an annual IRA fee of $15 per Social Security number. See Asset
Planner in Part B.

The following example illustrates the expenses that an investor
would pay on a $1,000 investment over various time periods, assuming
(1) a 5% annual rate of return, (2) redemption and no redemption
at the end of each time period and (3) for Class B Shares and
Class C Shares, payment of a CDSC at the time of redemption, if
applicable. The following example assumes the voluntary waiver of the
management fee by the Manager and the 12b-1 fee by the Distributor as
discussed in this Prospectus.

ASSUMING REDEMPTION ASSUMING NO REDEMPTION
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $62 1 $91 $123 $213 $62 $91 $123 $213
Class B Shares 62 99 138 234 2 22 69 118 234 2
Class C Shares 32 69 118 253 22 69 118 253

1 Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, which has
not been reflected in this calculation, may be imposed on certain
redemptions made within 24 months after purchase. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.

2 At the end of approximately eight years after purchase, Class B Shares
of the Fund will be automatically converted into Class A Shares of the
Fund. The example above assumes conversion of Class B Shares at the end
of the eighth year. However, the conversion may occur as late as three
months after the eighth anniversary of purchase, during which time the
higher 12b-1 Plan fees payable by Class B Shares will continue to be
assessed. Information for the ninth and tenth years reflects expenses of
the Class A Shares. See Automatic Conversion of Class B Shares under
Classes of Shares for a description of the automatic conversion feature.

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.

The purpose of the above tables is to assist the investor
in understanding the various costs and expenses that an investor in any
of the Classes will bear directly or indirectly.

</TABLE>

FINANCIAL
HIGHLIGHTS

The following financial highlights are derived from the financial
statements of Voyageur Mutual Funds III, Inc.--Tax-Efficient Equity Fund
and have been audited by Ernst & Young LLP, independent auditors. The
data should be read in conjunction with the financial statements,
related notes, and the report of Ernst & Young LLP, all of which are
incorporated by reference into Part B. Further information about the
Fund's performance is contained in its Annual Report to shareholders. A
copy of the Fund's Annual Report (including the report of Ernst & Young
LLP) may be obtained from the Fund upon request at no charge.

TAX-EFFICIENT EQUITY FUND
Class A Shares Class B Shares Class C Shares
-------------- -------------- -------------
PERIOD PERIOD PERIOD
6/27/97 1 6/27/97 1 6/27/97 1
THROUGH THROUGH THROUGH
4/30/98 4/30/98 4/30/98
<S> <C> <C> <C>
Net asset value,
beginning of period $ 8.500 $ 8.500 $ 8.500

INCOME FROM INVESTMENT OPERATIONS

Net investment income (loss) 0.010 (0.053) (0.054)
Net realized and unrealized
gain on investments 2.500 2.513 2.514
-------- -------- --------
Total from investment operations 2.510 2.460 2.460
-------- -------- --------
Net asset value, end of period $11.010 $10.960 $10.960
======== ======== ========

TOTAL RETURN 29.53% 2,5 28.94% 3,5 28.94% 4,5

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period
(000's omitted) $13,898 $ 7,958 $ 2,451
Ratio of expenses to average net assets 1.47% 2.20% 2.20%
Ratio of expenses to average net assets
prior to expense limitation 1.99% 2.72% 2.72%
Ratio of net investment income (loss)
to average net assets 0.13% (0.60%) (0.60%)
Ratio of net investment income (loss)
to average net assets prior to
expense limitation (0.39%) (1.12%) (1.12%)
Portfolio turnover 14% 14% 14%
Average commission rate paid 6 $0.0600 $0.0600 $0.0600

1 Commencement of operations. Ratios have been annualized but total
return has not been annualized. Total return for this short of a time
period may not be representative of longer term results.

2 Does not reflect any maximum front-end sales charge nor the Limited
CDSC that varies from 0.50%-1% depending on the holding period for Class
A Shares, applicable to certain redemptions made within two years after
purchase. See Contingent Deferred Sales Charge for Certain Redemptions
of Class A Shares Purchased at Net Asset Value.

3 Does not reflect any CDSC that varies from 1%-4%, depending on the
holding period for Class B Shares. See Contingent Deferred Sales
Charge--Class B Shares and Class C Shares.

4 Does not reflect the CDSC of 1% for Class C Shares for 12 months from
the date of purchase. See Contingent Deferred Sales Charge--Class B
Shares and Class C Shares.

5 Total return reflects expense limitations in effect for the Fund.

6 Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there
was a commission charged.

INVESTMENT OBJECTIVE
AND POLICIES

SUITABILITY

The Fund may be suitable for the patient investor interested in
long-term capital appreciation. Although the Fund may be appropriate for
any investor, it may be especially well suited to the investment needs
of high-tax bracket investors, retirement savers and college savers.
Because the Fund is designed to maximize after-tax total return, the
Fund may not be suitable for tax-exempt investors. Investors should be
willing to accept the risks associated with investments in equity
securities issued by domestic and foreign issuers.

* * *

Naturally, the Fund cannot assure a specific rate of return or that
principal will be protected. The value of the Fund's shares can be
expected to move up and down depending upon market conditions.
Consequently, appreciation may be obtained in periods of generally
rising markets, while in declining markets, the value of its shares may,
of course, decline. For this reason, the Fund is not appropriate for
short-term investors. However, through the cautious selection and
supervision of its portfolio, the Fund will strive to achieve its
objective set forth above.

Investors should not consider a purchase of shares of the Fund as
equivalent to a complete investment program. Delaware Investments
includes a family of funds, generally available through registered
investment dealers, which may be used together to create a more complete
investment program.

INVESTMENT STRATEGY

In attempting to achieve its investment objective, the Fund under
normal circumstances will invest at least 90% of its net assets in a
widely diversified portfolio of common stocks, securities convertible
into common stocks and instruments whose returns depend upon stock
market prices. An emphasis will be placed on lower-dividend or
non-dividend paying common stocks of companies which the Manager
believes to have superior appreciation potential.

Investments in securities convertible into common stock will be made
on the basis of the common stocks into which such securities are
convertible, and not on the basis of the debt ratings of such
securities. Under normal circumstances, at least 65% of the Fund's total
assets will be invested in equity securities (defined as common stocks
and securities convertible into common stocks). The Fund may invest up
to 10% of its total assets in foreign securities. See Other Investment
Policies and Special Risk Considerations for additional information.

Over time, common stock mutual funds generally accumulate capital
gains as the securities in their portfolios appreciate. In most cases,
the active management of these funds will involve a significant amount
of portfolio security trading, leading to the realization of capital
gains which will be taxable when distributed to fund shareholders.
Primarily as a result of these taxable capital gains distributions, the
after-tax return to a taxable investor in the fund with even moderate
portfolio turnover can be substantially lower than the pre-tax return.
The Manager believes that, in order to achieve the best possible
after-tax return for taxable investors, investment strategies must be
employed which will minimize portfolio turnover and postpone the
realization of accrued capital gains.

Some realization of capital gains will, of course, be inevitable. For
example, portfolio securities must be sold as they mature in order to
avoid negative growth. In addition, merger and acquisition activities in
the marketplace will result in unavoidable sales of portfolio
securities. The Manager will attempt to minimize such capital gains to
the extent possible by, for example, realizing accrued losses in the
portfolio to offset such gains. To help reduce realized capital gains
when the sale of appreciated securities is necessary, the Manager will
also seek to sell share lots that qualify for long-term capital gains
treatment and have the highest cost basis.

From time to time, the Manager may also employ a trading strategy
which involves the use of options, futures contracts and other
derivative products to hedge against anticipated market movements,
rather than a more traditional strategy that would involve the purchase
and sale of portfolio securities in anticipation of such movements. For
example, using a more traditional trading strategy, if an investment
adviser anticipated a market decline with respect to a particular group
of portfolio stocks with significant unrealized gains, the adviser would
sell the stocks, realize any gains and make a taxable distribution of
such gains to shareholders. If market prices fall as anticipated, the
fund will have avoided capital losses as a result of the fall in prices,
but the fund will have incurred trading costs and investors will be
taxed on the realized capital gains. In the event market prices rise,
trading costs and tax consequences will be the same; however, the fund
will have lost the opportunity to participate in the rising prices.
Using the tax-sensitive trading strategy which the Manager intends to
employ, rather than sell the Fund's portfolio securities, the Manager
might, for example, buy a put option on the group of securities. If
prices fall as anticipated, the decline in the value of the Fund's
portfolio would be offset by the gain on the put options. Although this
gain will be taxable, presumably the gain, and therefore the tax
liability, will be significantly less than the gain that would have been
realized had the Fund sold the underlying portfolio securities. The Fund
will not incur trading costs, but will pay a premium for purchase of the
put option. In the event prices rise, the Fund will be in a
significantly better position than had the underlying securities been
sold. Although the Fund will have lost the premium it paid for the
option, the Fund will participate fully in the rising stock prices and
will have deferred the realization of capital gains (and the resulting
tax liability of shareholders).

In employing the investment strategy described above, the Fund may
invest in various derivative instruments whose return depends on the
prices of common stocks. These may include debt securities whose prices
or interest rates are indexed to the return of a particular stock index,
including a foreign stock index ("indexed securities"), swap agreements
linked to a stock index or group of common stocks, option and futures
contracts. The Fund may also lend its portfolio securities and sell its
portfolio securities short. See Other Investment Policies and Special
Risk Considerations for a description of these investment practices.

In normal conditions, the Manager will attempt to invest as much of
the Fund's assets as is practical in common stocks, securities
convertible into common stocks and instruments whose returns depend on
stock market prices. However, the Fund may invest temporarily in certain
short-term fixed-income securities. Such securities may be used to
invest uncommitted cash balances or to maintain liquidity to meet
shareholder redemptions. These securities include obligations of the
U.S. government and its agencies or instrumentalities, commercial paper,
bank certificates of deposit and bankers' acceptances, and repurchase
agreements. The Fund may invest in these securities without limitation
if the Manager believes that market conditions warrant a temporary
defensive posture.

* * *

For additional information on the Fund's investment policies and
certain risks associated with investments in certain types of
securities, see Other Investment Policies and Special Risk
Considerations.

Although the Fund will constantly strive to attain its objective,
there can be no assurance that it will be attained.

Because of the risks associated with the Fund's investments, the
Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on shortterm
stock market movements. On an informal basis, the Manager may compare
the total return of the Fund to the total return of a broad based
securities index, currently expected to be the Standard & Poor's 500
Index ("S&P 500"), with a view toward achieving after-tax total returns
of the Fund in excess of the pre-tax total returns of such securities
index. However, the Fund is not managed to replicate the securities
contained in such indices and therefore may achieve returns which are
less than or greater than such indices. Securities indices are unmanaged
and hence do not incur expenses while the Fund is subject to investment
management and other expenses as set forth herein.

THE DELAWARE
DIFFERENCE

PLANS AND SERVICES

The Delaware Difference is our commitment to provide you with
superior information and quality service on your investments in the
Delaware Investments family of funds.

SHAREHOLDER PHONE DIRECTORY

INVESTOR INFORMATION CENTER

800-523-1918

FUND INFORMATION; LITERATURE; PRICE;
YIELD AND PERFORMANCE FIGURES

SHAREHOLDER SERVICE CENTER
800-523-1918

INFORMATION ON EXISTING REGULAR INVESTMENT
ACCOUNTS AND RETIREMENT PLAN ACCOUNTS;
WIRE INVESTMENTS; WIRE LIQUIDATIONS;
TELEPHONE LIQUIDATIONS AND TELEPHONE EXCHANGES

DELAPHONE
800-362-FUND
(800-362-3863)

PERFORMANCE INFORMATION

During business hours, you can call the Investor Information Center
at any time for current performance information.

SHAREHOLDER SERVICES

During business hours, you can call Delaware Investments' Shareholder
Service Center. Our representatives can answer any questions about your
account, the Fund, various service features and other funds in the
Delaware Investments family.

DELAPHONE SERVICE

Delaphone is an account inquiry service for investors with
Touch-Tone(R) phone service. It enables you to get information on your
account faster than the mailed statements and confirmations. Delaphone
also provides current performance information on the Fund, as well as
other funds in the Delaware Investments family. Delaphone is available
seven days a week, 24 hours a day.

DIVIDEND PAYMENTS

Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in cash.
You may also elect to have the dividends earned in one fund
automatically invested in another Delaware Investments fund with a
different investment objective, subject to certain exceptions and
limitations.

For more information, see Additional Methods of Adding to Your
Investment--Dividend Reinvestment Plan under How to Buy Shares or call
the Shareholder Service Center.

RETIREMENT PLANNING

An investment in the Fund may be a suitable investment option for
tax-deferred retirement plans. Delaware Investments offers a full
spectrum of qualified and non-qualified retirement plans, including the
popular 401(k) deferred compensation plan, IRA, and the new Roth IRA.
Just call Delaware Investments at 800-523-1918 for more information.

For more information, see Additional Methods of Adding to Your
Investment--Dividend Reinvestment Plan under How to Buy Shares or call
the Shareholder Service Center.

MONEYLINE SM SERVICES

Delaware Investments offers the following services for fast and
convenient transfer of funds between your personal bank account and your
Fund account.

1. MoneyLine SM Direct Deposit Service

If you elect to have your dividends and distributions paid in cash
and such dividends and distributions are in an amount of $25 or more,
you may choose the MoneyLine SM Direct Deposit Service and have such
payments transferred from your Fund account to your predesignated bank
account. See Dividends and Distributions. In addition, you may elect to
have your Systematic Withdrawal Plan payments transferred from your Fund
account to your predesignated bank account through this service. See
Systematic Withdrawal Plans under Redemption and Exchange. This service
is not available for certain retirement plans.

2. MoneyLine SM On Demand

You or your investment dealer may request purchases and redemptions
of Fund shares by phone using MoneyLine SM On Demand. When you authorize
the Fund to accept such requests from you or your investment dealer,
funds will be withdrawn from (for share purchases) or deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There
is a $25 minimum and $50,000 maximum limit for MoneyLine SM On Demand
transactions. With respect to retirement plans, this service is only
available for purchases through an IRA.

For each MoneyLine SM Service, it may take up to four business days
for the transactions to be completed. You can initiate either service by
completing an Account Services form. If your name and address are not
identical to the name and address on your Fund account, you must have
your signature guaranteed. The Fund does not charge a fee for
MoneyLine SM services; however, your bank may charge a fee. Please call
the Shareholder Service Center for additional information about these
services.

STATEMENTS AND CONFIRMATIONS

You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent
following all transactions other than those involving a reinvestment of
dividends and those involving salary deferral purchases in connection
with SIMPLE IRAs. You should examine statements and confirmations
immediately and promptly report any discrepancy by calling the
Shareholder Service Center.

DUPLICATE CONFIRMATIONS

If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or
her. This makes it easier for your adviser to help you manage your
investments.

TAX INFORMATION

Each year, Mutual Funds III, Inc. will mail to you information on
the tax status of your dividends and distributions.

RIGHT OF ACCUMULATION

With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class A
Shares, Class B Shares and Class C Shares of the Fund with the dollar
amount of new purchases of Class A Shares to qualify for a reduced
front-end sales charge on such purchases of Class A Shares. Under the
Combined Purchases Privilege, you may also include certain shares that
you own in other funds in the Delaware Investments family. See Classes
of Shares.

LETTER OF INTENTION

The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating
certain of your purchases of shares of funds in the Delaware Investments
family over a 13-month period. See Classes of Shares and Part B.

12-MONTH REINVESTMENT PRIVILEGE

The 12-Month Reinvestment Privilege permits you to reinvest proceeds
from a redemption of Class A Shares, within one year of the date of the
redemption, without paying a front-end sales charge. See Part B.

EXCHANGE PRIVILEGE

The Exchange Privilege permits you to exchange all or part of your
shares into shares of other mutual funds in the Delaware Investments
family, subject to certain exceptions and limitations. For additional
information on exchanges, see Investing by Exchange under How to Buy
Shares and Redemption and Exchange.

WEALTH BUILDER OPTION

You may elect to invest in the Fund through regular liquidations of
shares in your accounts in other funds in the Delaware Investments
family. Investments under this feature are exchanges and are therefore
subject to the same conditions and limitations as other exchanges of
Fund shares. See Additional Methods of Adding to Your Investment--Wealth
Builder Option and Investing by Exchange under How to Buy Shares and
Redemption and Exchange.

FINANCIAL INFORMATION ABOUT THE FUND

Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information
about the Fund's investments and performance. Mutual Funds III, Inc.'s
fiscal year ends on April 30.

CLASSES
OF SHARES

ALTERNATIVE PURCHASE ARRANGEMENTS

Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be imposed,
at the election of the purchaser, at the time of the purchase for Class
A Shares ("front-end sales charge alternative"), or on a contingent
deferred basis for Class B Shares ("deferred sales charge alternative")
or Class C Shares ("level sales charge alternative").

Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when
they are purchased, but generally are not subject to any sales charge
when they are redeemed. Class A Shares are subject to annual 12b-1 Plan
expenses of up to a maximum of 0.30% of average daily net assets of such
shares. For the period from February 1, 1998 through December 31, 1998,
the Distributor has elected voluntarily to waive its right to receive
12b-1 Plan fees with respect to Class A Shares to the extent necessary
to ensure that 12b-1 Plan expenses for this Class do not exceed 0.25% of
average daily net assets. Certain purchases of Class A Shares qualify
for reduced front-end sales charges. See Front-End Sales Charge
Alternative--Class A Shares, below. See also Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange and Distribution (12b-1) and Service
under Management of the Fund.

Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end
sales charge when they are purchased, but are subject to a contingent
deferred sales charge if they are redeemed within six years of purchase.
Class B Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 1% (0.25% of which are service fees to be paid to the
Distributor, dealers or others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of such
shares for approximately eight years after purchase, Class B Shares
permit all of the investor's dollars to work from the time the
investment is made. The higher 12b-1 Plan expenses paid by Class B
Shares will cause such shares to have a higher expense ratio and to pay
lower dividends than Class A Shares. At the end of approximately eight
years after purchase, Class B Shares will automatically be converted
into Class A Shares and, thereafter, for the remainder of the life of
the investment, the annual 12b-1 Plan fee for Class A Shares will apply.
See Automatic Conversion of Class B Shares, below.

Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-end
sales charge when they are purchased, but are subject to a contingent
deferred sales charge if they are redeemed within 12 months of purchase.
Class C Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 1% (0.25% of which are service fees to be paid to the
Distributor, dealers or others for providing personal service and/or
maintaining shareholder accounts) of average daily net assets of such
shares for the life of the investment. The higher 12b-1 Plan expenses
paid by Class C Shares will cause such shares to have a higher expense
ratio and to pay lower dividends than Class A Shares. Unlike Class B
Shares, Class C Shares do not convert to another class.

The alternative purchase arrangements described above permit
investors to choose the method of purchasing shares that is most
suitable given the amount of their purchase, the length of time they
expect to hold their shares and other relevant circumstances. Investors
should determine whether, given their particular circumstances, it is
more advantageous to purchase Class A Shares and incur a front-end sales
charge, purchase Class B Shares and have the entire initial purchase
amount invested in the Fund with their investment being subject to a
CDSC if they redeem shares within six years of purchase, or purchase
Class C Shares and have the entire initial purchase amount invested in
the Fund with their investment being subject to a CDSC if they redeem
shares within 12 months of purchase. In addition, investors should
consider the level of annual 12b-1 Plan expenses applicable to each
Class. The higher 12b-1 Plan expenses on Class B Shares and Class C
Shares will be offset to the extent a return is realized on the
additional money initially invested upon the purchase of such shares.
However, there can be no assurance as to the return, if any, that will
be realized on such additional money. In addition, the effect of any
return earned on such additional money will diminish over time. In
comparing Class B Shares to Class C Shares, investors should also
consider the duration of the annual 12b-1 Plan expenses to which each
Class is subject to and the desirability of an automatic conversion
feature, which is available only for Class B Shares.

For the distribution and related services provided to, and the
expenses borne on behalf of, the Fund, the Distributor and others will
be paid, in the case of Class A Shares, from the proceeds of the
front-end sales charge and 12b-1 Plan fees and, in the case of Class B
Shares and Class C Shares, from the proceeds of the 12b-1 Plan fees and,
if applicable, the CDSC incurred upon redemption. Financial advisers may
receive different compensation for selling Class A, Class B and Class C
Shares. Investors should understand that the purpose and function of the
respective 12b-1 Plans and the CDSCs applicable to Class B Shares and
Class C Shares are the same as those of the 12b-1 Plan and the front-end
sales charge applicable to Class A Shares in that such fees and charges
are used to finance the distribution of the respective Classes. See
Distribution (12b-1) and Service under Management of the Fund.

Dividends, if any, paid on Class A, Class B and Class C Shares will
be calculated in the same manner, at the same time, on the same day and
will be in the same amount, except that the additional amount of 12b-1
Plan expenses relating to Class B Shares and Class C Shares will be
borne exclusively by such shares. See Calculation of Offering Price and
Net Asset Value Per Share.

The NASD has adopted certain rules relating to investment company
sales charges. Mutual Funds III, Inc. and the Distributor intend to
operate in compliance with these rules.

FRONT-END SALES CHARGE ALTERNATIVE--CLASS A SHARES

Class A Shares may be purchased at the offering price, which
reflects a maximum front-end sales charge of 4.75%. See Calculation of
Offering Price and Net Asset Value Per Share.

Purchases of $100,000 or more carry a reduced front-end sales charge
as shown in the following table:

TAX-EFFICIENT EQUITY FUND A CLASS

Front-End Sales Dealer's
Charge as % of Commission***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
-------- -------- --------------
Less than $100,000 4.75% 5.00% 4.00%
$100,000 but under $250,000 3.75 3.91 3.00
$250,000 but under $500,000 2.50 2.54 2.00
$500,000 but under $1,000,000* 2.00 2.00 1.60

*There is no front-end sales charge on purchases of Class A
Shares of $1,000,000 or more but, under certain limited circumstances, a
Limited CDSC of 1% may apply upon redemption of such shares made during
the first year after purchase and 0.50% may apply upon redemption of
such shares made during the second year after purchase.

**Based on the net asset value per share of Class A Shares as
of the end of Mutual Funds III, Inc.'s most recent fiscal year.

***Financial institutions or their affiliated brokers may receive
an agency transaction fee in the percentages set forth above.

- ---------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would
qualify for the reduced front-end sales charge on the basis of previous
or current purchases. The reduced front-end sales charge will be granted
upon confirmation of the shareholder's holdings by the Fund. Such
reduced front-end sales charges are not retroactive.

From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during
which the Distributor may reallow to dealers up to the full amount of
the front-end sales charge shown above. In addition, certain dealers who
enter into an agreement to provide extra training and information on
Delaware Investments' products and services and who increase sales of
shares of the funds in the Delaware Investments family may receive an
additional commission of up to 0.15% of the offering price. Dealers who
receive 90% or more of the sales charge may be deemed to be underwriters
under the 1933 Act.

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

Beginning July 1, 1998, for initial purchases of Class A Shares of
$1,000,000 or more, a dealer's commission may be paid by the Distributor
to financial advisers through whom such purchases are made in accordance
with the following schedule:

DEALER'S COMMISSION
AMOUNT OF PURCHASE (as a percentage of amount purchased)
- ------------------ -------------------------------------
Up to $5 million 1.00%
Next $20 million up to $25 million 0.50
Amount over $25 million 0.25

Such Class A Shares are subject to a Limited CDSC of 1% if shares
are redeemed during the first year after purchase and 0.50% if shares
are redeemed during the second year after purchase.

For accounts with assets over $1 million, the dealer commission
resets annually to the highest incremental commission rate on the
anniversary of the first purchase. In determining a financial adviser's
eligibility for the dealer's commission, purchases of Class A Shares of
other funds in the Delaware Investments family as to which a Limited
CDSC applies may be aggregated with those of the Class A Shares of the
Fund. Financial advisers also may be eligible for a dealer's commission
in connection with certain purchases made under a Letter of Intention or
pursuant to an investor's Right of Accumulation. Financial advisers
should contact the Distributor concerning the applicability and
calculation of the dealer's commission in the case of combined
purchases.

An exchange from other funds in the Delaware Investments family will
not qualify for payment of the dealer's commission, unless a dealer's
commission or similar payment has not been previously paid on the assets
being exchanged. The schedule and program for payment of the dealer's
commission are subject to change or termination at any time by the
Distributor at its discretion.

Redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC if the dealer's commission
described above was paid in connection with the purchase of those shares.
See Contingent Deferred Sales Charge for Certain Redemptions of
Class A Shares Purchased at Net Asset Value under Redemption and Exchange.

COMBINED PURCHASES PRIVILEGE

By combining your holdings of Class A Shares with your holdings of
Class B Shares and/or Class C Shares of the Fund and shares of other
funds in the Delaware Investments family, except those noted below, you
can reduce the front-end sales charges on any additional purchases of
Class A Shares. Shares of Delaware Group Premium Fund, Inc. beneficially
owned in connection with ownership of variable insurance products may be
combined with other Delaware Investments fund holdings. Assets held by
investment advisory clients of the Manager or its affiliates in a stable
value account may be combined with other fund holdings in the Delaware
Investments family. Shares of other funds that do not carry a front-end
sales charge or CDSC may not be included unless they were acquired
through an exchange from a fund in the Delaware Investments family that
does carry a front-end sales charge or CDSC.

This privilege permits you to combine your purchases and holdings
with those of your spouse, your children under 21 and any trust,
fiduciary or retirement account for the benefit of such family members.

It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a
13-month period and qualify the entire purchase for a reduction in
front-end sales charges on Class A Shares.

Combined purchases of $1,000,000 or more, including certain
purchases made at net asset value pursuant to a Right of Accumulation or
under a Letter of Intention, may result in the payment of a dealer's
commission and the applicability of a Limited CDSC. Investors should
consult their financial advisers or the Shareholder Service Center about
the operation of these features. See Front-End Sales Charge
Alternative--Class A Shares, above.

ALLIED PLANS

Class A Shares are available for purchase by participants in certain
defined contribution plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another
institution through which mutual funds are marketed and which allow
investments in Class A Shares of designated Delaware Investments funds
("eligible Delaware Investments fund shares"), as well as shares of
designated classes of non-Delaware Investments funds ("eligible
non-Delaware Investments fund shares"). Class B Shares and Class C
Shares are not eligible for purchase by Allied Plans.

With respect to purchases made in connection with an Allied Plan,
the value of eligible Delaware Investments and eligible non-Delaware
Investments fund shares held by the Allied Plan may be combined with the
dollar amount of new purchases by that Allied Plan to obtain a reduced
front-end sales charge on additional purchases of eligible Delaware
Investments fund shares.

Participants in Allied Plans may exchange all or part of their
eligible Delaware Investments fund shares for other eligible Delaware
Investments fund shares or for eligible non-Delaware Investments fund
shares at net asset value without payment of a front-end sales charge.
However, exchanges of eligible fund shares, both Delaware Investments
and non-Delaware Investments, which were not subject to a front end
sales charge, will be subject to the applicable sales charge if
exchanged for eligible Delaware Investments fund shares to which a sales
charge applies. No sales charge will apply if the eligible fund shares
were previously acquired through the exchange of eligible shares on
which a sales charge was already paid or through the reinvestment of
dividends. See Investing by Exchange.

A dealer's commission may be payable on purchases of eligible
Delaware Investments fund shares under an Allied Plan. In determining a
financial adviser's eligibility for a dealer's commission on net asset
value purchases of eligible Delaware Investments fund shares in
connection with Allied Plans, all participant holdings in the Allied
Plan will be aggregated.

The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been
paid. Waivers of the Limited CDSC, as described under Waiver of Limited
Contingent Deferred Sales Charge--Class A Shares under Redemption and
Exchange, apply to redemptions by participants in Allied Plans except in
the case of exchanges between eligible Delaware Investments and
non-Delaware Investments fund shares. When eligible Delaware Investments
fund shares are exchanged into eligible non-Delaware Investments fund
shares, the Limited CDSC will be imposed at the time of the exchange,
unless the joint venture agreement specifies that the amount of the
Limited CDSC will be paid by the financial adviser or selling dealer.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.

BUYING CLASS A SHARES AT NET ASSET VALUE

Class A Shares may be purchased at net asset value under the
Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment
Privilege. See The Delaware Difference and Redemption and Exchange for
additional information.

Purchases of Class A Shares may be made at net asset value by
current and former officers, directors and employees (and members of
their families) of the Manager, any affiliate, any of the funds in the
Delaware Investments family, certain of their agents and registered
representatives and employees of authorized investment dealers and by
employee benefit plans for such entities. Individual purchases,
including those in retirement accounts, must be for accounts in the name
of the individual or a qualifying family member.

Purchases of Class A Shares may also be made by clients of
registered representatives of an authorized investment dealer at net
asset value within 12 months after the registered representative changes
employment, if the purchase is funded by proceeds from an investment
where a front-end sales charge, contingent deferred sales charge or
other sales charge has been assessed. Purchases of Class A Shares may
also be made at net asset value by bank employees who provide services
in connection with agreements between the bank and unaffiliated brokers
or dealers concerning sales of shares of funds in the Delaware
Investments family. Officers, directors and key employees of
institutional clients of the Manager or any of its affiliates may
purchase Class A Shares at net asset value. Moreover, purchases may be
effected at net asset value for the benefit of the clients of brokers,
dealers and registered investment advisers affiliated with a broker or
dealer, if such broker, dealer or investment adviser has entered into an
agreement with the Distributor providing specifically for the purchase
of Class A Shares in connection with special investment products, such
as wrap accounts or similar fee based programs. Investors may be charged
a fee when effecting transactions in Class A Shares through a broker or
agent that offers these special investment products.

Purchases of Class A Shares at net asset value may also be made by
the following: financial institutions investing for the account of their
trust customers when they are not eligible to purchase shares of the
institutional class of the fund; and any group retirement plan
(excluding defined benefit pension plans), or such plans of the same
employer, for which plan participant records are maintained on the
Delaware Investment & Retirement Services, Inc. ("DIRSI") proprietary
record keeping system that (i) has in excess of $500,000 of plan assets
invested in Class A Shares of funds in the Delaware Investments family
and in any stable value product available through Delaware Investments,
or (ii) is sponsored by an employer that has at any point after May 1,
1997 more than 100 employees while such plan has held Class A Shares of
a fund in the Delaware Investments family and such employer has properly
represented to DIRSI in writing that it has the requisite number of
employees and has received written confirmation back from DIRSI. See
Group Investment Plans for information regarding the applicability of
the Limited CDSC.

Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken
from such accounts will be made at net asset value. Loan repayments made
to a Delaware Investments account in connection with loans originated
from accounts previously maintained by another investment firm will also
be invested at net asset value.

Investors in Delaware Investments Unit Investment Trusts may
reinvest monthly dividend checks and/or repayment of invested capital
into Class A Shares of any of the funds in the Delaware Investments
family at net asset value.

The Fund must be notified in advance that an investment qualifies
for purchase at net asset value.

GROUP INVESTMENT PLANS

Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE IRA, SIMPLE
401(k), Profit Sharing, Money Purchase Pension, 401(k) Defined
Contribution Plans, and 403(b)(7) and 457 Deferred Compensation Plans)
may benefit from the reduced frontend sales charges available on Class A
Shares based on total plan assets. If a company has more than one plan
investing in the funds in the Delaware Investments family, then the
total amount invested in all plans will be aggregated to determine the
applicable front-end sales charge reduction on each purchase, both
initial and subsequent, if, at the time of each such purchase, the
company notifies the Fund that it qualifies for the reduction. Employees
participating in such Group Investment Plans may also combine the
investments held in their plan account to determine the front-end sales
charge applicable to purchases in non-retirement investment accounts in
Delaware Investments if, at the time of each such purchase, they notify
the Fund that they are eligible to combine purchase amounts held in
their plan account.

The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a
dealer's commission has been paid only if such redemption is made
pursuant to a withdrawal of the entire plan from a fund in the Delaware
Investments family. See Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange.

DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES

Class B Shares may be purchased at net asset value without a
front-end sales charge and, as a result, the full amount of the
investor's purchase payment will be invested in Fund shares. The
Distributor currently anticipates compensating dealers or brokers for
selling Class B Shares at the time of purchase from its own assets in an
amount equal to no more than 4% of the dollar amount purchased. In
addition, from time to time, upon written notice to all of its dealers,
the Distributor may hold special promotions for specified periods during
which the Distributor may pay additional compensation to dealers or
brokers for selling Class B Shares at the time of purchase. As discussed
below, however, Class B Shares are subject to annual 12b-1 Plan expenses
and, if redeemed within six years of purchase, a CDSC.

Proceeds from the CDSC and the annual 12b-1 Plan fees, if any, are
paid to the Distributor and others for providing distribution and
related services, and bearing related expenses, in connection with the
sale of Class B Shares. These payments support the compensation paid to
dealers or brokers for selling Class B Shares. Payments to the
Distributor and others under the Class B 12b-1 Plan may be in an amount
equal to no more than 1% annually. The combination of the CDSC and the
proceeds of the 12b-1 Plan fees makes it possible for the Fund to sell Class B
Shares without deducting a front-end sales charge at the time of
purchase.

Holders of Class B Shares who exercise the exchange privilege
described below will continue to be subject to the CDSC schedule for the
Class B Shares described in this Prospectus, even after the exchange.
Such CDSC schedule may be higher than the CDSC schedule for the Class B
Shares acquired as a result of the exchange. See Redemption and
Exchange.

AUTOMATIC CONVERSION OF CLASS B SHARES

Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for
automatic conversion into Class A Shares. Conversions of Class B Shares
into Class A Shares will occur only four times in any calendar year, on
the last business day of the second full week of March, June, September
and December (each, a "Conversion Date"). If the eighth anniversary
after a purchase of Class B Shares falls on a Conversion Date, an
investor's Class B Shares will be converted on that date. If the eighth
anniversary occurs between Conversion Dates, an investor's Class B
Shares will be converted on the next Conversion Date after such
anniversary. Consequently, if a shareholder's eighth anniversary falls
on the day after a Conversion Date, that shareholder will have to hold
Class B Shares for as long as three additional months after the eighth
anniversary of purchase before the shares will automatically convert
into Class A Shares.

Class B Shares of a fund acquired through a reinvestment of
dividends will convert to the corresponding Class A Shares of that fund
(or, in the case of Delaware Group Cash Reserve, Inc., the Delaware Cash
Reserve Consultant Class) pro-rata with Class B Shares of that fund not
acquired through dividend reinvestment.

All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.

LEVEL SALES CHARGE ALTERNATIVE--CLASS C SHARES

Class C Shares may be purchased at net asset value without a
front-end sales charge and, as a result, the full amount of the
investor's purchase payment will be invested in Fund shares. The
Distributor currently anticipates compensating dealers or brokers for
selling Class C Shares at the time of purchase from its own assets in an
amount equal to no more than 1% of the dollar amount purchased. As
discussed below, however, Class C Shares are subject to annual 12b-1
Plan expenses and, if redeemed within 12 months of purchase, a CDSC.

Proceeds from the CDSC and the annual 12b-1 Plan fees, if any, are
paid to the Distributor and others for providing distribution and
related services, and bearing related expenses, in connection with the
sale of Class C Shares. These payments support the compensation paid to
dealers or brokers for selling Class C Shares. Payments to the
Distributor and others under the Class C 12b-1 Plan may be in an amount
equal to no more than 1% annually.

Holders of Class C Shares who exercise the exchange privilege
described below will continue to be subject to the CDSC schedule for the
Class C Shares as described in this Prospectus. See Redemption and
Exchange.

CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES AND CLASS C SHARES

Class B Shares redeemed within six years of purchase may be subject
to a CDSC at the rates set forth below and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are
charged as a percentage of the dollar amount subject to the CDSC. The
charge will be assessed on an amount equal to the lesser of the net
asset value at the time of purchase of the shares being redeemed or the
net asset value of those shares at the time of redemption. No CDSC will
be imposed on increases in net asset value above the initial purchase
price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestments of dividends or capital gains distributions. For
purposes of this formula, the "net asset value at the time of purchase"
will be the net asset value at purchase of Class B Shares or Class C
Shares of the Fund, even if those shares are later exchanged for shares
of another fund in the Delaware Investments family. In the event of an
exchange of the shares, the "net asset value of such shares at the time
of redemption" will be the net asset value of the shares that were
acquired in the exchange.

The following table sets forth the rates of the CDSC for Class B
Shares of the Funds:

CONTINGENT DEFERRED
SALES CHARGE

(AS A PERCENTAGE OF

YEAR AFTER DOLLAR AMOUNT
PURCHASE MADE SUBJECT TO CHARGE)
---------------- -------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None

During the seventh year after purchase and, thereafter, until
converted automatically into Class A Shares, Class B Shares will still
be subject to the annual 12b-1 Plan expenses of up to 1% of average
daily net assets of those shares. See Automatic Conversion of Class B
Shares, above. Investors are reminded that the Class A Shares into which
Class B Shares will convert are subject to ongoing annual 12b-1 Plan
expenses of up to a maximum of 0.30% of average daily net assets of such
shares. For the period from February 1, 1998 through December 31, 1998,
the Distributor has elected voluntarily to waive its right to receive
12b-1 Plan fees with respect to Class A Shares to the extent necessary
to ensure that 12b-1 Plan expenses for such Class do not exceed 0.25% of
average daily net assets.

In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are
redeemed first, followed by shares acquired through the reinvestment of
dividends or distributions, and finally by shares held longest during
the six-year period. With respect to Class C Shares, it will be assumed
that shares held for more than 12 months are redeemed first followed by
shares acquired through the reinvestment of dividends or distributions,
and finally by shares held for 12 months or less.

All investments made during a calendar month, regardless of what day
of the month the investment occurred, will age one month on the last day
of that month and each subsequent month.

The CDSC is waived on certain redemptions of Class B Shares and
Class C Shares. See Waiver of Contingent Deferred Sales Charge--Class B
and Class C Shares under Redemption and Exchange.

OTHER PAYMENTS TO DEALERS--CLASS A, CLASS B AND CLASS C SHARES

From time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes exceed
certain limits, as set by the Distributor, may receive from the
Distributor an additional payment of up to 0.25% of the dollar amount of
such sales. The Distributor may also provide additional promotional
incentives or payments to dealers that sell shares of the funds in the
Delaware Investments family. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold
or may sell certain amounts of shares.

Subject to pending amendments to the NASD's Conduct Rules, in
connection with the promotion of shares of the funds in the Delaware
Investments family, the Distributor may, from time to time, pay to
participate in dealer-sponsored seminars and conferences, reimburse
dealers for expenses incurred in connection with preapproved seminars,
conferences and advertising and may, from time to time, pay or allow
additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as
part of preapproved sales contests. Payment of non-cash compensation to
dealers is currently under review by the NASD and the SEC. It is likely
that the NASD's Conduct Rules will be amended such that the ability of
the Distributor to pay non-cash compensation as described above will be
restricted in some fashion. The Distributor intends to comply with the
NASD's Conduct Rules as they may be amended.

TAX-EFFICIENT EQUITY FUND INSTITUTIONAL CLASS

In addition to offering Class A, Class B and Class C Shares, the
Fund also offers Tax-Efficient Equity Fund Institutional Class, which is
described in a separate prospectus and is available for purchase only by
certain investors. Tax-Efficient Equity Fund Institutional Class shares
generally are distributed directly by the Distributor and do not have a
front-end sales charge, a CDSC or a Limited CDSC, and are not subject to
12b-1 Plan distribution expenses. To obtain the prospectus that
describes Tax-Efficient Equity Fund Institutional Class, contact the
Distributor by writing to the address or by calling the telephone number
listed on the back of this Prospectus.

HOW TO
BUY SHARES

PURCHASE AMOUNTS

Generally, the minimum initial purchase is $1,000 for Class A
Shares, Class B Shares and Class C Shares. Subsequent purchases of
shares of any Class generally must be $100 or more. For purchases under
a Uniform Gifts to Minors Act or Uniform Transfers to Minors Act or
through an Automatic Investing Plan, there is a minimum initial purchase
of $250 and a minimum subsequent purchase of $25. Minimum purchase
requirements do not apply to retirement plans other than IRAs, for which
there is a minimum initial purchase of $250, and a minimum subsequent
purchase of $25, regardless of which Class is selected.

There is a maximum purchase limitation of $250,000 on each purchase
of Class B Shares. For Class C Shares, each purchase must be in an
amount that is less than $1,000,000. An investor may exceed these
maximum purchase limitations by making cumulative purchases over a
period of time. In doing so, an investor should keep in mind that
reduced front-end sales charges are available on investments of $100,000
or more in Class A Shares, and that Class A Shares (i) are subject to
lower annual 12b-1 Plan expenses than Class B Shares and Class C Shares
and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class
B Shares or Class C Shares by the plan.

INVESTING THROUGH YOUR INVESTMENT DEALER

You can make a purchase of shares of the Fund through most
investment dealers who, as part of the service they provide, must
transmit orders promptly. They may charge for this service. If you want
a dealer but do not have one, Delaware Investments can refer you to one.

INVESTING BY MAIL

1. Initial Purchases--An Investment Application or, in the case of a
retirement account, an appropriate retirement plan application, must be
completed, signed and sent with a check, payable to the specific Class
selected to Delaware Investments at 1818 Market Street, Philadelphia, PA
19103.

2. Subsequent Purchases--Additional purchases may be made at any
time by mailing a check payable to the specific Class selected. Your
check should be identified with your name(s) and account number. An
investment slip (similar to a deposit slip) is provided at the bottom of
transaction confirmations and dividend statements that you will receive
from Mutual Funds III, Inc. Use of this investment slip can help
expedite processing of your check when making additional purchases. Your
investment may be delayed if you send additional purchases by certified
mail.

INVESTING BY WIRE

You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number for the Fund and Class in
which you are investing).

1. Initial Purchases--Before you invest, telephone the Shareholder
Service Center to get an account number. If you do not call first,
processing of your investment may be delayed. In addition, you must
promptly send your Investment Application or, in the case of a
retirement account, an appropriate retirement plan application, to the
specific Class selected, to Delaware Investments at 1818 Market Street,
Philadelphia, PA 19103.

2. Subsequent Purchases--You may make additional investments anytime
by wiring funds to CoreStates Bank, N.A., as described above. You should
advise the Shareholder Service Center by telephone of each wire
you send.

If you want to wire investments to a retirement plan account, call
the Shareholder Service Center for special wiring instructions.

INVESTING BY EXCHANGE

If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or
all of your investment into shares of the Fund. If you wish to open an
account by exchange, call the Shareholder Service Center for more
information. All exchanges are subject to the eligibility and minimum
purchase requirements set forth in each fund's prospectus. See
Redemption and Exchange for more complete information concerning your
exchange privileges.

Holders of Class A Shares of the Fund may exchange all or part of
their shares for certain of the shares of other funds in the Delaware
Investments family, including other Class A Shares, but may not exchange
their Class A Shares for Class B Shares or Class C Shares of the Fund or
of any other fund in the Delaware Investments family. Holders of Class B
Shares of the Fund are permitted to exchange all or part of their Class
B Shares only into Class B Shares of other funds in the Delaware
Investments family. Similarly, holders of Class C Shares of the Fund are
permitted to exchange all or part of their Class C Shares only into
Class C Shares of other funds in the Delaware Investments family. Class
B Shares of the Fund and Class C Shares of the Fund acquired by exchange
will continue to carry the CDSC and, in the case of Class B Shares, the
automatic conversion schedule of the fund from which the exchange is
made. The holding period of Class B Shares of the Fund acquired by
exchange will be added to that of the shares that were exchanged for
purposes of determining the time of the automatic conversion into Class
A Shares of the Fund.

Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge, except for exchanges of shares that
were not previously subject to a front-end sales charge (unless such
shares were acquired through the reinvestment of dividends). Permissible
exchanges into Class B Shares or Class C Shares of the Fund will be made
without the imposition of a CDSC by the fund from which the exchange is
being made at the time of the exchange.

See Allied Plans under Classes of Shares for information on
exchanges by participants in an Allied Plan.

ADDITIONAL METHODS OF ADDING TO YOUR INVESTMENT

Call the Shareholder Service Center for more information if you wish
to use the following services:

1. Automatic Investing Plan

THE AUTOMATIC INVESTING PLAN ENABLES YOU TO MAKE REGULAR MONTHLY
INVESTMENTS WITHOUT WRITING OR MAILING CHECKS. You may authorize Mutual
Funds III, Inc. to transfer a designated amount monthly from your
checking account to your Fund account. Many shareholders use this as an
automatic savings plan. Shareholders should allow a reasonable amount of
time for initial purchases and changes to these plans to become
effective.

This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7)
or 457 Deferred Compensation Plans.

2. Direct Deposit

YOU MAY HAVE YOUR EMPLOYER OR BANK MAKE REGULAR INVESTMENTS DIRECTLY
TO YOUR FUND ACCOUNT FOR YOU (for example: payroll deduction, pay by
phone, annuity payments). The Fund also accepts preauthorized recurring
government and private payments by Electronic Fund Transfer, which
avoids mail time and check clearing holds on payments such as social
security, federal salaries, Railroad Retirement benefits, etc.

* * *

Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Mutual Funds III, Inc.
has the right to liquidate your shares to reimburse the government or
transmitting bank. If there are insufficient funds in your account, you
are obligated to reimburse the Fund.

3. MoneyLine SM On Demand

Through the MoneyLine SM On Demand service, you or your investment
dealer may call the Fund to request a transfer of funds from your
predesignated bank account to your Fund account. See MoneyLine SM
Services under The Delaware Difference for additional
information about this service.

4. Wealth Builder Option

You can use our Wealth Builder Option to invest in the Fund through
regular liquidations of shares in your accounts in other funds in the
Delaware Investments family. You may also elect to invest in other
mutual funds in the Delaware Investments family through the Wealth
Builder Option through regular liquidations of shares in your Fund
account.

Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from your
account in one or more funds in the Delaware Investments family and
invested automatically into any other account in a fund in the Delaware
Investments family that you may specify. If in connection with the
election of the Wealth Builder Option, you wish to open a new account to
receive the automatic investment, such new account must meet the minimum
initial purchase requirements described in the prospectus of the fund
that you select. All investments under this option are exchanges and are
therefore subject to the same conditions and limitations as other
exchanges noted above. You can terminate your participation in Wealth
Builder at any time by giving written notice to the fund from which the
exchanges are made. See Redemption and Exchange.

5. Dividend Reinvestment Plan

You can elect to have your distributions (capital gains and/or
dividend income) paid to you by check or reinvested in your Fund
account. Or, you may invest your distributions in certain other funds in
the Delaware Investments family, subject to the exceptions noted below
as well as the eligibility and minimum purchase requirements set forth
in each fund's prospectus.

Reinvestments of distributions into Class A Shares of the Fund or of
other funds in the Delaware Investments family are made without a
front-end sales charge. Reinvestments of distributions into Class B
Shares of the Fund or of other funds in the Delaware Investments family
or into Class C Shares of the Fund or of other funds in the Delaware
Investments family are also made without any sales charge and will not
be subject to a CDSC if later redeemed. See Automatic Conversion of
Class B Shares under Classes of Shares for information concerning the
automatic conversion of Class B Shares acquired by reinvesting
dividends.

Holders of Class A Shares of the Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the
Delaware Investments family, including the Fund. Holders of Class B
Shares of the Fund may reinvest their distributions only into Class B
Shares of the funds in the Delaware Investments family which offer that
class of shares. Similarly, holders of Class C Shares of the Fund may
reinvest their distributions only into Class C Shares of the funds in
the Delaware Investments family which offer that class of shares. For
more information about reinvestments, call the Shareholder Service
Center.

Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same
Delaware Investments fund into which their investments are held:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7)
or 457 Deferred Compensation Plans.

PURCHASE PRICE AND EFFECTIVE DATE

The offering price and net asset value of Class A, Class B and Class
C Shares are determined as of the close of regular trading on the New
York Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the
Exchange is open.

The effective date of a purchase made through an investment dealer
is the date the order is received by the Fund. The effective date of a
direct purchase is the day your wire, electronic transfer or check is
received unless it is received after the time the offering price or net
asset value of shares is determined, as noted above. Purchase orders
received after such time will be effective the next business day.

THE CONDITIONS OF YOUR PURCHASE

The Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are
responsible for any loss incurred. The Fund can redeem shares from your
account(s) to reimburse itself for any loss, and you may be restricted
from making future purchases in any of the funds in the Delaware
Investments family. The Fund reserves the right to reject purchase
orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check
drawn on a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency conversion.

The Fund also reserves the right, following shareholder
notification, to charge a service fee on non-retirement accounts that,
as a result of a redemption, have remained below the minimum stated
account balance for a period of three or more consecutive months.
Holders of such accounts may be notified of their insufficient account
balance and advised that they have until the end of the current calendar
quarter to raise their balance to the stated minimum. If the account has
not reached the minimum balance requirement by that time, the Fund will
charge a $9 fee for that quarter and each subsequent calendar quarter
until the account is brought up to the minimum balance. The service fee
will be deducted from the account during the first week of each calendar
quarter for the previous quarter, and will be used to help defray the
cost of maintaining low-balance accounts. No fees will be charged
without proper notice, and no CDSC will apply to such assessments.

The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial
purchase amount as a result of redemptions. An investor making the
minimum initial investment may be subject to involuntary redemption
without the imposition of a CDSC or Limited CDSC if he or she redeems
any portion of his or her account.

REDEMPTION
AND EXCHANGE

YOU CAN REDEEM OR EXCHANGE YOUR SHARES IN A NUMBER OF DIFFERENT
WAYS. The exchange service is useful if your investment requirements
change and you want an easy way to invest in other equity funds, bond
funds, tax-advantaged funds or money market funds. This service is also
useful if you are anticipating a major expenditure and want to move a
portion of your investment into a fund that has the checkwriting
feature. Exchanges are subject to the requirements of each fund and all
exchanges of shares constitute taxable events. See Taxes. Further, in
order for an exchange to be processed, shares of the fund being acquired
must be registered in the state where the acquiring shareholder resides.
You may want to consult your financial adviser or investment dealer to
discuss which funds in the Delaware Investments family will best meet
your changing objectives, and the consequences of any exchange
transaction. You may also call Delaware Investments directly for fund
information.

Your shares will be redeemed or exchanged at a price based on the
net asset value next determined after the Fund receives your request in
good order, subject, in the case of a redemption, to any applicable CDSC
or Limited CDSC. For example, redemption or exchange requests received
in good order after the time the offering price and net asset value of
shares are determined will be processed on the next business day. See
Purchase Price and Effective Date under How to Buy Shares. A shareholder
submitting a redemption request may indicate that he or she wishes to
receive redemption proceeds of a specific dollar amount. In the case of
such a request, and in the case of certain redemptions from retirement
plan accounts, the Fund will redeem the number of shares necessary to
deduct the applicable CDSC in the case of Class B and Class C Shares,
and, if applicable, the Limited CDSC in the case of Class A Shares and
tender to the shareholder the requested amount, assuming the shareholder
holds enough shares in his or her account for the redemption to be
processed in this manner. Otherwise, the amount tendered to the
shareholder upon redemption will be reduced by the amount of the
applicable CDSC or Limited CDSC. Redemption proceeds will be distributed
promptly, as described below, but not later than seven days after
receipt of a redemption request.

Except as noted below, for a redemption request to be in "good
order," you must provide your account number, account registration, and
the total number of shares or dollar amount of the transaction. For
exchange requests, you must also provide the name of the fund in which
you want to invest the proceeds. Exchange instructions and redemption
requests must be signed by the record owner(s) exactly as the shares are
registered. You may request a redemption or an exchange by calling the
Shareholder Service Center at 800-523-1918. The Fund may suspend,
terminate, or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.

The Fund will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have
already settled. The Fund will honor redemption requests as to shares
for which a check was tendered as payment, but the Fund will not mail or
wire the proceeds until it is reasonably satisfied that the check has
cleared, which may take up to 15 days from the purchase date. You can
avoid this potential delay if you purchase shares by wiring Federal
Funds. The Fund reserves the right to reject a written or telephone
redemption request or delay payment of redemption proceeds if there has
been a recent change to the shareholder's address of record.

There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any
applicable front-end sales charge will apply to exchanges from shares of
funds not subject to a front-end sales charge, except for exchanges
involving assets that were previously invested in a fund with a
front-end sales charge and/or exchanges involving the reinvestment of
dividends.

Holders of Class B Shares or Class C Shares that exchange their
shares ("Original Shares") for shares of other funds in the Delaware
Investments family (in each case, "New Shares") in a permitted exchange,
will not be subject to a CDSC that might otherwise be due upon
redemption of the Original Shares. However, such shareholders will
continue to be subject to the CDSC and, in the case of Class B Shares,
the automatic conversion schedule of the Original Shares as described in
this Prospectus and any CDSC assessed upon redemption will be charged by
the Fund from which the Original Shares were exchanged. In an exchange
of Class B Shares from the Fund, the Fund's CDSC schedule may be higher
than the CDSC schedule relating to the New Shares acquired as a result
of the exchange. For purposes of computing the CDSC that may be payable
upon a disposition of the New Shares, the period of time that an
investor held the Original Shares is added to the period of time that an
investor held the New Shares. With respect to Class B Shares, the
automatic conversion schedule of the Original Shares may be longer than
that of the New Shares. Consequently, an investment in New Shares by
exchange may subject an investor to the higher 12b-1 fees applicable to
Class B Shares of the Fund for a longer period of time than if the
investment in New Shares were made directly.

Various redemption and exchange methods are outlined below. Except
for the CDSC applicable to certain redemptions of Class B and Class C
Shares and the Limited CDSC applicable to certain redemptions of Class A
Shares purchased at net asset value, there is no fee charged by the Fund
or the Distributor for redeeming or exchanging your shares, but such
fees could be charged in the future. You may have your investment dealer
arrange to have your shares redeemed or exchanged. Your investment
dealer may charge for this service.

All authorizations given by shareholders, including selection of any
of the features described below, shall continue in effect until such
time as a written revocation or modification has been received by the
Fund or its agent.

WRITTEN REDEMPTION

You can write to the Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares. The request must be signed
by all owners of the account or your investment dealer of record. For
redemptions of more than $50,000, or when the proceeds are not sent to
the shareholder(s) at the address of record, the Fund requires a
signature by all owners of the account and a signature guarantee for
each owner. Each signature guarantee must be supplied by an eligible
guarantor institution. The Fund reserves the right to reject a signature
guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from
corporations, executors, retirement plans, administrators, trustees or
guardians.

Payment is normally mailed the next business day after receipt of
your redemption request. If your Class A Shares are in certificate form,
the certificate(s) must accompany your request and also be in good
order. Certificates are issued for Class A Shares only if a shareholder
submits a specific request. Certificates are not issued for Class B
Shares or Class C Shares.

WRITTEN EXCHANGE

You may also write to the Fund (at 1818 Market Street, Philadelphia,
PA 19103) to request an exchange of any or all of your shares into
another mutual fund in the Delaware Investments family, subject to the
same conditions and limitations as other exchanges noted above.

TELEPHONE REDEMPTION AND EXCHANGE

To get the added convenience of the telephone redemption and
exchange methods, you must have the Transfer Agent hold your shares
(without charge) for you. If you choose to have your Class A Shares in
certificate form, you may redeem or exchange only by written request and
you must return your certificate(s).

The Telephone Redemption--Check to Your Address of Record service
and the Telephone Exchange service, both of which are described below,
are automatically provided unless you notify the Fund in which you have
your account in writing that you do not wish to have such services
available with respect to your account. The Fund reserves the right to
modify, terminate or suspend these procedures upon 60 days' written
notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an
unusually large volume of telephone requests.

Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone
instructions for redemption or exchange of Fund shares which are
reasonably believed to be genuine. With respect to such telephone
transactions, the Fund will follow reasonable procedures to confirm that
instructions communicated by telephone are genuine (including
verification of a form of personal identification) as, if it does not,
the Fund or its Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by
telephone are generally tape recorded, and a written confirmation will
be provided for all purchase, exchange and redemption transactions
initiated by telephone. By exchanging shares by telephone, you are
acknowledging prior receipt of a prospectus for the fund into which your
shares are being exchanged.

TELEPHONE REDEMPTION--CHECK TO YOUR ADDRESS OF RECORD

THE TELEPHONE REDEMPTION FEATURE IS A QUICK AND EASY METHOD TO
REDEEM SHARES. You or your investment dealer of record can have
redemption proceeds of $50,000 or less mailed to you at your address of
record. Checks will be payable to the shareholder(s) of record. Payment
is normally mailed the next business day after receipt of the redemption
request. This service is only available to individual, joint and
individual fiduciary-type accounts.

TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK

Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize
this service when you open your account. If you change your
predesignated bank account, you must complete an Authorization Form and
have your signature guaranteed. For your protection, your authorization
must be on file. If you request a wire, your funds will normally be sent
the next business day. CoreStates Bank, N.A.'s fee (currently $7.50)
will be deducted from your redemption proceeds. If you ask for a check,
it will normally be mailed the next business day after receipt of your
redemption request to your predesignated bank account. There are no
separate fees for this redemption method, but the mail time may delay
getting funds into your bank account. Simply call the Shareholder
Service Center prior to the time the offering price and net asset value
are determined, as noted above.

MONEYLINE SM ON DEMAND

Through the MoneyLine SM On Demand service, you or your investment
dealer may call the Fund to request a transfer of funds from your Fund
account to your predesignated bank account. See MoneyLine SM Services
under The Delaware Difference for additional information about this
service.

TELEPHONE EXCHANGE

The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and
investment objectives change. You or your investment dealer of record
can exchange your shares into other funds in the Delaware Investments
family under the same registration, subject to the same conditions and
limitations as other exchanges noted above. As with the written exchange
service, telephone exchanges are subject to the requirements of each
fund, as described above. Telephone exchanges may be subject to
limitations as to amounts or frequency.

SYSTEMATIC WITHDRAWAL PLANS

1. Regular Plans

This plan provides shareholders with a consistent monthly (or
quarterly) payment. THIS IS PARTICULARLY USEFUL TO SHAREHOLDERS LIVING
ON FIXED INCOMES, SINCE IT CAN PROVIDE THEM WITH A STABLE SUPPLEMENTAL
AMOUNT. With accounts of at least $5,000, you may elect monthly
withdrawals of $25 (quarterly $75) or more. The Fund does not recommend
any particular monthly amount, as each shareholder's situation and needs
vary. Payments are normally made by check. In the alternative, you may
elect to have your payments transferred from your Fund account to your
predesignated bank account through the MoneyLine(SM) Direct Deposit
Service. Through this service, it may take up to four business days for
the transaction to be completed. There are no separate fees for this
redemption method. See MoneyLine(SM) Services under The Delaware
Difference for more information about this service.

2. Retirement Plans

For shareholders eligible under the applicable retirement plan to
receive benefits in periodic payments, the Systematic Withdrawal Plan
provides you with maximum flexibility. A number of formulas are
available for calculating your withdrawals depending upon whether the
distributions are required or optional. Withdrawals must be for $25 or
more; however, no minimum account balance is required. The MoneyLine(SM)
Direct Deposit Service described above is not available for certain
retirement plans.

* * *

Shareholders should not purchase additional shares while
participating in a Systematic Withdrawal Plan.

Redemptions of Class A Shares via a Systematic Withdrawal Plan may
be subject to a Limited CDSC if the original purchase was made at net
asset value within the 12 months prior to the withdrawal and a dealer's
commission was paid on that purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value, below.

The applicable CDSC for Class B Shares and Class C Shares redeemed
via a Systematic Withdrawal Plan will be waived if, on the date that the
Plan is established, the annual amount selected to be withdrawn is less
than 12% of the account balance. If the annual amount selected to be
withdrawn exceeds 12% of the account balance on the date that the
Systematic Withdrawal Plan is established, all redemptions under the
Plan will be subject to the applicable CDSC. Whether a waiver of the
CDSC is available or not, the first shares to be redeemed for each
Systematic Withdrawal Plan payment will be those not subject to a CDSC
because they have either satisfied the required holding period or were
acquired through the reinvestment of distributions. The 12% annual limit
will be reset on the date that any Systematic Withdrawal Plan is
modified (for example, a change in the amount selected to be withdrawn
or the frequency or date of withdrawals), based on the balance in the
account on that date. See Waiver of Contingent Deferred Sales
Charge--Class B and Class C Shares, below.

For more information on Systematic Withdrawal Plans, call the
Shareholder Service Center.

CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS OF CLASS A
SHARES PURCHASED AT NET ASSET VALUE

For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares
(or shares into which such Class A Shares are exchanged) according to
the following schedule: (1) 1.00% if shares are redeemed during the
first year after purchase; and (2) 0.50% if such shares are redeemed
during the second year after purchase, if such purchases were made at
net asset value and triggered the payment by the Distributor of the
dealer's commission described above.

The Limited CDSC will be paid to the Distributor and will be
assessed on an amount equal to the lesser of (1) the net asset value at
the time of purchase of the Class A Shares being redeemed or (2) the net
asset value of such Class A Shares at the time of redemption. For
purposes of this formula, the "net asset value at the time of purchase"
will be the net asset value at purchase of Class A Shares even if those
shares are later exchanged for shares of another Delaware Group fund
and, in the event of an exchange of Class A Shares, the "net asset value
of such shares at the time of redemption" will be the net asset value of
the shares acquired in the exchange.

Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A
Shares into another Delaware Group fund will not trigger the imposition
of the Limited CDSC at the time of such exchange. The period a
shareholder owns shares into which Class A Shares are exchanged will
count towards satisfying the two-year holding period. The Limited CDSC
is assessed if such two-year period is not satisfied irrespective of
whether the redemption triggering its payment is of Class A Shares of
the Fund or Class A Shares acquired in the exchange.

In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed
followed by other shares held for the longest period of time. The
Limited CDSC will not be imposed upon shares representing reinvested
dividends or capital gains distributions, or upon amounts representing
share appreciation. All investments made during a calendar month,
regardless of what day of the month the investment occurred, will age
one month on the last day of that month and each subsequent month.

WAIVER OF LIMITED CONTINGENT DEFERRED SALES CHARGE--CLASS A SHARES

The Limited CDSC for Class A Shares on which a dealer's commission
has been paid will be waived in the following instances: (i) redemptions
that result from the Fund's right to liquidate a shareholder's account
if the aggregate net asset value of the shares held in the account is
less than the then-effective minimum account size; (ii) distributions to
participants from a retirement plan qualified under section 401(a) or
401(k) of the Internal Revenue Code of 1986, as amended (the "Code"), or
due to death of a participant in such a plan; (iii) redemptions pursuant
to the direction of a participant or beneficiary of a retirement plan
qualified under section 401(a) or 401(k) of the Code with respect to
that retirement plan; (iv) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death,
disability, or attainment of age 59 1/2, and IRA distributions
qualifying under Section 72(t) of the Internal Revenue Code; (v) returns
of excess contributions to an IRA; (vi) distributions by other employee
benefit plans to pay benefits; (vii) distributions described in (ii),
(iv), and (vi) above pursuant to a Systematic Withdrawal Plan; and
(viii) redemptions by the classes of shareholders who are permitted to
purchase shares at net asset value, regardless of the size of the
purchase (see Buying Class A Shares at Net Asset Value under Classes of
Shares).

WAIVER OF CONTINGENT DEFERRED SALES CHARGE--CLASS B AND CLASS C SHARES

The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result
from the Fund's right to liquidate a shareholder's account if the
aggregate net asset value of the shares held in the account is less than
the then-effective minimum account size; (ii) returns of excess
contributions to an IRA, SIMPLE IRA, SEP/IRA or 403(b)(7) or 457
Deferred Compensation Plans; (iii) periodic distributions from an IRA,
SIMPLE IRA, SAR/SEP, SEP/IRA, 403(b)(7) or 457 Deferred Compensation
Plan due to death, disability and attainment of age 59 1/2, and IRA
distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results
from the death of all registered owners of the account (in the case of
accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the
death of all beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners occurring
after the purchase of the shares being redeemed.

The CDSC on Class C Shares is waived in connection with the
following redemptions: (i) redemptions that result from the Fund's right
to liquidate a shareholder's account if the aggregate net asset value of
the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE
IRA, 403(b)(7) or 457 Deferred Compensation Plan, Profit Sharing Plan,
Money Purchase Pension Plan, or 401(k) Defined Contribution Plan; (iii)
periodic distributions from a 403(b)(7) or 457 Deferred Compensation
Plan upon attainment of age 59 1/2, Profit Sharing Plan, Money Purchase
Pension Plan, 401(k) Defined Contribution Plans upon attainment of age
70 1/2, and IRA distributions qualifying under Section 72(t) of the
Internal Revenue Code; (iv) distributions from a 403(b)(7) Deferred
Compensation Plan, 457 Deferred Compensation Plan, Profit Sharing Plan,
or 401(k) Defined Contribution Plan, under hardship provisions of the
plan; (v) distributions from a 403(b)(7) Deferred Compensation Plan, 457
Deferred Compensation Plan, Profit Sharing Plan, Money Purchase Pension
Plan or a 401(k) Defined Contribution Plan upon attainment of normal
retirement age under the plan or upon separation from service; (vi)
periodic distributions from an IRA or SIMPLE IRA on or after attainment
of age 591/2; and (vii) distributions from an account if the redemption
results from the death of all registered owners of the account (in the
case of accounts established under the Uniform Gifts to Minors or
Uniform Transfers to Minors Acts or trust accounts, the waiver applies
upon the death of all beneficial owners) or a total and permanent
disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.

In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual
amount selected to be withdrawn under the Plan does not exceed 12% of
the value of the account on the date that the Systematic Withdrawal Plan
was established or modified.

DIVIDENDS AND
DISTRIBUTIONS

Each Class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the per share dividends
from net investment income on Class A Shares, Class B Shares and Class C
Shares will vary due to the expenses under the 12b-1 Plan applicable to
each Class. Generally, the dividends per share on Class B Shares and
Class C Shares can be expected to be lower than the dividends per share
on Class A Shares because the expenses under the 12b-1 Plans relating to
Class B and Class C Shares will be higher than the expenses under the
12b-1 Plan relating to Class A Shares. See Distribution (12b-1) and
Service under Management of the Fund.

Both dividends and distributions, if any, are automatically
reinvested in your account at net asset value unless you elect
otherwise. Any check in payment of dividends or other distributions
which cannot be delivered by the United States Post Office or which
remains uncashed for a period of more than one year may be reinvested in
your account at the then-current net asset value and the dividend option
may be changed from cash to reinvest. If you elect to take your
dividends and distributions in cash and such dividends and distributions
are in an amount of $25 or more, you may choose the MoneyLine SM Direct
Deposit Service and have such payments transferred from your Fund
account to your predesignated bank account. This service is not
available for certain retirement plans. See MoneyLine SM Services under
The Delaware Difference for more information about this service.

TAXES

The tax discussion set forth below is included for general
information only. Investors should consult their own tax advisers
concerning the federal, state, local or foreign tax consequences of an
investment in the Fund.

The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. As such, the Fund will not be subject to
federal income tax, or to any excise tax, to the extent its earnings are
distributed as provided in the Code and it satisfies certain other
requirements relating to the sources of its income and diversification
of its assets.

On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping changes
in the Code. Because many of these changes are complex, and only
indirectly affect the Fund and its distributions to you, they are
discussed in Part B. Changes in the treatment of capital gains, however,
are discussed in this section.

The Fund intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends from net
investment income or net short-term capital gains will be taxable to
those investors who are subject to income taxes as ordinary income,
whether received in cash or in additional shares. For corporate
investors, dividends from net investment income will generally qualify
in part for the corporate dividends-received deduction. The portion of
dividends paid by the Fund that so qualifies will be designated each
year in a notice from Mutual Funds III, Inc. to the Fund's shareholders.

Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors
who are subject to income taxes as long-term capital gains, regardless
of the length of time an investor has owned shares in the Fund. The Fund
does not seek to realize any particular amount of capital gains during a
year; rather, realized gains are a by-product of Fund management
activities. Consequently, capital gains distributions may be expected to
vary considerably from year to year. Also, for those investors subject
to tax, if purchases of shares in the Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of
the investment will be returned as a taxable distribution.

THE TREATMENT OF CAPITAL GAIN DISTRIBUTIONS UNDER THE TAXPAYER
RELIEF ACT OF 1997

The 1997 Act creates a category of long-term capital gain for
individuals who will be taxed at new lower tax rates. For investors who
are in the 28% or higher federal income tax brackets, these gains will
be taxed at a maximum rate of 20%. For investors who are in the 15%
federal income tax bracket, these gains will be taxed at a maximum rate
of 10%. Capital gain distributions will qualify for these new maximum
tax rates, depending on when the Fund's securities were sold and how
long they were held by the Fund before they were sold. Investors who
want more information on holding periods and other qualifying rules
relating to these new rates should review the expanded discussion in
Part B, or should contact their own tax advisers.

Mutual Funds III, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain
distributions which will qualify for these maximum federal tax rates.

Although dividends generally will be treated as distributed when
paid, dividends which are declared in October, November or December to
shareholders of record on a specified date in one of those months, but
which, for operational reasons, may not be paid to the shareholder until
the following January, will be treated for tax purposes as if paid by
the Fund and received by the shareholder on December 31 of the calendar
year in which they are declared.

The sale of shares of the Fund is a taxable event and may result in
a capital gain or loss to shareholders subject to tax. Capital gain or
loss may be realized from an ordinary redemption of shares or an
exchange of shares between the Fund and any other fund in the Delaware
Investments family. Any loss incurred on a sale or exchange of Fund
shares that had been held for six months or less will be treated as a
long-term capital loss to the extent of capital gain dividends received
with respect to such shares. All or a portion of the sales charge
incurred in acquiring Fund shares will be excluded from the federal tax
basis of any of such shares sold or exchanged within 90 days of their
purchase (for purposes of determining gain or loss upon the sale of such
shares) if the sale proceeds are reinvested in such Fund or in another
fund in the Delaware Investments family and a sales charge that would
otherwise apply to the reinvestment is reduced or eliminated. Any
portion of such sales charge excluded from the tax basis of the shares
sold will be added to the tax basis of the shares acquired in the
reinvestment.

The automatic conversion of Class B Shares into Class A Shares at
the end of approximately eight years after purchase will be tax-free for
federal tax purposes. See Automatic Conversion of Class B Shares under
Classes of Shares.

The Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities.

In addition to the federal taxes described above, shareholders may
or may not be subject to various state and local taxes. For example,
distributions of interest income and capital gains realized from certain
types of U.S. government securities may be exempt from state personal
income taxes. Because investors' state and local taxes may be different
than the federal taxes described above, investors should consult their
own tax advisers.

Each year, Mutual Funds III, Inc. will mail to you information on
the tax status of the Fund's dividends and distributions. Shareholders
will also receive each year information as to the portion of dividend
income, if any, that is derived from U.S. government securities that are
exempt from state income tax. Of course, shareholders who are not
subject to tax on their income would not be required to pay tax on
amounts distributed to them by the Fund.

The Fund is required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid
this withholding requirement by certifying on your Investment
Application your proper Taxpayer Identification Number and by certifying
that you are not subject to backup withholding.

See Part B for additional information on tax matters relating to the
Fund and its shareholders.

CALCULATION OF
OFFERING PRICE AND
NET ASSET VALUE PER SHARE

The net asset value ("NAV") per share is computed by adding the
value of all securities and other assets in the portfolio, deducting any
liabilities (expenses and fees are accrued daily) and dividing by the
number of shares outstanding. Debt securities are priced on the basis of
valuations provided by an independent pricing service using methods
approved by Mutual Funds III, Inc.'s Board of Directors. Equity
securities for which market quotations are available are priced at
market value. Short-term investments having a maturity of less than 60
days are valued at amortized cost, which approximates market value. All
other securities are valued at their fair value as determined in good
faith and in a method approved by Mutual Funds III, Inc.'s Board of
Directors.

Class A Shares are purchased at the offering price per share, while
Class B Shares and Class C Shares are purchased at the NAV per share.
The offering price per share of Class A Shares consists of the NAV per
share next computed after the order is received, plus any applicable
front-end sales charges.

The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.

The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share
based on the proportionate participation in the Fund represented by the
value of shares of that class. All income earned and expenses incurred
by the Fund will be borne on a pro-rata basis by each outstanding share
of a class, based on each class' percentage in the Fund represented by
the value of shares of such classes, except that Tax-Efficient Equity
Fund Institutional Class will not incur any of the expenses under Mutual
Funds III, Inc.'s 12b-1 Plans and Class A, Class B and Class C Shares
alone will bear the 12b-1 Plan expenses payable under their respective
Plans. Due to the specific distribution expenses and other costs that
will be allocable to each class, the NAV of each class of the Fund will
vary.

MANAGEMENT OF
THE FUND

DIRECTORS

The business and affairs of Mutual Funds III, Inc. are managed under
the direction of its Board of Directors. Part B contains additional
information regarding Mutual Funds III, Inc.'s directors and officers.

INVESTMENT MANAGER

The Manager furnishes investment management services to the Fund.

The Manager and its predecessors have been managing the funds in the
Delaware Investments family since 1938. On April 30, 1998, the Manager
and its affiliates within Delaware Investments, including Delaware
International Advisers Ltd., were managing in the aggregate more than
$45 billion in assets in various institutional or separately managed
(approximately $27,330,570,000) and investment company (approximately
$17,773,730,000) accounts.

The Manager is a series of Delaware Management Business Trust. The
Manager changed its form of organization from a corporation to a
business trust on March 1, 1998. The Manager is an indirect, wholly
owned subsidiary of Delaware Management Holdings, Inc. ("DMH"). On April
3, 1995, a merger between DMH and a wholly owned subsidiary of Lincoln
National Corporation ("Lincoln National") was completed. DMH and the
Manager are now indirect, wholly owned subsidiaries, and subject to the
ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.

The Manager administers the affairs of and is ultimately responsible
for the investment management of the Fund under an Investment Management
Agreement with Mutual Funds III, Inc. on behalf of the Fund dated June
26, 1997. Under the Investment Management Agreement for the Fund, the
Manager is paid an annual fee equal to 0.75% on the first $500 million
of average daily net assets, 0.725% on the next $500 million and 0.70%
on the average daily net assets in excess of $1 billion. For the fiscal
year ended April 30, 1998, investment management fees accrued by the
Fund amounted to 0.75% (annualized) of average daily net assets and
0.23% (annualized) of average daily net assets was paid considering the
waiver of fees by the Manager.

George H. Burwell has primary responsibility for making day-to-day
investment decisions for the Fund. Mr. Burwell holds a BA from the
University of Virginia. Prior to joining Delaware Investments in 1992,
Mr. Burwell was a portfolio manager for Midlantic Bank in Edison, New
Jersey, where he managed an equity mutual fund and three commingled
funds. Mr. Burwell is a CFA charterholder.

In making investment decisions for the Fund, Mr. Burwell regularly
consults with Wayne A. Stork and Richard G. Unruh, Jr. Mr. Stork,
Chairman of the Manager's and Mutual Funds III, Inc.'s Boards of
Directors, is a graduate of Brown University and attended New York
University's Graduate School of Business Administration. Mr. Stork
joined Delaware Investments in 1962 and has served in various executive
capacities at different times within the Delaware organization. A
graduate of Brown University, Mr. Unruh received his MBA from the
University of Pennsylvania's Wharton School and joined Delaware
Investments in 1982 after 19 years of investment management experience
with Kidder, Peabody & Co. Inc. Mr. Unruh is an Executive Vice President
of Mutual Funds III, Inc. He is also a member of the Board of the
Manager and was named an Executive Vice President of the Manager
in 1994.

PORTFOLIO TRADING PRACTICES

The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of
time they have been held. The degree of portfolio activity will affect
brokerage costs of the Fund and may affect taxes payable by the Fund's
shareholders. Given the Fund's investment objective, its annual
portfolio turnover rate is not expected to exceed 100%. A turnover rate
of 100% would occur, for example, if all the investments in the Fund's
portfolio at the beginning of the year were replaced by the end of the
year.

The Fund uses its best efforts to obtain the best available price
and most favorable execution for portfolio transactions. Orders may be
placed with brokers or dealers who provide brokerage and research
services to the Manager or to their advisory clients. These services may
be used by the Manager in servicing any of its accounts. Subject to best
price and execution, the Fund may consider a broker/dealer's sales of
shares of funds in the Delaware Investments family in placing portfolio
orders and may place orders with broker/dealers that have agreed to
defray certain expenses of such funds, such as custodian fees.

PERFORMANCE INFORMATION

From time to time, the Fund may quote total return performance of
its Classes in advertising and other types of literature.

Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value and:
(i) in the case of Class A Shares, the impact of the maximum front-end
sales charge at the beginning of each specified period; and (ii) in the
case of Class B Shares and Class C Shares, the deduction of any
applicable CDSC at the end of the relevant period. Each presentation
will include the average annual total return for one-, five- and
ten-year (or life-of-fund, if applicable) periods. The Fund may also
advertise aggregate and average total return information concerning a
Class over additional periods of time. In addition, the Fund may present
total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC. In this case,
such total return information would be more favorable than total return
information that includes the deductions of the maximum front-end sales
charge or any applicable CDSC.

Because securities prices fluctuate, investment results of the
Classes will fluctuate over time and past performance should not be
considered a guarantee of future results.

DISTRIBUTION (12B-1) AND SERVICE

The Distributor, Delaware Distributors, L.P., serves as the national
distributor of the Fund's shares under a Distribution Agreement with
Mutual Funds III, Inc. dated as of June 26, 1997.

Mutual Funds III, Inc. has adopted a separate distribution plan
under Rule 12b-1 for each of the Class A Shares, Class B Shares and
Class C Shares of the Fund (the "Plans"). The Plans permit the Fund to
pay the Distributor from the assets of the respective Classes a monthly
fee for the Distributor's services and expenses in distributing and
promoting sales of shares. These expenses include, among other things,
preparing and distributing advertisements, sales literature, and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, holding special promotions for specified periods of
time, and paying distribution and maintenance fees to brokers, dealers
and others. In connection with the promotion of shares of the Classes,
the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, and reimburse dealers for
expenses incurred in connection with preapproved seminars, conferences,
and advertising. The Distributor may pay or allow additional promotional
incentives to dealers as part of preapproved sales contests and/or to
dealers who provide extra training and information concerning a Class
and increase sales of the Class. In addition, the Fund may make payments
from the 12b-1 plan fees of its respective Class directly to others,
such as banks, who aid in the distribution of Class shares or provide
services in respect of a Class, pursuant to service agreements with
Mutual Funds III, Inc.

The 12b-1 Plan expenses relating to each of the Class B Shares and
Class C Shares are also used to pay the Distributor for advancing the
commission costs to dealers with respect to the initial sale of such
shares.

The aggregate fees paid by the Fund from the assets of its Classes
to the Distributor and others under the Plans may not exceed (i) 0.30%
of Class A Shares' average daily net assets in any year, and (ii) 1%
(0.25% of which are service fees to be paid to the Distributor, dealers
and others for providing personal service and/or maintaining shareholder
accounts) of each of the Class B Shares' and Class C Shares' average
daily net assets in any year. Class A, Class B and Class C Shares will
not incur any distribution expenses beyond these limits, which may not
be increased without shareholder approval. For the period from February
1, 1998 through December 31, 1998, the Distributor has elected
voluntarily to waive its right to receive 12b-1 Plan fees with respect
to Class A Shares to the extent necessary to ensure that 12b-1 Plan
expenses for this Class do not exceed 0.25% of average daily net assets.

While payments pursuant to the Plans may not exceed 0.30% annually
with respect to Class A Shares, and 1% annually with respect to each of
the Class B Shares and the Class C Shares, the Plans do not limit fees
to amounts actually expended by the Distributor. It is therefore
possible that the Distributor may realize a profit in any particular
year. However, the Distributor currently expects that its distribution
expenses will likely equal or exceed payments to it under the Plans. The
Distributor may, however incur such additional expenses and make
additional payments to dealers from its own resources to promote the
distribution of shares of the Classes. The monthly fees paid to the
Distributor under the Plans are subject to the review and approval of
Mutual Funds III, Inc.'s unaffiliated directors, who may reduce the fees
or terminate the Plans at any time.

The Plans do not apply to Tax-Efficient Equity Fund Institutional
Class of shares. Those shares are not included in calculating the Plans'
fees, and the Plans are not used to assist in the distribution and
marketing of Tax-Efficient Equity Fund Institutional Class.

The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the
Fund pursuant to an amended and restated agreement dated as of May 1,
1997. The Transfer Agent also provides accounting services to the Fund
pursuant to the terms of a separate Fund Accounting Agreement. The
directors of Mutual Funds III, Inc. annually review service fees paid to
the Transfer Agent.

The Distributor and the Transfer Agent are also indirect, wholly
owned subsidiaries of DMH.

* * *

As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if
the computer systems used by its service providers do not properly process
and calculate date-related information from and after January 1, 2000.
This is commonly known as the "Year 2000 Problem." Mutual Funds III, Inc.
is taking steps to obtain satisfactory assurances that the Fund's major
service providers are taking steps reasonably designed to address the
Year 2000 Problem with respect to the computer systems that such service
providers use. There can be no assurances that these steps will be
sufficient to avoid any adverse impact on the business of the Fund.

Several European countries are participating in the European
Economic and Monetary Union, which will establish a common European
currency for participating countries. This currency will commonly be
known as the "Euro." It is anticipated that each such participating
country will replace its existing currency with the Euro on January 1,
1999. Additional European countries may elect to participate after that
date. If the Fund is invested in securities of participating countries
it could be adversely affected if the computer systems used by its major
service providers are not properly prepared to handle the implementation
of this single currency or the adoption of the Euro by additional
countries in the future. Mutual Funds III, Inc. is taking steps to
obtain satisfactory assurances that the major service providers of the
Fund are taking steps reasonably designed to address these matters with
respect to the computer systems that such service providers use. There
can be no assurances that these steps will be sufficient to avoid any
adverse impact on the business of the Fund.

EXPENSES

The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those
borne by the Distributor under the Distribution Agreement.

For the fiscal year ended April 30, 1998, the annualized ratio of
operating expenses to average daily net assets for each Class of the
Fund was as follows:

ASSUMING WITHOUT
VOLUNTARY VOLUNTARY
WAIVER WAIVERS
OF FEES OF FEES
Class A Shares 1.47% 1.99%
Class B Shares 2.20% 2.72%
Class C Shares 2.20% 2.72%

The expense ratio of each Class reflects the impact of its 12b-1
Plan.

Fund shares have a par value of $.01, equal voting rights, except as
noted below, and are equal in all other respects. Each fund will vote
separately on any matter which affects only that fund. Shares of each
fund have a priority over shares of any other fund of Mutual Funds III,
Inc. in the assets and income of that fund.

All of the shares have noncumulative voting rights which means that
the holders of more than 50% of Mutual Funds III, Inc.'s shares voting
for the election of directors can elect 100% of the directors if they
choose to do so. Under Minnesota law, Mutual Funds III, Inc. is not
required, and does not intend, to hold annual meetings of shareholders
unless, under certain circumstances, it is required to do so under the
1940 Act.

In addition to Class A Shares, Class B Shares and Class C Shares,
the Fund offers an Institutional Class. Shares of each Class represent
proportionate interests in the assets of the Fund and have the same
voting and other rights and preferences as the other classes of the
Fund, except that shares of the Institutional Class are not subject to,
and may not vote on matters affecting, the Distribution Plans under Rule
12b-1 relating to Class A, Class B and Class C Shares. Similarly, as a
general matter, the shareholders of Class A Shares, Class B Shares and
Class C Shares may vote only on matters affecting the 12b-1 Plan that
relates to the class of shares that they hold. However, Class B Shares
of the Fund may vote on any proposal to increase materially the fees to
be paid by the Fund under the 12b-1 Plan relating to Class A Shares.

OTHER INVESTMENT
POLICIES AND SPECIAL
RISK CONSIDERATIONS

RULE 144A SECURITIES

The Fund may invest in restricted securities, including privately
placed securities, some of which may be eligible for resale without
registration pursuant to Rule 144A ("Rule 144A Securities") under the
Securities Act of 1933. Rule 144A permits many privately placed and
legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more than
15% of the value of its net assets in illiquid securities.

While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day function of determining whether or not
individual Rule 144A Securities are liquid for purposes of the Fund's
15% limitation on investments in illiquid assets. The Board has
instructed the Manager to consider the following factors in determining
the liquidity of a Rule 144A Security: (i) the frequency of trades and
trading volume for the security; (ii) whether at least three dealers are
willing to purchase or sell the security and the number of potential
purchasers; (iii) whether at least two dealers are making a market in
the security; (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security,
the method of soliciting offers, and the mechanics of transfer).

If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result,
the Fund's holdings of illiquid securities exceed the Fund's 15% limit
on investments in such securities, the Manager will determine what
action to take to ensure that the Fund continues to adhere to
such limitation.

INDEXED SECURITIES

Indexed securities include commercial paper, certificates of deposit
and other fixed-income securities whose values at maturity or coupon
interest rates are determined by reference to the return of a particular
stock index or group of stocks. Indexed securities can be affected by
changes in interest rates and the creditworthiness of their issuers as
well as stock prices and may not track market returns as accurately as
direct investments in common stocks.

Indexed securities in which the Fund may invest include Foreign
Index Linked Instruments. Foreign Index Linked Instruments are
fixed-income securities which are issued by U.S. issuers (including U.S.
subsidiaries of foreign issuers) and are denominated in U.S. dollars but
return principal and/or pay interest to investors in amounts which are
linked to the level of a particular foreign index. A foreign index may
be based upon the exchange rate of a particular currency or currencies
or the differential between two currencies, or the level of interest
rates in a particular country or countries, or the differential in
interest rates between particular countries. In the case of Foreign
Index Linked Instruments linking the principal amount to a foreign
index, the amount of principal payable by the issuer at maturity will
increase or decrease in response to changes in the level of the foreign
index during the term of the Foreign Index Linked Instrument. In the
case of Foreign Index Linked Instruments linking the interest component
to a foreign index, the amount of interest payable will adjust
periodically in response to changes in the level of the foreign index
during the term of the Foreign Index Linked Instrument. Foreign Index
Linked Instruments may be issued by a U.S. governmental agency or
instrumentality or by a private issuer.

SWAP AGREEMENTS

Swap agreements typically involve a commitment by the Fund to pay
specified amounts (such as fixed or floating interest rates) at regular
intervals in return for all or a portion of the investment return of a
particular stock index or group of stocks. As with stock index options
and futures (discussed below), swap agreements provide exposure to the
stock market, but may not track market returns as accurately as direct
investments in common stocks. In addition, the Fund typically depends on
the credit of a single counterparty when investing in a swap agreement,
and may suffer a loss irrespective of the value of the underlying index
if the counterparty's credit declines. The Fund will usually enter into
swap agreements on a net basis, i.e., the two payment streams are netted
out, with the Fund receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any, of the
Fund's obligations over its entitlements with respect to each swap
agreement will be accrued on a daily basis, and an amount of cash, U.S.
government securities or other liquid high-grade debt securities having
an aggregate net asset value at least equal to the accrued excess will
be maintained in a segregated account by the Fund's custodian. If the
Fund enters into a swap agreement on other than a net basis, the Fund
will maintain a segregated account in the full amount, accrued on a
daily basis, of the Fund's obligations with respect to the swap.

INVESTMENT COMPANY SECURITIES

Any investments that the Fund makes in either closed-end or open-end
investment companies will be limited by the 1940 Act, and would involve
an indirect payment of a portion of the expenses, including advisory
fees, of such other investment companies. Under the 1940 Act's current
limitations, the Fund may not (1) own more than 3% of the voting stock
of another investment company; (2) invest more than 5% of the Fund's
total assets in the shares of any one investment company; nor (3) invest
more than 10% of the Fund's total assets in shares of other investment
companies. If the Fund elects to limit its investment in other
investment companies to closed-end investment companies, the 3%
limitation described above is increased to 10%. These percentage
limitations also apply to the Fund's investments in unregistered
investment companies.

REPURCHASE AGREEMENTS

In order to invest its short-term cash reserves or when in a
temporary defensive posture, the Fund may enter into repurchase
agreements with banks or broker/dealers deemed to be creditworthy by the
Manager, under guidelines approved by the Board of Directors. A
repurchase agreement is a short-term investment in which the purchaser
(i.e. the Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price,
thereby determining the yield during the purchaser's holding period.
Generally, repurchase agreements are of short duration, often less than
one week but on occasion for longer periods. Not more than 15% of the
Fund's assets may be invested in illiquid securities, including
repurchase agreements of over seven-days' maturity. Should an issuer of
a repurchase agreement fail to repurchase the underlying security, the
loss to the Fund, if any, would be the difference between the repurchase
price and the market value of the security. The Fund will limit its
investments in repurchase agreements to those which the Manager under
guidelines of the Board of Directors determines to present minimal
credit risks and which are of high quality. In addition, the Fund must
have collateral of at least 102% of the repurchase price, including the
portion representing the Fund's yield under such agreements, which is
monitored on a daily basis.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Fund may purchase securities on a when-issued or delayed
delivery basis. In such transactions, instruments are purchased with
payment and delivery taking place in the future in order to secure what
is considered to be an advantageous yield or price at the time of the
transaction. Delivery of and payment for these securities may take as
long as a month or more after the date of the purchase commitment. The
Fund will maintain with its custodian bank a separate account with a
segregated portfolio of securities in an amount at least equal to these
commitments. The payment obligation and the interest rates that will be
received are each fixed at the time the Fund enters into the commitment
and no interest accrues to the Fund until settlement. Thus, it is
possible that the market value at the time of settlement could be higher
or lower than the purchase price if the general level of interest rates
has changed.

HEDGING TRANSACTIONS

The Fund may write covered call options and secured put options and
purchase call and put options on securities and security indices. The
Fund may also engage in transactions in financial futures contracts and
related options for hedging purposes. These investment techniques and
the related risks are summarized below and are described in more detail
in Part B.

OPTIONS

The Manager may employ options techniques in an attempt to protect
appreciation attained and to take advantage of the liquidity available
in the options market. The Fund may purchase call options on foreign or
U.S. securities and indices and enter into related closing transactions
and the Fund may write covered call options on such securities. The Fund
may also purchase put options on such securities and indices and enter
into related closing transactions.

A call option enables the purchaser, in return for the premium paid,
to purchase securities from the writer of the option at an agreed price
up to an agreed date. A covered call option obligates the writer, in
return for the premium received, to sell the securities subject to the
option to the purchaser of the option for an agreed upon price up to an
agreed date. The advantage is that the purchaser may hedge against an
increase in the price of securities it ultimately wishes to buy or take
advantage of a rise in a particular index. The Fund will only purchase
call options to the extent that premiums paid on all outstanding call
options do not exceed 2% of its total assets.

A put option enables the purchaser of the option, in return for the
premium paid, to sell the security underlying the option to the writer
at the exercise price during the option period, and the writer of the
option has the obligation to purchase the security from the purchaser of
the option. The Fund will only purchase put options to the extent that
the premiums on all outstanding put options do not exceed 2% of its
total assets. The advantage is that the purchaser can be protected
should the market value of the security decline or should a particular
index decline.

An option on a securities index gives the purchaser of the option,
in return for the premium paid, the right to receive from the seller
cash equal to the difference between the closing price of the index and
the exercise price of the option.

Closing transactions essentially let the Fund offset put options or
call options prior to exercise or expiration. If the Fund cannot effect
closing transactions, it may have to hold a security it would otherwise
sell or deliver a security it might want to hold.

In purchasing put and call options, the premium paid by the Fund
plus any transaction costs will reduce any benefit realized by the Fund
upon exercise of the option. With respect to writing covered call
options, the Fund may lose the potential market appreciation of the
securities subject to the option, if the Manager's judgment is wrong and
the price of the security moves in the opposite direction from what was
anticipated.

The Fund may use both Exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Fund will only
invest in such options to the extent consistent with its 15% limitation
on investment in illiquid securities. The Fund will comply with
Securities and Exchange Commission asset segregation and coverage
requirements when engaging in these types of transactions.

FUTURES

Futures contracts are agreements for the purchase or sale for future
delivery of securities. When a futures contract is sold, the Fund incurs
a contractual obligation to deliver the securities underlying the
contract at a specified price on a specified date during a specified
future month. A purchase of a futures contract means the acquisition of
a contractual right to obtain delivery to the Fund of the securities
called for by the contract at a specified price during a specified
future month.

While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally terminated by
entering into an offsetting transaction. When the Fund enters into a
futures transaction, it must deliver to the futures commission merchant
selected by the Fund an amount referred to as "initial margin." This
amount is maintained by the futures commission merchant in an account at
the Fund's custodian bank. Thereafter, a "variation margin" may be paid
by the Fund to, or drawn by the Fund from, such account in accordance
with controls set for such account, depending upon changes in the price
of the underlying securities subject to the futures contract.

The Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities
except that options on futures give the purchaser the right, in return
for the premium paid, to assume a position in a futures contract, rather
than actually to purchase or sell the futures contract, at a specified
exercise price at any time during the period of the option.

The purpose of the purchase or sale of futures contracts consisting
of U.S. government securities is to protect the Fund against the adverse
effects of fluctuations in interest rates without actually buying or
selling such securities. Similarly, when it is expected that interest
rates may decline, futures contracts may be purchased to hedge in
anticipation of subsequent purchases of U.S. government securities at
higher prices.

INVESTMENT RESTRICTIONS

Although the Fund is permitted under certain circumstances to borrow
money, the Fund normally will not do so. The Fund will not purchase new
securities whenever borrowings exceed 5% of the value of the total
assets of the Fund.

The Fund may not concentrate investments in any industry, which
means that the Fund may generally not invest more than 25% of its assets
in any one industry. The term "industry" will be deemed to include the
government of any country other than the United States, but not the U.S.
Government.

* * *

Certain other fundamental and nonfundamental investment restrictions
adopted by the Fund are described in Part B.

[THIS PAGE INTENTIONALLY LEFT BLANK]

Delaware Investments includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific
tax-exempt funds, money market funds, global and international funds and
closed-end equity funds give investors the ability to create a portfolio
that fits their personal financial goals. For more information, contact
your financial adviser or call Delaware Investments at 800-523-1918.

INVESTMENT MANAGER

Delaware Management Company

One Commerce Square
Philadelphia, PA 19103

NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103

SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103

INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103

CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245

[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]

www.delawarefunds.com

Printed in the U.S.A. on recycled paper
P-002 [--] PP 6/98

1818 MARKET STREET, PHILADELPHIA, PA 19103

FOR MORE INFORMATION ABOUT TAX-EFFICIENT EQUITY FUND INSTITUTIONAL
CLASS CALL DELAWARE INVESTMENTS AT 800-828-5052.

This Prospectus describes the shares of Tax-Efficient Equity Fund
series (the "Fund") of Voyageur Mutual Funds III, Inc. ("Mutual Funds
III, Inc."), a professionally-managed mutual fund of the series type.

The objective of the Fund is to obtain for taxable investors a
high total return on an after-tax basis. The Fund will attempt to
achieve this objective by seeking to provide a high long-term after-
tax total return through managing its portfolio in a manner that will
defer the realization of accrued capital gains and minimize dividend
income. See Investment Objective and Policies.

The Fund offers Tax-Efficient Equity Fund Institutional Class
(the "Class"). This Prospectus relates only to the Class and sets
forth information that you should read and consider before you invest.
Please retain it for future reference. The Fund's Statement of
Additional Information ("Part B" of Mutual Funds III, Inc.'s
registration statement), dated June 29, 1998, as it may be amended
from time to time, contains additional information about the Fund and
has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available,
without charge, by writing to Delaware Distributors, L.P. at the above
address or by calling the above number. The Fund's financial
statements appear in its Annual Report for the fiscal year ended April
30, 1998, which will accompany any response to requests for Part B.
The SEC also maintains a Web site (http://www.sec.gov) that contains
Part B, material we incorporated by reference and other information
regarding registrants that electronically file with the SEC.

The Fund also offers Class A Shares, Class B Shares and Class C
Shares. Shares of these classes are subject to sales charges and other
expenses, which may affect their performance. A prospectus for these
classes can be obtained by writing to Delaware Distributors, L.P. at
the above address or by calling 800-523-1918.

TABLE OF CONTENTS

COVER PAGE 1

SYNOPSIS 2

SUMMARY OF EXPENSES 3

FINANCIAL HIGHLIGHTS 4

INVESTMENT OBJECTIVE AND POLICIES

SUITABILITY 4

INVESTMENT STRATEGY 4

CLASSES OF SHARES 6

HOW TO BUY SHARES 6

REDEMPTION AND EXCHANGE 7

DIVIDENDS AND DISTRIBUTIONS 9

TAXES 9

CALCULATION OF NET ASSET VALUE PER SHARE 10

MANAGEMENT OF THE FUND 10

OTHER INVESTMENT POLICIES AND
SPECIAL RISK CONSIDERATIONS 13

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

BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS.
MUTUAL FUNDS CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER,
SHARES OF THE FUNDS ARE NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED
BY ANY BANK OR ANY CREDIT UNION, ARE NOT OBLIGATIONS OF ANY BANK OR
ANY CREDIT UNION, AND INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF THE FUNDS ARE NOT
BANK OR CREDIT UNION DEPOSITS.

SYNOPSIS

INVESTMENT OBJECTIVE

The investment objective of the Fund is to obtain for taxable
investors a high total return on an after-tax basis. The Fund will
attempt to achieve this objective by seeking to provide a high long-
term after-tax total return through managing its portfolio in a manner
that will defer the realization of accrued capital gains and minimize
dividend income.

For further details, see Investment Objective and Policies and
Other Investment Policies and Special Risk Considerations.

RISK FACTORS AND SPECIAL CONSIDERATIONS

As a mutual fund investing primarily in common stocks, the Fund
is subject to market risk, that is the possibility that common stock
prices will decline over short or even extended periods.

The Fund has the ability to enter into options and futures
transactions. There are risks that result from the use of options and
futures and the investor should review the description of these risks
in this Prospectus. See Futures and Options under Other Investment
Policies and Special Risk Considerations.

The Fund may invest up to 10% of its total assets directly or
indirectly in securities of issuers domiciled in foreign countries.
Such investments involve certain risk and opportunity considerations
not typically associated with investing in United States companies.
See Investment Objective and Policies and Other Investment Policies
and Special Risk Considerations.

INVESTMENT MANAGER, DISTRIBUTOR AND TRANSFER AGENT

Delaware Management Company (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and
direction of Mutual Funds III, Inc.'s Board of Directors. The Manager
also provides investment management services to certain of the other
funds in the Delaware Investments family. Delaware Distributors, L.P.
(the "Distributor") is the national distributor for the Fund and for
all of the other mutual funds in the Delaware Investments family.
Delaware Service Company, Inc. (the "Transfer Agent") is the
shareholder servicing, dividend disbursing, accounting services and
transfer agent for the Fund and for all of the other mutual funds in
the Delaware Investments family. See Summary of Expenses and
Management of the Fund for further information regarding the Manager
and the fees payable under the Fund's Investment Management Agreement.

PURCHASE PRICE

Shares of the Class offered by this Prospectus are available at
net asset value, without a front-end or contingent deferred sales
charge and are not subject to distribution fees under a Rule 12b-1
distribution plan. See Classes of Shares.

REDEMPTION AND EXCHANGE

Shares of the Class are redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request.
See Redemption and Exchange.

OPEN-END INVESTMENT COMPANY

Mutual Funds III, Inc., which was organized as a Minnesota
corporation in January 1985, is an open-end management investment
company. The Fund's portfolio of assets is diversified as defined by
the Investment Company Act of 1940 (the "1940 Act"). The Fund is one
of several series of Mutual Funds III, Inc. See Shares under
Management of the Fund.

SUMMARY OF EXPENSES

SHAREHOLDER TRANSACTION EXPENSES
- -----------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None

Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None

Exchange Fees None*

ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)

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

Management Fees
(after voluntary waivers) 0.23%**

12b-1 Fees None

Other Operating Expenses
(after voluntary waivers) 0.97%**
----
Total Operating Expenses
(after voluntary waivers) 1.20%**
====

*Exchanges are subject to the requirements of each fund and a
front-end sales charge may apply.

**The Manager has elected voluntarily to waive that portion, if any,
of the annual management fees payable by the Fund and to pay certain
expenses of the Fund to the extent necessary to ensure that the Total
Operating Expenses (exclusive of taxes, interest, brokerage
commissions and extraordinary expenses) do not exceed, on an
annualized basis, 1.20% of the average daily net assets of the Class
from the commencement of the public offering of Class through December
30, 1998. Without the Manager's voluntary fee waivers, the Total
Operating Expenses would have been 1.72%, including Management Fees of
0.75%.

For expense information about the Fund's A Class, B Class and C Class,
see the separate prospectus relating to those classes.

The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a
5% annual rate of return, and (2) redemption at the end of each time
period. Mutual Funds III, Inc. charges no redemption fees. The
following example assumes the voluntary waiver of the management fee
by the Manager as discussed in this Prospectus.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$12 $38 $66 $145

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.

The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in the
Class will bear directly or indirectly.

FINANCIAL HIGHLIGHTS

For the period September 1, 1997 through March 9, 1998, the Class sold
shares which were subsequently redeemed by shareholders. As of April
30, 1998, the Class had one share outstanding, representing initial
seed purchase. Data for the Class is excluded because the data is
believed to be immaterial.

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to obtain for taxable
investors a high total return on an after-tax basis. The Fund will
attempt to achieve this objective by seeking to provide a high long-
term after-tax total return through managing its portfolio in a manner
that will defer the realization of accrued capital gains and minimize
dividend income.

SUITABILITY

The Fund may be suitable for the patient investor interested in
long-term capital appreciation. Although the Fund may be appropriate
for any investor, it may be especially well suited to the investment
needs of high-tax bracket investors, retirement savers and college
savers. Because the Fund is designed to maximize after-tax total
return, the Fund may not be suitable for tax-exempt investors.
Investors should be willing to accept the risks associated with
investments in equity securities issued by domestic and foreign
issuers.

* * *

Naturally, the Fund cannot assure a specific rate of return or
that principal will be protected. The value of the Fund's shares can
be expected to move up and down depending upon market conditions.
Consequently, appreciation may be obtained in periods of generally
rising markets, while in declining markets, the value of its shares
may, of course, decline. For this reason, the Fund is not appropriate
for short-term investors. However, through the cautious selection and
supervision of its portfolio, the Fund will strive to achieve its
objective set forth above.

INVESTMENT STRATEGY

In attempting to achieve its investment objective, the Fund under
normal circumstances will invest at least 90% of its net assets in a
widely diversified portfolio of common stocks, securities convertible
into common stocks and instruments whose returns depend upon stock
market prices. An emphasis will be placed on lower-dividend or non-
dividend paying common stocks of companies which the Manager believes
to have superior appreciation potential.

Investments in securities convertible into common stock will be
made on the basis of the common stocks into which such securities are
convertible, and not on the basis of the debt ratings of such
securities. Under normal circumstances, at least 65% of the Fund's
total assets will be invested in equity securities (defined as common
stocks and securities convertible into common stocks). The Fund may
invest up to 10% of its total assets in foreign securities. See Other
Investment Policies and Special Risk Considerations for additional
information.

Over time, common stock mutual funds generally accumulate capital
gains as the securities in their portfolios appreciate. In most cases,
the active management of these funds will involve a significant amount
of portfolio security trading, leading to the realization of capital
gains which will be taxable when distributed to fund shareholders.
Primarily as a result of these taxable capital gains distributions,
the after-tax return to a taxable investor in the fund with even
moderate portfolio turnover can be substantially lower than the pre-
tax return. The Manager believes that, in order to achieve the best
possible after-tax return for taxable investors, investment strategies
must be employed which will minimize portfolio turnover and postpone
the realization of accrued capital gains.

Some realization of capital gains will, of course, be inevitable.
For example, portfolio securities must be sold as they mature in order
to avoid negative growth. In addition, merger and acquisition
activities in the marketplace will result in unavoidable sales of
portfolio securities. The Manager will attempt to minimize such
capital gains to the extent possible by, for example, realizing
accrued losses in the portfolio to offset such gains. To help reduce
realized capital gains when the sale of appreciated securities is
necessary, the Manager will also seek to sell share lots that qualify
for long-term capital gains treatment and have the highest cost basis.

From time to time, the Manager may also employ a trading strategy
which involves the use of options, futures contracts and other
derivative products to hedge against anticipated market movements,
rather than a more traditional strategy that would involve the
purchase and sale of portfolio securities in anticipation of such
movements. For example, using a more traditional trading strategy, if
an investment adviser anticipated a market decline with respect to a
particular group of portfolio stocks with significant unrealized
gains, the adviser would sell the stocks, realize any gains and make a
taxable distribution of such gains to shareholders. If market prices
fall as anticipated, the fund will have avoided capital losses as a
result of the fall in prices, but the fund will have incurred trading
costs and investors will be taxed on the realized capital gains. In
the event market prices rise, trading costs and tax consequences will
be the same; however, the fund will have lost the opportunity to
participate in the rising prices. Using the tax-sensitive trading
strategy which the Manager intends to employ, rather than sell the
Fund's portfolio securities, the Manager might, for example, buy a put
option on the group of securities. If prices fall as anticipated, the
decline in the value of the Fund's portfolio would be offset by the
gain on the put options. Although this gain will be taxable,
presumably the gain, and therefore the tax liability, will be
significantly less than the gain that would have been realized had the
Fund sold the underlying portfolio securities. The Fund will not incur
trading costs, but will pay a premium for purchase of the put option.
In the event prices rise, the Fund will be in a significantly better
position than had the underlying securities been sold. Although the
Fund will have lost the premium it paid for the option, the Fund will
participate fully in the rising stock prices and will have deferred
the realization of capital gains (and the resulting tax liability of
shareholders).

In employing the investment strategy described above, the Fund
may invest in various derivative instruments whose return depends on
the prices of common stocks. These may include debt securities whose
prices or interest rates are indexed to the return of a particular
stock index, including a foreign stock index ("indexed securities"),
swap agreements linked to a stock index or group of common stocks,
option and futures contracts. The Fund may also lend its portfolio
securities and sell its portfolio securities short. See Other
Investment Policies and Special Risk Considerations for a description
of these investment practices.

In normal conditions, the Manager will attempt to invest as much
of the Fund's assets as is practical in common stocks, securities
convertible into common stocks and instruments whose returns depend on
stock market prices. However, the Fund may invest temporarily in
certain short-term fixed-income securities. Such securities may be
used to invest uncommitted cash balances or to maintain liquidity to
meet shareholder redemptions. These securities include obligations of
the U.S. government and its agencies or instrumentalities, commercial
paper, bank certificates of deposit and bankers' acceptances, and
repurchase agreements. The Fund may invest in these securities without
limitation if the Manager believes that market conditions warrant a
temporary defensive posture.

* * *

Although the Fund will constantly strive to attain its objective,
there can be no assurance that it will be attained.

Because of the risks associated with the Fund's investments, the
Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on shortterm
stock market movements. On an informal basis, the Manager may compare
the total return of the Fund to the total return of a broad based
securities index, currently expected to be the Standard & Poor's 500
Index ("S&P 500"), with a view toward achieving after-tax total
returns of the Fund in excess of the pre-tax total returns of such
securities index. However, the Fund is not managed to replicate the
securities contained in such indices and therefore may achieve returns
which are less than or greater than such indices. Securities indices
are unmanaged and hence do not incur expenses while the Fund is
subject to investment management and other expenses as set forth
herein.

CLASSES OF SHARES

The Distributor serves as the national distributor for the Fund.
Shares of the Class may be purchased directly by contacting the Fund
or its agent or through authorized investment dealers. All purchases
of shares of the Class are made at net asset value. There is no front-
end or contingent deferred sales charge.

INVESTMENT INSTRUCTIONS GIVEN ON BEHALF OF PARTICIPANTS IN AN
EMPLOYER-SPONSORED RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH
DIRECTIONS PROVIDED BY THE EMPLOYER. EMPLOYEES CONSIDERING PURCHASING
SHARES OF THE CLASS AS PART OF THEIR RETIREMENT PROGRAM SHOULD CONTACT
THEIR EMPLOYER FOR DETAILS.

Shares of the Class are available for purchase only by: (a)
retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business
and rollover individual retirement accounts from such plans; (b) tax-
exempt employee benefit plans of the Manager or its affiliates and
securities dealer firms with a selling agreement with the Distributor;
(c) institutional advisory accounts of the Manager or its affiliates
and those having client relationships with the Manager or its
affiliates and their corporate sponsors, as well as subsidiaries and
related employee benefit plans and rollover individual retirement
accounts from such institutional advisory accounts; (d) a bank, trust
company and similar financial institution investing for its own
account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in
purchasing shares of the Class, except where the investment is part of
a program that requires payment to the financial institution of a Rule
12b-1 Plan fee; and (e) registered investment advisers investing on
behalf of clients that consist solely of institutions and high net-
worth individuals having at least $1,000,000 entrusted to the adviser
for investment purposes, but only if the adviser is not affiliated or
associated with a broker or dealer and derives compensation for its
services exclusively from its clients for such advisory services.

CLASS A SHARES, CLASS B SHARES AND CLASS C SHARES

In addition to offering Tax-Efficient Equity Fund Institutional
Class of shares, the Fund also offers: Tax-Efficient Equity Fund A
Class, Tax-Efficient Equity Fund B Class and Tax-Efficient Equity Fund
C Class, which are described in a separate prospectus. Class A Shares,
Class B Shares and Class C Shares may be purchased through authorized
investment dealers or directly by contacting the Fund or its
Distributor. Class A Shares, Class B Shares and Class C Shares may
have different sales charges and other expenses which may affect
performance. To obtain a prospectus relating to such classes, contact
the Distributor by writing to the address or by calling the phone
number listed on the cover of this Prospectus.

HOW TO BUY SHARES

The Fund makes it easy to invest by mail, by wire, by exchange
and by arrangement with your investment dealer. In all instances,
investors must qualify to purchase shares of the Class.

INVESTING DIRECTLY BY MAIL

1. Initial Purchases-An Investment Application or, in the case of a
retirement account, an appropriate retirement plan application, must
be completed, signed and sent with a check payable to the Fund and
Class selected, to Delaware Investments at 1818 Market Street,
Philadelphia, PA 19103.

2. Subsequent Purchases-Additional purchases may be made at any time
by mailing a check payable to the Fund and Class selected. Your check
should be identified with your name(s) and account number.

INVESTING DIRECTLY BY WIRE

You may purchase shares by requesting your bank to transmit funds
by wire to CoreStates Bank, N.A., ABA #031000011, account number
1412893401 (include your name(s) and your account number for the Fund
and Class in which you are investing).

1. Initial Purchases-Before you invest, telephone the Client Services
Department to get an account number at 800-828-5052. If you do not
call first, it may delay processing your investment. In addition, you
must promptly send your Investment Application or, in the case of a
retirement account, an appropriate retirement plan application, to the
Fund and Class selected by you, to Delaware Investments at 1818 Market
Street, Philadelphia, PA 19103.

2. Subsequent Purchases-You may make additional investments anytime by
wiring funds to CoreStates Bank, N.A., as described above. You must
advise your Client Services Representative by telephone at 800-828-
5052 prior to sending your wire.

INVESTING BY EXCHANGE

If you have an investment in another mutual fund in the Delaware
Investments family and you qualify to purchase shares of the Class,
you may write and authorize an exchange of part or all of your
investment into the Fund. However, Class B Shares and Class C Shares
of the Fund and Class B Shares and Class C Shares of the other funds
in the Delaware Investments family offering such a class of shares may
not be exchanged into the Class. If you wish to open an account by
exchange, call your Client Services Representative at 800-828-5052 for
more information. See Redemption and Exchange for more complete
information concerning your exchange privileges.

INVESTING THROUGH YOUR INVESTMENT DEALER

You can make a purchase of Fund shares through most investment
dealers who, as part of the service they provide, must transmit orders
promptly to the Fund. They may charge for this service.

PURCHASE PRICE AND EFFECTIVE DATE

The purchase price (net asset value) of the Class is determined
as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.

The effective date of a purchase made through an investment
dealer is the date the order is received by the Fund. The effective
date of a direct purchase is the day your wire, electronic transfer or
check is received, unless it is received after the time the share
price is determined, as noted above. Purchase orders received after
such time will be effective the next business day.

THE CONDITIONS OF YOUR PURCHASE

The Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are
responsible for any loss incurred. The Fund can redeem shares from
your account(s) to reimburse itself for any loss, and you may be
restricted from making future purchases in any of the funds in the
Delaware Investments family. The Fund reserves the right to reject
purchases by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check
drawn on a foreign financial institution is accepted, you may be
subject to additional bank charges for clearance and currency
conversion.

The Fund also reserves the right, upon 60 days' written notice,
to involuntarily redeem accounts that remain under $250 as a result of
redemptions.

REDEMPTION AND EXCHANGE

REDEMPTION AND EXCHANGE REQUESTS MADE ON BEHALF OF PARTICIPANTS
IN AN EMPLOYER-SPONSORED RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH
DIRECTIONS PROVIDED BY THE EMPLOYER. EMPLOYEES SHOULD THEREFORE
CONTACT THEIR EMPLOYER FOR DETAILS.

Your shares will be redeemed or exchanged at a price based on the
net asset value next determined after the Fund receives your request
in good order. For example, redemption or exchange requests received
in good order after the time the net asset value of shares is
determined, will be processed on the next business day. See Purchase
Price and Effective Date under How to Buy Shares. Except as otherwise
noted below, for a redemption request to be in "good order," you must
provide your account number, account registration, and the total
number of shares or dollar amount of the transaction. With regard to
exchanges, you must also provide the name of the fund you want to
receive the proceeds. Exchange instructions and redemption requests
must be signed by the record owner(s) exactly as the shares are
registered. You may request a redemption or an exchange by calling the
Fund at 800-828-5052. Redemption proceeds will be distributed
promptly, as described below, but not later than seven days after
receipt of a redemption request.

The Fund will process written and telephone redemption requests
to the extent that the purchase orders for the shares being redeemed
have already settled. The Fund will not honor redemption requests as
to shares for which a check was tendered as payment until the Fund is
reasonably satisfied that the check has cleared, which may take up to
15 days from the purchase date. You can avoid this potential delay if
you purchase shares by wiring Federal Funds. The Fund reserves the
right to reject a written or telephone redemption request or delay
payment of redemption proceeds if there has been a recent change to
the shareholder's address of record.

Shares of the Class may be exchanged into any other Delaware
Investments mutual fund provided: (1) the investment satisfies the
eligibility and other requirements set forth in the prospectus of the
fund being acquired, including the payment of any applicable front-end
sales charge; and (2) the shares of the fund being acquired are in a
state where that fund is registered. If exchanges are made into other
shares that are eligible for purchase only by those permitted to
purchase shares of the Class, such shares will be exchanged at net
asset value. Shares of the Class may not be exchanged into the Class B
Shares or Class C Shares of the funds in the Delaware Investments
family. The Fund may suspend, terminate or amend the terms of the
exchange privilege upon 60 days' written notice to shareholders.

Various redemption and exchange methods are outlined below. No
fee is charged by the Fund or the Distributor for redeeming or
exchanging your shares, although, in the case of an exchange, a sales
charge may apply. You may also have your investment dealer arrange to
have your shares redeemed or exchanged. Your investment dealer may
charge for this service.

All authorizations given by shareholders, including selection of
any of the features described below, shall continue in effect until
such time as a written revocation or modification has been received by
the Fund or its agent.

WRITTEN REDEMPTION AND EXCHANGE

You can write to the Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares or to request an exchange
of any or all your shares into another mutual fund in the Delaware
Investments family, subject to the same conditions and limitations as
other exchanges noted above. The request must be signed by all owners
of the account or your investment dealer of record.

For redemptions of more than $50,000, or when the proceeds are
not sent to the shareholder(s) at the address of record, the Fund
requires a signature by all owners of the account and may require a
signature guarantee. Each signature guarantee must be supplied by an
eligible guarantor institution. The Fund reserves the right to reject
a signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from
corporations, executors, retirement plans, administrators, trustees or
guardians.

Payment is normally mailed the next business day after receipt of
your redemption request. Certificates are issued for shares only if
you submit a specific request. If your shares are in certificate form,
the certificates(s) must accompany your request and also be in good
order.

You also may submit your written request for redemption or
exchange by facsimile transmission at the following number: 215-255-
8864.

TELEPHONE REDEMPTION AND EXCHANGE

To get the added convenience of the telephone redemption and
exchange methods, you must have the Transfer Agent hold your shares
(without charge) for you. If you choose to have your shares in
certificate form, you may redeem or exchange only by written request
and you must return your certificate(s).

The Telephone Redemption-Check to Your Address of Record service
and the Telephone Exchange service, both of which are described below,
are automatically provided unless you notify the Fund in writing that
you do not wish to have such services available with respect to your
account. The Fund reserves the right to modify, terminate or suspend
these procedures upon 60 days' written notice to shareholders. It may
be difficult to reach the Fund by telephone during periods when market
or economic conditions lead to an unusually large volume of telephone
requests.

Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone
instructions for redemption or exchange of Fund shares which are
reasonably believed to be genuine. With respect to such telephone
transactions, the Fund will follow reasonable procedures to confirm
that instructions communicated by telephone are genuine (including
verification of a form of personal identification) as, if it does not,
the Fund or its Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will
be provided for all purchase, exchange and redemption transactions
initiated by telephone. By exchanging shares by telephone, you are
acknowledging prior receipt of a prospectus for the fund into which
your shares are being exchanged.

TELEPHONE REDEMPTION-CHECK TO YOUR ADDRESS OF RECORD

You or your investment dealer of record can have redemption
proceeds of $50,000 or less mailed to you at your address of record.
Checks will be payable to the shareholder(s) of record. Payment is
normally mailed the next business day after receipt of the redemption
request.

TELEPHONE REDEMPTION-PROCEEDS TO YOUR BANK

Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize
this service when you open your account. If you change your
predesignated bank account, you must submit a written authorization
and you may need to have your signature guaranteed. For your
protection, your authorization must be on file. If you request a wire,
your funds will normally be sent the next business day. If you ask for
a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account.
There are no fees for this redemption method, but the mail time may
delay getting funds into your bank account. Simply call your Client
Services Representative prior to the time the net asset value is
determined, as noted above.

TELEPHONE EXCHANGE

You or your investment dealer of record can exchange shares into
any fund in the Delaware Investments family under the same
registration. As with the written exchange service, telephone
exchanges are subject to the same conditions and limitations as other
exchanges noted above. Telephone exchanges may be subject to
limitations as to amounts or frequency.

DIVIDENDS AND DISTRIBUTIONS

Mutual Funds III, Inc. currently intends to make annual payments
from the Fund's net investment income. Payments from the Fund's net
realized security profits will be made during the first quarter of the
next fiscal year. Both dividends and distributions, if any, are
automatically reinvested in your account at net asset value.

Each class of the Fund will share proportionately in the
investment income and expenses of the Fund, except that the Class will
not incur any distribution fee under Mutual Funds III, Inc.'s 12b-1
Plans which apply to Tax-Efficient Equity Fund A Class, B Class and C
Class.

TAXES

The Fund intends to qualify as a regulated investment company
under Subchapter M of the Code. As such, the Fund will not be subject
to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Code and it satisfies
certain other requirements relating to the sources of its income and
diversification of its assets.

On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping
changes in the Code. Because many of these changes are complex, and
only indirectly affect the Fund and its distributions to you, they are
discussed in Part B. Changes in the treatment of capital gains,
however, are discussed in this section.

Distributions paid by the Fund from long-term capital gains,
received in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the
length of time an investor has owned shares in the Fund. The Fund does
not seek to realize any particular amount of capital gains during a
year; rather, realized gains are a by-product of Fund management
activities. Consequently, capital gains distributions may be expected
to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in the Fund are made shortly
before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.

THE TREATMENT OF CAPITAL GAIN DISTRIBUTIONS UNDER THE TAXPAYER RELIEF
ACT OF 1997

The 1997 Act creates a category of long-term capital gain for
individuals who will be taxed at new lower tax rates. For investors
who are in the 28% or higher federal income tax brackets, these gains
will be taxed at a maximum rate of 20%. For investors who are in the
15% federal income tax bracket, these gains will be taxed at a maximum
rate of 10%. Capital gain distributions will qualify for these new
maximum tax rates, depending on when the Fund's securities were sold
and how long they were held by the Fund before they were sold.
Investors who want more information on holding periods and other
qualifying rules relating to these new rates should review the
expanded discussion in Part B, or should contact their own tax
advisers.

Mutual Funds III, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain
distributions which will qualify for these maximum federal tax rates.

Although dividends generally will be treated as distributed when
paid, dividends which are declared in October, November or December to
shareholders of record on a specified date in one of those months, but
which, for operational reasons, may not be paid to the shareholder
until the following January, will be treated for tax purposes as if
paid by the Fund and received by the shareholder on December 31 of the
calendar year in which they are declared.

The Fund may be subject to foreign withholding taxes on income
from certain of its foreign securities.

In addition to the federal taxes described above, shareholders
may or may not be subject to various state and local taxes. For
example, distributions of interest income and capital gains realized
from certain types of U.S. government securities may be exempt from
state personal income taxes. Because investors' state and local taxes
may be different than the federal taxes described above, investors
should consult their own tax advisers.

Each year, Mutual Funds III, Inc. will mail to you information on
the tax status of the Fund's dividends and distributions. Shareholders
will also receive each year information as to the portion of dividend
income, if any, that is derived from U.S. government securities that
are exempt from state income tax. Of course, shareholders who are not
subject to tax on their income would not be required to pay tax on
amounts distributed to them by the Fund.

The Fund is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who
have not complied with IRS taxpayer identification regulations. You
may avoid this withholding requirement by certifying on your
Investment Application your proper Taxpayer Identification Number and
by certifying that you are not subject to backup withholding.

See Part B for additional information on tax matters relating to
the Fund and its shareholders.

CALCULATION OF NET ASSET VALUE PER SHARE

The purchase and redemption price of Class shares is the net
asset value ("NAV") per share of the Class next computed after the
order is received. The NAV is computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.

The NAV per share is computed by adding the value of all
securities and other assets in the portfolio, deducting any
liabilities (expenses and fees are accrued daily) and dividing by the
number of shares outstanding. Debt securities are priced on the basis
of valuations provided by an independent pricing service using methods
approved by Mutual Funds III, Inc.'s Board of Directors. Equity
securities for which marked quotations are available are priced at
market value. Short-term investments having a maturity of less than 60
days are valued at amortized cost, which approximates market value.
All other securities are valued at their fair value as determined in
good faith and in a method approved by Mutual Funds III, Inc.'s Board
of Directors.

The net asset values of all outstanding shares of each class of
the Fund will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Fund represented
by the value of shares of that class. All income earned and expenses
incurred by the Fund will be borne on a pro-rata basis by each
outstanding share of a class, based on each class' percentage in the
Fund represented by the value of shares of such classes, except that
the Class will not incur any of the expenses under the Fund's 12b-1
Plans and the Class A, B and C Shares alone will bear the 12b-1 Plan
fees payable under their respective Plans.

MANAGEMENT OF THE FUND

DIRECTORS

The business and affairs of Mutual Funds III, Inc. are managed
under the direction of its Board of Directors. Part B contains
additional information regarding Mutual Funds III, Inc.'s directors
and officers.

INVESTMENT MANAGER

The manager furnishes investment management services to the fund.

The Manager and its predecessors have been managing the funds in
the Delaware Investments family since 1938. On April 30, 1998, the
Manager and its affiliates within Delaware Investments, including
Delaware International Advisers Ltd., were managing in the aggregate
more than $45 billion in assets in various institutional or separately
managed (approximately $27,330,570,000) and investment company
(approximately $17,773,730,000) accounts.

The Manager is a series of Delaware Management Business Trust.
The Manager changed its form of organization from a corporation to a
business trust on March 1, 1998. The Manager is an indirect, wholly
owned subsidiary of Delaware Management Holdings, Inc. ("DMH"). On
April 3, 1995, a merger between DMH and a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") was completed. DMH
and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services
industry, including insurance and investment management.

The Manager administers the affairs of and is ultimately
responsible for the investment management of the Fund under an
Investment Management Agreement with Mutual Funds III, Inc. on behalf
of the Fund dated June 26, 1997. Under the Investment Management
Agreement for the Fund, the Manager is paid an annual fee equal to
0.75% on the first $500 million of average daily net assets, 0.725% on
the next $500 million and 0.70% on the average daily net assets in
excess of $1 billion. For the fiscal year ended April 30, 1998,
investment management fees accrued by the Fund amounted to 0.75%
(annualized) of average daily net assets and 0.23% (annualized) of
average daily net assets was paid considering the waiver of fees by
the Manager.

George H. Burwell has primary responsibility for making day-to-
day investment decisions for the Fund. Mr. Burwell holds a BA from the
University of Virginia. Prior to joining Delaware Investments in 1992,
Mr. Burwell was a portfolio manager for Midlantic Bank in Edison, New
Jersey, where he managed an equity mutual fund and three commingled
funds. Mr. Burwell is a CFA charterholder.

In making investment decisions for the Fund, Mr. Burwell
regularly consults with Wayne A. Stork and Richard G. Unruh, Jr. Mr.
Stork, Chairman of the Manager's and Mutual Funds III, Inc.'s Boards
of Directors, is a graduate of Brown University and attended New York
University's Graduate School of Business Administration. Mr. Stork
joined Delaware Investments in 1962 and has served in various
executive capacities at different times within the Delaware
organization. A graduate of Brown University, Mr. Unruh received his
MBA from the University of Pennsylvania's Wharton School and joined
Delaware Investments in 1982 after 19 years of investment management
experience with Kidder, Peabody & Co. Inc. Mr. Unruh is an Executive
Vice President of Mutual Funds III, Inc. He is also a member of the
Board of the Manager and was named an Executive Vice President of the
Manager in 1994.

PORTFOLIO TRADING PRACTICES

The Fund normally will not invest for short-term trading
purposes. However, the Fund may sell securities without regard to the
length of time they have been held. The degree of portfolio activity
will affect brokerage costs of the Fund and may affect taxes payable
by the Fund's shareholders. Given the Fund's investment objective, its
annual portfolio turnover rate is not expected to exceed 100%. A
turnover rate of 100% would occur, for example, if all the investments
in the Fund's portfolio at the beginning of the year were replaced by
the end of the year.

The Fund uses its best efforts to obtain the best available price
and most favorable execution for portfolio transactions. Orders may be
placed with brokers or dealers who provide brokerage and research
services to the Manager or to their advisory clients. These services
may be used by the Manager in servicing any of its accounts. Subject
to best price and execution, the Fund may consider a broker/dealer's
sales of shares of funds in the Delaware Investments family in placing
portfolio orders and may place orders with broker/dealers that have
agreed to defray certain expenses of such funds, such as custodian
fees.

PERFORMANCE INFORMATION

From time to time, the Fund may quote total return performance of
its Class in advertising and other types of literature.

Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value.
Each presentation will include the average annual total return for
one-, five- and ten-year (or life of fund, if applicable) periods. The
Fund may also advertise aggregate and average total return information
concerning the Class over additional periods of time.

Because securities prices fluctuate, investment results of the
Class will fluctuate over time and past performance should not be
considered a guarantee of future results.

STATEMENTS AND CONFIRMATIONS

You will receive quarterly statements of your account summarizing
all transactions during the period. A confirmation statement will be
sent following all transactions other than those involving a
reinvestment of dividends. You should examine statements and
confirmations immediately and promptly report any discrepancy by
calling your Client Services Representative.

FINANCIAL INFORMATION ABOUT THE FUND

Each fiscal year, you will receive an audited annual report and
an unaudited semi-annual report. These reports provide detailed
information about the Fund's investments and per-formance. Mutual
Funds III, Inc.'s fiscal year ends on April 30.

DISTRIBUTION AND SERVICE

The Distributor, Delaware Distributors, L.P., serves as the
national distributor of the Fund's shares under a Distribution
Agreement with Mutual Funds III, Inc. dated June 26, 1997. The
Distributor bears all of the costs of promotion and distribution.

The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the
Fund under an agreement dated May 1, 1997. The Transfer Agent also
provides accounting services to the Fund pursuant to the terms of a
separate Fund Accounting Agreement. The directors annually review
service fees paid to the Transfer Agent. Certain recordkeeping
services and other shareholder services that otherwise would be
performed by the Transfer Agent may be performed by certain other
entities and the Transfer Agent may elect to enter into an agreement
to pay such other entities for those services. In addition,
participant account maintenance fees may be assessed for certain
recordkeeping services provided as part of retirement plan and
administration service packages. These fees are based on the number of
participants in the plan and the various services selected by the
employer. Fees will be quoted upon request and are subject to change.

The Distributor and the Transfer Agent are indirect, wholly owned
subsidiaries of DMH.

* * *

As with other mutual funds, financial and business organizations
and individuals around the world, the Fund could be adversely affected
if the computer systems used by its service providers do not properly
process and calculate date-related information from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." Mutual
Funds III, Inc. is taking steps to obtain satisfactory assurances that
the Fund's major service providers are taking steps reasonably
designed to address the Year 2000 Problem with respect to the computer
systems that such service providers use. There can be no assurances
that these steps will be sufficient to avoid any adverse impact on the
business of the Fund.

Several European countries are participating in the European
Economic and Monetary Union, which will establish a common European
currency for participating countries. This currency will commonly be
known as the "Euro." It is anticipated that each such participating
country will replace its existing currency with the Euro on January 1,
1999. Additional European countries may elect to participate after
that date. If the Fund is invested in securities of participating
countries it could be adversely affected if the computer systems used
by its major service providers are not properly prepared to handle the
implementation of this single currency or the adoption of the Euro by
additional countries in the future. Mutual Funds III, Inc. is taking
steps to obtain satisfactory assurances that the major service
providers of Fund are taking steps reasonably designed to address
these matters with respect to the computer systems that such service
providers use. There can be no assurances that these steps will be
sufficient to avoid any adverse impact on the business of the Fund.

EXPENSES

The Fund is responsible for all of its own expenses other than
those borne by the Manager under the Investment Management Agreement
and those borne by the Distributor under the Distribution Agreement.

Mutual Funds III, Inc. is an openend management investment
company. The Fund's portfolio of assets is diversified as defined by
the 1940 Act. Commonly known as a mutual fund, Mutual Funds III, Inc.
was organized as a Minnesota corporation in January 1985. In addition
to the Fund, Mutual Funds III, Inc. presently also offers two other
series of shares - the Aggressive Growth Fund series and the Growth
Stock Fund series. Fund shares have a par value of $.01, equal voting
rights, except as noted below, and are equal in all other respects.
Each fund will vote separately on any matter which affects only that
fund. Shares of each fund have a priority over shares of any other
fund of Mutual Funds III, Inc. in the assets and income of that fund.

All of the shares have noncumulative voting rights which means
that the holders of more than 50% of Mutual Funds III, Inc.'s shares
voting for the election of directors can elect 100% of the directors
if they choose to do so. Under Minnesota law, Mutual Funds III, Inc.
is not required, and does not intend, to hold annual meetings of
shareholders unless, under certain circumstances, it is required to do
so under the 1940 Act.

In addition to Institutional Class shares, the Fund offers Class
A Shares, Class B Shares and Class C Shares. Shares of each class
represent proportionate interests in the assets of the Fund and have
the same voting and other rights and preferences as the other classes
of the Fund, except that shares of the Class are not subject to, and
may not vote on matters affecting, the Distribution Plans under Rule
12b-1 relating to Class A, Class B and Class C Shares. Similarly, as
a general matter, the shareholders of Class A Shares, Class B Shares
and Class C Shares may vote only on matters affecting the 12b-1 Plan
that relates to the class of shares that they hold. However, Class B
Shares of the Fund may vote on any proposal to increase materially the
fees to be paid by the Fund under the 12b-1 Plan relating to Class A
Shares.

OTHER INVESTMENT POLICIES AND SPECIAL RISK CONSIDERATIONS

RULE 144A SECURITIES

The Fund may invest in restricted securities, including privately
placed securities, some of which may be eligible for resale without
registration pursuant to Rule 144A ("Rule 144A Securities") under the
Securities Act of 1933. Rule 144A permits many privately placed and
legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more
than 15% of the value of its net assets in illiquid securities.

While maintaining oversight, the Board of Directors has delegated
to the Manager the day-to-day function of determining whether or not
individual Rule 144A Securities are liquid for purposes of the Fund's
15% limitation on investments in illiquid assets. The Board has
instructed the Manager to consider the following factors in
determining the liquidity of a Rule 144A Security: (i) the frequency
of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the
number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; (iv) the nature of the security and
the nature of the marketplace trades (e.g., the time needed to dispose
of the security, the method of soliciting offers, and the mechanics of
transfer).

If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a
result, the Fund's holdings of illiquid securities exceed the Fund's
15% limit on investments in such securities, the Manager will
determine what action to take to ensure that the Fund continues to
adhere to such limitation.

INDEXED SECURITIES

Indexed securities include commercial paper, certificates of
deposit and other fixed-income securities whose values at maturity or
coupon interest rates are determined by reference to the return of a
particular stock index or group of stocks. Indexed securities can be
affected by changes in interest rates and the creditworthiness of
their issuers as well as stock prices and may not track market returns
as accurately as direct investments in common
stocks.

Indexed securities in which the Fund may invest include Foreign
Index Linked Instruments. Foreign Index Linked Instruments are fixed-
income securities which are issued by U.S. issuers (including U.S.
subsidiaries of foreign issuers) and are denominated in U.S. dollars
but return principal and/or pay interest to investors in amounts which
are linked to the level of a particular foreign index. A foreign index
may be based upon the exchange rate of a particular currency or
currencies or the differential between two currencies, or the level of
interest rates in a particular country or countries, or the
differential in interest rates between particular countries. In the
case of Foreign Index Linked Instruments linking the principal amount
to a foreign index, the amount of principal payable by the issuer at
maturity will increase or decrease in response to changes in the level
of the foreign index during the term of the Foreign Index Linked
Instrument. In the case of Foreign Index Linked Instruments linking
the interest component to a foreign index, the amount of interest
payable will adjust periodically in response to changes in the level
of the foreign index during the term of the Foreign Index Linked
Instrument. Foreign Index Linked Instruments may be issued by a U.S.
governmental agency or instrumentality or by a private issuer.

SWAP AGREEMENTS

Swap agreements typically involve a commitment by the Fund to pay
specified amounts (such as fixed or floating interest rates) at
regular intervals in return for all or a portion of the investment
return of a particular stock index or group of stocks. As with stock
index options and futures (discussed below), swap agreements provide
exposure to the stock market, but may not track market returns as
accurately as direct investments in common stocks. In addition, the
Fund typically depends on the credit of a single counterparty when
investing in a swap agreement, and may suffer a loss irrespective of
the value of the underlying index if the counterparty's credit
declines. The Fund will usually enter into swap agreements on a net
basis, i.e., the two payment streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of the
two payments. The net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each swap agreement
will be accrued on a daily basis, and an amount of cash, U.S.
government securities or other liquid high-grade debt securities
having an aggregate net asset value at least equal to the accrued
excess will be maintained in a segregated account by the Fund's
custodian. If the Fund enters into a swap agreement on other than a
net basis, the Fund will maintain a segregated account in the full
amount, accrued on a daily basis, of the Fund's obligations with
respect to the swap.

INVESTMENT COMPANY SECURITIES

Any investments that the Fund makes in either closed-end or open-
end investment companies will be limited by the 1940 Act, and would
involve an indirect payment of a portion of the expenses, including
advisory fees, of such other investment companies. Under the 1940
Act's current limitations, the Fund may not (1) own more than 3% of
the voting stock of another investment company; (2) invest more than
5% of the Fund's total assets in the shares of any one investment
company; nor (3) invest more than 10% of the Fund's total assets in
shares of other investment companies. If the Fund elects to limit its
investment in other investment companies to closed-end investment
companies, the 3% limitation described above is increased to 10%.
These percentage limitations also apply to the Fund's investments in
unregistered investment companies.

REPURCHASE AGREEMENTS

In order to invest its short-term cash reserves or when in a
temporary defensive posture, the Fund may enter into repurchase
agreements with banks or broker/dealers deemed to be creditworthy by
the Manager, under guidelines approved by the Board of Directors. A
repurchase agreement is a short-term investment in which the purchaser
(i.e. the Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price,
thereby determining the yield during the purchaser's holding period.
Generally, repurchase agreements are of short duration, often less
than one week but on occasion for longer periods. Not more than 15% of
the Fund's assets may be invested in illiquid securities, including
repurchase agreements of over seven-days' maturity. Should an issuer
of a repurchase agreement fail to repurchase the underlying security,
the loss to the Fund, if any, would be the difference between the
repurchase price and the market value of the security. The Fund will
limit its investments in repurchase agreements to those which the
Manager under guidelines of the Board of Directors determines to
present minimal credit risks and which are of high quality. In
addition, the Fund must have collateral of at least 102% of the
repurchase price, including the portion representing the Fund's yield
under such agreements, which is monitored on a daily basis.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Fund may purchase securities on a when-issued or delayed
delivery basis. In such transactions, instruments are purchased with
payment and delivery taking place in the future in order to secure
what is considered to be an advantageous yield or price at the time of
the transaction. Delivery of and payment for these securities may take
as long as a month or more after the date of the purchase commitment.
The Fund will maintain with its custodian bank a separate account with
a segregated portfolio of securities in an amount at least equal to
these commitments. The payment obligation and the interest rates that
will be received are each fixed at the time the Fund enters into the
commitment and no interest accrues to the Fund until settlement. Thus,
it is possible that the market value at the time of settlement could
be higher or lower than the purchase price if the general level of
interest rates has changed.

HEDGING TRANSACTIONS

The Fund may write covered call options and secured put options
and purchase call and put options on securities and security indices.
The Fund may also engage in transactions in financial futures
contracts and related options for hedging purposes. These investment
techniques and the related risks are summarized below and are
described in more detail in Part B.

OPTIONS

The Manager may employ options techniques in an attempt to
protect appreciation attained and to take advantage of the liquidity
available in the options market. The Fund may purchase call options on
foreign or U.S. securities and indices and enter into related closing
transactions and the Fund may write covered call options on such
securities. The Fund may also purchase put options on such securities
and indices and enter into related closing transactions.

A call option enables the purchaser, in return for the premium
paid, to purchase securities from the writer of the option at an
agreed price up to an agreed date. A covered call option obligates the
writer, in return for the premium received, to sell the securities
subject to the option to the purchaser of the option for an agreed
upon price up to an agreed date. The advantage is that the purchaser
may hedge against an increase in the price of securities it ultimately
wishes to buy or take advantage of a rise in a particular index. The
Fund will only purchase call options to the extent that premiums paid
on all outstanding call options do not exceed 2% of its total assets.

A put option enables the purchaser of the option, in return for
the premium paid, to sell the security underlying the option to the
writer at the exercise price during the option period, and the writer
of the option has the obligation to purchase the security from the
purchaser of the option. The Fund will only purchase put options to
the extent that the premiums on all outstanding put options do not
exceed 2% of its total assets. The advantage is that the purchaser can
be protected should the market value of the security decline or should
a particular index decline.

An option on a securities index gives the purchaser of the
option, in return for the premium paid, the right to receive from the
seller cash equal to the difference between the closing price of the
index and the exercise price of the option.

Closing transactions essentially let the Fund offset put options
or call options prior to exercise or expiration. If the Fund cannot
effect closing transactions, it may have to hold a security it would
otherwise sell or deliver a security it might want to hold.

In purchasing put and call options, the premium paid by the Fund
plus any transaction costs will reduce any benefit realized by the
Fund upon exercise of the option. With respect to writing covered call
options, the Fund may lose the potential market appreciation of the
securities subject to the option, if the Manager's judgment is wrong
and the price of the security moves in the opposite direction from
what was anticipated.

The Fund may use both Exchange-traded and over-the-counter
options. Certain over-the-counter options may be illiquid. The Fund
will only invest in such options to the extent consistent with its 15%
limitation on investment in illiquid securities. The Fund will comply
with Securities and Exchange Commission asset segregation and coverage
requirements when engaging in these types of transactions.

FUTURES

Futures contracts are agreements for the purchase or sale for
future delivery of securities. When a futures contract is sold, the
Fund incurs a contractual obligation to deliver the securities
underlying the contract at a specified price on a specified date
during a specified future month. A purchase of a futures contract
means the acquisition of a contractual right to obtain delivery to the
Fund of the securities called for by the contract at a specified price
during a specified future month.

While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally terminated by
entering into an offsetting transaction. When the Fund enters into a
futures transaction, it must deliver to the futures commission
merchant selected by the Fund an amount referred to as "initial
margin." This amount is maintained by the futures commission merchant
in an account at the Fund's custodian bank. Thereafter, a "variation
margin" may be paid by the Fund to, or drawn by the Fund from, such
account in accordance with controls set for such account, depending
upon changes in the price of the underlying securities subject to the
futures contract.

The Fund may also purchase and write options to buy or sell
futures contracts. Options on futures are similar to options on
securities except that options on futures give the purchaser the
right, in return for the premium paid, to assume a position in a
futures contract, rather than actually to purchase or sell the futures
contract, at a specified exercise price at any time during the period
of the option.

The purpose of the purchase or sale of futures contracts
consisting of U.S. government securities is to protect the Fund
against the adverse effects of fluctuations in interest rates without
actually buying or selling such securities. Similarly, when it is
expected that interest rates may decline, futures contracts may be
purchased to hedge in anticipation of subsequent purchases of U.S.
government securities at higher prices.

OTHER INVESTMENT POLICIES

Although the Fund is permitted under certain circumstances to
borrow money, the Fund normally will not do so. The Fund will not
purchase new securities whenever borrowings exceed 5% of the value of
the total assets of the Fund.

The Fund may not concentrate investments in any industry, which
means that the Fund may generally not invest more than 25% of its
assets in any one industry. The term "industry" will be deemed to
include the government of any country other than the United States,
but not the U.S. Government.

* * *

Certain other fundamental and nonfundamental investment
restrictions adopted by the Fund are described in Part B.

For more information, call
Delaware Investments at 800-828-5052.

INVESTMENT MANAGER

Delaware Management Company

One Commerce Square
Philadelphia, PA 19103

NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103

SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103

LEGAL COUNSEL
Stradley, Ronon, Stevens
& Young, LLP
One Commerce Square
Philadelphia, PA 19103

INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103

CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245

www.delawarefunds.com

[RECYCLED LOGO OMITTED] Printed in the U.S.A. on recycled paper.
P-440 [--] PP 7/98

- ---------------
TAX-EFFICIENT
EQUITY
FUND
INSTITUTIONAL
- ---------------

PROSPECTUS
JUNE 29, 1998

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PROSPECTUS

JUNE 29, 1998

[GRAPHIC OMITTED: DELAWARE INVESTMENTS LOGO]

A Class
B Class
C Class

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[GRAPHIC OMITTED: DRAWING OF FAMILY ON LAND]

Table of
Contents

Cover Page 1
Synopsis 2
Summary of Expenses 4
Financial Highlights 6
Investment Objectives and Policies
SUITABILITY 10
INVESTMENT STRATEGY 10
The Delaware Difference
PLANS AND SERVICES 12

Classes of Shares 14

How to Buy Shares 20
Redemption and Exchange 23
Dividends and Distributions 28
Taxes 29
Calculation of Offering Price and
Net Asset Value Per Share 31
Management of the Funds 32
Other Investment Policies and
Risk Considerations 36

Aggressive Growth Fund
Growth Stock Fund
A Class/B Class/C Class

June 29, 1998

1818 MARKET STREET, PHILADELPHIA, PA 19103

FOR PROSPECTUS AND PERFORMANCE:
NATIONWIDE 800-523-1918

INFORMATION ON EXISTING ACCOUNTS:
(SHAREHOLDERS ONLY)
NATIONWIDE 800-523-1918

DEALER SERVICES:
(BROKER/DEALERS ONLY)
NATIONWIDE 800-362-7500

REPRESENTATIVES OF FINANCIAL INSTITUTIONS:
NATIONWIDE 800-659-2265

This Prospectus describes shares of Aggressive Growth Fund
series and Growth Stock Fund series (individually a "Fund" and
collectively the "Funds") of Voyageur Mutual Funds III, Inc.
("Mutual Funds III, Inc."), a professionally managed mutual fund
of the series type.

Aggressive Growth Fund's investment objective is long-term
capital appreciation which the Fund attempts to achieve by investing
primarily in equity securities of companies which Delaware
Management Company (the "Manager") believes have the potential for
high earnings growth. Growth Stock Fund's investment objective is
long-term capital appreciation through investment in equity
securities diversified among individual companies and industries.
There is no assurance that either Fund's investment objective will
be achieved. See Investment Objectives and Policies.

Each Fund offers three retail classes of shares: "Class A
Shares," "Class B Shares" and "Class C Shares" (individually, a
"Class" and collectively, the "Classes").

This Prospectus relates only to the Classes listed above and
sets forth information that you should read and consider before you
invest. Please retain it for future reference. An investment in
either Fund involves certain risks and requires consideration of
such risks. The Funds' Statement of Additional Information ("Part
B" of Mutual Funds III, Inc.'s registration statement), dated June
29, 1998, as it may be amended from time to time, contains
additional information about the Funds and has been filed with the
Securities and Exchange Commission ("SEC"). Part B is incorporated
by reference into this Prospectus and is available, without
charge, by writing to Delaware Distributors, L.P. at the above
address or by calling the above numbers. Each Fund's financial
statements appear in the Annual Report of Mutual Funds III, Inc.
for the fiscal year ended April 30, 1998, which will accompany any
response to requests for Part B. The SEC also maintains a Web site
(http://www.sec.gov) that contains Part B, material we
incorporated by reference and other information regarding
registrants that electronically file with the SEC.

Each Fund also offers an Institutional Class, which is available
for purchase only by certain investors. A prospectus for the
Funds' Institutional Classes can be obtained by writing to
Delaware Distributors, L.P. at the above address or by calling the
above numbers.

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

BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS.
MUTUAL FUNDS CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN;
HOWEVER, SHARES OF THE FUNDS ARE NOT FDIC OR NCUSIF INSURED, ARE
NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION, ARE NOT
OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED. SHARES OF THE FUNDS ARE NOT BANK OR CREDIT UNION
DEPOSITS.

SYNOPSIS

INVESTMENT OBJECTIVES

Aggressive Growth Fund -- The investment objective of Aggressive
Growth Fund is long-term capital appreciation which the Fund
attempts to achieve by investing primarily in equity securities of
companies which the Manager believes have the potential for high
earnings growth.

Growth Stock Fund -- The investment objective of Growth Stock
Fund is long-term capital appreciation through investment in equity
securities diversified among individual companies and industries.

For further details, see Investment Objectives and Policies and
Other Investment Policies and Risk Considerations.

RISK FACTORS AND SPECIAL CONSIDERATIONS

Prospective investors should consider a number of factors:

1. Each Fund invests in common stocks. The prices of common
stocks, especially those of smaller companies, tend to fluctuate,
particularly in the shorter term. Investors should be willing to
accept the risks associated with investments in emerging and
growth-oriented companies, some of the securities of which may be
speculative and subject to additional investment risk. See
Investment Objectives and Policies.

2. Each Fund may invest up to 10% of its total assets directly
or indirectly in securities of issuers domiciled in foreign
countries. Such investments involve certain risk and opportunity
considerations not typically associated with investing in the
United States. See Investment Objectives and Policies and Other
Investment Policies and Risk Considerations.

3. Each Fund has the ability to engage in options transactions
for hedging purposes to counterbalance portfolio volatility. While
neither Fund engages in options transactions for speculative
purposes, there are risks which result from the use of options,
and an investor should carefully review the description of these
risks in this Prospectus. Certain options may be considered to be
derivative securities. See Investment Objectives and Policies and
Other Investment Policies and Risk Considerations.

INVESTMENT MANAGER, SUB-ADVISER, DISTRIBUTOR AND TRANSFER AGENT

The Manager is the investment manager for each Fund and, in that
capacity, provides investment advice to each Fund, subject to the
supervision of Mutual Funds III, Inc.'s Board of Directors. The
Manager also provides investment management services to certain of
the other funds in the Delaware Investments family. The Manager
employs Voyageur Asset Management LLC (the "Sub-Adviser") as
Growth Stock Fund's Sub-Adviser. Delaware Distributors, L.P. (the
"Distributor") is the national distributor for each Fund and for
all of the other mutual funds in the Delaware Investments family.
Delaware Service Company, Inc. (the "Transfer Agent") is the
shareholder servicing, dividend disbursing, accounting services
and transfer agent for each Fund and for all of the other mutual
funds in the Delaware Investments family. See Summary of Expenses
and Management of the Funds for further information regarding the
Manager and the Sub-Adviser and the fees payable under each Fund's
Investment Management Agreement and the Sub-Advisory Agreement on
behalf of Growth Stock Fund.

SALES CHARGES

The price of each of the Class A Shares includes a maximum front-
end sales charge of 4.75% of the offering price. The front-end
sales charge is reduced on certain transactions of at least
$100,000 but under $1,000,000. For purchases of $1,000,000 or
more, the front-end sales charge is eliminated; if a dealer's
commission is paid in connection with those sales, a contingent
deferred sales charge ("Limited CDSC") of 1% will be imposed if
shares are redeemed during the first year after purchase and 0.50%
will be imposed if shares are redeemed during the second year
after the purchase. See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value
under Redemption and Exchange. Class A Shares are subject to
annual 12b-1 Plan expenses for the life of the investment.

The price of each of the Class B Shares is equal to the net asset
value per share. Class B Shares are subject to a contingent
deferred sales charge ("CDSC") of: (i) 4% if shares are redeemed
within two years of purchase; (ii) 3% if shares are redeemed
during the third or fourth year following purchase; (iii) 2% if
shares are redeemed during the fifth year following purchase; (iv)
1% if shares are redeemed during the sixth year following
purchase; and (v) 0% thereafter. Class B Shares are subject to
annual 12b-1 Plan expenses for approximately eight years after
purchase. See Deferred Sales Charge Alternative--Class B Shares
and Automatic Conversion of Class B Shares under Classes of
Shares.

The price of the Class C Shares is equal to the net asset value
per share. Class C Shares are subject to a CDSC of 1% if shares
are redeemed within 12 months of purchase. Class C Shares are
subject to annual 12b-1 Plan expenses for the life of the
investment.

See Classes of Shares and Distribution (12b-1) and Service under
Management of the Funds.

PURCHASE AMOUNTS

Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments generally must be at least $100.

Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be
in an amount that is less than $1,000,000. An investor may exceed
these maximum purchase limitations for Class B Shares and Class C
Shares by making cumulative purchases over a period of time. An
investor should keep in mind, however, that reduced front-end
sales charges apply to investments of $100,000 or more in Class A
Shares, and that Class A Shares are subject to lower annual 12b-1
Plan expenses than Class B and Class C Shares and generally are
not subject to a CDSC. The minimum and maximum purchase amounts
for retirement plans may vary. See How to Buy Shares.

REDEMPTION AND EXCHANGE

Class A Shares of each Fund may be redeemed or exchanged at the
net asset value calculated after receipt of the redemption or
exchange request. Neither the Funds nor the Distributor assesses a
charge for redemptions or exchanges of Class A Shares, except for
certain redemptions of shares purchased at net asset value, which
may be subject to a CDSC if a dealer's commission was paid in
connection with such purchases. See Front-End Sales Charge
Alternative--Class A Shares under Classes of Shares.

Class B Shares and Class C Shares may be redeemed or exchanged at
the net asset value calculated after receipt of the redemption or
exchange request subject, in the case of redemptions, to any
applicable CDSC. Neither the Funds nor the Distributor assesses
any charges other than the CDSC for redemptions or exchanges of
Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes
of shares that are offered. See Redemption and Exchange.

OPEN-END INVESTMENT COMPANY

Mutual Funds III, Inc. is an open-end, registered management
investment company. Each Fund operates as a diversified fund as
defined under the Investment Company Act of 1940 Act (the "1940
Act"). Mutual Funds III, Inc. was organized as a Minnesota
corporation in January 1985. See Shares under Management of the
Funds.

SUMMARY OF
EXPENSES

A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares of each Fund
follows.

AGGRESSIVE
GROWTH FUND
CLASS A CLASS B CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES SHARES
- -----------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as a
percentage of offering price) None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds, as
applicable) None 1 4.00% 2 1.00% 3
Redemption Fees None 4 None 4 None 4

GROWTH STOCK FUND
CLASS A CLASS B CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES SHARES
- -----------------------------------------------------------------
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as a
percentage of offering price) None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds, as
applicable) None 1 4.00% 2 1.00% 3
Redemption Fees None 4 None 4 None 4

AGGRESSIVE
ANNUAL OPERATING EXPENSES GROWTH FUND
(AS A PERCENTAGE OF CLASS A CLASS B CLASS C
AVERAGE DAILY NET ASSETS) SHARES SHARES SHARES
- -----------------------------------------------------------------
Management Fees
(after voluntary waivers)5/6 0.46% 0.46% 0.46%
12b-1 Expenses
(including service fees) 0.25% 7 1.00% 7 1.00% 7
Other Operating Expenses 1.04% 1.04% 1.04%
----- ----- ----
Total Operating Expenses
(after voluntary waivers)5 1.75% 2.50% 2.50%
===== ===== =====

ANNUAL OPERATING EXPENSES GROWTH STOCK FUND
(AS A PERCENTAGE OF CLASS A CLASS B CLASS C
AVERAGE DAILY NET ASSETS) SHARES SHARES SHARES
- -----------------------------------------------------------------
Management Fees
(after voluntary waivers)5/6 0.93% 0.93% 0.93%
12b-1 Expenses
(including service fees) 0.25% 7 1.00% 7 1.00% 7
Other Operating Expenses 0.57% 0.57% 0.57%
===== ===== =====
Total Operating Expenses
(after voluntary waivers)5 1.75% 2.50% 2.50%
===== ===== =====

1 Class A purchases of $1 million or more may be made at
net asset value. However, if in connection with any such purchase a
dealer commission is paid to the financial adviser through whom such
purchase is effected, a Limited CDSC of 1% will be imposed on
certain redemptions made during the first year after purchase and
0.50% will be imposed on certain redemptions made during the second
year after purchase. Additional Class A purchase options involving
the imposition of a CDSC may be permitted as described in this
Prospectus from time to time. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.

2 Class B Shares are subject to a CDSC of: (i) 4% if shares
are redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase; (iii)
2% if shares are redeemed during the fifth year following purchase;
(iv) 1% if shares are redeemed during the sixth year following
purchase; and (v) 0% thereafter. See Deferred Sales Charge
Alternative--Class B Shares under Classes of Shares.

3 Class C Shares are subject to a CDSC of 1% if the shares
are redeemed within 12 months of purchase. See Level Sales Charge
Alternative--Class C Shares under Classes of Shares.

4 CoreStates Bank, N.A. currently charges $7.50 per redemption
for redemptions payable by wire.

5 The Manager has elected voluntarily to waive that portion, if any,
of the annual management fees payable by Aggressive Growth Fund
and Growth Stock Fund and to pay each Fund's expenses to the extent
necessary to ensure that total operating expenses of each Class do
not exceed on an annualized basis (exclusive of 12b-1 Plan Expenses,
taxes, interest, brokerage commissions and extraordinary expenses)
1.50% through December 31, 1998. In the absence of voluntary waivers,
"Total Operating Expenses" for Aggressive Growth Fund would be
2.29%, 3.04% and 3.04% for Class A, Class B and Class C Shares,
respectively and for Growth Stock Fund would be 1.82%, 2.57% and
2.57% for Class A, Class B and Class C Shares, respectively.

6 The Fund's management fee without voluntary waivers and
payments would be 1.00%.

7 Class A Shares, Class B Shares and Class C Shares are
subject to separate 12b-1 Plans. Long-term shareholders may pay more
than the economic equivalent of the maximum front-end sales charges
permitted by rules of the National Association of Securities
Dealers, Inc. (the "NASD"). See Distribution (12b-1) and Service
under Management of the Funds.

Investors utilizing the Asset Planner asset allocation service
also typically incur an annual maintenance fee of $35 per Strategy.
However, the annual maintenance fee is waived until further notice.
Investors who utilize the Asset Planner for an Individual Retirement
Plan ("IRA") will pay an annual IRA fee of $15 per Social Security
number. See Asset Planner in
Part B.

For expense information about the Funds' Institutional Classes,
see the separate prospectus relating to those classes.

The following example illustrates the expenses that an investor
would pay on a $1,000 investment over various time periods, assuming
(1) a 5% annual rate of return, (2) redemption and no redemption at
the end of each time period and (3) for Class B Shares and Class C
Shares, payment of a CDSC at the time of redemption, if applicable.
The following example assumes the voluntary waiver of the management
fee by the Manager as discussed in this Prospectus.

AGGRESSIVE GROWTH FUND
ASSUMING REDEMPTION
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A Shares $64 1 $100 $138 $244
Class B Shares $65 $108 $153 $265 2
Class C Shares $35 $78 $133 $284

ASSUMING NO REDEMPTION
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A Shares $64 $100 $138 $244
Class B Shares $25 $78 $133 $265 2
Class C Shares $25 $78 $133 $284

GROWTH STOCK FUND
ASSUMING REDEMPTION
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A Shares $64 1 $100 $138 $244
Class B Shares $65 $108 $153 $265 2
Class C Shares $35 $78 $133 $284

ASSUMING NO REDEMPTION
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A Shares $64 $100 $138 $244
Class B Shares $25 $78 $133 $265 2
Class C Shares $25 $78 $133 $284

1 Generally, no redemption charge is assessed upon redemption of
Class A Shares. Under certain circumstances, however, a Limited
CDSC or other CDSC, which has not been reflected in this
calculation, may be imposed on certain redemptions made within 24
months after purchase. See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value
under Redemption and Exchange.

2 At the end of approximately eight years after purchase, Class B
Shares of a Fund will be automatically converted into Class A
Shares of that Fund. The example above assumes conversion of Class
B Shares at the end of the eighth year. However, the conversion
may occur as late as three months after the eighth anniversary of
purchase, during which time the higher 12b-1 Plan fees payable by
Class B Shares will continue to be assessed. Information for the
ninth and tenth years reflects expenses of the Class A Shares. See
Automatic Conversion of Class B Shares under Classes of Shares for
a description of the automatic conversion feature.

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.

The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in
each Class will bear directly or indirectly.

FINANCIAL
HIGHLIGHTS

The following financial highlights are derived from the financial
statements of the Funds and have been audited by Ernst & Young
LLP, independent auditors for the year ended April 30, 1998 and by
the Funds' previous independent auditors for the prior fiscal
periods. The data for the most recent fiscal year should be read
in conjunction with the financial statements, related notes, and
the report of Ernst & Young LLP, all of which are incorporated by
reference into Part B. Further information about the Funds'
performance is contained in the Funds' Annual Report to
shareholders. A copy of the Funds' Annual Report (including the
report of Ernst & Young LLP) may be obtained from the Funds upon
request at no charge.

</TABLE>
<TABLE>
<CAPTION>

AGGRESSIVE GROWTH FUND 1
CLASS A SHARES
-------------------------------------------------
PERIOD
5/16/94 2
YEAR ENDED THROUGH
4/30/98 4/30/97 4/30/96 4/30/95
<S> <C> <C> <C>
Net asset value, beginning of
period $11.770 $13.080 $10.400 $10.000

INCOME FROM INVESTMENT OPERATIONS
Net investment loss (0.052) (0.180) (0.100) (0.090)
Net realized and unrealized
gain on investments 11.127 0.960 3.270 0.490
------- ------- ------- -------
Total from investment operations 11.075 0.780 3.170 0.400
------- ------- ------- -------

LESS DIVIDENDS AND DISTRIBUTIONS
Distributions from net realized
gain on investment transactions (2.275) (2.090) (0.400) --
Return of capital -- -- (0.090) --
------- ------- ------- -------
Total distributions (2.275) (2.090) (0.490) --
------- ------- ------- -------
Net asset value, end of period $20.570 $11.770 $13.080 $10.400
======= ======= ======= =======
- -----------------------------------------------------------------------------------------
TOTAL RETURN 98.60% 3,5 4.34% 3,5 31.02% 3,5 4.00% 3,5
- -----------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $31,926 $4,944 $4,334 $2,189
Ratio of expenses to average
net assets 1.75% 1.84% 2.01% 1.74%
Ratio of expenses to average
net assets prior to expense
limitation 2.29% 2.65% 2.74% 2.97%
Ratio of net investment loss
to average net assets (0.69%) (1.38%) (1.00%) (1.21%)
Ratio of net investment loss
to average net assets prior
to expense limitation (1.23%) (2.19%) (1.73%) (2.44%)
Portfolio turnover 356% 180% 166% 88%
Average commission rate paid 6 $0.0600 $0.0600 N/A N/A

</TABLE>

AGGRESSIVE GROWTH FUND 1
CLASS B SHARES
----------------------------------
PERIOD
4/16/96 2
YEAR ENDED THROUGH
4/30/98 4/30/97 4/30/96
<S> <C> <C> <C>

Net asset value, beginning of period $11.570 $13.060 $11.910

INCOME FROM INVESTMENT OPERATIONS
Net investment loss (0.061) (0.210) (0.010)
Net realized and unrealized
gain on investments 10.766 0.810 1.160
------- ------- -------
Total from investment operations 10.705 0.600 1.150
------- ------- -------

LESS DIVIDENDS AND DISTRIBUTIONS
Distributions from net realized gain
on investment transactions (2.275) (2.090) --
Return of capital -- -- --
------- ------- -------
Total distributions (2.275) (2.090) --
------- ------- -------
Net asset value, end of period $20.000 $11.570 $13.060
======= ======= =======
- --------------------------------------------------------------------------------------
TOTAL RETURN 97.12% 4,5 2.84% 4,5 9.66% 4
- --------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $16,539 $95 $0
Ratio of expenses to average
net assets 2.50% 2.57% 1.86%
Ratio of expenses to average
net assets prior to expense
limitation 3.04% 3.37% 1.86%
Ratio of net investment loss
to average net assets (1.44%) (1.97%) (1.39%)
Ratio of net investment loss
to average net assets prior
to expense limitation (1.98%) (2.77%) (1.39%)
Portfolio turnover 356% 180% 166%
Average commission rate paid 6 $0.0600 $0.0600 N/A

1 Effective May 1, 1995, Voyageur Fund Managers, Inc. assumed responsibility for
Aggressive Growth Fund's investment management replacing George D. Bjurman, the
Fund's sub-adviser. Beginning May 1, 1997, Delaware Management Company became the
investment adviser to the Fund.

2 Commencement of operations. Ratios have been annualized but total return has not
been annualized. Total return for this short of a time period may not be
representative of longer term results.

3 Does not reflect any maximum front-end sales charge nor the Limited CDSC that
varies from 0.50%-1% depending on the holding period for Aggressive Growth Fund A
Class, applicable to certain redemptions made within two years after purchase. See
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased
at Net Asset Value.

4 Does not reflect any CDSC that varies from 1%-4%, depending on the holding period
for Aggressive Growth Fund B Class. See Contingent Deferred Sales Charge-- Class B
Shares and Class C Shares.

5 Total return reflects expense limitations in effect for the Fund.

6 Computed by dividing the total amount of commissions paid by the total number of
shares purchased and sold during the period for which there was a commission
charged.

</TABLE>

AGGRESSIVE GROWTH FUND 1
CLASS C SHARES
----------------------------------------------
Period
5/20/94 2
Year Ended through
4/30/98 4/30/97 4/30/96 4/30/95
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $11.470 $12.880 $10.330 $10.000

INCOME FROM INVESTMENT OPERATIONS
Net investment loss (0.071) (0.230) (0.210) (0.160)
Net realized and unrealized
gain on investments 10.676 0.910 3.250 0.490
------- ------- ------- -------

Total from investment
operations 10.605 0.680 3.040 0.330

LESS DIVIDENDS AND DISTRIBUTIONS
Distributions from net realized
gain on investment transactions (2.275) (2.090) (0.400) --
Return of capital -- -- (0.090) --
------- ------- ------- -------

Total distributions (2.275) (2.090) (0.490) --
------- ------- ------- -------

Net asset value, end of period $19.800 $11.470 $12.880 $10.330
======= ======= ======= =======
- ---------------------------------------------------------------------------------------
TOTAL RETURN 3 96.99% 4 3.58% 4 29.96% 4 3.30% 4
- ---------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $5,892 $222 $150 $128
Ratio of expenses to average
net assets 2.50% 2.62% 2.77% 2.40%
Ratio of expenses to average
net assets prior to expense
limitation 3.04% 3.43% 3.50% 3.50%
Ratio of net investment loss
to average net assets (1.44%) (2.02%) (1.73%) (1.80%)
Ratio of net investment loss
to average net assets prior
to expense limitation (1.98%) (2.83%) (2.46%) (2.90%)
Portfolio turnover 356% 180% 166% 88%
Average commission rate paid 5 $0.0600 $0.0600 N/A N/A

1 Effective May 1, 1995, Voyageur Fund Managers, Inc. assumed responsibility for
Aggressive Growth Fund's investment management replacing George D. Bjurman, the
Fund's sub- adviser. Beginning May 1, 1997, Delaware Management Company became the
investment adviser to the Fund.

2 Commencement of operations. Ratios have been annualized but total return has not
been annualized. Total return for this short of a time period may not be
representative of longer term results.

3 Does not reflect the CDSC of 1% for Aggressive Growth Fund C Class for 12 months
from the date of purchase. See Contingent Deferred Sales Charge--Class B Shares and
Class C Shares.

4 Total return reflects expense limitations in effect for the Fund.

5 Computed by dividing the total amount of commissions paid by the total number of
shares purchased and sold during the period for which there was a commission charged.

</TABLE>

GROWTH STOCK FUND 1
CLASS A SHARES
-----------------------------------------------
YEAR ENDED APRIL 30,
1998 1997 1996 1995 1994

<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $25.340 $23.660 $19.910 $17.510 $17.810

INCOME FROM INVESTMENT OPERATIONS
Net investment income
(loss) 0.029 0.160 0.080 0.150 0.070
Net realized and unrealized
gain (loss) on investments 8.591 3.360 4.820 2.770 (0.160)
------- ------- ------- ------- -------
Total from investment operations 8.620 3.520 4.900 2.920 (0.090)
------- ------- ------- ------- -------

LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income (0.140) (0.080) (1.110) (0.130) (0.060)
Distributions from net realized
gain on investment transactions (1.990) (1.760) (1.040) (0.390) (0.150)
------- ------- ------- ------- -------
Total dividends and distributions (2.130) (1.840) (1.150) (0.520) (0.210)
------- ------- ------- ------- -------
Net asset value, end of period $31.830 $25.340 $23.660 $19.910 $17.510
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------
TOTAL RETURN 2 35.27% 3 15.27% 25.00% 3 17.04% 3 (0.52%) 3
- --------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $41,196 $34,255 $28,956 $23,651 $28,518
Ratio of expenses to average
net assets 1.75% 1.72% 1.78% 1.90% 1.90%
Ratio of expenses to average
net assets prior to expense
limitation 1.82% 1.72% 1.87% 1.99% 2.13%
Ratio of net investment
income (loss) to average
net assets 0.08% 0.68% 0.36% 0.75% 0.40%
Ratio of net investment
income (loss) to average
net assets prior to expense
limitation -- 0.68% 0.27% 0.66% 0.17%
Portfolio turnover 9% 29% 37% 22% 34%
Average commission rate paid 4 $0.0600 $0.0600 N/A N/A N/A

</TABLE>

GROWTH STOCK FUND 1
CLASS A SHARES
-----------------------------------------------
YEAR ENDED APRIL 30,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $23.810 $19.360 $18.850 $19.390 $16.100

INCOME FROM INVESTMENT OPERATIONS
Net investment income
(loss) 0.050 (0.180) (0.110) (0.080) (0.150)
Net realized and unrealized
gain (loss) on investments 0.220 4.810 3.400 1.290 3.510
------- ------- ------- ------- -------
Total from investment operations 0.270 4.630 3.290 1.210 3.360
------- ------- ------- ------- -------

LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income -- -- -- -- --
Distributions from net realized
gain on investment transactions (6.270) (0.180) (2.780) (1.750) (0.070)
------- ------- ------- ------- -------
Total dividends and distributions (6.270) (0.180) (2.780) (1.750) (0.070)
------- ------- ------- ------- -------
Net asset value, end of period $17.810 $23.810 $19.360 $18.850 $19.390
------- ------- ------- ------- -------
- --------------------------------------------------------------------------------------
TOTAL RETURN 2 1.51% 3 23.86% 3 20.51% 3 6.09% 3 20.92% 3
- --------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $26,784 $19,351 $11,400 $10,331 $9,183
Ratio of expenses to average
net assets 1.90% 2.25% 2.36% 2.31% 2.42%
Ratio of expenses to average
net assets prior to expense
limitation 2.70% 2.86% 2.86% 2.86% 3.00%
Ratio of net investment
income (loss) to average
net assets 0.26% (0.76%) (0.67%) (0.66%) (0.69%)
Ratio of net investment
income (loss) to average
net assets prior to expense
limitation (0.54%) (1.37%) (1.17%) (1.21%) (1.27%)
Portfolio turnover 17% 143% 128% 115% 32%
Average commission rate paid 4 N/A N/A N/A N/A N/A

1 Effective September 1, 1990, Voyageur Fund Managers, Inc. replaced Investment
Advisers, Inc. as the investment adviser and Wilke/Thompson Capital Management began
acting as Growth Stock Fund's sub-investment adviser until January 1, 1992 when
Voyageur Fund Managers, Inc. became the sole investment adviser to the Fund.
Beginning May 1, 1997, Delaware Management Company became the investment adviser to
the Fund and Voyageur Asset Management LLC began acting as Sub-Adviser to Growth
Stock Fund.

2 Does not reflect any maximum front-end sales charge nor the Limited CDSC that
varies from 0.50%-1% depending on the holding period for Class A Shares, applicable
to certain redemptions made within two years after purchase. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset Value.

3 Total return reflects expense limitations in effect for the Fund.

4 Computed by dividing the total amount of commissions paid by the total number of
shares purchased and sold during the period for which there was a commission
charged.

</TABLE>

GROWTH STOCK FUND 1
CLASS B SHARES
---------------------------
PERIOD
9/8/952
YEAR ENDED THROUGH
4/30/98 4/30/97 4/30/96
<S> <C> <C> <C>
Net asset value, beginning
of period $24.930 $23.390 $21.640

INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.165) -- 0.060
Net realized and unrealized
gain (loss) on investments 8.425 3.300 2.960
------- ------- -------

Total from investment operations 8.260 3.300 3.020
------- ------- -------

LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income -- -- (0.230)
Distributions from net realized
gain on investment transactions (1.990) (1.760) (1.040)
------- ------- -------

Total dividends and distributions (1.990) (1.760) (1.270)
------- ------- -------

Net asset value, end of period $31.200 $24.930 $23.390
======= ======= =======
- --------------------------------------------------------------------
TOTAL RETURN 3 34.29% 4 14.50% 14.37% 4
- --------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,903 $1,182 $454
Ratio of expenses to average
net assets 2.50% 2.47% 2.41%
Ratio of expenses to average
net assets prior to expense
limitation 2.57% 2.47% 2.50%
Ratio of net investment
income (loss) to average
net assets (0.67%) (0.01%) (0.62%)
Ratio of net investment
income (loss) to average net
assets prior to expense
limitation (0.74%) (0.01%) (0.71%)
Portfolio turnover 9% 29% 37%
Average commission rate paid 5 $0.0600 $0.0600 N/A

</TABLE>

GROWTH STOCK FUND 1
CLASS C SHARES
-----------------------------
PERIOD
10/31/95 2
YEAR ENDED THROUGH
4/30/98 4/30/97 4/30/96
Net asset value, beginning
of period $24.930 $23.430 $22.610
<S> <C> <C> <C>
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.192) 0.070 0.110
Net realized and unrealized
gain (loss) on investments 8.442 3.220 2.000
------- ------- -------

Total from investment operations 8.250 3.290 2.110
------- ------- -------

LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income -- (0.030) (0.250)
Distributions from net realized
gain on investment transactions (1.990) (1.760) (1.040)
------- ------- -------

Total dividends and distributions (1.990) (1.790) (1.290)
------- ------- -------

Net asset value, end of period $31.190 $24.930 $23.430
======= ======= =======
- --------------------------------------------------------------------
TOTAL RETURN 3 34.25% 4 14.42% 9.72% 4
- --------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,112 $712 $104
Ratio of expenses to average
net assets 2.50% 2.47% 2.35%
Ratio of expenses to average
net assets prior to expense
limitation 2.57% 2.47% 2.43%
Ratio of net investment
income (loss) to average
net assets (0.67%) 0.14% (0.65%)
Ratio of net investment
income (loss) to average net
assets prior to expense
limitation (0.74%) 0.14% (0.73%)
Portfolio turnover 9% 29% 37%
Average commission rate paid 5 $0.0600 $0.0600 N/A

1 Effective September 1, 1990, Voyageur Fund Managers, Inc.
replaced Investment Advisers, Inc. as the investment adviser and
Wilke/Thompson Capital Management began acting as Growth Stock
Fund's sub-investment adviser until January 1, 1992 when Voyageur
Fund Managers, Inc. became the sole investment adviser to the
Fund. Beginning May 1, 1997, Delaware Management Company became
the investment adviser to the Fund and Voyageur Asset Management
LLC began acting as Sub-Adviser to Growth Stock Fund.

2 Commencement of operations. Ratios have been annualized but
total return has not been annualized. Total return for this short
of a time period may not be representative of longer term results.

3 Does not reflect any CDSC that varies from 1%-4%, depending on
the holding period for Growth Stock Fund B Class and 1% for Growth
Stock Fund C Class for 12 months from the date of purchase. See
Contingent Deferred Sales Charge--Class B Shares and Class C
Shares.

4 Total return reflects expense limitations in effect for the
Fund.

5 Computed by dividing the total amount of commissions paid by the
total number of shares purchased and sold during the period for
which there was a commission charged.

</TABLE>

Investment Objectives
and Policies

Aggressive Growth Fund--Aggressive Growth Fund's investment
objective is long-term capital appreciation which the Fund
attempts to achieve by investing primarily in equity securities of
companies which the Manager believes have the potential for high
earnings growth. Although the Fund, in seeking its objective, may
receive current income from dividends and interest, income is only
an incidental consideration in the selection of the Fund's
investments.

Growth Stock Fund--Growth Stock Fund has an objective of
long-term capital appreciation. Growth Stock Fund seeks to achieve
its objective by investing in equity securities diversified among
individual companies and industries.

No assurance can be given that either Fund will be able to
achieve its investment objective.

SUITABILITY

The value of a Fund's investments, and as a result the net asset
value of a Fund's shares, will fluctuate in response to changes in
the market and economic conditions as well as the financial
condition and prospects of issuers in which the Fund invests.
Because of the risks associated with a Fund's investments, each
Fund is intended to be a long term investment vehicle and is not
designed to provide investors with a means of speculating on
short-term stock market movements.

Companies in which Aggressive Growth Fund invests typically are
subject to a greater degree of change in earnings and business
prospects than are companies with more established earnings
patterns. In light of these factors, Aggressive Growth Fund may be
subject to greater investment risk than that assumed by other
investment companies.

Ownership of a Fund's shares can reduce the bookkeeping and
administrative inconveniences that would be connected with direct
purchases of the types of securities in which the Fund invests.
Investors should not consider a purchase of shares of either Fund
as equivalent to a complete investment program. Delaware
Investments includes a family of funds, generally available
through registered investment dealers, which may be used together
to create a more complete investment program.

INVESTMENT STRATEGY

AGGRESSIVE GROWTH FUND
The Fund seeks to achieve its investment objective by investing
primarily (at least 65% of its total assets) in equity securities
(including convertible securities) of companies which the Manager
believes have the potential for high earnings growth and which are
U.S. companies with stock market capitalizations of at least $300
million. The Fund has been designed to provide investors with
potentially greater long-term rewards than provided by an
investment in a fund that seeks capital appreciation from common
stocks with more established earnings histories.

The Fund will invest in equity securities of companies the
Manager believes to be undervalued and to have the potential for
high earnings growth. Companies in which the Fund invests generally
will meet one or more of the following criteria: high historical
earnings-per-share (EPS) growth; high projected future EPS growth;
an increase in research analyst earnings estimates; attractive
relative price to earnings ratios; and high relative discounted
cash flows. In selecting the Fund's investments, the Manager also
focuses on companies with capable management teams, strong
industry positions, sound capital structures, high returns on
equity, high reinvestment rates and conservative financial
accounting policies.

In pursuing its objective, the Fund anticipates that it will
invest substantially all, and under normal conditions not less
than 65%, of its assets in common stocks, preferred stocks,
convertible bonds, convertible debentures, convertible notes,
convertible preferred stocks and warrants or rights. To the extent
that the Fund invests in convertible debt securities, those
securities will be purchased on the basis of their equity
characteristics, and ratings, if any, of those securities will not
be an important factor in their selection.

At no time will the investments of the Fund in bank obligations,
including time deposits, exceed 25% of the value of the Fund's
assets.

GROWTH STOCK FUND
In seeking to achieve its investment objective, Growth Stock
Fund's policy is to invest under normal market conditions not less
than 80% of its total assets in common stocks which the Manager or
Sub-Adviser believes offer the potential for long-term capital
appreciation. Some of the factors the Manager or Sub-Adviser will
consider in making the Fund's investments are increasing demand
for a company's products or services, the belief that a company's
securities are temporarily undervalued, the development of new or
improved products or services, the probability of increased
operating efficiencies, changes in management, emphasis on
research and development, cyclical conditions, or possible mergers
or acquisitions. The Fund anticipates that, in normal market
conditions, at least 75% of the Fund's investments in common
stocks will have received at the time of investment one of the two
highest earnings and dividend ratings (A+ or A) assigned by
Standard & Poor's Ratings Group (Standard & Poor's). The Fund also
may invest up to 20% of its total assets in preferred stocks and
corporate bonds if they are accompanied by warrants or are
convertible into common stocks.

* * *

Each Fund may invest up to 10% of its assets in foreign
securities. Each Fund may also invest in securities of foreign
issuers in the form of American Depositary Receipts ("ADRs"),
which are U.S. dollar-denominated receipts, typically issued by
domestic banks or trust companies, that represent the deposit with
those entities of securities of a foreign issuer, and Global
Depositary Receipts ("GDRs"), which generally are issued by
foreign banks and evidence ownership of either foreign or domestic
securities. ADRs are publicly traded on exchanges or over-the-
counter in the United States and are issued through "sponsored" or
"unsponsored" arrangements. In a sponsored ADR arrangement, the
foreign issuer assumes the obligation to pay some or all of the
depositary's transaction fees, whereas under an unsponsored
arrangement, the foreign issuer assumes no obligations and the
depositary's transaction fees are paid directly by the ADR
holders. In addition, less information is available in the United
States about an unsponsored ADR than about a sponsored ADR. Each
Fund may invest in ADRs through both sponsored and unsponsored
arrangements.

For additional information on each Fund's investment policies and
certain risks associated with investments in certain types of
securities, see Other Investment Policies and Risk Considerations.

THE DELAWARE
DIFFERENCE

PLANS AND SERVICES

The Delaware Difference is our commitment to provide you with
superior information and quality service on your investments in
the funds in the Delaware Investments family.

SHAREHOLDER PHONE DIRECTORY

INVESTOR INFORMATION CENTER

800-523-1918

FUND INFORMATION; LITERATURE; PRICE;
YIELD AND PERFORMANCE FIGURES

SHAREHOLDER SERVICE CENTER
800-523-1918
INFORMATION ON EXISTING REGULAR INVESTMENT ACCOUNTS AND RETIREMENT
PLAN ACCOUNTS; WIRE INVESTMENTS; WIRE LIQUIDATIONS; TELEPHONE
LIQUIDATIONS AND TELEPHONE EXCHANGES

DELAPHONE
800-362-FUND (800-362-3863)

PERFORMANCE INFORMATION

During business hours, you can call the Investor Information
Center for current performance information. Total return
information may also be included in advertisements and information
given to shareholders.

SHAREHOLDER SERVICES

During business hours, you can call Delaware Investments'
Shareholder Service Center. Our representatives can answer any
questions about your account, the Funds, various service features
and other funds in the Delaware Investments family.

DELAPHONE SERVICE

Delaphone is an account inquiry service for investors with Touch-
Tone(registered trademark) phone service. It enables you to get
information on your account faster than the mailed statements and
confirmations. Delaphone also provides current performance
information on the Funds, as well as other funds in the Delaware
Investments family. Delaphone is available seven days a week, 24
hours a day.

STATEMENTS AND CONFIRMATIONS

You will receive quarterly statements of your account summarizing
all transactions during the period. A confirmation statement will
be sent following all transactions other than those involving a
reinvestment of dividends and those involving salary deferral
purchases in connection with SIMPLE IRAs. You should examine
statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.

DUPLICATE CONFIRMATIONS

If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to
him or her. This makes it easier for your adviser to help you
manage your investments.

TAX INFORMATION

Each year, Mutual Funds III, Inc. will mail to you information on
the tax status of your dividends and distributions.

DIVIDEND PAYMENTS

Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in
cash. You may also elect to have the dividends earned in one fund
automatically invested in another Delaware Investments fund with a
different investment objective, subject to certain exceptions and
limitations.

For more information, see Additional Methods of Adding to Your
Investment--Dividend Reinvestment Plan under How to Buy Shares or
call the Shareholder Service Center.

RETIREMENT PLANNING

An investment in either Fund may be a suitable investment option
for tax-deferred retirement plans. Delaware Investments offers a
full spectrum of qualified and non-qualified retirement plans,
including the popular 401(k) deferred compensation plan, IRA, and
the new Roth IRA. Just call Delaware Investments at 800-523-1918
for more information.

MONEYLINE SM SERVICES

Delaware Investments offers the following services for fast and
convenient transfer of funds between your personal bank account
and your Fund account.

1. MONEYLINE SM DIRECT DEPOSIT SERVICE
If you elect to have your dividends and distributions paid in
cash and such dividends and distributions are in an amount of $25 or
more, you may choose the MoneyLine SM Direct Deposit Service and
have such payments transferred from your Fund account to your
predesignated bank account. See Dividends and Distributions. In
addition, you may elect to have your Systematic Withdrawal Plan
payments transferred from your Fund account to your predesignated
bank account through this service. See Systematic Withdrawal Plans
under Redemption and Exchange. This service is not available for
certain retirement plans.

2. MONEYLINE SM ON DEMAND
You or your investment dealer may request purchases and
redemptions of Fund shares by phone using MoneyLine SM On Demand.
When you authorize a Fund to accept such requests from you or your
investment dealer, funds will be withdrawn from (for share
purchases) or deposited to (for share redemptions) your
predesignated bank account. Your request will be processed the
same day if you call prior to 4 p.m., Eastern time. There is a $25
minimum and $50,000 maximum limit for MoneyLine SM On Demand
transactions. With respect to retirement plans, this service is
only available for purchases through an IRA.

For each MoneyLine SM Service, it may take up to four business
days for the transactions to be completed. You can initiate either
service by completing an Account Services form. If your name and
address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. Neither Fund
charges a fee for MoneyLine SM services; however, your bank may
charge a fee. Please call the Shareholder Service Center for
additional information about these services.

RIGHT OF ACCUMULATION

With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class
A Shares, Class B Shares and Class C Shares of a Fund with the
dollar amount of new purchases of Class A Shares of a Fund to
qualify for a reduced front-end sales charge on such purchases of
Class A Shares. Under the Combined Purchases Privilege, you may
also include certain shares that you own in other funds in the
Delaware Investments. See Classes of Shares.

LETTER OF INTENTION

The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by
aggregating certain of your purchases of shares of funds in the
Delaware Investments family over a 13-month period. See Classes of
Shares and Part B.

12-MONTH REINVESTMENT PRIVILEGE

The 12-Month Reinvestment Privilege permits you to reinvest
proceeds from a redemption of Class A Shares, within one year of
the date of the redemption, without paying a front-end sales
charge. See Part B.

EXCHANGE PRIVILEGE

The Exchange Privilege permits you to exchange all or part of
your shares into shares of other mutual funds in the Delaware
Investments family, subject to certain exceptions and limitations.
For additional information on exchanges, see Investing by Exchange
under How to Buy Shares and Redemption and Exchange.

WEALTH BUILDER OPTION

You may elect to invest in the Funds through regular liquidations
of shares in your accounts in other funds in the Delaware
Investments family. Investments under this feature are exchanges
and are therefore subject to the same conditions and limitations
as other exchanges of Fund shares. See Additional Methods of
Adding to Your Investment--Wealth Builder Option and Investing by
Exchange under How to Buy Shares and Redemption and Exchange.

FINANCIAL INFORMATION ABOUT THE FUNDS

Each fiscal year, you will receive an audited annual report and
an unaudited semi-annual report. These reports provide detailed
information about each Fund's investments and performance. Mutual
Funds III, Inc.'s fiscal year ends on April 30.

CLASSES
OF SHARES

ALTERNATIVE PURCHASE ARRANGEMENTS

Shares may be purchased at a price equal to the
next determined net asset value per share, subject to a sales
charge which may be imposed, at the election of
the purchaser, at the time of the purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent
deferred basis for Class B Shares ("deferred sales charge
alternative") or Class C Shares ("level sales charge
alternative").

Class A Shares. An investor who elects the front-end sales
charge alternative acquires Class A Shares, which incur a sales
charge when they are purchased, but generally are not subject to any
sales charge when they are redeemed. Class A Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 0.25% of average
daily net assets of such shares. Certain purchases of Class A
Shares qualify for reduced front-end sales charges. See Front-End
Sales Charge Alternative--Class A Shares, below. See also
Contingent Deferred Sales Charge for Certain Redemptions of Class
A Shares Purchased at Net Asset Value under Redemption and
Exchange and Distribution (12b-1) and Service under Management of
the Funds.

Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-
end sales charge when they are purchased, but are subject to a
contingent deferred sales charge if they are redeemed within six
years of purchase. Class B Shares are subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (0.25% of which are service fees
to be paid to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of
average daily net assets of such shares for approximately eight
years after purchase. Class B Shares permit all of the investor's
dollars to work from the time the investment is made. The higher
12b-1 Plan expenses paid by Class B Shares will cause such shares
to have a higher expense ratio and to pay lower dividends than
Class A Shares. At the end of approximately eight years after
purchase, the Class B Shares will automatically be converted into
Class A Shares and, thereafter, for the remainder of the life of
the investment, the annual 12b-1 Plan fee of up to 0.25% for the
Class A Shares will apply. See Automatic Conversion of Class B
Shares, below.

Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-
end sales charge when they are purchased, but are subject to a
contingent deferred sales charge if they are redeemed within 12
months of purchase. Class C Shares are subject to annual 12b-1
Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder
accounts) of average daily net assets of such shares for the life
of the investment. The higher 12b-1 Plan expenses paid by Class C
Shares will cause such shares to have a higher expense ratio and
to pay lower dividends than Class A Shares. Unlike Class B Shares,
Class C Shares do not convert to another class.

The alternative purchase arrangements described above permit
investors to choose the method of purchasing shares that is most
suitable given the amount of their purchase, the length of time
they expect to hold their shares and other relevant circumstances.
Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares
and incur a front-end sales charge, purchase Class B Shares and
have the entire initial purchase amount invested in a Fund with
their investment being subject to a CDSC if they redeem shares
within six years of purchase, or purchase Class C Shares and have
the entire initial purchase amount invested in a Fund with their
investment being subject to a CDSC if they redeem shares within 12
months of purchase. In addition, investors should consider the
level of annual 12b-1 Plan expenses applicable to each Class. The
higher 12b-1 Plan expenses on Class B Shares and Class C Shares
will be offset to the extent a return is realized on the
additional money initially invested upon the purchase of such
shares. However, there can be no assurance as to the return, if
any, that will be realized on such additional money. In addition,
the effect of any return earned on such additional money will
diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1
Plan expenses to which each Class is subject to and the
desirability of an automatic conversion feature, which is
available only for Class B Shares.

For the distribution and related services provided to, and the
expenses borne on behalf of, the Funds, the Distributor and others
will be paid, in the case of Class A Shares, from the proceeds of
the front-end sales charge and 12b-1 Plan fees and, in the case of
Class B Shares and Class C Shares, from the proceeds of the 12b-1
Plan fees and, if applicable, the CDSC incurred upon redemption.
Financial advisers may receive different compensation for selling
Class A, Class B and Class C Shares. INVESTORS SHOULD UNDERSTAND
THAT THE PURPOSE AND FUNCTION OF THE RESPECTIVE 12B-1 PLANS AND
THE CDSCS APPLICABLE TO CLASS B SHARES AND CLASS C SHARES ARE THE
SAME AS THOSE OF THE 12B-1 PLAN AND THE FRONT-END SALES CHARGE
APPLICABLE TO CLASS A SHARES IN THAT SUCH FEES AND CHARGES ARE
USED TO FINANCE THE DISTRIBUTION OF THE RESPECTIVE CLASSES. SEE
DISTRIBUTION (12B-1) AND SERVICE UNDER MANAGEMENT OF THE FUNDS.

Dividends, if any, paid on Class A, Class B and Class C Shares
will be calculated in the same manner, at the same time, on the
same day and will be in the same amount, except that the
additional amount of 12b-1 Plan expenses relating to Class B
Shares and Class C Shares will be borne exclusively by such
shares. See Calculation of Offering Price and Net Asset Value Per
Share.

The NASD has adopted certain rules relating to investment
company sales charges. Mutual Funds III, Inc. and the Distributor
intend to operate in compliance with these rules.

FRONT-END SALES CHARGE ALTERNATIVE--
CLASS A SHARES

Class A Shares may be purchased at the offering
price, which reflects a maximum front-end sales charge
of 4.75%. See Calculation of Offering Price and Net Asset Value
Per Share.

Purchases of $100,000 or more carry a reduced front-end sales
charge as shown in the following table.

Dealer's
Front-End Sales Commission***
Charge as % of as % of
Amount of Purchase Offering Amount Offering
Price Invested** Price
- ---------------------------------------------------------------------
Aggressive Growth
Growth Stock
Fund Fund
-----------------

Less than $100,000 4.75% 5.01% 5.00% 4.00%
$100,000 but under $250,000 3.75 3.89 3.90 3.00
$250,000 but under $500,000 2.50 2.58 2.58 2.00
$500,000 but under $1,000,000* 2.00 2.04 2.04 1.60

* There is no front-end sales charge on purchases of
Class A Shares of $1 million or more but, under certain limited
circumstances, a Limited CDSC of 1% may apply upon redemption of
such shares made during the first year after purchase and 0.50%
may apply upon redemption of such shares made during the second
year after purchase.

** Based on the net asset value per share of the
respective Class A Shares as of the end of Mutual Funds III,
Inc.'s most recent fiscal year.
*** Financial institutions or their affiliated brokers
may receive an agency transaction fee in the percentages set
forth above.
- ---------------------------------------------------------------------
A Fund must be notified when a sale takes place which would
qualify for the reduced front-end sales charge on the basis of
previous or current purchases. The reduced front-end sales charge
will be granted upon confirmation of the shareholder's holdings by
such Fund. Such reduced front-end sales charges are not
retroactive.

From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods
during which the Distributor may reallow to dealers up to the full
amount of the front-end sales charge shown above. In addition,
certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments' products and
services and who increase sales of shares of the funds in the
Delaware Investments family may receive an additional commission
of up to 0.15% of the offering price. Dealers who receive 90% or
more of the sales charge may be deemed to be underwriters under
the 1933 Act.
- ---------------------------------------------------------------------

Beginning July 1, 1998, for initial purchases of Class A Shares of
$1,000,000 or more, a dealer's commission may be paid by the
Distributor to financial advisers through whom such purchases are
made in accordance with the following schedule:

DEALER'S COMMISSION
(AS A PERCENTAGE OF
AMOUNT OF PURCHASE AMOUNT PURCHASED)
- ------------------ -------------------
Up to $5 million 1.00%
Next $20 million up to $25 million 0.50
Amount over $25 million 0.25

Such Class A Shares are subject to a Limited CDSC of 1% if shares
are redeemed during the first year after purchase and 0.50% if
shares are redeemed during the second year after purchase.

For accounts with assets over $1 million, the dealer commission
resets annually to the highest incremental commission rate on the
anniversary of the first purchase. In determining a financial
adviser's eligibility for the dealer's commission, purchases of
Class A Shares of other funds in the Delaware Investments family
as to which a Limited CDSC applies may be aggregated with those of
the Class A Shares of a Fund. Financial advisers also may be
eligible for a dealer's commission in connection with certain
purchases made under a Letter of Intention or pursuant to an
investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and
calculation of the dealer's commission in the case of combined
purchases.

An exchange from other funds in the Delaware Investments family
will not qualify for payment of the dealer's commission, unless a
dealer's commission or similar payment has not been previously
paid on the assets being exchanged. The schedule and program for
payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.

Redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC if the dealer's
commission described above was paid in connection with the
purchase of those shares. See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value
under Redemption and Exchange.

COMBINED PURCHASES PRIVILEGE

By combining your holdings of Class A Shares with your holdings
of Class B Shares and/or Class C Shares of a Fund and shares of other
funds in the Delaware Investments family, except those noted
below, you can reduce the front-end sales charges on any
additional purchases of Class A Shares. Shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership
of variable insurance products may be combined with other Delaware
Investments fund holdings. Assets held by investment advisory
clients of the Manager or its affiliates in a stable value account
may be combined with other fund holdings in the Delaware
Investments family. Shares of other funds that do not carry a
front-end sales charge or CDSC may not be included unless they
were acquired through an exchange from a fund in the Delaware
Investments family that does carry a front-end sales charge or
CDSC.

It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over
a 13-month period and qualify the entire purchase for a reduction
in front-end sales charges on Class A Shares.

Combined purchases of $1,000,000 or more, including certain
purchases made at net asset value pursuant to a Right of
Accumulation or under a Letter of Intention, may result in the
payment of a dealer's commission and the applicability of a
Limited CDSC. Investors should consult their financial advisers or
the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative--Class A Shares,
above.

ALLIED PLANS

Class A Shares are available for purchase by participants in
certain defined contribution plans ("Allied Plans") which are made
available under a joint venture agreement between the Distributor
and another institution through which mutual funds are marketed
and which allow investments in Class A Shares of designated
Delaware Investments funds ("eligible Delaware Investments fund
shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments fund
shares"). Class B Shares and Class C Shares are not eligible for
purchase by Allied Plans.

With respect to purchases made in connection with an Allied Plan,
the value of eligible Delaware Investments and eligible non-
Delaware Investments fund shares held by the Allied Plan may be
combined with the dollar amount of new purchases by that Allied
Plan to obtain a reduced front-end sales charge on additional
purchases of eligible Delaware Investments fund shares.

Participants in Allied Plans may exchange all or part of their
eligible Delaware Investments fund shares for other eligible
Delaware Investments fund shares or for eligible non-Delaware
Investments fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments,
which were not subject to a front end sales charge, will be
subject to the applicable sales charge if exchanged for eligible
Delaware Investments fund shares to which a sales charge applies.
No sales charge will apply if the eligible fund shares were
previously acquired through the exchange of eligible shares on
which a sales charge was already paid or through the reinvestment
of dividends. See Investing by Exchange.

A dealer's commission may be payable on purchases of eligible
Delaware Investments fund shares under an Allied Plan. In
determining a financial adviser's eligibility for a dealer's
commission on net asset value purchases of eligible Delaware
Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated.

The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has
been paid. Waivers of the Limited CDSC, as described under Waiver
of Limited Contingent Deferred Sales Charge--Class A Shares under
Redemption and Exchange, apply to redemptions by participants in
Allied Plans except in the case of exchanges between eligible
Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into
eligible non-Delaware Investments fund shares, the Limited CDSC
will be imposed at the time of the exchange, unless the joint
venture agreement specifies that the amount of the Limited CDSC
will be paid by the financial adviser or selling dealer. See
Contingent Deferred Sales Charge for Certain Redemptions of Class
A Shares Purchased at Net Asset Value under Redemption and
Exchange.

BUYING CLASS A SHARES AT NET ASSET VALUE

Class A Shares may be purchased at net asset value under the
Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month
Reinvestment Privilege. See The Delaware Difference and Redemption
and Exchange for additional information.

Purchases of Class A Shares may be made at net asset value by
current and former officers, directors and employees (and members
of their families) of the Manager or the Sub-Adviser, any
affiliate, any of the funds in the Delaware Investments family,
certain of their agents and registered representatives and
employees of authorized investment dealers and by employee benefit
plans for such entities. Individual purchases, including those in
retirement accounts, must be for accounts in the name of the
individual or a qualifying family member.

Purchases of Class A Shares may also be made by clients of
registered representatives of an authorized investment dealer at
net asset value within 12 months after the registered
representative changes employment, if the purchase is funded by
proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been
assessed. Purchases of Class A Shares may also be made at net
asset value by bank employees who provide services in connection
with agreements between the bank and unaffiliated brokers or
dealers concerning sales of shares of funds in the Delaware
Investments family. Officers, directors and key employees of
institutional clients of the Manager or Sub-Adviser or any of its
affiliates may purchase Class A Shares at net asset value.
Moreover, purchases may be effected at net asset value for the
benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such
broker, dealer or investment adviser has entered into an agreement
with the Distributor providing specifically for the purchase of
Class A Shares in connection with special investment products,
such as wrap accounts or similar fee based programs. Investors may
be charged a fee when effecting transactions in Class A Shares
through a broker or agent that offers these special investment
products.

Purchases of Class A Shares at net asset value may also be made
by the following: financial institutions investing for the account of
their trust customers if they are not eligible to purchase shares
of the institutional class of a Fund; and any group retirement
plan (excluding defined benefit pension plans), or such plans of
the same employer, for which plan participant records are
maintained on the Delaware Investment & Retirement Services, Inc.
("DIRSI") proprietary record keeping system that (i) has in excess
of $500,000 of plan assets invested in Class A Shares of funds in
the Delaware Investments family and any stable value product
available through Delaware Investments, or (ii) is sponsored by an
employer that has at any point after May 1, 1997 had more than 100
employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly
represented to DIRSI in writing that it has the requisite number
of employees and has received written confirmation back from
DIRSI. See Group Investment Plans for information regarding the
applicability of the Limited CDSC.

Investments in Class A Shares made by plan level and/or
participant retirement accounts that are for the purpose of
repaying a loan taken from such accounts will be made at net asset
value. Loan repayments made to a Delaware Investments account in
connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net
asset value.

Investors in Delaware Investments Unit Investment Trusts may
reinvest monthly dividend checks and/or repayment of invested
capital into Class A Shares of any of the funds in the Delaware
Investments family at net asset value.

A Fund must be notified in advance that an investment qualifies
for purchase at net asset value.

GROUP INVESTMENT PLANS

Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE IRA,
SIMPLE 401(k), Profit Sharing, Money Purchase Pension, 401(k) Defined
Contribution Plans, and 403(b)(7) and 457 Deferred Compensation
Plans) may benefit from the reduced front-end sales charges
available on Class A Shares based on total plan assets. If a
company has more than one plan investing in the funds in the
Delaware Investments family, then the total amount invested in all
plans will be aggregated to determine the applicable front-end
sales charge reduction on each purchase, both initial and
subsequent, if, at the time of each such purchase, the company
notifies the Fund in which it is investing that it qualifies for
the reduction. Employees participating in such Group Investment
Plans may also combine the investments held in their plan account
to determine the front-end sales charge applicable to purchases in
non-retirement investment accounts in Delaware Investments if, at
the time of each such purchase, they notify the Fund in which they
are investing that they are eligible to combine purchase amounts
held in their plan account.

The Limited CDSC is applicable to any redemptions of net asset
value purchases made on behalf of any group retirement plan on
which a dealer's commission has been paid only if such redemption
is made pursuant to a withdrawal of the entire plan from a fund in
the Delaware Investments family. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.

DEFERRED SALES CHARGE ALTERNATIVE--
CLASS B SHARES

Class B Shares may be purchased at net asset value without a
front-end sales charge and, as a result, the full amount of the
investor's purchase payment will be invested in Fund shares. The
Distributor currently anticipates compensating dealers or brokers
for selling Class B Shares at the time of purchase from its own
assets in an amount equal to no more than 4% of the dollar amount
purchased. In addition, from time to time, upon written notice to
all of its dealers, the Distributor may hold special promotions
for specified periods during which the Distributor may pay
additional compensation to dealers or brokers for selling Class B
Shares at the time of purchase. As discussed below, however, Class
B Shares are subject to annual 12b-1 Plan expenses and, if
redeemed within six years of purchase, a CDSC.

Proceeds from the CDSC and the annual 12b-1 Plan fees are paid
to the Distributor and others for providing distribution and related
services, and bearing related expenses, in connection with the
sale of Class B Shares. These payments support the compensation
paid to dealers or brokers for selling Class B Shares. Payments to
the Distributor and others under the Class B 12b-1 Plan may be in
an amount equal to no more than 1% annually. The combination of
the CDSC and the proceeds of the 12b-1 Plan fees makes it possible
for a Fund to sell Class B Shares without deducting a front-end
sales charge at the time of purchase.

Holders of Class B Shares who exercise the exchange privilege
described below will continue to be subject to the CDSC schedule
for the Class B Shares described in this Prospectus, even after
the exchange. Such CDSC schedule may be higher than the CDSC
schedule for the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.

AUTOMATIC CONVERSION OF CLASS B SHARES

Class B Shares, other than shares acquired through reinvestment
of dividends, held for eight years after purchase are eligible for
automatic conversion into Class A Shares. Conversions of Class B
Shares into Class A Shares will occur only four times in any
calendar year, on the last business day of the second full week of
March, June, September and December (each, a "Conversion Date").
If the eighth anniversary after a purchase of Class B Shares falls
on a Conversion Date, an investor's Class B Shares will be
converted on that date. If the eighth anniversary occurs between
Conversion Dates, an investor's Class B Shares will be converted
on the next Conversion Date after such anniversary. Consequently,
if a shareholder's eighth anniversary falls on the day after a
Conversion Date, that shareholder will have to hold Class B Shares
for as long as three additional months after the eighth
anniversary of purchase before the shares will automatically
convert into Class A Shares.

Class B Shares of a fund acquired through a reinvestment of
dividends will convert to the corresponding Class A Shares of that
fund (or, in the case of Delaware Group Cash Reserve, Inc., the
Delaware Cash Reserve Consultant Class) pro-rata with Class B
Shares of that fund not acquired through dividend reinvestment.

All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.

LEVEL SALES CHARGE ALTERNATIVE--
CLASS C SHARES

Class C Shares may be purchased at net asset value without a
front-end sales charge and, as a result, the full amount of the
investor's purchase payment will be invested in Fund shares. The
Distributor currently anticipates compensating dealers or brokers
for selling Class C Shares at the time of purchase from its own
assets in an amount equal to no more than 1% of the dollar amount
purchased. As discussed below, however, Class C Shares are subject
to annual 12b-1 Plan expenses and, if redeemed within 12 months of
purchase, a CDSC.

Holders of Class C Shares who exercise the exchange privilege
described below will continue to be subject to the CDSC schedule
for the Class C Shares as described in this Prospectus. See
Redemption and Exchange.

CONTINGENT DEFERRED SALES CHARGE--
CLASS B SHARES AND CLASS C SHARES

Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth below and Class C Shares
redeemed within 12 months of purchase may be subject to a CDSC of
1%. CDSCs are charged as a percentage of the dollar amount subject
to the CDSC. The charge will be assessed on an amount equal to the
lesser of the net asset value at the time of purchase of the
shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in
net asset value above the initial purchase price, nor will a CDSC
be assessed on redemptions of shares acquired through
reinvestments of dividends or capital gains distributions. For
purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B
Shares or Class C Shares of a Fund, even if those shares are later
exchanged for shares of another fund in the Delaware Investments
family. In the event of an exchange of the shares, the "net asset
value of such shares at the time of redemption" will be the net
asset value of the shares that were acquired in the exchange.

The following table sets forth the rates of the CDSC for
Class B Shares of the Funds:

CONTINGENT DEFERRED
SALES CHARGE
(AS A PERCENTAGE OF
YEAR AFTER DOLLAR AMOUNT
PURCHASE MADE SUBJECT TO CHARGE)
---------------- -------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None

In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six
years are redeemed first, followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares
held longest during the six-year period. With respect to Class C
Shares, it will be assumed that shares held for more than 12
months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares
held for 12 months or less.

All investments made during a calendar month, regardless of what
day of the month the investment occurred, will age one month on
the last day of that month and each subsequent month.

The CDSC is waived on certain redemptions of Class B Shares and
Class C Shares. See Waiver of Contingent Deferred Sales Charge--
Class B and Class C Shares under Redemption and Exchange.

OTHER PAYMENTS TO DEALERS--CLASS A,
CLASS B AND CLASS C SHARES

From time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes
exceed certain limits, as set by the Distributor, may receive from
the Distributor an additional payment of up to 0.25% of the dollar
amount of such sales. The Distributor may also provide additional
promotional incentives or payments to dealers that sell shares of
the funds in the Delaware Investments family. In some instances,
these incentives or payments may be offered only to certain
dealers who maintain, have sold or may sell certain amounts of
shares.

Subject to pending amendments to the NASD's Conduct Rules, in
connection with the promotion of shares of the funds in the
Delaware Investments family, the Distributor may, from time to
time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection
with preapproved seminars, conferences and advertising and may,
from time to time, pay or allow additional promotional incentives
to dealers, which shall include non-cash concessions, such as
certain luxury merchandise or a trip to or attendance at a
business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to
dealers is currently under review by the NASD and the SEC. It is
likely that the NASD's Conduct Rules will be amended such that the
ability of the Distributor to pay non-cash compensation as
described above will be restricted in some fashion. The
Distributor intends to comply with the NASD's Conduct Rules as
they may be amended.

INSTITUTIONAL CLASSES

In addition to offering Class A, Class B and Class C Shares, each
Fund also offers an Institutional Class, which is described in a
separate prospectus and is available for purchase only by certain
investors. Institutional Class shares generally are distributed
directly by the Distributor and do not have a front-end sales
charge, a CDSC or a Limited CDSC and are not subject to 12b-1 Plan
distribution expenses. To obtain the prospectus that describes the
Institutional Classes, contact the Distributor by writing to the
address or by calling the telephone number listed on the back
cover of this Prospectus.

HOW TO
BUY SHARES

PURCHASE AMOUNTS

Generally, the minimum initial purchase is $1,000 for Class A
Shares, Class B Shares and Class C Shares. Subsequent purchases of
shares of any Class generally must be $100 or more. For purchases
under the Uniform Gifts to Minors Act or Uniform Transfers to
Minors Act or through an Automatic Investing Plan, there is a
minimum initial purchase of $250 and a minimum subsequent purchase
of $25. Minimum purchase requirements do not apply to retirement
plans other than IRAs, for which there is a minimum initial purchase
of $250, and a minimum subsequent purchase of $25, regardless
of which Class is selected.

There is a maximum purchase limitation of $250,000 on each
purchase of Class B Shares. For Class C Shares, each purchase must
be in an amount that is less than $1,000,000. An investor may
exceed these maximum purchase limitations by making cumulative
purchases over a period of time. In doing so, an investor should
keep in mind that reduced front-end sales charges are available on
investments of $100,000 or more in Class A Shares, and that Class
A Shares (i) are subject to lower annual 12b-1 Plan expenses than
Class B Shares and Class C Shares and (ii) generally are not
subject to a CDSC. For retirement plans, the maximum purchase
limitations apply only to the initial purchase of Class B Shares
or Class C Shares by the plan.

INVESTING THROUGH YOUR INVESTMENT DEALER

You can make a purchase of shares of the Funds through most
investment dealers who, as part of the service they provide, must
transmit orders promptly. They may charge for this service. If you
want a dealer but do not have one, the Delaware Investments can
refer you to one.

INVESTING BY MAIL

1. Initial Purchases--An Investment Application or, in the case of
a retirement account, an appropriate retirement plan application,
must be completed, signed and sent with a check, payable to the
specific Fund and Class selected to Delaware Investments at 1818
Market Street, Philadelphia, PA 19103.

2. Subsequent Purchases--Additional purchases may be made at any
time by mailing a check payable to the specific Fund and Class
selected. Your check should be identified with your name(s) and
account number. An investment slip (similar to a deposit slip) is
provided at the bottom of transaction confirmations and dividend
statements that you will receive from Mutual Funds III, Inc. Use
of this investment slip can help expedite processing of your check
when making additional purchases. Your investment may be delayed
if you send additional purchases by certified mail.

INVESTING BY WIRE

You may purchase shares by requesting your bank to transmit funds
by wire to CoreStates Bank, N.A., ABA #031000011, account number
1412893401 (include your name(s) and your account number for the
Class in which you are investing).

1. Initial Purchases--Before you invest, telephone the Shareholder
Service Center to get an account number. If you do not call first,
processing of your investment may be delayed. In addition, you
must promptly send your Investment Application or, in the case of
a retirement account, an appropriate retirement plan application,
to the specific Fund and Class selected, to Delaware Investments
at 1818 Market Street, Philadelphia, PA 19103.

2. Subsequent Purchases--You may make additional investments
anytime by wiring funds to CoreStates Bank, N.A., as described
above. You should advise the Shareholder Service Center by
telephone of each wire you send.

If you want to wire investments to a retirement plan account,
call the Shareholder Service Center for special wiring instructions.

INVESTING BY EXCHANGE

If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of
part or all of your investment into shares of a Fund. If you wish
to open an account by exchange, call the Shareholder Service
Center for more information. All exchanges are subject to the
eligibility and minimum purchase requirements set forth in each
fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.

Holders of Class A Shares of a Fund may exchange all or part of
their shares for certain of the shares of other funds in the
Delaware Investments family, including other Class A Shares, but
may not exchange their Class A Shares for Class B Shares or Class
C Shares of the Fund or of any other fund in the Delaware
Investments family. Holders of Class B Shares of a Fund are
permitted to exchange all or part of their Class B Shares only
into Class B Shares of other funds in the Delaware Investments
family. Similarly, holders of Class C Shares of a Fund are
permitted to exchange all or part of their Class C Shares only
into Class C Shares of other funds in the Delaware Investments
family. Class B Shares of a Fund and Class C Shares of a Fund
acquired by exchange will continue to carry the CDSC and, in the
case of Class B Shares, the automatic conversion schedule of the
fund from which the exchange is made. The holding period of
Class B Shares of a Fund acquired by exchange will be added to
that of the shares that were exchanged for purposes of determining
the time of the automatic conversion into Class A Shares
of that Fund.

Permissible exchanges into Class A Shares of a Fund will be made
without a front-end sales charge, except for exchanges of shares
that were not previously subject to a front-end sales charge
(unless such shares were acquired through the reinvestment of
dividends). Permissible exchanges into Class B Shares or Class C
Shares of a Fund will be made without the imposition of a CDSC by
the fund from which the exchange is being made at the time of the
exchange.

See Allied Plans under Classes of Shares for information on
exchanges by participants in an Allied Plan.

ADDITIONAL METHODS OF ADDING
TO YOUR INVESTMENT

Call the Shareholder Service Center for more information if you
wish to use the following services:

1. Automatic Investing Plan

THE AUTOMATIC INVESTING PLAN ENABLES YOU TO MAKE REGULAR MONTHLY
INVESTMENTS WITHOUT WRITING OR MAILING CHECKS. You may authorize
Mutual Funds III, Inc. to transfer a designated amount monthly
from your checking account to your Fund account. Many shareholders
use this as an automatic savings plan. Shareholders should allow a
reasonable amount of time for initial purchases and changes to
these plans to become effective.

This option is not available to participants in the following
plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing
and Money Purchase Pension Plans, 401(k) Defined Contribution
Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.

2. Direct Deposit

YOU MAY HAVE YOUR EMPLOYER OR BANK MAKE REGULAR INVESTMENTS
DIRECTLY TO YOUR ACCOUNT FOR YOU (for example: payroll deduction,
pay by phone, annuity payments). Each Fund also accepts
preauthorized recurring government and private payments by
Electronic Fund Transfer, which avoids mail time and check
clearing holds on payments such as social security, federal
salaries, Railroad Retirement benefits, etc.

* * *

Should investments through an automatic investing plan or by
direct deposit be reclaimed or returned for some reason, Mutual
Funds III, Inc. has the right to liquidate your shares to
reimburse the government or transmitting bank. If there are
insufficient funds in your account, you are obligated to reimburse
the Fund.

3. MoneyLine SM On Demand

Through the MoneyLine SM On Demand service, you or your investment
dealer may call a Fund to request a transfer of funds from your
predesignated bank account to your Fund account. See MoneyLine SM
Services under The Delaware Difference for additional information
about this service.

4. Wealth Builder Option

You can use our Wealth Builder Option to invest in a Fund through
regular liquidations of shares in your accounts in other funds in
the Delaware Investments family. You may also elect to invest in
other mutual funds in the Delaware Investments family through the
Wealth Builder Option through regular liquidations of shares in
your Fund account.

Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from
your account in one or more funds in the Delaware Investments
family and invested automatically into any other account in a fund
in the Delaware Investments family that you may specify. If in
connection with the election of the Wealth Builder Option, you
wish to open a new account to receive the automatic investment,
such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you
select. All investments under this option are exchanges and are
therefore subject to the same conditions and limitations as other
exchanges noted above. You can terminate your participation in
Wealth Builder at any time by giving written notice to the fund
from which the exchanges are made. See Redemption and Exchange.

This option is not available to participants in the following
plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing
and Money Purchase Pension Plans, 401(k) Defined Contribution
Plans, or 403(b)(7) or 457 Deferred Compensation Plans.

5. Dividend Reinvestment Plan

You can elect to have your distributions (capital gains and/or
dividend income) paid to you by check or reinvested in your
account. Or, you may invest your distributions in certain other
funds in the Delaware Investments family, subject to the
exceptions noted below as well as the eligibility and minimum
purchase requirements set forth in each fund's prospectus.

Reinvestments of distributions into Class A Shares of a Fund or
of other funds in the Delaware Investments family are made without a
front-end sales charge. Reinvestments of distributions into Class
B Shares of a Fund or of other funds in the Delaware Investments
family or into Class C Shares of a Fund or of other funds in the
Delaware Investments family are also made without any sales charge
and will not be subject to a CDSC if later redeemed. See Automatic
Conversion of Class B Shares under Classes of Shares for
information concerning the automatic conversion of Class B Shares
acquired by reinvesting dividends.

Holders of Class A Shares of a Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in
the Delaware Investments family, including the Funds. Holders of
Class B Shares of a Fund may reinvest their distributions only
into Class B Shares of the funds in the Delaware Investments
family which offer that class of shares. Similarly, holders of
Class C Shares of a Fund may reinvest their distributions only
into Class C Shares of the funds in the Delaware Investments
family which offer that class of shares. For more information
about reinvestments, call the Shareholder Service Center.

Capital gains and/or dividend distributions for participants in
the following retirement plans are automatically reinvested into
the same Delaware Investments fund into which their investments
are held: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit
Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, or 403(b)(7) or 457 Deferred Compensation
Plans.

PURCHASE PRICE AND EFFECTIVE DATE

The offering price and net asset value of Class A, Class B and
Class C Shares are determined as of the close of regular trading
on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time)
on days when the Exchange is open.

The effective date of a purchase made through an investment
dealer is the date the order is received by a Fund, its agent or
designee. The effective date of a direct purchase is the day your
wire, electronic transfer or check is received, unless it is
received after the time the offering price or net asset value of
shares is determined, as noted above. Purchase orders received
after such time will be effective the next business day.

THE CONDITIONS OF YOUR PURCHASE

Each Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you
are responsible for any loss incurred. A Fund can redeem shares
from your account(s) to reimburse itself for any loss, and you may
be restricted from making future purchases in any of the funds in
the Delaware Investments family. Each Fund reserves the right to
reject purchase orders paid by third-party checks or checks that
are not drawn on a domestic branch of a United States financial
institution. If a check drawn on a foreign financial institution
is accepted, you may be subject to additional bank charges for
clearance and currency conversion.

Each Fund also reserves the right, following shareholder
notification, to charge a service fee on non-retirement accounts
that, as a result of a redemption, have remained below the minimum
stated account balance for a period of three or more consecutive
months. Holders of such accounts may be notified of their
insufficient account balance and advised that they have until the
end of the current calendar quarter to raise their balance to the
stated minimum. If the account has not reached the minimum balance
requirement by that time, the Fund will charge a $9 fee for that
quarter and each subsequent calendar quarter until the account is
brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar
quarter for the previous quarter, and will be used to help defray
the cost of maintaining low-balance accounts. No fees will be
charged without proper notice, and no CDSC will apply to such
assessments.

Each Fund also reserves the right, upon 60 days' written notice,
to involuntarily redeem accounts that remain under the minimum
initial purchase amount as a result of redemptions. An investor
making the minimum initial investment may be subject to
involuntary redemption without the imposition of a CDSC or
Limited CDSC if he or she redeems any portion of
his or her account.

REDEMPTION
AND EXCHANGE

YOU CAN REDEEM OR EXCHANGE YOUR SHARES IN A NUMBER OF DIFFERENT
WAYS. The exchange service is useful if your investment
requirements change and you want an easy way to invest in other
equity funds, tax-advantaged funds, bond funds or money market
funds. This service is also useful if you are anticipating a major
expenditure and want to move a portion of your investment into a
fund that has the checkwriting feature. Exchanges are subject to
the requirements of each fund and all exchanges of shares
constitute taxable events. See Taxes. Further, in order for an
exchange to be processed, shares of the fund being acquired must
be registered in the state where the acquiring shareholder
resides. You may want to consult your financial adviser or
investment dealer to discuss which funds in the Delaware
Investments family will best meet your changing objectives, and
the consequences of any exchange transaction. You may also call
Delaware Investments directly for fund information.

Your shares will be redeemed or exchanged at a price based on
the net asset value next determined after a Fund receives your request
in good order, subject, in the case of a redemption, to any
applicable CDSC or Limited CDSC. For example, redemption or
exchange requests received in good order after the time the
offering price and net asset value of shares are determined will
be processed on the next business day. See Purchase Price and
Effective Date under How to Buy Shares. A shareholder submitting a
redemption request may indicate that he or she wishes to receive
redemption proceeds of a specific dollar amount. In the case of
such a request, and in the case of certain redemptions from
retirement plan accounts, a Fund will redeem the number of shares
necessary to deduct the applicable CDSC in the case of Class B and
Class C Shares, and, if applicable, the Limited CDSC in the case
of Class A Shares and tender to the shareholder the requested
amount, assuming the shareholder holds enough shares in his or her
account for the redemption to be processed in this manner.
Otherwise, the amount tendered to the shareholder upon redemption
will be reduced by the amount of the applicable CDSC or Limited
CDSC. Redemption proceeds will be distributed promptly, as
described below, but not later than seven days after receipt of a
redemption request.

Except as noted below, for a redemption request to be in "good
order," you must provide your account number, account
registration, and the total number of shares or dollar amount of
the transaction. For exchange requests, you must also provide the
name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by
the record owner(s) exactly as the shares are registered. You may
request a redemption or an exchange by calling the Shareholder
Service Center at 800-523-1918. Each Fund may suspend, terminate,
or amend the terms of the exchange privilege upon 60 days' written
notice to shareholders.

Each Fund will process written and telephone redemption requests
to the extent that the purchase orders for the shares being
redeemed have already settled. Each Fund will honor redemption
requests as to shares for which a check was tendered as payment,
but a Fund will not mail or wire the proceeds until it is
reasonably satisfied that the purchase check has cleared, which
may take up to 15 days from the purchase date. You can avoid this
potential delay if you purchase shares by wiring Federal Funds.
Each Fund reserves the right to reject a written or telephone
redemption request or delay payment of redemption proceeds if
there has been a recent change to the shareholder's address of
record.

There is no front-end sales charge or fee for exchanges made
between shares of funds which both carry a front-end sales charge.
Any applicable front-end sales charge will apply to exchanges from
shares of funds not subject to a front-end sales charge, except
for exchanges involving assets that were previously invested in a
fund with a front-end sales charge and/or exchanges involving the
reinvestment of dividends.

Holders of Class B Shares or Class C Shares that exchange their
shares ("Original Shares") for shares of other funds in the
Delaware Investments family (in each case, "New Shares") in a
permitted exchange, will not be subject to a CDSC that might
otherwise be due upon redemption of the Original Shares. However,
such shareholders will continue to be subject to the CDSC and, in
the case of Class B Shares, the automatic conversion schedule of
the Original Shares as described in this Prospectus and any CDSC
assessed upon redemption will be charged by the fund from which
the Original Shares were exchanged. In an exchange of Class B
Shares from a Fund, the Fund's CDSC schedule may be higher than
the CDSC schedule relating to the New Shares acquired as a result
of the exchange. For purposes of computing the CDSC that may be
payable upon a disposition of the New Shares, the period of time
that an investor held the Original Shares is added to the period
of time that an investor held the New Shares. With respect to
Class B Shares, the automatic conversion schedule of the Original
Shares may be longer than that of the New Shares. Consequently, an
investment in New Shares by exchange may subject an investor to
the higher 12b-1 fees applicable to Class B Shares of a Fund for a
longer period of time than if the investment in New Shares were
made directly.

Various redemption and exchange methods are outlined below.
Except for the CDSC applicable to certain redemptions of Class B and
Class C Shares and the Limited CDSC applicable to certain
redemptions of Class A Shares purchased at net asset value, there
is no fee charged by the Fund or the Distributor for redeeming or
exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your
shares redeemed or exchanged. Your investment dealer may charge
for this service.

All authorizations given by shareholders, including selection of
any of the features described below, shall continue in effect
until such time as a written revocation or modification has been
received by a Fund or its agent.

WRITTEN REDEMPTION

You can write to each Fund at 1818 Market Street, Philadelphia,
PA 19103 to redeem some or all of your shares. The request must be
signed by all owners of the account or your investment dealer of
record. For redemptions of more than $50,000, or when the proceeds
are not sent to the shareholder(s) at the address of record, the
Funds require a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must
be supplied by an eligible guarantor institution. Each Fund
reserves the right to reject a signature guarantee supplied by an
eligible institution based on its creditworthiness. The Funds may
require further documentation from corporations, executors,
retirement plans, administrators, trustees or guardians.

Payment is normally mailed the next business day after receipt of
your redemption request. If your Class A Shares are in certificate
form, the certificate(s) must accompany your request and also be
in good order. Certificates are issued for Class A Shares only if
a shareholder submits a specific request. Certificates are not
issued for Class B Shares or Class C Shares.

WRITTEN EXCHANGE

You may also write to each Fund (at 1818 Market Street,
Philadelphia, PA 19103) to request an exchange of any or all of
your shares into another mutual fund in the Delaware Investments
family, subject to the same conditions and limitations as other
exchanges noted above.

TELEPHONE REDEMPTION AND EXCHANGE

To get the added convenience of the telephone redemption and
exchange methods, you must have the Transfer Agent hold your
shares (without charge) for you. If you choose to have your Class
A Shares in certificate form, you may redeem or exchange only by
written request and you must return your certificate(s).

The Telephone Redemption--Check to Your Address of Record service
and the Telephone Exchange service, both of which are described
below, are automatically provided unless you notify the Fund in
which you have your account in writing that you do not wish to
have such services available with respect to your account. Each
Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be
difficult to reach the Funds by telephone during periods when
market or economic conditions lead to an unusually large volume of
telephone requests.

Neither the Funds nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone
instructions for redemption or exchange of Fund shares which are
reasonably believed to be genuine. With respect to such telephone
transactions, each Fund will follow reasonable procedures to
confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as,
if it does not, such Fund or the Transfer Agent may be liable for
any losses due to unauthorized or fraudulent transactions.
Instructions received by telephone are generally tape recorded,
and a written confirmation will be provided for all purchase,
exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are
being exchanged.

TELEPHONE REDEMPTION--CHECK TO YOUR
ADDRESS OF RECORD

THE TELEPHONE REDEMPTION FEATURE IS A QUICK AND EASY METHOD TO
REDEEM SHARES. You or your investment dealer of record can have
redemption proceeds of $50,000 or less mailed to you at your
address of record. Checks will be payable to the shareholder(s) of
record. Payment is normally mailed the next business day after
receipt of the redemption request. This service is only available
to individual, joint and individual fiduciary-type accounts.

TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK

Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should
authorize this service when you open your account. If you change
your predesignated bank account, you must complete an
Authorization Form and have your signature guaranteed. For your
protection, your authorization must be on file. If you request a
wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted
from your redemption proceeds. If you ask for a check, it will
normally be mailed the next business day after receipt of your
redemption request to your predesignated bank account. There are
no separate fees for this redemption method, but the mail time may
delay getting funds into your bank account. Simply call the
Shareholder Service Center prior to the time the offering price
and net asset value are determined, as noted above.

MONEYLINE SM ON DEMAND

Through the MoneyLine SM On Demand service, you or your investment
dealer may call a Fund to request a transfer of funds from your
Fund account to your predesignated bank account. See MoneyLine SM
Services under The Delaware Difference for additional information
about this service.

TELEPHONE EXCHANGE

The Telephone Exchange feature is a convenient and efficient way
to adjust your investment holdings as your liquidity requirements
and investment objectives change. You or your investment dealer of
record can exchange your shares into other funds in the Delaware
Investments family under the same registration, subject to the
same conditions and limitations as other exchanges noted above. As
with the written exchange service, telephone exchanges are subject
to the requirements of each fund, as described above. Telephone
exchanges may be subject to limitations as to amounts or
frequency.

SYSTEMATIC WITHDRAWAL PLANS

1. Regular Plans

This plan provides shareholders with a consistent monthly (or
quarterly) payment. THIS IS PARTICULARLY USEFUL TO SHAREHOLDERS
LIVING ON FIXED INCOMES, SINCE IT CAN PROVIDE THEM WITH A STABLE
SUPPLEMENTAL AMOUNT. With accounts of at least $5,000, you may
elect monthly withdrawals of $25 (quarterly $75) or more. The
Funds do not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made
by check. In the alternative, you may elect to have your payments
transferred from your Fund account to your predesignated bank
account through the MoneyLine(SM) Direct Deposit Service. Through
this service, it may take up to four business days for the
transaction to be completed. There are no separate fees
for this redemption method. See MoneyLine SM Services under The
Delaware Difference for more information about this service.

2. Retirement Plans

For shareholders eligible under the applicable retirement plan
to receive benefits in periodic payments, the Systematic Withdrawal
Plan provides you with maximum flexibility. A number of formulas
are available for calculating your withdrawals depending upon
whether the distributions are required or optional. Withdrawals
must be for $25 or more; however, no minimum account balance is
required. The MoneyLine SM Direct Deposit Service is not available
for certain retirement plans.

* * *

Shareholders should not purchase additional shares while
participating in a Systematic Withdrawal Plan.

Redemptions of Class A Shares via a Systematic Withdrawal Plan
may be subject to a Limited CDSC if the original purchase was made at
net asset value within the 12 months prior to the withdrawal and a
dealer's commission was paid on that purchase. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value, below.

The applicable CDSC for Class B Shares and Class C Shares redeemed
via a Systematic Withdrawal Plan will be waived if, on the date
that the Plan is established, the annual amount selected to be
withdrawn is less than 12% of the account balance. If the annual
amount selected to be withdrawn exceeds 12% of the account balance
on the date that the Systematic Withdrawal Plan is established,
all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first
shares to be redeemed for each Systematic Withdrawal Plan payment
will be those not subject to a CDSC because they have either
satisfied the required holding period or were acquired through the
reinvestment of distributions. The 12% annual limit will be reset
on the date that any Systematic Withdrawal Plan is modified (for
example, a change in the amount selected to be withdrawn or the
frequency or date of withdrawals), based on the balance in the
account on that date. See Waiver of Contingent Deferred Sales
Charge--Class B and Class C Shares, below.

For more information on Systematic Withdrawal Plans, call the
Shareholder Service Center.

CONTINGENT DEFERRED SALES CHARGE FOR
CERTAIN REDEMPTIONS OF CLASS A SHARES
PURCHASED AT NET ASSET VALUE

For purchases of $1 million or more made on or after July 1, 1998,
a Limited CDSC will be imposed on certain redemptions of Class A
Shares (or shares into which such Class A Shares are exchanged)
according to the following schedule: (1) 1% if shares are redeemed
during the first year after purchase; and (2) 0.50% if such shares
are redeemed during the second year after purchase, if such
purchases were made at net asset value and triggered the payment
by the Distributor of the dealer's commission previously
described. See Classes of Shares.

The Limited CDSC will be paid to the Distributor and will be
assessed on an amount equal to the lesser of: (1) the net asset
value at the time of purchase of the Class A Shares being
redeemed; or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset
value at the time of purchase" will be the net asset value at
purchase of Class A Shares even if those shares are later
exchanged for shares of another fund in the Delaware Investments
family and, in the event of an exchange of Class A Shares, the
"net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.

Redemptions of such Class A Shares held for more than two years
will not be subjected to the Limited CDSC and an exchange of such
Class A Shares into another fund in the Delaware Investments
family will not trigger the imposition of the Limited CDSC at the
time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying
the two-year holding period. The Limited CDSC is assessed if such
two-year period is not satisfied irrespective of whether the
redemption triggering its payment is of Class A Shares of a Fund
or Class A Shares acquired in the exchange.

In determining whether a Limited CDSC is payable, it will be
assumed that shares not subject to the Limited CDSC are the first
redeemed followed by other shares held for the longest period of
time. The Limited CDSC will not be imposed upon shares
representing reinvested dividends or capital gains distributions,
or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month
the investment occurred, will age one month on the last day of
that month and each subsequent month.

WAIVER OF LIMITED CONTINGENT DEFERRED
SALES CHARGE--CLASS A SHARES

The Limited CDSC for Class A Shares on which a dealer's commission
has been paid will be waived in the following instances: (i)
redemptions that result from a Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the
shares held in the account is less than the then-effective minimum
account size; (ii) distributions to participants from a retirement
plan qualified under section 401(a) or 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"), or due to death of
a participant in such a plan; (iii) redemptions pursuant to the
direction of a participant or beneficiary of a retirement plan
qualified under section 401(a) or 401(k) of the Code with respect
to that retirement plan; (iv) periodic distributions from an IRA,
SIMPLE IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to
death, disability, or attainment of age 59 1/2, and IRA
distributions qualifying under Section 72(t) of the Internal
Revenue Code; (v) returns of excess contributions to an IRA; (vi)
distributions by other employee benefit plans to pay benefits;
(vii) distributions described in (ii), (iv), and (vi) above
pursuant to a Systematic Withdrawal Plan; and (viii) redemptions
by the classes of shareholders who are permitted to purchase
shares at net asset value, regardless of the size of the purchase
(see Buying Class A Shares at Net Asset Value under Classes of
Shares).

WAIVER OF CONTINGENT DEFERRED SALES CHARGE--
CLASS B AND CLASS C SHARES

The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that
result from a Fund's right to liquidate a shareholder's account if
the aggregate net asset value of the shares held in the account is
less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, SEP/IRA or 403(b)(7)
or 457 Deferred Compensation Plans; (iii) periodic distributions
from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, 403(b)(7) or 457
Deferred Compensation Plan due to death, disability and attainment
of age 59 1/2, and IRA distributions qualifying under Section
72(t) of the Internal Revenue Code; and (iv) distributions from an
account if the redemption results from the death of all registered
owners of the account (in the case of accounts established under
the Uniform Gifts to Minors or Uniform Transfers to Minors Acts or
trust accounts, the waiver applies upon the death of all
beneficial owners) or a total and permanent disability (as defined
in Section 72 of the Code) of all registered owners occurring
after the purchase of the shares being redeemed.

The CDSC on Class C Shares is waived in connection with the
following redemptions: (i) redemptions that result from a Fund's
right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the
then-effective minimum account size; (ii) returns of excess
contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension
Plan, or 401(k) Defined Contribution Plan; (iii) periodic
distributions from a 403(b)(7) or 457 Deferred Compensation Plan
upon attainment of age 59 1/2, Profit Sharing Plan, Money Purchase
Pension Plan, 401(k) Defined Contribution Plans upon attainment of
age 70 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (iv) distributions from a 403(b)(7)
Deferred Compensation Plan, 457 Deferred Compensation Plan, Profit
Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) Deferred
Compensation Plan, 457 Deferred Compensation Plan, Profit Sharing
Plan, Money Purchase Pension Plan or a 401(k) Defined Contribution
Plan upon attainment of normal retirement age under the plan or
upon separation from service; (vi) periodic distributions from an
IRA or SIMPLE IRA on or after attainment of age 59 1/2; and (vii)
distributions from an account if the redemption results from the
death of all registered owners of the account (in the case of
accounts established under the Uniform Gifts to Minors or
Uniform Transfers to Minors Acts or trust accounts, the waiver
applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of
all registered owners occurring after the purchase of the shares
being redeemed.

In addition, the CDSC will be waived on Class B and Class C
Shares redeemed in accordance with a Systematic Withdrawal Plan if
the annual amount selected to be withdrawn under the Plan does not
exceed 12% of the value of the account on the date that the
Systematic Withdrawal Plan was established or modified.

DIVIDENDS AND
DISTRIBUTIONS

Each class of a Fund will share proportionately in the
investment income and expenses of that Fund, except that the per
share dividends from net investment income on Class A Shares, Class B
Shares and Class C Shares will vary due to the expenses under the
12b-1 Plan applicable to each Class. Generally, the dividends per
share on Class B Shares and Class C Shares can be expected to be
lower than the dividends per share on Class A Shares because the
expenses under the 12b-1 Plans relating to Class B and Class C
Shares will be higher than the expenses under the 12b-1 Plan
relating to Class A Shares. See Distribution (12b-1) and Service
under Management of the Funds.

Both dividends and distributions, if any, are automatically
reinvested in your account at net asset value unless you elect
otherwise. Any check in payment of dividends or other
distributions which cannot be delivered by the United States Post
Office or which remains uncashed for a period of more than one
year may be reinvested in your account at the then-current net
asset value and the dividend option may be changed from cash to
reinvest. If you elect to take your dividends and distributions in
cash and such dividends and distributions are in an amount of $25
or more, you may choose the MoneyLine SM Direct Deposit Service and
have such payments transferred from your Fund account to your
predesignated bank account. This service is not available for
certain retirement plans. See MoneyLine SM Services under The
Delaware Difference for more information about this service.

TAXES

Each Fund has qualified and intends to continue to qualify as a
regulated investment company under Subchapter M of the Code. As
such, a Fund will not be subject to federal income tax, or to any
excise tax, to the extent its earnings are distributed as provided
in the Code and it satisfies certain other requirements relating
to the sources of its income and diversification of its assets.

On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping
changes in the Code. Because many of these changes are complex,
and only indirectly affect a Fund and its distributions to you,
they are discussed in Part B. Changes in the treatment of capital
gains, however, are discussed in this section.

Each Fund intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends from
net investment income or net short-term capital gains will be
taxable to those investors who are subject to income taxes as
ordinary income, whether received in cash or in additional shares.
For corporate investors, dividends from net investment income will
generally qualify in part for the corporate dividends-received
deduction. The portion of dividends paid by each Fund that so
qualifies will be designated each year in a notice from Mutual
Funds III, Inc. to the Fund's shareholders. For the fiscal year
ended April 30, 1998, all of Growth Stock Fund's dividends from
net investment income qualified for the corporate dividends-
received deduction.

Distributions paid by a Fund from long-term capital gains,
whether received in cash or in additional shares, are taxable to
those investors who are subject to income taxes as long-term capital
gains, regardless of the length of time an investor has owned
shares in the Fund. The Funds do not seek to realize any
particular amount of capital gains during a year; rather, realized
gains are a by-product of Fund management activities.
Consequently, capital gains distributions may be expected to vary
considerably from year to year. Also, for those investors subject
to tax, if purchases of shares in a Fund are made shortly before
the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a
taxable distribution.

THE TREATMENT OF CAPITAL GAIN DISTRIBUTIONS
UNDER THE TAXPAYER RELIEF ACT OF 1997

The 1997 Act creates a category of long-term capital gain for
individuals who will be taxed at new lower tax rates. For
investors who are in the 28% or higher federal income tax
brackets, these gains will be taxed at a maximum rate of 20%. For
investors who are in the 15% federal income tax bracket, these
gains will be taxed at a maximum rate of 10%. Capital gain
distributions will qualify for these new maximum tax rates,
depending on when a Fund's securities were sold and how long they
were held by the Fund before they were sold. Investors who want
more information on holding periods and other qualifying rules
relating to these new rates should review the expanded discussion
in Part B, or should contact their own tax advisers.

Mutual Funds III, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain
distributions which will qualify for these maximum federal tax
rates.

Although dividends generally will be treated as distributed when
paid, dividends which are declared in October, November or
December to shareholders of record on a specified date in one of
those months, but which, for operational reasons, may not be paid
to the shareholder until the following January, will be treated
for tax purposes as if paid by a Fund and received by the
shareholder on December 31 of the calendar year in which they are
declared.

The sale of shares of the Funds is a taxable event and may result
in a capital gain or loss to shareholders subject to tax. Capital
gain or loss may be realized from an ordinary redemption of shares
or an exchange of shares between a Fund and any other fund in the
Delaware Investments family. Any loss incurred on a sale or
exchange of Fund shares that had been held for six months or less
will be treated as a long-term capital loss to the extent of
capital gain dividends received with respect to such shares. All
or a portion of the sales charge incurred in acquiring Fund shares
will be excluded from the federal tax basis of any of such shares
sold or exchanged within 90 days of their purchase (for purposes
of determining gain or loss upon the sale of such shares) if the
sale proceeds are reinvested in such Fund or in another fund in
the Delaware Investments family and a sales charge that would
otherwise apply to the reinvestment is reduced or eliminated. Any
portion of such sales charge excluded from the tax basis of the
shares sold will be added to the tax basis of the shares acquired
in the reinvestment.

The automatic conversion of Class B Shares into Class A Shares
at the end of approximately eight years after purchase will be tax-
free for federal tax purposes. See Automatic Conversion of Class B
Shares under Classes
of Shares.

Each Fund may be subject to foreign withholding taxes on income
from certain of its foreign securities.

In addition to the federal taxes described above, shareholders
may or may not be subject to various state and local taxes. For
example, distributions of interest income and capital gains
realized from certain types of U.S. government securities may be
exempt from state personal income taxes. Because investors' state
and local taxes may be different than the federal taxes described
above, investors should consult their own tax advisers.

Each year, Mutual Funds III, Inc. will mail to you information
on the tax status of a Fund's dividends and distributions.
Shareholders will also receive each year information as to the
portion of dividend income, if any, that is derived from U.S.
government securities that are exempt from state income tax. Of
course, shareholders who are not subject to tax on their income
would not be required to pay tax on amounts distributed to them by
a Fund.

Each Fund is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders
who have not complied with IRS taxpayer identification
regulations. You may avoid this withholding requirement by
certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject
to backup withholding.

See in Part B for additional information on tax matters relating
to each Fund and its shareholders.

CALCULATION OF
OFFERING PRICE AND
NET ASSET VALUE PER SHARE

The net asset value ("NAV") per share is computed by adding the
value of all securities and other assets in the portfolio,
deducting any liabilities (expenses and fees are accrued daily)
and dividing by the number of shares outstanding. Debt securities
are priced on the basis of valuations provided by an independent
pricing service using methods approved by Mutual Funds III, Inc.'s
Board of Directors. Equity securities for which market quotations
are available are priced at market value. Short-term investments
having a maturity of less than 60 days are valued at amortized
cost, which approximates market value. All other securities are
valued at their fair value as determined in good faith and in a
method approved by Mutual Funds III, Inc.'s Board of Directors.

Class A Shares are purchased at the offering price per share,
while Class B Shares and Class C Shares are purchased at the NAV
per share. The offering price per share of Class A Shares consists
of the NAV per share next computed after the order is received,
plus any applicable front-end sales charges.

The offering price and NAV are computed as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m.,
Eastern time) on days when the Exchange is open.

The net asset values of all outstanding shares of each class of
a Fund will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in that Fund
represented by the value of shares of that class. All income
earned and expenses incurred by a Fund will be borne on a pro-rata
basis by each outstanding share of a class, based on each class'
percentage in that Fund represented by the value of shares of such
classes, except that Aggressive Growth Fund Institutional Class
and Growth Stock Fund Institutional Class will not incur any of
the expenses under 12b-1 Plans and Class A, Class B and Class C
Shares alone will bear the 12b-1 Plan expense payable under their
respective Plans.

MANAGEMENT OF
THE FUNDS

DIRECTORS

The business and affairs of Mutual Funds III, Inc. are managed
under the direction of its Board of Directors. Part B contains
additional information regarding Mutual Funds III, Inc.'s
directors and officers.

INVESTMENT MANAGER AND SUB-ADVISER

The Manager furnishes investment management services to each
Fund. The Sub-Adviser is responsible for the day-to-day investment
management of Growth Stock Fund. The Manager has offices located
at One Commerce Square, Philadelphia, PA 19103. The Sub-Adviser
has offices located at 90 South Seventh Street, Suite 4400,
Minneapolis, MN 55402.

The Manager and its predecessors have been managing the funds in
the Delaware Investments family since 1938. On April 30, 1998, the
Manager and its affiliates within Delaware Investments, including
Delaware International Advisers Ltd., were managing in the
aggregate more than $45 billion in assets in various institutional
or separately managed (approximately $27,330,570,000) and
investment company (approximately $17,773,730,000) accounts.

Prior to May 1, 1997, Voyageur Fund Managers, Inc. ("Voyageur")
had been retained under an investment advisory contract to act as
each Fund's investment adviser, subject to the authority of the
Board of Directors. Voyageur was an indirect, wholly-owned
subsidiary of Dougherty Financial Group, Inc. ("DFG"). After the
close of business on April 30, 1997, Voyageur became an indirect,
wholly owned subsidiary of Lincoln National Corporation ("LNC") as
a result of LNC's acquisition of DFG. LNC, headquartered in Fort
Wayne, Indiana, owns and operates insurance and investment
management businesses, including Delaware Management Holdings,
Inc. ("DMH"). Affiliates of DMH serve as adviser, distributor and
transfer agent for the Delaware Investments family of mutual
funds.

Because LNC's acquisition of DFG resulted in a change of control
of Voyageur, the Fund's previous investment advisory agreements
with Voyageur were "assigned," as that term is defined by the 1940
Act, and the previous agreements therefore terminated upon the
completion of the acquisition. The Board of Directors of the Funds
unanimously approved new investment advisory agreements with the
Manager at a meeting held in person on February 14, 1997, and
called for a shareholders meeting to approve the new agreements.
At a meeting held on April 11, 1997, the shareholders of each Fund
approved its respective investment advisory agreement with the
Manager to become effective after the close of business on April
30, 1997, the date the acquisition was completed. At that meeting,
shareholders of Growth Stock Fund also approved a Sub-Advisory
Agreement between the Manager and the Sub-Adviser to take effect
at the same time as the Investment Management Agreement.

Beginning May 1, 1997, the Manager, an indirect, wholly owned
subsidiary of LNC, became the Funds' investment manager. The
Manager administers the affairs of and is ultimately responsible
for the investment management of each of the Funds under separate
Investment Management Agreements. The Manager also administers
Mutual Funds III, Inc.'s affairs and pays the salaries of all the
directors, officers and employees of Mutual Funds III, Inc. who
are affiliated with the Manager. For these services, under their
respective Investment Management Agreements, Aggressive Growth
Fund and Growth Stock Fund each pay the Manager a monthly
investment advisory fee equivalent on an annual basis to 1.00% of
their average daily net assets. Investment management fees accrued
by Aggressive Growth Fund for the fiscal year ended April 30, 1998
were 1.00% of average daily net assets and 0.46% was paid to the
Manager as a result of the voluntary waiver of fees by Voyageur.
Investment management fees accrued by Growth Stock Fund for the
fiscal year ended April 30, 1998 were 1.00% of average daily net
assets and 0.93% was paid to the Manager as a result of the
voluntary waiver of fees by Voyageur.

The Manager is a series of Delaware Management Business Trust.
The Manager changed its form of organization from a corporation to a
business trust on March 1, 1998.

Gerald S. Frey, Vice President/Senior Portfolio Manager, assumed
primary responsibility for making day-to-day investment decisions
for the Aggressive Growth Fund on May 1, 1997. Mr. Frey also
serves as Vice President/Senior Portfolio Manager for certain
other funds in the Delaware Investments family. Mr. Frey has
23 years' experience in the money management business and holds a
BA in Economics from Bloomsburg University and attended Wilkes
College and New York University. Prior to joining Delaware
Investments in 1996, he was a Senior Director with Morgan Grenfell
Capital Management in New York.

In making investment decisions for the Aggressive Growth Fund,
Mr. Frey regularly consults with Wayne A. Stork, Marshall T. Bassett,
John A. Heffern, Jeffrey Hynoski, and Lori Wachs. Mr. Bassett,
Vice President, joined Delaware in 1997. In his most recent
position, he served as Vice President in Morgan Stanley Asset
Management's Emerging Growth Group, where he analyzed small growth
companies. Prior to that, he was a trust officer at Sovran Bank
and Trust Company. He received his bachelor's degree and MBA from
Duke University. Mr. Heffern, Vice President, holds a bachelor's
degree and an MBA from the University of North Carolina at Chapel
Hill. He joined Delaware in 1997. Previously, he was a Senior Vice
President, Equity Research at NatWest Securities Corporation's
Specialty Finance Services unit. Prior to that, he was a Principal
and Senior Regional Bank Analyst at Alex. Brown & Sons. Mr.
Hynoski is a Vice President. He joined Delaware Investments in
1998. Previously, he served as a Vice President at Bessemer Trust
Company in the mid and large capitalization growth group, where he
specialized in the areas of science, technology, and
telecommunications. Prior to that, Mr. Hynoski held positions at Lord
Abbett & Co. and Cowen Asset Management. Mr. Hynoski holds a BS in
Finance from the University of Delaware and an MBA with a
concentration in Investments/Portfolio Management and Financial
Economics from Pace University. Ms. Wachs is a Vice President. She
joined Delaware Investments in 1992 from Goldman Sachs, where
she was an equity analyst for two years. She is a graduate of
the University of Pennsylvania's Wharton School, where she majored
in Finance and Oriental studies.

Pursuant to the terms of a Sub-Advisory Agreement with the
Manager, the Sub-Adviser participates in the management of Growth
Stock Fund's assets, is responsible for day-to-day investment
management of the Fund, makes and executes investment decisions
for the Fund in accordance with the Fund's investment objectives
and stated policies. The Manager continues to have ultimate
responsibility for all investment advisory services in connection
with the management of the Fund pursuant to the Investment
Management Agreement and supervises the Sub-Adviser's performance
of such services. For the services provided to the Manager, the
Manager pays the Sub-Adviser an annual sub-advisory fee equal to
0.50% of Growth Stock Fund's average daily net assets.

James King, an employee of the Sub-Adviser, currently has day-to-
day portfolio management responsibility for Growth Stock Fund. Mr.
King was a director of Voyageur from 1993 through 1995 and was a
Senior Equity Portfolio Manager of Voyageur from 1990 through
1997. Prior to joining Voyageur, Mr. King was President and Chief
Investment Officer of King Management Company. Mr. King is a
lecturer at the Drake University School of Finance. Mr. King
currently has over 30 years of investment experience.

PORTFOLIO TRADING PRACTICES

Each Fund normally will not invest for short-term trading
purposes. However, a Fund may sell securities without regard to
the length of time they have been held. The degree of portfolio
activity will affect brokerage costs of a Fund and may affect
taxes payable by such Fund's shareholders.

Each Fund uses its best efforts to obtain the best available
price and most favorable execution for portfolio transactions. Orders
may be placed with brokers or dealers who provide brokerage and
research services to the Manager or to their advisory clients.
These services may be used by the Manager in servicing any of its
accounts. These services may be used by the Manager in servicing
any of its accounts. Subject to best price and execution, each
Fund may consider a broker/dealer's sales of shares of funds in
the Delaware Investments family in placing portfolio orders and
may place orders with broker/dealers that have agreed to defray
certain expenses of such funds, such as custodian fees.

PERFORMANCE INFORMATION

From time to time, each Fund may quote total return performance
of its Classes in advertising and other types of literature.

Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset
value and: (i) in the case of Class A Shares, the impact of the
maximum front-end sales charge at the beginning of each specified
period; and (ii) in the case of Class B Shares and Class C Shares,
the deduction of any applicable CDSC at the end of the relevant
period. Each presentation will include the average annual total
return for one-, five- and ten-year (or life-of-fund, if
applicable) periods. Each Fund may also advertise aggregate and
average total return information concerning a Class over
additional periods of time. In addition, each Fund may present
total return information that does not reflect the deduction of
the maximum front-end sales charge or any applicable CDSC. In this
case, such total return information would be more favorable than
total return information that includes the deductions of the
maximum front-end sales charge or any applicable CDSC.

Net asset value fluctuates and is not guaranteed. Past performance
is not a guarantee of future results.

DISTRIBUTION (12B-1) AND SERVICE

The Distributor, Delaware Distributors, L.P., serves as the
national distributor for each Fund's shares under a Distribution
Agreement dated June 26, 1997.

Mutual Funds III, Inc. has adopted a separate distribution plan
under Rule 12b-1 for each of the Class A Shares, Class B Shares
and Class C Shares of the Funds (the "Plans"). Each Plan permits a
Fund to which the Plan relates to pay the Distributor from the
assets of its respective Classes a monthly fee for the
Distributor's services and expenses in distributing and promoting
sales of shares.

These expenses include, among other things, preparing and
distributing advertisements, sales literature, and prospectuses
and reports used for sales purposes, compensating sales and
marketing personnel, holding special promotions for specified
periods of time, and paying distribution and maintenance fees to
brokers, dealers and others. In connection with the promotion of
shares of the Classes, the Distributor may, from time to time, pay
to participate in dealer-sponsored seminars and conferences, and
reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising. The Distributor
may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide
extra training and information concerning a Class and increase
sales of the Class. In addition, each Fund may make payments from
the 12b-1 Plan fees of its respective Classes directly to others,
such as banks, who aid in the distribution of Class shares or
provide services in respect of such Classes, pursuant to service
agreements with Mutual Funds III, Inc.

The 12b-1 Plan expenses relating to each of the Class B Shares
and Class C Shares of the Funds are also used to pay the Distributor
for advancing the commission costs to dealers with respect to the
initial sale of such shares.

The aggregate fees paid by a Fund from the assets of the
respective Classes to the Distributor and others under the Plans
may not exceed (i) 0.25% of a Class A Shares' average daily net
assets in any year, and (ii) 1% (0.25% of which are service fees to
be paid by the Fund to the Distributor, dealers and others, for
providing personal service and/or maintaining shareholder accounts)
of each Fund's Class B Shares' and Class C Shares' average daily net
assets in any year. Class A, Class B and Class C Shares will not
incur any distribution expenses beyond these limits, which may not
be increased without shareholder approval.

While payments pursuant to the Plans may not exceed 0.25%
annually with respect to each Fund's Class A Shares, and 1% annually
with respect to each Fund's Class B Shares and Class C Shares, the
Plans do not limit fees to amounts actually expended by the
Distributor. It is therefore possible that the Distributor may
realize a profit in any particular year. However, the Distributor
currently expects that its distribution expenses will likely equal
or exceed payments to it under the Plans. The Distributor may,
however, incur such additional expenses and make additional payments
to dealers from its own resources to promote the distribution of
shares of the Classes. The monthly fees paid to the Distributor
under the Plans are subject to the review and approval of Mutual
Funds III, Inc.'s unaffiliated directors, who may reduce the
fees or terminate the Plans at any time.

The Plans do not apply to the Institutional Class of shares of
either Fund. Those shares are not included in calculating the
Plans' fees, and the Plans are not used to assist in the
distribution and marketing of the shares of the Institutional
Class of either Fund.

The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for
each Fund under a Shareholders Services Agreement dated May 1,
1997. The Transfer Agent also provides accounting services to the
Funds pursuant to the terms of a separate Fund Accounting
Agreement. The directors annually review service fees paid to the
Transfer Agent.

The Distributor and the Transfer Agent are also indirect, wholly
owned subsidiaries of DMH.

* * *

As with other mutual funds, financial and business organizations
and individuals around the world, each Fund could be adversely
affected if the computer systems used by its service providers do
not properly process and calculate date-related information from
and after January 1, 2000. This is commonly known as the "Year
2000 Problem." Mutual Funds III, Inc. is taking steps to obtain
satisfactory assurances that the Funds' major service providers
are taking steps reasonably designed to address the Year 2000
Problem with respect to the computer systems that such service
providers use. There can be no assurances that these steps will be
sufficient to avoid any adverse impact on the business of the
Funds.

Several European countries are participating in the European
Economic and Monetary Union, which will establish a common
European currency for participating countries. This currency will
commonly be known as the "Euro." It is anticipated that each such
participating country will replace its existing currency with the
Euro on January 1, 1999. Additional European countries may elect
to participate after that date. If a Fund is invested in
securities of participating countries it could be adversely
affected if the computer systems used by its major service
providers are not properly prepared to handle the implementation
of this single currency or the adoption of the Euro by additional
countries in the future. Mutual Funds III, Inc. is taking steps to
obtain satisfactory assurances that the major service providers of
Funds are taking steps reasonably designed to address these
matters with respect to the computer systems that such service
providers use. There can be no assurances that these steps will be
sufficient to avoid any adverse impact on the business of the
Funds.

EXPENSES

Each Fund is responsible for all of its own expenses other than
those borne by the Manager under the Investment Management Agreement
and those borne by the Distributor under the Distribution Agreement.

For the fiscal year ended April 30, 1998, the ratio of operating
expenses to average daily net asset for each Class of each Fund
was as follows:

ASSUMING WITHOUT
VOLUNTARY VOLUNTARY
WAIVER WAIVERS
OF FEES OF FEES

CLASS A SHARES
Aggressive Growth Fund 1.75% 2.29%
Growth Stock Fund 1.75% 1.82%

CLASS B SHARES
Aggressive Growth Fund 2.50% 3.04%
Growth Stock Fund 2.50% 2.57%

CLASS C SHARES
Aggressive Growth Fund 2.50% 3.04%
Growth Stock Fund 2.50% 2.57%

The expense ratio of each Class reflects the impact of its 12b-1
Plan.

Mutual Funds III, Inc. is an open-end management investment
company. Each Fund's portfolio of assets is diversified as defined
by the 1940 Act. Commonly known as a mutual fund, Mutual Funds
III, Inc. was organized as a Minnesota corporation in January
1985. In addition to the Funds, Mutual Fund III, Inc. presently
also offers the Tax-Efficient Equity Fund series of shares. Fund
shares have a par value of $.01, equal voting rights, except as
noted below, and are equal in all other respects. Each Fund will
vote separately on any matter which affects only that Fund. Shares
of each Fund have a priority over shares of any other fund of
Mutual Funds III, Inc. in the assets and income of that Fund.

All of the shares have noncumulative voting rights which means
that the holders of more than 50% of Mutual Funds III, Inc.'s
shares voting for the election of directors can elect 100% of the
directors if they choose to do so. Under Minnesota law, Mutual
Funds III, Inc. is not required, and does not intend, to hold
annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act.

In addition to Class A Shares, Class B Shares and Class C Shares,
the Funds offer Institutional Classes. Shares of each Class
represent proportionate interests in the assets of the respective
Fund and have the same voting and other rights and preferences as
the other classes of that Fund, except that shares of the
Institutional Classes are not subject to, and may not vote on
matters affecting, the Distribution Plans under Rule 12b-1
relating to Class A, Class B and Class C Shares. Similarly, as a
general matter, the shareholders of Class A Shares, Class B Shares
and Class C Shares may vote only on matters affecting the 12b-1
Plan that relates to the class of shares that they hold. However,
Class B Shares of a Fund may vote on any proposal to increase
materially the fees to be paid by that Fund under the 12b-1 Plan
relating to Class A Shares.

Beginning June 9, 1997, the names of Voyageur Aggressive Growth
Fund changed to Aggressive Growth Fund series and Voyageur Growth
Stock Fund changed to Growth Stock Fund series.

OTHER INVESTMENT
POLICIES AND
RISK CONSIDERATIONS

DEBT SECURITIES

In pursuing its investment objective, Aggressive Growth Fund may
invest up to 35% of its total assets and Growth Stock Fund may
invest up to 20% of its total net assets in debt securities of
corporate and governmental issuers. The risks inherent in debt
securities depend primarily on the term and quality of the
obligations in a Fund's portfolio as well as on market conditions.
A decline in the prevailing levels of interest rates generally
increases the value of debt securities, while an increase in rates
usually reduces the value of those securities.

Investments in debt securities by each Fund are limited to those
that are at the time of investment within the four highest grades
(generally referred to as an investment grade) assigned by a
nationally recognized statistical rating organization or, if
unrated, are deemed to be of comparable quality by the Manager. If
a change in credit quality after acquisition by a Fund causes a
security to no longer be investment grade, the Fund will dispose
of the security, if necessary, to keep its holdings to 5% or less
of the Fund's net assets. See Credit Quality under Investment
Restrictions and Policies in Part B. Debt securities rated Baa by
Moody's or BBB by Standard & Poor's, although considered
investment grade, have speculative characteristics and changes in
economic circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case
with higher grade bonds.

When a Fund's Manager or Sub-Adviser, as the case may be,
determines that adverse market or economic conditions exist and
considers a temporary defensive position advisable, the Fund may
invest without limitation in high-quality fixed income securities
or hold assets in cash or cash equivalents.

RULE 144A SECURITIES

Each Fund may invest in restricted securities, including privately
placed securities, some of which may be eligible for resale
without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits
many privately placed and legally restricted securities to be
freely traded among certain institutional buyers such as a Fund.
Each Fund may invest no more than 15% of the value of its net
assets in illiquid securities.

While maintaining oversight, the Board of Directors has delegated
to the Manager the day-to-day function of determining whether or
not individual Rule 144A Securities are liquid for purposes of a
Fund's 15% limitation on investments in illiquid assets. The Board
has instructed the Manager to consider the following factors in
determining the liquidity of a Rule 144A Security: (i) the
frequency of trades and trading volume for the security; (ii)
whether at least three dealers are willing to purchase or sell the
security and the number of potential purchasers; (iii) whether at
least two dealers are making a market in the security; (iv) the
nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer).

If the Manager or Sub-Adviser, as the case may be, determines that
a Rule 144A Security which was previously determined to be liquid
is no longer liquid and, as a result, a Fund's holdings of
illiquid securities exceed the Fund's 15% limit on investments in
such securities, the Manager will determine what action to take to
ensure that the Fund continues to adhere to such limitation.

INVESTMENT COMPANY SECURITIES

Any investments that either Fund makes in either closed-end or
open-end investment companies will be limited by the 1940 Act, and
would involve an indirect payment of a portion of the expenses,
including advisory fees, of such other investment companies. Under
the 1940 Act's current limitations, a Fund may not (1) own more
than 3% of the voting stock of another investment company; (2)
invest more than 5% of the Fund's total assets in the shares of
any one investment company; nor (3) invest more than 10% of the
Fund's total assets in shares of other investment companies. If a
Fund elects to limit its investment in other investment companies
to closed-end investment companies, the 3% limitation described
above is increased to 10%. These percentage limitations also apply
to each Fund's investments in unregistered investment companies.

REPURCHASE AGREEMENTS

In order to invest its short-term cash reserves or when in a
temporary defensive posture, each Fund may enter into repurchase
agreements with banks or broker/dealers deemed to be creditworthy
by the Manager or Sub-Adviser, under guidelines approved by the
Board of Directors. A repurchase agreement is a short-term
investment in which the purchaser (i.e. a Fund) acquires ownership
of a debt security and the seller agrees to repurchase the
obligation at a future time and set price, thereby determining the
yield during the purchaser's holding period. Generally, repurchase
agreements are of short duration, often less than one week but on
occasion for longer periods. Not more than 15% of each Fund's
assets may be invested in illiquid securities, including
repurchase agreements of over seven-days' maturity. Should an
issuer of a repurchase agreement fail to repurchase the underlying
security, the loss to a Fund, if any, would be the difference
between the repurchase price and the market value of the security.
Each Fund will limit its investments in repurchase agreements to
those which the Manager or Sub-Adviser under guidelines of the
Board of Directors determines to present minimal credit risks and
which are of high quality. In addition, each Fund must have
collateral of at least 102% of the repurchase price, including the
portion representing the Fund's yield under such agreements, which
is monitored on a daily basis.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

Each Fund may purchase securities on a when-issued or delayed
delivery basis. In such transactions, instruments are purchased
with payment and delivery taking place in the future in order to
secure what is considered to be an advantageous yield or price at
the time of the transaction. Delivery of and payment for these
securities may take as long as a month or more after the date of
the purchase commitment. Each Fund will maintain with its
custodian bank a separate account with a segregated portfolio of
securities in an amount at least equal to these commitments. The
payment obligation and the interest rates that will be received
are each fixed at the time the a enters into the commitment and no
interest accrues to the Fund until settlement. Thus, it is
possible that the market value at the time of settlement could be
higher or lower than the purchase price if the general level of
interest rates has changed.

TEMPORARY INVESTMENTS

Each Fund's reserves may be invested in domestic short-term money
market instruments including, but not limited to, U.S. government
and agency obligations, certificates of deposit, bankers'
acceptances, time deposits, commercial paper, short-term corporate
debt securities and repurchase agreements. During temporary
defensive periods as determined by the Manager or the Sub-Adviser,
as the case may be, each Fund may hold up to 100% of its total
assets in short-term obligations of the types described above.

HEDGING TRANSACTIONS

Each Fund may write covered call options and secured put options
and purchase call and put options on securities and security
indices. Each Fund may also engage in transactions in financial
futures contracts and related options for hedging purposes. These
investment techniques and the related risks are summarized below
and are described in more detail in Part B.

OPTIONS

The Manager and Sub-Adviser may employ options techniques in an
attempt to protect appreciation attained and to take advantage of
the liquidity available in the options market. Each Fund may
purchase call options on foreign or U.S. securities and indices
and enter into related closing transactions and a Fund may write
covered call options on such securities. A Fund may also purchase
put options on such securities and indices and enter into related
closing transactions.

A call option enables the purchaser, in return for the premium
paid, to purchase securities from the writer of the option at an
agreed price up to an agreed date. A covered call option obligates
the writer, in return for the premium received, to sell the
securities subject to the option to the purchaser of the option
for an agreed upon price up to an agreed date. The advantage is
that the purchaser may hedge against an increase in the price of
securities it ultimately wishes to buy or take advantage of a rise
in a particular index. A Fund will only purchase call options to
the extent that premiums paid on all outstanding call options do
not exceed 2% of its total assets.

A put option enables the purchaser of the option, in return for
the premium paid, to sell the security underlying the option to
the writer at the exercise price during the option period, and the
writer of the option has the obligation to purchase the security
from the purchaser of the option. A Fund will only purchase put
options to the extent that the premiums on all outstanding put
options do not exceed 2% of its total assets. The advantage is
that the purchaser can be protected should the market value of the
security decline or should a particular index decline.

An option on a securities index gives the purchaser of the option,
in return for the premium paid, the right to receive from the
seller cash equal to the difference between the closing price of
the index and the exercise price of the option.

Closing transactions essentially let a Fund offset put options or
call options prior to exercise or expiration. If a Fund cannot
effect closing transactions, it may have to hold a security it
would otherwise sell or deliver a security it might want to hold.

In purchasing put and call options, the premium paid by a Fund
plus any transaction costs will reduce any benefit realized by the
Fund upon exercise of the option. With respect to writing covered
call options, a Fund may lose the potential market appreciation of
the securities subject to the option, if the Manager's or the Sub-
Adviser's judgment is wrong and the price of the security moves in
the opposite direction from what was anticipated.

Each Fund may use both Exchange-traded and over-the-counter
options. Certain over-the-counter options may be illiquid. Each
Fund will only invest in such options to the extent consistent
with its 15% limitation on investment in illiquid securities. Each
Fund will comply with Securities and Exchange Commission asset
segregation and coverage requirements when engaging in these types
of transactions.

FUTURES

Futures contracts are agreements for the purchase or sale for
future delivery of securities. When a futures contract is sold, a
Fund incurs a contractual obligation to deliver the securities
underlying the contract at a specified price on a specified date
during a specified future month. A purchase of a futures contract
means the acquisition of a contractual right to obtain delivery to
a Fund of the securities called for by the contract at a specified
price during a specified future month.

While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally
terminated by entering into an offsetting transaction. When a Fund
enters into a futures transaction, it must deliver to the futures
commission merchant selected by the Fund an amount referred to as
"initial margin." This amount is maintained by the futures
commission merchant in an account at the Fund's custodian bank.
Thereafter, a "variation margin" may be paid by a Fund to, or
drawn by the Fund from, such account in accordance with controls
set for such account, depending upon changes in the price of the
underlying securities subject to the futures contract.

Each Fund may also purchase and write options to buy or sell
futures contracts. Options on futures are similar to options on
securities except that options on futures give the purchaser the
right, in return for the premium paid, to assume a position in a
futures contract, rather than actually to purchase or sell the
futures contract, at a specified exercise price at any time during
the period of
the option.

The purpose of the purchase or sale of futures contracts
consisting of U.S. government securities is to protect a Fund
against the adverse effects of fluctuations in interest rates
without actually buying or selling such securities. Similarly,
when it is expected that interest rates may decline, futures
contracts may be purchased to hedge in anticipation of subsequent
purchases of U.S. government securities at higher prices.

FOREIGN SECURITIES

Each Fund may invest up to 10% of its total assets in foreign
securities. Foreign securities may include ADRs and GDRs. There
are substantial and different risks involved in investing in
foreign securities. An investor should consider these risks
carefully. For example, there is generally less publicly available
information about foreign companies than is available about
companies in the U.S. Foreign companies are not subject to uniform
audit and financial reporting standards, practices and
requirements comparable to those in the U.S.

Foreign securities involve currency risks. The U.S. dollar value
of a foreign security tends to decrease when the value of the
dollar rises against the foreign currency in which the security is
denominated and tends to increase when the value of the dollar
falls against such currency. Fluctuations in exchange rates may
also affect the earning power and asset value of the foreign
entity issuing the security. Dividend and interest payments may be
returned to the country of origin, based on the exchange rate at
the time of disbursement, and restrictions on capital flows may be
imposed. Losses and other expenses may be incurred in converting
between various currencies in connection with purchases and sales
of foreign securities.

Foreign stock markets are generally not as developed or efficient
as those in the U.S. In most foreign markets volume and liquidity
are less than in the U.S. and, at times, volatility of price can
be greater than that in the U.S. Fixed commissions on foreign
stock exchanges are generally higher than the negotiated
commissions on U.S. exchanges. There is generally less government
supervision and regulation of foreign stock exchanges, brokers and
companies than in the U.S.

There is also the possibility of adverse changes in investment or
exchange control regulations, expropriation or confiscatory
taxation, limitations on the removal of funds or other assets,
political or social instability, or diplomatic developments which
could adversely affect investments, assets or securities
transactions of a Fund in some foreign countries. The Funds are
not aware of any investment or exchange control regulations which
might substantially impair their operations as described, although
this could change at any time.

The dividends and interest payable on certain foreign securities
may be subject to foreign withholding taxes, thus reducing the net
amount available for distribution to a Fund's shareholders.

INVESTMENTS BY FUND OF FUNDS

Aggressive Growth Fund accepts investments from the series
portfolios of Delaware Group Foundation Funds, a fund of funds
(the "Foundation Funds"). From time to time, the Fund may
experience large investments or redemptions due to allocations or
rebalancings by the Foundation Funds. While it is impossible to
predict the overall impact of these transactions over time, there
could be adverse effects on portfolio management to the extent
that the Fund may be required to sell securities or invest cash at
times when it would not otherwise do so. These transactions could
also have tax consequences if sales of securities result in gains
and could also increase transactions costs or portfolio turnover.
The Manager will monitor such transactions and will attempt to
minimize any adverse effects on both the Fund and the Foundation
Funds resulting from such transactions.

OTHER INVESTMENT POLICIES

Although each Fund is permitted under certain circumstances to
borrow money, neither Fund normally does so. Aggressive Growth
Fund will not purchase new securities whenever borrowings exceed
5% of the value of the total assets of the Fund.

Neither Fund may concentrate investments in any industry, which
means that a Fund may generally not invest more than 25% of its
assets in any one industry. With respect to Aggressive Growth
Fund, the term "industry" will be deemed to include the government
of any country other than the United States, but not the
U.S. Government.

* * *

Certain other fundamental and non-fundamental investment
restrictions adopted by the Funds are described in Part B.

[THIS PAGE INTENTIONALLY LEFT BLANK]

Delaware Investments includes funds with a wide range of
investment objectives. Stock funds, income funds, national and
state-specific tax-exempt funds, money market funds, global and
international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial
goals. For more information, contact your financial adviser or
call Delaware Investments at 800-523-1918.

INVESTMENT MANAGER

Delaware Management Company

One Commerce Square
Philadelphia, PA 19103

SUB-ADVISER
Growth Stock Fund:
Voyageur Asset Management LLC
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402.

NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103

SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103

INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103

CUSTODIAN
Norwest Bank Minnesota, N.A.
Sixth Street & Marquette Avenue
Minneapolis, MN 55402

[LOGO OMITTED: DELAWARE INVESTMENTS
---------------------
Philadelphia * London]

www.delawarefunds.com

[RECYLE LOGO OMITTED] Printed in the USA on recycled paper

AGGRESSIVE GROWTH FUND PROSPECTUS
GROWTH STOCK FUND JUNE 29, 1998
INSTITUTIONAL CLASS SHARES

1818 MARKET STREET, PHILADELPHIA, PA 19103
FOR MORE INFORMATION ABOUT AGGRESSIVE GROWTH FUND INSTITUTIONAL CLASS
AND GROWTH STOCK FUND INSTITUTIONAL CLASS
CALL DELAWARE INVESTMENTS AT 800-828-5052.

This Prospectus describes the shares of Aggressive Growth Fund series
and Growth Stock Fund series (individually, a "Fund" and collectively,
the "Funds") of Voyageur Mutual Funds III, Inc. ("Mutual Funds III,
Inc."), a professionally-managed mutual fund of the series type.

Aggressive Growth Fund's investment objective is long-term capital
appreciation which the Fund attempts to achieve by investing primarily
in equity securities of companies which Delaware Management Company (the
"Manager") believes have the potential for high earnings growth. Growth
Stock Fund's investment objective is long-term capital appreciation
through investment in equity securities diversified among individual
companies and industries. There is no assurance that either Fund's
investment objective will be achieved. See Investment Objectives and
Policies.

Aggressive Growth Fund offers Aggressive Growth Fund Institutional Class
and Growth Stock Fund offers Growth Stock Fund Institutional Class
(individually, a "Class" and collectively, the "Classes").

This Prospectus relates only to the Classes and sets forth information
that you should read and consider before you invest. Please retain it
for future reference. An investment in either Fund involves certain
risks and requires consideration of such risks. The Funds' Statement of
Additional Information ("Part B" of Mutual Funds III, Inc.'s
registration statement), dated June 29, 1998, as it may be amended from
time to time, contains additional information about the Funds and has
been filed with the Securities and Exchange Commission ("SEC"). Part B
is incorporated by reference into this Prospectus and is available,
without charge, by writing to Delaware Distributors, L.P. at the above
address or by calling the above number. Each Fund's financial statements
appear in its Annual Report for the fiscal year ended April 30, 1998,
which will accompany any response to requests for Part B. The SEC also
maintains a Web site (http://www.sec.gov) that contains Part B, material
we incorporated by reference, and other information regarding
registrants that electronically file with the SEC.

Each Fund also offers Class A Shares, Class B Shares and Class C Shares.
Shares of these classes are subject to sales charges and other expenses,
which may affect their performance. A prospectus for these classes can
be obtained by writing to Delaware Distributors, L.P. at the above
address or by calling 800-523-1918.

TABLE OF CONTENTS

COVER PAGE 1

SYNOPSIS 2

SUMMARY OF EXPENSES 3

FINANCIAL HIGHLIGHTS 4

INVESTMENT OBJECTIVES AND POLICIES

SUITABILITY 6

INVESTMENT STRATEGY 6

CLASSES OF SHARES 7

HOW TO BUY SHARES 8

REDEMPTION AND EXCHANGE 9

DIVIDENDS AND DISTRIBUTIONS 10

TAXES 11

CALCULATION OF NET ASSET VALUE PER SHARE 12

MANAGEMENT OF THE FUNDS 13

OTHER INVESTMENT POLICIES AND
RISK CONSIDERATIONS 16

BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS.
MUTUAL FUNDS CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER,
SHARES OF THE FUNDS ARE NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED
BY ANY BANK OR ANY CREDIT UNION, ARE NOT OBLIGATIONS OF ANY BANK OR ANY
CREDIT UNION, AND INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS
OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF THE FUNDS ARE NOT BANK OR
CREDIT UNION DEPOSITS.

SYNOPSIS

INVESTMENT OBJECTIVES

Aggressive Growth Fund -- The investment objective of Aggressive
Growth Fund is long-term capital appreciation which the Fund attempts to
achieve by investing primarily in equity securities of companies which
the Manager believes have the potential for high earnings growth.

Growth Stock Fund -- The investment objective of Growth Stock Fund
is long-term capital appreciation through investment in equity
securities diversified among individual companies and industries.

For further details, see Investment Objectives and Policies and
Other Investment Policies and Risk Considerations.

RISK FACTORS AND SPECIAL CONSIDERATIONS

Prospective investors should consider a number of factors:

1. Each Fund invests in common stocks. The prices of common stocks,
especially those of smaller companies, tend to fluctuate, particularly
in the shorter term. Investors should be willing to accept the risks
associated with investments in emerging and growth-oriented companies,
some of the securities of which may be speculative and subject to
additional investment risk. See Investment Objectives and Policies.

2. Each Fund may invest up to 10% of its total assets directly or
indirectly in securities of issuers domiciled in foreign countries. Such
investments involve certain risk and opportunity considerations not
typically associated with investing in the United States. See Investment
Objectives and Policies and Other Investment Policies and Risk Considerations.

3. Each Fund has the ability to engage in options transactions for
hedging purposes to counterbalance portfolio volatility. While neither
Fund engages in options transactions for speculative purposes, there are
risks which result from the use of options, and an investor should
carefully review the description of these risks in this Prospectus.
Certain options may be considered to be derivative securities. See
Investment Objectives and Policies and Other Investment Policies and
Risk Considerations.

INVESTMENT MANAGER, SUB-ADVISER, DISTRIBUTOR AND TRANSFER AGENT

The Manager is the investment manager for each Fund and, in that
capacity, provides investment advice to each Fund, subject to the
supervision of Mutual Funds III, Inc.'s Board of Directors. The Manager
also provides investment management services to certain of the other
funds in the Delaware Investments family. The Manager employs Voyageur
Asset Management LLC (the "Sub-Adviser") as Growth Stock Fund's Sub-
Adviser. Delaware Distributors, L.P. (the "Distributor") is the national
distributor for each Fund and for all of the other mutual funds in the
Delaware Investments family. Delaware Service Company, Inc. (the
"Transfer Agent") is the shareholder servicing, dividend disbursing,
accounting services and transfer agent for each Fund and for all of the
other mutual funds in the Delaware Investments family. See Summary of
Expenses and Management of the Funds for further information regarding
the Manager and the Sub-Adviser and the fees payable under each Fund's
Investment Management Agreement and the Sub-Advisory Agreement on behalf
of Growth Stock Fund.

PURCHASE PRICE

Shares of each Class offered by this Prospectus are available at
net asset value, without a front-end or contingent deferred sales charge
and are not subject to distribution fees under a Rule 12b-1 distribution
plan. See Classes of Shares.

REDEMPTION AND EXCHANGE

Shares of each Class are redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request.
See Redemption and Exchange.

OPEN-END INVESTMENT COMPANY

Mutual Funds III, Inc. is an open-end, registered management
investment company. Each Fund operates as a diversified fund as defined
under the Investment Company Act of 1940 (the "1940 Act"). Mutual Funds
III, Inc. was organized as a Minnesota corporation in January 1985. See
Shares under Management of the Funds.

SUMMARY OF EXPENSES

AGGRESSIVE
GROWTH FUND
INSTITUTIONAL
SHAREHOLDER TRANSACTION EXPENSES CLASS

Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Exchange Fees None*

AGGRESSIVE
GROWTH FUND
ANNUAL OPERATING EXPENSES INSTITUTIONAL
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS) CLASS

Management Fees (after voluntary waivers) 0.46%**
12b-1 Fees None
Other Operating Expenses 1.04%**
-------
Total Operating Expenses (after voluntary waivers) 1.50%**
=======

GROWTH
STOCK FUND
INSTITUTIONAL
SHAREHOLDER TRANSACTION EXPENSES CLASS

Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Exchange Fees None*

GROWTH
STOCK FUND
ANNUAL OPERATING EXPENSES INSTITUTIONAL
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS) CLASS

Management Fees (after voluntary waivers) 0.93%**
12b-1 Fees None
Other Operating Expenses 0.57%**
-------
Total Operating Expenses (after voluntary waivers) 1.50%**
=======

*Exchanges are subject to the requirements of each fund and a front-end
sales charge may apply.

**The Manager has elected voluntarily to waive that portion, if any, of
the annual management fees payable by Aggressive Growth Fund and
Growth Stock Fund and to pay each Fund's expenses to the extent
necessary to ensure that the Total Operating Expenses (after
voluntary waivers and payments) do not exceed 1.50% for each Class on
an annualized basis (exclusive of taxes, interest, brokerage
commissions and extraordinary expenses) through December 31, 1998.
Total Operating Expenses assume that the voluntary waiver has been
in effect and have been derived from the actual expenses incurred by
the Class A Shares of each Fund during its previous fiscal year less
12b-1 fees, which are inapplicable to the Institutional Classes.
Absent the voluntary fee waivers, "Total Operating Expenses (as a
percentage of average daily net assets)" are expected to equal 2.04%
for Aggressive Growth Fund Institutional Class and 1.57% for Growth
Stock Fund Institutional Class, including Management Fees of 1.00%
for each Class. "Other Operating Expenses" are based on estimated
amounts for the current fiscal year.

For expense information about each Fund's A Class, B Class and C
Class, see the separate prospectus relating to those classes.

The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a
5% annual rate of return, and (2) redemption at the end of each time
period. Mutual Funds III, Inc. charges no redemption fees. The
following example assumes the voluntary waiver of fees by the Manager
as discussed in this Prospectus.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
AGGRESSIVE GROWTH FUND $15 $47 $82 $179
INSTITUTIONAL CLASS

1 YEAR 3 YEARS 5 YEARS 10 YEARS
GROWTH STOCK FUND $15 $47 $82 $179
INSTITUTIONAL CLASS

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.

The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an
investor in each Class will bear directly or indirectly.

FINANCIAL HIGHLIGHTS

The following financial highlights are derived from the financial
statements of the Funds and have been audited by Ernst & Young LLP,
independent auditors for the year ended April 30, 1998 and by the
Funds' previous independent auditors for the prior fiscal periods.
The data for the most recent fiscal year should be read in
conjunction with the financial statements, related notes, and the
report of Ernst & Young LLP, all of which are incorporated by
reference into Part B. Further information about the Funds'
performance is contained in the Funds' Annual Report to shareholders.
A copy of the Funds' Annual Report (including the report of Ernst &
Young LLP) may be obtained from the Funds upon request at no charge.

<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND INSTITUTIONAL CLASS 1

PERIOD PERIOD
8/29/97 5/16/94 4
THROUGH YEAR ENDED THROUGH
4/30/98 2 4/30/98 3 4/30/97 3 4/30/96 3 4/30/95 3

<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $17.150 $11.770 $13.080 $10.400 $10.000

INCOME FROM INVESTMENT OPERATIONS

Net Investment Loss (0.019) (0.052) (0.180) (0.100) (0.090)
Net Realized and Unrealized
Gain From Investments 5.539 11.127 0.960 3.270 0.490
-------- -------- -------- -------- --------
Total From
Investment Operations 5.520 11.075 0.780 3.170 0.400
-------- -------- -------- -------- --------

LESS DIVIDENDS AND DISTRIBUTIONS

Distributions from Net
Realized Gain on
Investment Transactions (2.030) (2.275) (2.090) (0.400) --
Return of Capital -- -- -- (0.090) --
-------- -------- -------- -------- --------
Total Distributions (2.030) (2.275) (2.090) (0.490) --
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $20.640 $20.570 $11.770 $13.080 $10.400
======== ======== ======== ======== ========

TOTAL RETURN 34.68% 6 98.60% 5/6 4.34% 5/6 31.02% 5/6 4.00% 5/6

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period
(000's omitted) $2,391 $31,926 $4,944 $4,334 $2,189
Ratio of Expenses to
Average Net Assets 1.50% 1.75% 1.84% 2.01% 1.74%
Ratio of Expenses to Average
Net Assets Prior to Expense
Limitation 2.04% 2.29% 2.65% 2.74% 2.97%
Ratio of Net Investment
Loss to Average Net Assets (0.44%) (0.69%) (1.38%) (1.00%) (1.21%)
Ratio of Net Investment Loss
Average Net Assets Prior
to Expense Limitation (0.98%) (1.23%) (2.19%) (1.73%) (2.44%)
Portfolio Turnover 356% 356% 180% 166% 88%
Average Commission
Rate Paid 7 $0.0600 $0.0600 $0.0600 N/A N/A

</TABLE>

- ------------
1Effective May 1, 1995, Voyageur Fund Managers, Inc. assumed
responsibility for Aggressive Growth Fund's investment management
replacing George D. Bjurman, the Fund's sub-adviser. Beginning
May 1, 1997, Delaware Management Company became the investment
adviser to the Fund.

2Data are derived from Aggressive Growth Fund Institutional Class
shares, which commenced operations on August 29, 1997. Ratios have
been annualized but total return has not been annualized. Total return
for this short of a time period may not be representative of longer
term results.

3Data are derived from data of the Class A Shares of the Aggressive
Growth Fund and reflect the impact of 12b-1 Plan distribution expenses
paid by Class A Shares of this Fund.

4Commencement of operations of Class A Shares. Ratios have been
annualized but total return has not been annualized. Total return for
this short of a time period may not be representative of longer term
results.

5Does not reflect maximum sales charge that is or was in effect nor
the limited contingent deferred sales charge that varies from 0.50%-1%,
depending on the holding period for Aggressive Growth Fund A Class,
applicable to certain redemptions made within two years after
purchase for Aggressive Growth Fund A Class.

6Reflects the expense limitations in effect for the Fund.

7Computed by dividing the total amount of commissions paid by the
total number of shares purchased and sold during the period for
which there was a commission charged.

FINANCIAL HIGHLIGHTS
(Continued)

GROWTH STOCK FUND INSTITUTIONAL CLASS 1

PERIOD
8/29/97
THROUGH YEAR ENDED APRIL 30,
4/30/98 2 1998 3 1997 3 1996 3

<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $27.520 $25.340 $23.660 $19.910

INCOME FROM INVESTMENT OPERATIONS

Net Investment Income (loss) 0.047 0.029 0.160 0.080
Net Realized and Unrealized
Gain (loss) From Investments 5.803 8.591 3.360 4.820
-------- -------- -------- --------
Total From Investment Operations 5.850 8.620 3.520 4.900
-------- -------- -------- --------

LESS DIVIDENDS AND DISTRIBUTIONS

Dividends From Net Investment
Income (0.040) (0.140) (0.080) (0.110)
Distributions From Net Realized
Gain on Investment Transactions (1.300) (1.990) (1.760) (1.040)
-------- -------- -------- --------
Total Dividends and Distributions (1.340) (2.130) (1.840) (1.150)
-------- -------- -------- --------
Net Asset Value, End of Period $32.030 $31.830 $25.340 $23.660
======== ======== ======== ========

TOTAL RETURN 21.41% 5 35.27% 4/5 15.27% 4 25.00% 4/5

RATIOS/SUPPLEMENTAL DATA

Net Assets, End of Period
(000's omitted) $799 $41,196 $34,255 $28,956
Ratio of Expenses
to Average Net Assets 1.50% 1.75% 1.72% 1.78%
Ratio of Expenses to
Average Net Assets Prior
to Expense Limitation 1.57% 1.82% 1.72% 1.87%
Ratio of Net Investment Income
(loss) to Average Net Assets 0.33% 0.08% 0.68% 0.36%
Ratio of Net Investment Income
(loss) to Average Net Assets
Prior to Expense Limitation 0.26% -- 0.68% 0.27%
Portfolio Turnover 9% 9% 29% 37%
Average Commission Rate Paid 6 $0.0600 $0.0600 $0.0600 N/A

</TABLE>

GROWTH STOCK FUND INSTITUTIONAL CLASS 1
YEAR ENDED APRIL 30,
1995 3 1994 3 1993 3 1992 3

<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $17.510 $17.810 $23.810 $19.360

INCOME FROM INVESTMENT OPERATIONS

Net Investment Income (loss) 0.150 0.070 0.050 (0.180)
Net Realized and Unrealized
Gain (loss) From Investments 2.770 (0.160) 0.220 4.810
-------- -------- -------- --------
Total From Investment Operations 2.920 (0.090) 0.270 4.630
-------- -------- -------- --------

LESS DIVIDENDS AND DISTRIBUTIONS

Dividends From Net Investment
Income (0.130) (0.060) -- --
Distributions From Net Realized
Gain on Investment Transactions (0.390) (0.150) (6.270) (0.180)
-------- -------- -------- --------
Total Dividends and Distributions (0.520) (0.210) (6.270) (0.180)
-------- -------- -------- --------
Net Asset Value, End of Period $19.910 $17.510 $17.810 $23.810
======== ======== ======== ========

TOTAL RETURN 17.04% 4/5 (0.52%) 4/5 1.51% 4/5 23.86% 4/5

RATIOS/SUPPLEMENTAL DATA

Net Assets, End of Period
(000's omitted) $23,651 $28,518 $26,784 $19,351
Ratio of Expenses
to Average Net Assets 1.90% 1.90% 1.90% 2.25%
Ratio of Expenses to
Average Net Assets Prior
to Expense Limitation 1.99% 2.13% 2.70% 2.86%
Ratio of Net Investment Income
(loss) to Average Net Assets 0.75% 0.40% 0.26% (0.76%)
Ratio of Net Investment Income
(loss) to Average Net Assets
Prior to Expense Limitation 0.66% 0.17% (0.54%) (1.37%)
Portfolio Turnover 22% 34% 17% 143%
Average Commission Rate Paid 6 N/A N/A N/A N/A

</TABLE>

GROWTH STOCK FUND INSTITUTIONAL CLASS 1
YEAR ENDED APRIL 30,
1991 3 1990 3 1989 3

Net Asset Value,
Beginning of Period $18.850 $19.390 $16.100

INCOME FROM INVESTMENT OPERATIONS

Net Investment Income (loss) (0.110) (0.080) (0.150)
Net Realized and Unrealized
Gain (loss) From Investments 3.400 1.290 3.510
-------- -------- --------
Total From Investment Operations 3.290 1.210 3.360
-------- -------- --------

LESS DIVIDENDS AND DISTRIBUTIONS

Dividends From Net Investment
Income -- -- --
Distributions From Net Realized
Gain on Investment Transactions (2.780) (1.750) (0.070)
-------- -------- --------
Total Dividends and Distributions (2.780) (1.750) (0.070)
-------- -------- --------
Net Asset Value, End of Period $19.360 $18.850 $19.390
======== ======== ========

TOTAL RETURN 20.51% 4/5 6.09% 4/5 20.92% 4/5

RATIOS/SUPPLEMENTAL DATA

Net Assets, End of Period
(000's omitted) $11,400 $10,331 $9,183
Ratio of Expenses
to Average Net Assets 2.36% 2.31% 2.42%
Ratio of Expenses to
Average Net Assets Prior
to Expense Limitation 2.86% 2.86% 3.00%
Ratio of Net Investment Income
(loss) to Average Net Assets (0.67%) (0.66%) (0.69%)
Ratio of Net Investment Income
(loss) to Average Net Assets
Prior to Expense Limitation (1.17%) (1.21%) (1.27%)
Portfolio Turnover 128% 115% 32%
Average Commission Rate Paid 6 N/A N/A N/A

</TABLE>

1Effective September 1, 1990, Voyageur Fund Managers, Inc. replaced
Investment Advisers, Inc. as the investment adviser and Wilke/Thompson
Capital Management began acting as Growth Stock Fund's sub- investment
adviser until January 1, 1992 when Voyageur Fund Managers, Inc. became
the sole investment adviser to the Fund. Beginning May 1, 1997,
Delaware Management Company became the investment adviser to the Fund
and Voyageur Asset Management LLC began acting as Sub-Adviser to
Growth Stock Fund.

2Data are derived from Growth Stock Fund Institutional Class shares,
which commenced operations on August 29, 1997. Ratios have been
annualized but total return has not been annualized. Total return
for this short of a time period may not be representative of longer
term results.

3Data are derived from data of the Class A Shares of the Growth Stock
Fund and reflect the impact of 12b-1 Plan distribution expenses paid
by Class A Shares of this Fund.

4Does not reflect maximum sales charge that is or was in effect nor the
limited contingent deferred sales charge that varies from 0.50%-1%,
depending on the holding period for Growth Stock Fund A Class,
applicable to certain redemptions made within two years after purchase
for Growth Stock Fund A Class.

5Reflects expense limitations in effect for the Fund.

6Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there
was a commission charged.

INVESTMENT OBJECTIVES
AND POLICIES

Aggressive Growth Fund -- Aggressive Growth Fund's investment
objective is long-term capital appreciation which the Fund attempts to
achieve by investing primarily in equity securities of companies which
the Manager believes have the potential for high earnings growth.
Although the Fund, in seeking its objective, may receive current income
from dividends and interest, income is only an incidental consideration
in the selection of the Fund's investments.

Growth Stock Fund -- Growth Stock Fund has an objective of long-
term capital appreciation. Growth Stock Fund seeks to achieve its
objective by investing in equity securities diversified among individual
companies and industries.

No assurance can be given that either Fund will be able to achieve
its investment objective.

SUITABILITY

The value of a Fund's investments, and as a result the net asset
value of a Fund's shares, will fluctuate in response to changes in the
market and economic conditions as well as the financial condition and
prospects of issuers in which the Fund invests. Because of the risks
associated with a Fund's investments, each Fund is intended to be a long
term investment vehicle and is not designed to provide investors with a
means of speculating on short-term stock market movements.

Companies in which Aggressive Growth Fund invests typically are
subject to a greater degree of change in earnings and business prospects
than are companies with more established earnings patterns. In light of
these factors, Aggressive Growth Fund may be subject to greater
investment risk than that assumed by other investment companies.

Ownership of a Fund's shares can reduce the bookkeeping and
administrative inconveniences that would be connected with direct
purchases of the types of securities in which the Fund invests.
Investors should not consider a purchase of shares of either Fund as
equivalent to a complete investment program. Delaware Investments
includes a family of funds, generally available through registered
investment dealers, which may be used together to create a more complete
investment program.

INVESTMENT STRATEGY

AGGRESSIVE GROWTH FUND

The Fund seeks to achieve its investment objective by investing
primarily (at least 65% of its total assets) in equity securities
(including convertible securities) of companies which the Manager
believes have the potential for high earnings growth and which are U.S.
companies with stock market capitalizations of at least $300 million.
The Fund has been designed to provide investors with potentially greater
long-term rewards than provided by an investment in a fund that seeks
capital appreciation from common stocks with more established earnings
histories.

The Fund will invest in equity securities of companies the Manager
believes to be undervalued and to have the potential for high earnings
growth. Companies in which the Fund invests generally will meet one or
more of the following criteria: high historical earnings-per-share
("EPS") growth; high projected future EPS growth; an increase in
research analyst earnings estimates; attractive relative price to
earnings ratios; and high relative discounted cash flows. In selecting
the Fund's investments, the Manager also focuses on companies with
capable management teams, strong industry positions, sound capital
structures, high returns on equity, high reinvestment rates and
conservative financial accounting policies.

In pursuing its objective, the Fund anticipates that it will invest
substantially all, and under normal conditions not less than 65%, of its
assets in common stocks, preferred stocks, convertible bonds,
convertible debentures, convertible notes, convertible preferred stocks
and warrants or rights. To the extent that the Fund invests in
convertible debt securities, those securities will be purchased on the
basis of their equity characteristics, and ratings, if any, of those
securities will not be an important factor in their selection.

At no time will the investments of the Fund in bank obligations,
including time deposits, exceed 25% of the value of the
Fund's assets.

GROWTH STOCK FUND

In seeking to achieve its investment objective, Growth Stock Fund's
policy is to invest under normal market conditions not less than 80% of
its total assets in common stocks which the Manager or Sub-Adviser
believe offer the potential for long-term capital appreciation. Some of
the factors the Manager or Sub-Adviser will consider in making the
Fund's investments are increasing demand for a company's products or
services, the belief that a company's securities are temporarily
undervalued, the development of new or improved products or services,
the probability of increased operating efficiencies, changes in
management, emphasis on research and development, cyclical conditions,
or possible mergers or acquisitions. The Fund anticipates that, in
normal market conditions, at least 75% of the Fund's investments in
common stocks will have received at the time of investment one of the
two highest earnings and dividend ratings (A+ or A) assigned by Standard
& Poor's Ratings Group ("Standard & Poor's"). The Fund also may invest
up to 20% of its total assets in preferred stocks and corporate bonds if
they are accompanied by warrants or are convertible into common stocks.

* * *

Each Fund may invest up to 10% of its assets in foreign securities.
Each Fund may also invest in securities of foreign issuers in the form of
American Depositary Receipts ("ADRs"), which are U.S. dollar-denominated
receipts, typically issued by domestic banks or trust companies, that
represent the deposit with those entities of securities of a foreign
issuer, and Global Depositary Receipts ("GDRs"), which generally are
issued by foreign banks and evidence ownership of either foreign or
domestic securities. ADRs are publicly traded on exchanges or over-the-
counter in the United States and are issued through "sponsored" or
"unsponsored" arrangements. In a sponsored ADR arrangement, the foreign
issuer assumes the obligation to pay some or all of the depositary's
transaction fees, whereas under an unsponsored arrangement, the foreign
issuer assumes no obligations and the depositary's transaction fees are
paid directly by the ADR holders. In addition, less information is
available in the United States about an unsponsored ADR than about a
sponsored ADR. Each Fund may invest in ADRs through both sponsored and
unsponsored arrangements.

CLASSES OF SHARES

The Distributor serves as the national distributor for each Fund.
Shares of each Class may be purchased directly by contacting a Fund or
its agent or through authorized investment dealers. All purchases of
shares of each Class are made at net asset value. There is no front-end
or contingent deferred sales charge.

INVESTMENT INSTRUCTIONS GIVEN ON BEHALF OF PARTICIPANTS IN AN
EMPLOYER-SPONSORED RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH
DIRECTIONS PROVIDED BY THE EMPLOYER. EMPLOYEES CONSIDERING PURCHASING
SHARES OF A CLASS AS PART OF THEIR RETIREMENT PROGRAM SHOULD CONTACT
THEIR EMPLOYER FOR DETAILS.

Shares of each Class are available for purchase only by: (a)
retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt
employee benefit plans of the Manager or its affiliates and securities
dealer firms with a selling agreement with the Distributor; (c)
institutional advisory accounts of the Manager or its affiliates and
those having client relationships with the Manager or its affiliates and
their corporate sponsors, as well as subsidiaries and related employee
benefit plans and rollover individual retirement accounts from such
institutional advisory accounts; (d) a bank, trust company and similar
financial institution investing for its own account or for the account
of its trust customers for whom such financial institution is exercising
investment discretion in purchasing shares of a Class, except where the
investment is part of a program that requires payment to the financial
institution of a Rule 12b-1 Plan fee; and (e) registered investment
advisers investing on behalf of clients that consist solely of
institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the
adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for
such advisory services.

CLASS A SHARES, CLASS B SHARES AND CLASS C SHARES

In addition to offering Institutional Class shares, each Fund also
offers Class A Shares, Class B Shares and Class C Shares, which are
described in a separate prospectus. Class A Shares, Class B Shares and
Class C Shares may be purchased through authorized investment dealers or
directly by contacting a Fund or its Distributor. Class A Shares, Class B
Shares and Class C Shares may have different sales charges and other
expenses which may affect performance. To obtain a prospectus relating
to such classes, contact the Distributor by writing to the address or by
calling the phone number listed on the cover of this Prospectus.

HOW TO BUY SHARES

Each Fund makes it easy to invest by mail, by wire, by exchange and
by arrangement with your investment dealer. In all instances, investors
must qualify to purchase shares of the Classes.

INVESTING DIRECTLY BY MAIL

1. Initial Purchases--An Investment Application or, in the case of
a retirement account, an appropriate retirement plan application, must
be completed, signed and sent with a check payable to the specific Fund
and Class selected, to Delaware Investments at 1818 Market Street,
Philadelphia, PA 19103.

INVESTING DIRECTLY BY WIRE

You may purchase shares by requesting your bank to transmit funds
by wire to CoreStates Bank, N.A., ABA #031000011, account number
1412893401 (include your name(s) and your account number for the Fund
and Class in which you are investing).

1. Initial Purchases--Before you invest, telephone the Client
Services Department to get an account number at 800-828-5052. If you do
not call first, it may delay processing your investment. In addition,
you must promptly send your Investment Application or, in the case of a
retirement account, an appropriate retirement plan application, to the
Fund and Class selected by you, to Delaware Investments at 1818 Market
Street, Philadelphia, PA 19103.

2. Subsequent Purchases--You may make additional investments
anytime by wiring funds to CoreStates Bank, N.A., as described above.
You must advise your Client Services Representative by telephone at 800-
828-5052 prior to sending your wire.

INVESTING BY EXCHANGE

If you have an investment in another mutual fund in the Delaware
Investments family and you qualify to purchase shares of the Classes,
you may write and authorize an exchange of part or all of your
investment into a Fund. However, Class B Shares and Class C Shares of
each Fund and Class B Shares and Class C Shares of the other funds in
the Delaware Investments family offering such a class of shares may not
be exchanged into the Classes. If you wish to open an account by
exchange, call your Client Services Representative at 800-828-5052 for
more information. See Redemption and Exchange for more complete
information concerning your exchange privileges.

INVESTING THROUGH YOUR INVESTMENT DEALER

You can make a purchase of Fund shares through most investment
dealers who, as part of the service they provide, must transmit orders
promptly to the Fund. They may charge for this service.

PURCHASE PRICE AND EFFECTIVE DATE

The purchase price (net asset value) of each Class is determined as
of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.

The effective date of a purchase is the date the order is received
by the Fund in which the shares are being purchased, its agent or
designee. The effective date of a direct purchase is the day your wire,
electronic transfer or check is received, unless it is received after
the time the share price is determined, as noted above. Purchase orders
received after such time will be effective the next business day.

THE CONDITIONS OF YOUR PURCHASE

Each Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are
responsible for any loss incurred. A Fund can redeem shares from your
account(s) to reimburse itself for any loss, and you may be restricted
from making future purchases in any of the funds in the Delaware
Investments family. Each Fund reserves the right to reject purchases by
third-party checks or checks that are not drawn on a domestic branch of
a United States financial institution. If a check drawn on a foreign
financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.

Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of
redemptions.

REDEMPTION AND EXCHANGE

REDEMPTION AND EXCHANGE REQUESTS MADE ON BEHALF OF PARTICIPANTS IN
AN EMPLOYER-SPONSORED RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH
DIRECTIONS PROVIDED BY THE EMPLOYER. EMPLOYEES SHOULD THEREFORE CONTACT
THEIR EMPLOYER FOR DETAILS.

Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Fund receives your request in good
order. For example, redemption or exchange requests received in good
order after the time the net asset value of shares is determined, will
be processed on the next business day. See Purchase Price and Effective
Date under How to Buy Shares. Except as otherwise noted below, for a
redemption request to be in "good order," you must provide your account
number, account registration, and the total number of shares or dollar
amount of the transaction. With regard to exchanges, you must also
provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a
redemption or an exchange by calling a Fund at 800-828-5052. Redemption
proceeds will be distributed promptly, as described below, but not later
than seven days after receipt of a redemption request.

Each Fund will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have
already settled. Neither Fund will honor redemption requests as to
shares for which a check was tendered as payment until the Fund is
reasonably satisfied that the check has cleared, which may take up to 15
days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. Each Fund reserves the right to
reject a written or telephone redemption request or delay payment of
redemption proceeds if there has been a recent change to the
shareholder's address of record.

Shares of a Class may be exchanged into any other mutual fund in the
Delaware Investments family provided: (1) the investment satisfies the
eligibility and other requirements set forth in the prospectus of the
fund being acquired, including the payment of any applicable front-end
sales charge; and (2) the shares of the fund being acquired are in a
state where that fund is registered. If exchanges are made into other
shares that are eligible for purchase only by those permitted to
purchase shares of a Class, such shares will be exchanged at net asset
value. Shares of a Class may not be exchanged into Class B Shares or
Class C Shares of the funds in the Delaware Investments family. Each
Fund may suspend, terminate or amend the terms of the exchange privilege
upon 60 days' written notice to shareholders.

Various redemption and exchange methods are outlined below. No fee is
charged by the Funds or the Distributor for redeeming or exchanging your
shares, although, in the case of an exchange, a sales charge may apply.
You may also have your investment dealer arrange to have your shares
redeemed or exchanged. Your investment dealer may charge for this
service.

All authorizations given by shareholders, including selection of any
of the features described below, shall continue in effect until such time
as a written revocation or modification has been received by the Fund to
which the authorization relates or its agent.

WRITTEN REDEMPTION AND EXCHANGE

You can write to a Fund at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your shares or to request an exchange of any or
all your shares into another mutual fund in the Delaware Investments
family, subject to the same conditions and limitations as other
exchanges noted above. The request must be signed by all owners of the
account or your investment dealer of record.

For redemptions of more than $50,000, or when the proceeds are not
sent to the shareholder(s) at the address of record, each Fund requires a
signature by all owners of the account and may require a signature
guarantee. Each signature guarantee must be supplied by an eligible
guarantor institution. Each Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. A Fund may require further documentation from
corporations, executors, retirement plans, administrators, trustees or
guardians.

Payment is normally mailed the next business day after receipt of
your redemption request. Certificates are issued for shares only if you
submit a specific request. If your shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.

You also may submit your written request for redemption or exchange
by facsimile transmission at the following number: 215-255-8864.

TELEPHONE REDEMPTION AND EXCHANGE

To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without
charge) for you. If you choose to have your shares in certificate form,
you may redeem or exchange only by written request and you must return
your certificate(s).

The Telephone Redemption -- Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you have your
account in writing that you do not wish to have such services available
with respect to your account. Each Fund reserves the right
to modify, terminate or suspend these procedures upon 60 days' written
notice to shareholders. It may be difficult to reach a Fund by telephone
during periods when market or economic conditions lead to an unusually
large volume of telephone requests.

Neither the Funds nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone
instructions for redemption or exchange of Fund shares which are
reasonably believed to be genuine. With respect to such telephone
transactions, a Fund will follow reasonable procedures to confirm that
instructions communicated by telephone are genuine (including
verification of a form of personal identification) as, if it does not,
such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be
provided for all purchase, exchange and redemption transactions
initiated by telephone. By exchanging shares by telephone, you are
acknowledging prior receipt of a prospectus for the fund into which your
shares are being exchanged.

TELEPHONE REDEMPTION--CHECK TO YOUR ADDRESS
OF RECORD

You or your investment dealer of record can have redemption proceeds
of $50,000 or less mailed to you at your address of record. Checks will be
payable to the shareholder(s) of record. Payment is normally mailed the
next business day after receipt of the redemption request.

TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK

Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize
this service when you open your account. If you change your
predesignated bank account, you must submit a written authorization and
you may need to have your signature guaranteed. For your protection,
your authorization must be on file. If you request a wire, your funds
will normally be sent the next business day. If you ask for a check, it
will normally be mailed the next business day after receipt of your
redemption request to your predesignated bank account. There are no fees
for this redemption method, but the mail time may delay getting funds
into your bank account. Simply call your Client Services Representative
prior to the time the net asset value is determined, as noted above.

TELEPHONE EXCHANGE

You or your investment dealer of record can exchange shares into any
fund in the Delaware Investments family under the same registration. As
with the written exchange service, telephone exchanges are subject to
the same conditions and limitations as other exchanges noted above.
Telephone exchanges may be subject to limitations as to amounts or
frequency.

DIVIDENDS AND DISTRIBUTIONS

Mutual Funds III, Inc. currently intends to make annual payments from
each Fund's net investment income. Payments from each Fund's net
realized security profits will be made during the first quarter of the
next fiscal year. Both dividends and distributions, if any, are
automatically reinvested in your account at net asset value.

Each class of a Fund will share proportionately in the investment
income and expenses of that Fund, except that the Classes will not incur
any distribution fee under Mutual Funds III, Inc.'s 12b-1 Plans which apply
to Aggressive Growth Fund A Class, B Class and C Class and Growth Stock
Fund A Class, B Class and C Class.

TAXES

The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in a
Fund.

Each Fund has qualified and intends to continue to qualify as a
regulated investment company under Subchapter M of the Code. As such, a
Fund will not be subject to federal income tax, or to any excise tax, to
the extent its earnings are distributed as provided in the Code and it
satisfies certain other requirements relating to the sources of its
income and diversification of its assets.

On August 5, 1997, President Clinton signed into law the Taxpayer Relief
Act of 1997 (the "1997 Act"). This new law makes sweeping changes in the
Code. Because many of these changes are complex, and only indirectly
affect a Fund and its distributions to you, they are discussed in Part
B. Changes in the treatment of capital gains, however, are discussed in
this section.

Each Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment
income or net short-term capital gains will be taxable to those
investors who are subject to income taxes as ordinary income, whether
received in cash or in additional shares. For corporate investors,
dividends from net investment income will generally qualify in part for
the corporate dividends-received deduction. The portion of dividends
paid by each Fund that so qualifies will be designated each year in a
notice from Mutual Funds III, Inc. to the Fund's shareholders. For the
fiscal year ended April 30, 1998, all of Growth Stock Fund's dividends
from net investment income qualified for the corporate dividends-
received deduction.

Distributions paid by a Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors
who are subject to income taxes as long-term capital gains, regardless
of the length of time an investor has owned shares in the Fund. The
Funds do not seek to realize any particular amount of capital gains
during a year; rather, realized gains are a by-product of Fund
management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, for those
investors subject to tax, if purchases of shares in a Fund are made
shortly before the record date for a dividend or capital gains
distribution, a portion of the investment will be returned as a taxable
distribution.

THE TREATMENT OF CAPITAL GAIN DISTRIBUTIONS UNDER THE TAXPAYER RELIEF
ACT OF 1997

The 1997 Act creates a category of long-term capital gain for
individuals who will be taxed at new lower tax rates. For investors who
are in the 28% or higher federal income tax brackets, these gains will
be taxed at a maximum rate of 20%. For investors who are in the 15%
federal income tax bracket, these gains will be taxed at a maximum rate
of 10%. Capital gain distributions will qualify for these new maximum
tax rates, depending on when a Fund's securities were sold and how long
they were held by the Fund before they were sold. Investors who want
more information on holding periods and other qualifying rules relating
to these new rates should review the expanded discussion in Part B, or
should contact their own tax advisers.

Mutual Funds III, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain
distributions which will qualify for these maximum federal tax rates.

Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to
shareholders of record on a specified date in one of those months, but
which, for operational reasons, may not be paid to the shareholder until
the following January, will be treated for tax purposes as if paid by a
Fund and received by the shareholder on December 31 of the calendar year
in which they are declared.

Each Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities.

In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes. For example,
distributions of interest income and capital gains realized from certain
types of U.S. government securities may be exempt from state personal
income taxes. Because investors' state and local taxes may be different
than the federal taxes described above, investors should consult their
own tax advisers.

Each year, Mutual Funds III, Inc. will mail to you information on the
tax status of a Fund's dividends and distributions. Shareholders will
also receive each year information as to the portion of dividend income,
if any, that is derived from U.S. government securities that are exempt
from state income tax. Of course, shareholders who are not subject to
tax on their income would not be required to pay tax on amounts
distributed to them by a Fund.

Each Fund is required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid
this withholding requirement by certifying on your Investment
Application your proper Taxpayer Identification Number and by certifying
that you are not subject to backup withholding.

See in Part B for additional information on tax matters relating to each
Fund and its shareholders.

CALCULATION OF NET ASSET VALUE PER SHARE

The purchase and redemption price of Class shares is the net asset value
("NAV") per share of a Class next computed after the order is received.
The NAV is computed as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the
Exchange is open.

The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and
fees are accrued daily) and dividing by the number of shares
outstanding. Debt securities are priced on the basis of valuations
provided by an independent pricing service using methods approved by
Mutual Funds III, Inc.'s Board of Directors. Equity securities for which
marked quotations are available are priced at market value. Short-term
investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities
are valued at their fair value as determined in good faith and in a
method approved by Mutual Funds III, Inc.'s Board of Directors.

The net asset values of all outstanding shares of each class of a Fund
will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of
shares of that class. All income earned and expenses incurred by a Fund
will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in the Fund represented by the value of
shares of such classes, except that a Class will not incur any of the
expenses under the respective Fund's 12b-1 Plans and Class A, B and C
Shares alone will bear the 12b-1 Plan fees payable under their
respective Plans.

MANAGEMENT OF THE FUNDS

DIRECTORS

The business and affairs of Mutual Funds III, Inc. are managed under the
direction of its Board of Directors. Part B contains additional
information regarding Mutual Funds III, Inc.'s directors and officers.

INVESTMENT MANAGER AND SUB-ADVISER

The Manager furnishes investment management services to each Fund. The
Sub-Adviser is responsible for the day-to-day investment management of
Growth Stock Fund. The Manager has offices located at One Commerce
Square, Philadelphia, PA 19103. The Sub-Adviser has offices located at
90 South Seventh Street, Suite 4400, Minneapolis, MN 55402.

Prior to May 1, 1997, Voyageur Fund Managers, Inc. ("Voyageur") had been
retained under an investment advisory contract to act as each Fund's
investment adviser, subject to the authority of the Board of Directors.
Voyageur was an indirect, wholly-owned subsidiary of Dougherty Financial
Group, Inc. ("DFG"). After the close of business on April 30, 1997,
Voyageur became an indirect, wholly owned subsidiary of Lincoln National
Corporation ("LNC") as a result of LNC's acquisition of DFG. LNC,
headquartered in Fort Wayne, Indiana, owns and operates insurance and
investment management businesses, including Delaware Management
Holdings, Inc. ("DMH"). Affiliates of DMH serve as adviser, distributor
and transfer agent for the Delaware Investments family of mutual funds.

Because LNC's acquisition of DFG resulted in a change of control of
Voyageur, the Fund's previous investment advisory agreements with
Voyageur were "assigned," as that term is defined by the 1940 Act, and
the previous agreements therefore terminated upon the completion of the
acquisition. The Board of Directors of the Funds unanimously approved
new investment advisory agreements with the Manager at a meeting held in
person on February 14, 1997, and called for a shareholders meeting to
approve the new agreements. At a meeting held on April 11, 1997, the
shareholders of each Fund approved its respective investment advisory
agreement with the Manager to become effective after the close of
business on April 30, 1997, the date the acquisition was completed. At
that meeting, shareholders of Growth Stock Fund also approved a Sub-
Advisory Agreement between the Manager and the Sub-Adviser to take
effect at the same time as the Investment Management Agreement.

Beginning May 1, 1997, the Manager, an indirect, wholly owned subsidiary
of LNC, became the Funds' investment manager. The Manager administers
the affairs of and is ultimately responsible for the investment
management of each of the Funds under separate Investment Management
Agreements. The Manager also administers Mutual Funds III, Inc.'s
affairs and pays the salaries of all the directors, officers and
employees of Mutual Funds III, Inc. who are affiliated with the Manager.
For these services, under their respective Investment Management
Agreements, Aggressive Growth Fund and Growth Stock Fund each pay the
Manager a monthly investment advisory fee equivalent on an annual basis
to 1.00% of their average daily net assets. Investment management fees
accrued by Aggressive Growth Fund for the fiscal year ended April 30,
1998 were 1.00% of average daily net assets and 0.46% was paid to the
Manager as a result of the voluntary waiver of fees by Voyageur.
Investment management fees accrued by Growth Stock Fund for the fiscal
year ended April 30, 1998 were 1.00% of average daily net assets and
0.93% was paid to the Manager as a result of the voluntary waiver of
fees by Voyageur.

The Manager is a series of Delaware Management Business Trust. The
Manager changed its form of organization from a corporation to a
business trust on March 1, 1998.

Gerald S. Frey, Vice President/Senior Portfolio Manager, assumed primary
responsibility for making day-to-day investment decisions for the
Aggressive Growth Fund on May 1, 1997. Mr. Frey also serves as Vice
President/Senior Portfolio Manager for certain other funds in the
Delaware Investments family. Mr. Frey has 23 years' experience in the
money management business and holds a BA in Economics from Bloomsburg
University and attended Wilkes College and New York University. Prior to
joining Delaware Investments in 1996, he was a Senior Director with
Morgan Grenfell Capital Management in New York.

In making investment decisions for the Aggressive Growth Fund, Mr. Frey
regularly consults with Wayne A. Stork, Marshall T. Bassett, John A.
Heffern, Jeffrey Hynoski and Lori Wachs. Mr. Bassett, Vice President,
joined Delaware in 1997. In his most recent position, he served as Vice
President in Morgan Stanley Asset Management's Emerging Growth Group,
where he analyzed small growth companies. Prior to that, he was a trust
officer at Sovran Bank and Trust Company. He received his bachelor's
degree and MBA from Duke University. Mr. Heffern, Vice President, holds
a bachelor's degree and an MBA from the University of North Carolina at
Chapel Hill. He joined Delaware in 1997. Previously, he was a Senior
Vice President, Equity Research at NatWest Securities Corporation's
Specialty Finance Services unit. Prior to that, he was a Principal and
Senior Regional Bank Analyst at Alex. Brown & Sons. Mr. Hynoski is a
Vice President. He joined Delaware Investments in 1998. Previously, he
served as a Vice President at Bessemer Trust Company in the mid and
large capitalization growth group, where he specialized in the areas of
science, technology and telecommunications. Prior to that, Mr. Hynoski
held positions at Lord Abbett & Co. and Cowen Asset Management. Mr.
Hynoski holds a BS in Finance from the University of Delaware and an MBA
with a concentration in Investments/Portfolio Management and Financial
Economics from Pace University. Ms. Wachs is a Vice President. She
joined Delaware Investments in 1992 from Goldman Sachs, where she was an
equity analyst for two years. She is a graduate of the University of
Pennsylvania's Wharton School, where she majored in Finance and Oriental
studies.

Pursuant to the terms of a Sub-Advisory Agreement with the Manager, the
Sub-Adviser participates in the management of Growth Stock Fund's
assets, is responsible for day-to-day investment management of the Fund,
makes and executes investment decisions for the Fund in accordance with
the Fund's investment objectives and stated policies. The Manager
continues to have ultimate responsibility for all investment advisory
services in connection with the management of the Fund pursuant to the
Investment Management Agreement and supervises the Sub-Adviser's
performance of such services. For the services provided to the Manager,
the Manager pays the Sub-Adviser an annual sub-advisory fee equal to
0.50% of Growth Stock Fund's average daily net assets.

James King, an employee of the Sub-Adviser, currently has day-to-day
portfolio management responsibility for Growth Stock Fund. Mr. King was
a director of Voyageur from 1993 through 1995 and was a Senior Equity
Portfolio Manager of Voyageur from 1990 through 1997. Prior to joining
Voyageur, Mr. King was President and Chief Investment Officer of King
Management Company. Mr. King is a lecturer at the Drake University
School of Finance. Mr. King currently has over 30 years of investment
experience.

PORTFOLIO TRADING PRACTICES

Each Fund normally will not invest for short-term trading purposes.
However, a Fund may sell securities without regard to the length of time
they have been held. The degree of portfolio activity will affect
brokerage costs of a Fund and may affect taxes payable by such Fund's
shareholders.

Each Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be
placed with brokers or dealers who provide brokerage and research
services to the Manager or to their advisory clients. These services may
be used by the Manager in servicing any of its accounts. These services
may be used by the Manager in servicing any of its accounts. Subject to
best price and execution, each Fund may consider a broker/dealer's sales
of shares of funds in the Delaware Investments family in placing
portfolio orders and may place orders with broker/dealers that have
agreed to defray certain expenses of such funds, such as custodian fees.

PERFORMANCE INFORMATION

From time to time, each Fund may quote total return performance of their
Classes in advertising and other types of literature.

Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value.
Each presentation will include the average annual total return for one-,
five- and ten-year (or life of fund, if applicable) periods. Each Fund
may also advertise aggregate and average total return information
concerning its Class over additional periods of time.

Because securities prices fluctuate, investment results of the Classes
will fluctuate over time and past performance should not be considered a
guarantee of future results.

STATEMENTS AND CONFIRMATIONS

You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent
following all transactions other than those involving a reinvestment of
dividends. You should examine statements and confirmations immediately
and promptly report any discrepancy by calling your Client Services
Representative.

FINANCIAL INFORMATION ABOUT THE FUNDS

Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information
about each Fund's investments and performance. Mutual Funds III, Inc.'s
fiscal year ends on April 30.

DISTRIBUTION AND SERVICE

The Distributor, Delaware Distributors, L.P., serves as the national
distributor of each Fund's shares under a Distribution Agreement with
Mutual Funds III, Inc. dated August 28, 1997. The Distributor bears all
of the costs of promotion and distribution.

The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for each
Fund under an agreement dated May 1, 1997. The Transfer Agent also
provides accounting services to the Funds pursuant to the terms of a
separate Fund Accounting Agreement. The directors annually review
service fees paid to the Transfer Agent. Certain recordkeeping services
and other shareholder services that otherwise would be performed by the
Transfer Agent may be performed by certain other entities and the
Transfer Agent may elect to enter into an agreement to pay such other
entities for those services. In addition, participant account
maintenance fees may be assessed for certain recordkeeping services
provided as part of retirement plan and administration service packages.
These fees are based on the number of participants in the plan and the
various services selected by the employer. Fees will be quoted upon
request and are subject to change.

The Distributor and the Transfer Agent are indirect, wholly owned
subsidiaries of DMH.

* * *

As with other mutual funds, financial and business organizations and
individuals around the world, each Fund could be adversely affected if
the computer systems used by its service providers do not properly
process and calculate date-related information from and after January 1,
2000. This is commonly known as the "Year 2000 Problem." Mutual Funds
III, Inc. is taking steps to obtain satisfactory assurances that the
Funds' major service providers are taking steps reasonably designed to
address the Year 2000 Problem with respect to the computer systems that
such service providers use. There can be no assurances that these steps
will be sufficient to avoid any adverse impact on the business of the
Funds.

Several European countries are participating in the European Economic
and Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the
"Euro." It is anticipated that each such participating country will
replace its existing currency with the Euro on January 1, 1999.
Additional European countries may elect to participate after that date.
If a Fund is invested in securities of participating countries it could
be adversely affected if the computer systems used by its major service
providers are not properly prepared to handle the implementation of this
single currency or the adoption of the Euro by additional countries in
the future. Mutual Funds III, Inc. is taking steps to obtain
satisfactory assurances that the major service providers of Funds are
taking steps reasonably designed to address these matters with respect
to the computer systems that such service providers use. There can be no
assurances that these steps will be sufficient to avoid any adverse
impact on the business of the Funds.

EXPENSES

Each Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreements and
those borne by the Distributor under the Distribution Agreements.

For the fiscal year ended April 30, 1998, the ratio of operating
expenses to average daily net assets for Aggressive Growth Fund
Institutional Class was 1.50% assuming the voluntary waiver of fees and
2.04% without the voluntary waiver of fees. For the fiscal year ended
April 30, 1998, the ratio of operating expenses to average daily net
assets for Growth Stock Fund Institutional Class was 1.50% assuming the
voluntary waiver of fees and 1.57% without the voluntary waiver of fees.

Mutual Funds III, Inc. is an open-end management investment company.
Each Fund's portfolio of assets is diversified as defined by the 1940
Act. Commonly known as a mutual fund, Mutual Funds III, Inc. was
organized as a Minnesota corporation in January 1985. In addition to the
Funds, Mutual Fund III, Inc. presently also offers the Tax-Efficient
Equity Fund series of shares. Fund shares have a par value of $.01,
equal voting rights, except as noted below, and are equal in all other
respects. Each Fund will vote separately on any matter which affects
only that Fund. Shares of each Fund have a priority over shares of any
other fund of Mutual Funds III, Inc. in the assets and income of that
Fund.

All of the shares have noncumulative voting rights which means that the
holders of more than 50% of Mutual Funds III, Inc.'s shares voting for
the election of directors can elect 100% of the directors if they choose
to do so. Under Minnesota law, Mutual Funds III, Inc. is not required,
and does not intend, to hold annual meetings of shareholders unless,
under certain circumstances, it is required to do so under the 1940 Act.

In addition to Institutional Class shares, the Funds offer Class A
Shares, Class B Shares and Class C Shares. Shares of each class
represent proportionate interests in the assets of the respective Fund
and have the same voting and other rights and preferences as the other
classes of that Fund, except that shares of the Classes are not subject
to, and may not vote on matters affecting, the Distribution Plans under
Rule 12b-1 relating to Class A, Class B and Class C Shares. Similarly,
as a general matter, the shareholders of Class A Shares, Class B Shares
and Class C Shares may vote only on matters affecting the 12b-1 Plan
that relates to the class of shares that they hold. However, Class B
Shares of a Fund may vote on any proposal to increase materially the
fees to be paid by that Fund under the 12b-1 Plan relating to Class A
Shares.

Beginning June 9, 1997, the names of Voyageur Aggressive Growth Fund
changed to Aggressive Growth Fund series and Voyageur Growth Stock Fund
changed to Growth Stock Fund series.

OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS

DEBT SECURITIES

In pursuing its investment objective, Aggressive Growth Fund may invest
up to 35% of its total assets and Growth Stock Fund may invest up to 20%
of its total net assets in debt securities of corporate and governmental
issuers. The risks inherent in debt securities depend primarily on the
term and quality of the obligations in a Fund's portfolio as well as on
market conditions. A decline in the prevailing levels of interest rates
generally increases the value of debt securities, while an increase in
rates usually reduces the value of those securities.

Investments in debt securities by each Fund are limited to those that
are at the time of investment within the four highest grades (generally
referred to as "investment grade") assigned by a nationally recognized
statistical rating organization or, if unrated, are deemed to be of
comparable quality by the Manager. If a change in credit quality after
acquisition by a Fund causes a security to no longer be investment
grade, the Fund will dispose of the security, if necessary, to keep its
holdings to 5% or less of the Fund's net assets. See Credit Quality
under Investment Restrictions and Policies in Part B. Debt securities
rated Baa by Moody's or BBB by Standard & Poor's, although considered
investment grade, have speculative characteristics and changes in
economic circumstances are more likely to lead to a weakened capacity to
make principal and interest payments than is the case with higher grade
bonds.

When a Fund's Manager or Sub-Adviser, as the case may be, determines
that adverse market or economic conditions exist and considers a
temporary defensive position advisable, the Fund may invest without
limitation in high-quality fixed income securities or hold assets in
cash or cash equivalents.

RULE 144A SECURITIES

Each Fund may invest in restricted securities, including privately
placed securities, some of which may be eligible for resale without
registration pursuant to Rule 144A ("Rule 144A Securities") under the
Securities Act of 1933. Rule 144A permits many privately placed and
legally restricted securities to be freely traded among certain
institutional buyers such as a Fund. Each Fund may invest no more than
15% of the value of its net assets in illiquid securities.

While maintaining oversight, the Board of Directors has delegated to the
Manager the day-to-day function of determining whether or not individual
Rule 144A Securities are liquid for purposes of a Fund's 15% limitation
on investments in illiquid assets. The Board has instructed the Manager
to consider the following factors in determining the liquidity of a Rule
144A Security: (i) the frequency of trades and trading volume for the
security; (ii) whether at least three dealers are willing to purchase or
sell the security and the number of potential purchasers; (iii) whether
at least two dealers are making a market in the security; (iv) the
nature of the security and the nature of the marketplace trades (e.g.,
the time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer).

If the Manager or Sub-Adviser, as the case may be, determines that a
Rule 144A Security which was previously determined to be liquid is no
longer liquid and, as a result, a Fund's holdings of illiquid securities
exceed the Fund's 15% limit on investments in such securities, the
Manager will determine what action to take to ensure that the Fund
continues to adhere to such limitation.

INVESTMENT COMPANY SECURITIES

Any investments that either Fund makes in either closed-end or open-end
investment companies will be limited by the 1940 Act, and would involve
an indirect payment of a portion of the expenses, including advisory
fees, of such other investment companies. Under the 1940 Act's current
limitations, a Fund may not (1) own more than 3% of the voting stock of
another investment company; (2) invest more than 5% of the Fund's total
assets in the shares of any one investment company; nor (3) invest more
than 10% of the Fund's total assets in shares of other investment
companies. If a Fund elects to limit its investment in other investment
companies to closed-end investment companies, the 3% limitation
described above is increased to 10%. These percentage limitations also
apply to each Fund's investments in unregistered investment companies.

REPURCHASE AGREEMENTS

In order to invest its short-term cash reserves or when in a temporary
defensive posture, each Fund may enter into repurchase agreements with
banks or broker/dealers deemed to be creditworthy by the Manager or Sub-
Adviser, under guidelines approved by the Board of Directors. A
repurchase agreement is a short-term investment in which the purchaser
(i.e. a Fund) acquires ownership of a debt security and the seller
agrees to repurchase the obligation at a future time and set price,
thereby determining the yield during the purchaser's holding period.
Generally, repurchase agreements are of short duration, often less than
one week but on occasion for longer periods. Not more than 15% of each
Fund's assets may be invested in illiquid securities, including
repurchase agreements of over seven-days' maturity. Should an issuer of
a repurchase agreement fail to repurchase the underlying security, the
loss to a Fund, if any, would be the difference between the repurchase
price and the market value of the security. Each Fund will limit its
investments in repurchase agreements to those which the Manager or Sub-
Adviser under guidelines of the Board of Directors determines to present
minimal credit risks and which are of high quality. In addition, each
Fund must have collateral of at least 102% of the repurchase price,
including the portion representing the Fund's yield under such
agreements, which is monitored on a daily basis.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

Each Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are purchased with payment and
delivery taking place in the future in order to secure what is
considered to be an advantageous yield or price at the time of the
transaction. Delivery of and payment for these securities may take as
long as a month or more after the date of the purchase commitment. Each
Fund will maintain with its custodian bank a separate account with a
segregated portfolio of securities in an amount at least equal to these
commitments. The payment obligation and the interest rates that will be
received are each fixed at the time the Fund enters into the commitment
and no interest accrues to the Fund until settlement. Thus, it is
possible that the market value at the time of settlement could be higher
or lower than the purchase price if the general level of interest rates
has changed.

TEMPORARY INVESTMENTS

Each Fund's reserves may be invested in domestic short-term money market
instruments including, but not limited to, U.S. government and agency
obligations, certificates of deposit, bankers' acceptances, time
deposits, commercial paper, short-term corporate debt securities and
repurchase agreements. During temporary defensive periods as determined
by the Manager or the Sub-Adviser, as the case may be, each Fund may
hold up to 100% of its total assets in short-term obligations of the
types described above.

HEDGING TRANSACTIONS

Each Fund may write covered call options and secured put options and
purchase call and put options on securities and security indices. Each
Fund may also engage in transactions in financial futures contracts and
related options for hedging purposes. These investment techniques and
the related risks are summarized below and are described in more detail
in Part B.

OPTIONS

The Manager and Sub-Adviser may employ options techniques in an attempt
to protect appreciation attained and to take advantage of the liquidity
available in the options market. Each Fund may purchase call options on
foreign or U.S. securities and indices and enter into related closing
transactions and a Fund may write covered call options on such
securities. A Fund may also purchase put options on such securities and
indices and enter into related closing transactions.

A call option enables the purchaser, in return for the premium paid, to
purchase securities from the writer of the option at an agreed price up
to an agreed date. A covered call option obligates the writer, in return
for the premium received, to sell the securities subject to the option
to the purchaser of the option for an agreed upon price up to an agreed
date. The advantage is that the purchaser may hedge against an increase
in the price of securities it ultimately wishes to buy or take advantage
of a rise in a particular index. A Fund will only purchase call options
to the extent that premiums paid on all outstanding call options do not
exceed 2% of its total assets.

A put option enables the purchaser of the option, in return for the
premium paid, to sell the security underlying the option to the writer
at the exercise price during the option period, and the writer of the
option has the obligation to purchase the security from the purchaser of
the option. A Fund will only purchase put options to the extent that the
premiums on all outstanding put options do not exceed 2% of its total
assets. The advantage is that the purchaser can be protected should the
market value of the security decline or should a particular index
decline.

An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash
equal to the difference between the closing price of the index and the
exercise price of the option.

Closing transactions essentially let a Fund offset put options or call
options prior to exercise or expiration. If a Fund cannot effect closing
transactions, it may have to hold a security it would otherwise sell or
deliver a security it might want to hold.

In purchasing put and call options, the premium paid by a Fund plus any
transaction costs will reduce any benefit realized by the Fund upon
exercise of the option. With respect to writing covered call options, a
Fund may lose the potential market appreciation of the securities
subject to the option, if the Manager's or the Sub-Adviser's judgment is
wrong and the price of the security moves in the opposite direction from
what was anticipated.

Each Fund may use both Exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. Each Fund will only
invest in such options to the extent consistent with its 15% limitation
on investment in illiquid securities. Each Fund will comply with
Securities and Exchange Commission asset segregation and coverage
requirements when engaging in these types of transactions.

FUTURES

Futures contracts are agreements for the purchase or sale for future
delivery of securities. When a futures contract is sold, a Fund incurs a
contractual obligation to deliver the securities underlying the contract
at a specified price on a specified date during a specified future
month. A purchase of a futures contract means the acquisition of a
contractual right to obtain delivery to a Fund of the securities called
for by the contract at a specified price during a specified future
month.

While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally terminated by
entering into an offsetting transaction. When a Fund enters into a
futures transaction, it must deliver to the futures commission merchant
selected by the Fund an amount referred to as "initial margin." This
amount is maintained by the futures commission merchant in an account at
the Fund's custodian bank. Thereafter, a "variation margin" may be paid
by a Fund to, or drawn by the Fund from, such account in accordance with
controls set for such account, depending upon changes in the price of
the underlying securities subject to the futures contract.

Each Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities
except that options on futures give the purchaser the right, in return
for the premium paid, to assume a position in a futures contract, rather
than actually to purchase or sell the futures contract, at a specified
exercise price at any time during the period of the option.

The purpose of the purchase or sale of futures contracts consisting of
U.S. government securities is to protect a Fund against the adverse
effects of fluctuations in interest rates without actually buying or
selling such securities. Similarly, when it is expected that interest
rates may decline, futures contracts may be purchased to hedge in
anticipation of subsequent purchases of U.S. government securities at
higher prices.

FOREIGN SECURITIES

Each Fund may invest up to 10% of its total assets in foreign
securities. Foreign securities may include ADRs and GDRs. There are
substantial and different risks involved in investing in foreign
securities. An investor should consider these risks carefully. For
example, there is generally less publicly available information about
foreign companies than is available about companies in the U.S. Foreign
companies are not subject to uniform audit and financial reporting
standards, practices and requirements comparable to those in the U.S.

Foreign securities involve currency risks. The U.S. dollar value of a
foreign security tends to decrease when the value of the dollar rises
against the foreign currency in which the security is denominated and
tends to increase when the value of the dollar falls against such
currency. Fluctuations in exchange rates may also affect the earning
power and asset value of the foreign entity issuing the security.
Dividend and interest payments may be returned to the country of origin,
based on the exchange rate at the time of disbursement, and restrictions
on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies in connection with
purchases and sales of foreign securities.

Foreign stock markets are generally not as developed or efficient as
those in the U.S. In most foreign markets volume and liquidity are less
than in the U.S. and, at times, volatility of price can be greater than
that in the U.S. Fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on U.S. exchanges.
There is generally less government supervision and regulation of foreign
stock exchanges, brokers and companies than in the U.S.

There is also the possibility of adverse changes in investment or
exchange control regulations, expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, political or social
instability, or diplomatic developments which could adversely affect
investments, assets or securities transactions of a Fund in some foreign
countries. The Funds are not aware of any investment or exchange control
regulations which might substantially impair their operations as
described, although this could change at any time.

The dividends and interest payable on certain foreign securities may be
subject to foreign withholding taxes, thus reducing the net amount
available for distribution to a Fund's shareholders.

INVESTMENT BY FUND OF FUNDS

Aggressive Growth Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds (the "Foundation
Funds"). From time to time, the Fund may experience large investments or
redemptions due to allocations or rebalancings by the Foundation Funds.
While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio
management to the extent that the Fund may be required to sell
securities or invest cash at times when it would not otherwise do so.
These transactions could also have tax consequences if sales of
securities result in gains and could also increase transactions costs or
portfolio turnover. The Manager will monitor such transactions and will
attempt to minimize any adverse effects on both the Fund and the
Foundation Funds resulting from such transactions.

OTHER INVESTMENT POLICIES

Although each Fund is permitted under certain circumstances to borrow
money, neither Fund normally does so. Aggressive Growth Fund will not
purchase new securities whenever borrowings exceed 5% of the value of
the total assets of the Fund.

Neither Fund may concentrate investments in any industry, which means
that a Fund may generally not invest more than 25% of its assets in any
one industry. With respect to Aggressive Growth Fund, the term
"industry" will be deemed to include the government of any country other
than the United States, but not the U.S. Government.

* * *

Certain other fundamental and non-fundamental investment restrictions
adopted by the Funds are described in Part B.

For more information, call
Delaware Investments at 800-828-5052.

INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103

GROWTH STOCK FUND:
SUB-ADVISER
Voyageur Asset Management LLC
90 South Seventh Street, Suite 4400,
Minneapolis, MN 55402

NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103

SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103

INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103

CUSTODIAN
Norwest Bank Minnesota, N.A.
Sixth Street & Marquette Avenue
Minneapolis, MN 55402

www.delawarefunds.com

[GRAPHIC OMITTED: RECYCLE LOGO]

Printed in the U.S.A. on recycled paper.
P-042 [--] PP 12/97

AGGRESSIVE
GROWTH FUND
INSTITUTIONAL
GROWTH STOCK FUND
INSTITUTIONAL

PART B--STATEMENT OF ADDITIONAL INFORMATION

JUNE 29, 1998

VOYAGEUR MUTUAL FUNDS III, INC.

1818 MARKET STREET
PHILADELPHIA, PA 19103

FOR MORE INFORMATION ABOUT THE INSTITUTIONAL CLASS: 800-828-5052

FOR PROSPECTUS AND PERFORMANCE OF CLASS A SHARES, CLASS B SHARES AND
CLASS C SHARES:

NATIONWIDE 800-523-1918

INFORMATION ON EXISTING ACCOUNTS OF CLASS A SHARES, CLASS B SHARES AND
CLASS C SHARES:
(SHAREHOLDERS ONLY) NATIONWIDE 800-523-1918

DEALER SERVICES: (BROKER/DEALERS ONLY) NATIONWIDE 800-362-7500

TABLE OF CONTENTS

COVER PAGE

INVESTMENT RESTRICTIONS AND POLICIES

ACCOUNTING AND TAX ISSUES

PERFORMANCE INFORMATION

TRADING PRACTICES AND BROKERAGE

PURCHASING SHARES

INVESTMENT PLANS

DETERMINING OFFERING PRICE AND NET ASSET VALUE

REDEMPTION AND REPURCHASE

DISTRIBUTIONS AND TAXES

INVESTMENT MANAGEMENT AGREEMENTS AND SUB-ADVISORY AGREEMENT

OFFICERS AND DIRECTORS

EXCHANGE PRIVILEGE

GENERAL INFORMATION

APPENDIX A -- RATINGS

APPENDIX B -- STOCK INDEX FUTURES CONTRACTS AND RELATED OPTIONS

FINANCIAL STATEMENTS

Voyageur Mutual Funds III, Inc. ("Mutual Funds III, Inc.") is a
professionally-managed mutual fund of the series type. This Statement of
Additional Information ("Part B" of the registration statement)
describes Aggressive Growth Fund series, Growth Stock Fund series and
Tax-Efficient Equity Fund series (individually a "Fund" and collectively
the "Funds") of Mutual Funds III, Inc. Each Fund offers Class A Shares,
Class B Shares and Class C Shares ("Class A Shares", "Class B Shares"
and "Class C Shares", and together, the "Fund Classes") and
Institutional Class shares (the "Institutional Classes").

Class B Shares, Class C Shares and Institutional Class shares of a
Fund may be purchased at a price equal to the next determined net asset
value per share. Class A Shares may be purchased at the public offering
price, which is equal to the next determined net asset value per share,
plus a front-end sales charge. Class A Shares are subject to a maximum
front-end sales charge of 4.75% and annual 12b-1 Plan expenses of up to
0.30% for Tax-Efficient Equity Fund and up to 0.25% for Aggressive
Growth Fund and Growth Stock Fund. Class B Shares are subject to a
contingent deferred sales charge ("CDSC") which may be imposed on
redemptions made within six years of purchase and annual 12b-1 Plan
expenses of up to 1% which are assessed against Class B Shares for
approximately eight years after purchase. See Automatic Conversion of
Class B Shares under Classes of Shares in the Fund Classes'
Prospectuses. Class C Shares are subject to a CDSC which may be imposed
on redemptions made within 12 months of purchase and annual 12b-1 Plan
expenses of up to 1% which are assessed against Class C Shares for the
life of the investment. Due to voluntary waivers by Delaware
Distributors, L.P. (the "Distributor"), Tax-Efficient Equity Fund A
Class will pay a 12b-1 fee of 0.25% until January 1, 1999.

This Part B supplements the information contained in the current
Prospectuses for the Funds dated June 29, 1998 as they may be amended
from time to time. It should be read in conjunction with the respective
Class' Prospectus. Part B is not itself a prospectus but is, in its
entirety, incorporated by reference into each Class' Prospectus.
Prospectuses relating to the Fund Classes and Prospectuses relating to
the Institutional Classes may be obtained by writing or calling your
investment dealer or by contacting the Funds' national distributor,
Delaware Distributors, L.P. (the "Distributor"), 1818 Market Street,
Philadelphia, PA 19103. All references to "shares" in this Part B refer
to all Classes of shares of each Fund, except where noted.

INVESTMENT RESTRICTIONS AND POLICIES

INVESTMENT RESTRICTIONS
Each Fund has adopted certain investment restrictions. Certain of
these restrictions are fundamental policies of a Fund. Under the
Investment Company Act of 1940, as amended (the "1940 Act"), a
fundamental policy may not be changed without the vote of a majority of
the outstanding voting securities of the Fund, as defined in the 1940
Act.

Aggressive Growth Fund:

The following investment restrictions have been adopted by
Aggressive Growth Fund as fundamental policies:

1. The Fund will not borrow money, except that the Fund may borrow from
banks for temporary or emergency (not leveraging) purposes, including
the meeting of redemption requests and cash payments of dividends and
distributions that might otherwise require the untimely disposition of
securities, in an amount not to exceed 20% of the value of the Fund's
total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the
borrowing is made. Whenever borrowings exceed 5% of the value of the
total assets of the Fund, the Fund will not make any additional
investments.

2. The Fund will not lend money to other persons, except through
purchasing debt obligations, lending portfolio securities and entering
into repurchase agreements.

3. The Fund will invest no more than 25% of the value of its total
assets in securities of issuers in any one industry. For purposes of
this restriction, the term industry will be deemed to include the
government of any country other than the United States, but not the U.S.
government.

4. The Fund will not purchase or sell real estate or real estate limited
partnership interests, except that the Fund may purchase and sell
securities of companies that deal in real estate or interests in real
estate.

5. The Fund will not purchase or sell commodities or commodity
contracts, except futures contracts and related options and other
similar contracts.

6. The Fund will not act as an underwriter of securities, except that
the Fund may acquire securities under circumstances in which, if the
securities were sold, the Fund might be deemed to be an underwriter for
purposes of the Securities Act of 1933, as amended.

Aggressive Growth Fund has adopted the following operating (i.e.
non-fundamental) investment policies and restrictions which may be
changed by the Board of Directors without shareholder approval. In each
case:

1. The Fund will not invest in oil, gas or other mineral leases or
exploration or development programs.

2. The Fund will not purchase any investment company security, other
than a security acquired pursuant to a plan of reorganization or an
offer of exchange, if as a result of the purchase (a) the Fund would own
more than 3% of the total outstanding voting securities of any
investment company, (b) more than 5% of the value of the Fund's total
assets would be invested in securities of any one investment company or
(c) more than 10% or the Fund's total assets would be invested in
securities issued by investment companies.

3. The Fund will not participate on a joint or joint-and-several basis
in any securities trading account.

4. The Fund will not make investments for the purpose of exercising
control or management.

5. The Fund will not purchase any security, if as a result of the
purchase, the Fund would then have more than 5% of its total assets
invested in securities of companies (including predecessors) that have
been in continuous operation for fewer than three years.

6. The Fund will not purchase or retain securities of any issuer if, to
the knowledge of the Fund, any of Mutual Funds III, Inc.'s Directors or
officers or any officer or director of the investment manager or sub-
adviser individually owns more than 0.5% of the outstanding securities
of the company and together they own beneficially more than 5% of the
securities.

7. The Fund will not invest in warrants (other than warrants acquired by
the Fund as part of a unit or attached to securities at the time of
purchase) if, as a result, the investments (valued at the lower of cost
or market) would exceed 5% of the value of the Fund's net assets of
which not more than 2% of the Fund's net assets may be invested in
warrants not listed on a recognized foreign or domestic stock exchange.

8. The Fund will not purchase securities on margin, except that the Fund
may obtain any short- term credits necessary for the clearance of
purchases and sales of securities. For purposes of this restriction, the
deposit or payment of initial or variation margin in connection with
futures contracts or options on futures contracts will not be deemed to
be a purchase of securities on margin.

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

In addition, subject to Aggressive Growth Fund's investment
policies and restrictions as set forth in the Prospectus and in this
Part B, as a nonfundamental policy, the Fund may not invest more than
15% of its assets, collectively, in illiquid investments and securities
of foreign issuers which are not listed on a recognized domestic or
foreign securities exchange.

Growth Stock Fund:

Growth Stock Fund has adopted the following investment restrictions
as fundamental policies. Growth Stock Fund may not:

1. Invest more than 5% of the value of its total assets in the
securities of any one issuer (other than securities of the U.S.
Government or its agencies or instrumentalities).

2. Purchase more than 10% of any class of securities of any one issuer
(taking all preferred stock issues of an issuer as a single class and
all debt issues of an issuer as a single class) or acquire more than 10%
of the outstanding voting securities of an issuer.

3. Concentrate its investments in any particular industry; however, it
may invest up to 25% of the value of its total assets in the securities
of issuers conducting their principal business activities in any one
industry.

4. Invest more than 5% of the value of its total assets in the
securities of any issuers which, with their predecessors, have a record
of less than three years' continuous operation. (Securities of such
issuers will not be deemed to fall within this limitation if they are
guaranteed by an entity in continuous operation for more than three
years.)

5. Issue any senior securities (as defined in the 1940 Act), except to
the extent that using options and futures contracts may be deemed to
constitute issuing a senior security.

6. Borrow money, except from banks for temporary or emergency purposes
in an amount not exceeding 5% of the value of the Fund's total assets.

7. Mortgage, pledge or hypothecate its assets except in an amount not
exceeding 10% of the value of its total assets, to secure temporary or
emergency borrowing. For purposes of this policy, collateral
arrangements for margin deposits on futures contracts or with respect to
the writing of options are not deemed to be a pledge of assets.

8. Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments,
it may be deemed to be an underwriter under federal securities laws.

9. Purchase or sell real estate or real estate mortgage loans, except
the Fund may purchase or sell securities issued by companies owning real
estate or interests therein.

10. Purchase or sell oil, gas or other mineral leases, rights or royalty
contracts, except the Fund may purchase or sell securities of companies
investing in the foregoing.

11. Purchase or sell commodities or commodities futures contracts,
except that it may enter into financial futures contracts and engage in
related options transactions.

12. Purchase or retain the securities of any issuer, if, to the Fund's
knowledge, those officers or directors of Mutual Funds III, Inc. or its
affiliates or of its investment adviser or sub-adviser who individually
own beneficially more than 0.5% of the outstanding securities of such
issuer, together own beneficially more than 5% of such outstanding
securities.

13. Make loans to other persons, except to the extent that repurchase
agreements are deemed to be loans under the 1940 Act, and except that it
may purchase debt securities as described in the Prospectus under
"Investment Objectives and Policies." The purchase of a portion of an
issue of bonds, debentures or other debt securities distributed to the
public or to financial institutions will not be considered the making of
a loan.

14. Purchase securities on margin, except that it may obtain such short-
term credits as may be necessary for the clearance of purchases or sales
of securities and except that it may make margin deposits in connection
with futures contracts.

15. Participate on a joint or a joint and several basis in any
securities trading account.

16. Write, purchase or sell puts, calls or combinations thereof, except
that it may (a) purchase or write put and call options on stock indexes
listed on national securities exchanges, (b) write and purchase put and
call options with respect to the securities in which it may invest and
(c) engage in financial futures contracts and related options
transactions.

17. Make short sales except where, by virtue of ownership of other
securities, it has the right to obtain without payment of further
consideration, securities equivalent in kind and amount to those sold.

18. Invest for the purpose of exercising control or management.

19. Invest more than 5% of the value of its total assets in the
securities of any single investment company or more than 10% of the
value of its total assets in the securities of two or more investment
companies except as part of a merger, consolidation or acquisition of
assets.

20. Invest more than 15% of its net assets in illiquid investments.

Tax-Efficient Equity Fund:

The following investment restrictions have been adopted by Tax-
Efficient Equity Fund as fundamental policies:

2. The Fund will not issue any senior securities, as defined in the 1940
Act, other than as set forth in investment restriction #1 above and
except to the extent that using options and futures contracts or
purchasing or selling securities on a when-issued or delayed delivery
basis may be deemed to constitute issuing a senior security.

3. The Fund will not lend money to other persons, except through
purchasing debt obligations, lending portfolio securities and entering
into repurchase agreements.

4. The Fund will invest no more than 25% of the value of its total
assets in securities of issuers in any one industry. For purposes of
this restriction, the term industry will be deemed to include the
government of any country other than the United States, but not the U.S.
government.

5. The Fund will not purchase or sell real estate or real estate limited
partnership interests, except that the Fund may purchase and sell
securities of companies that deal in real estate or interests in real
estate.

6. The Fund will not purchase or sell commodities or commodity
contracts, except futures contracts and related options and other
similar contracts.

7. The Fund will not act as an underwriter of securities, except that
the Fund may acquire securities under circumstances in which, if the
securities were sold, the Fund might be deemed to be an underwriter for
purposes of the Securities Act of 1933, as amended.

Each Fund may make commitments more restrictive than the
restrictions listed above so as to permit the sale of the Fund's shares
in certain states. Should a Fund determine that a commitment is no
longer in the best interests of the Fund and its shareholders, the Fund
will revoke the commitment by terminating the sale of the Fund's shares
in the state involved.

For purposes of a Fund's concentration policy, each Fund intends to
comply with the SEC staff position that securities issued or guaranteed
as to principal and interest by any single foreign government are
considered to be securities of issuers in the same industry.

Any investment restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an
excess over the applicable percentage occurs immediately after an
acquisition of securities or utilization of assets and such excess
results therefrom.

DIVERSIFICATION
Each Fund intends to operate as a "diversified" management
investment company, as defined in the 1940 Act, which means that at
least 75% of its total assets must be represented by cash and cash items
(including receivables), U.S. government securities, securities of other
investment companies, and other securities for the purposes of this
calculation limited in respect of any one issuer to an amount not
greater in value than 5% of the value of total assets of such Fund and
to not more than 10% of the outstanding voting securities of such
issuer.

Supplemental information is set out below concerning certain of the
securities and other instruments in which the Funds may invest, the
investment techniques and strategies that the Funds may utilize and
certain risks involved with those investments, techniques and
strategies.

GOVERNMENT SECURITIES
Securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities ("Government Securities") in which the
Funds may invest include debt obligations of varying maturities issued
by the U.S. Treasury or issued or guaranteed by an agency or
instrumentality of the U.S. government, including the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the
United States, Small Business Administration, Government National
Mortgage Association, General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation, Federal Intermediate Credit
Banks, Federal Land Banks, Federal National Mortgage Association,
Maritime Administration, Tennessee Valley Authority, District of
Columbia Armory Board, Student Loan Marketing Association and Resolution
Trust Corporation. Direct obligations of the United States Treasury
include a variety of securities that differ in their interest rates,
maturities and dates of issuance. Because the U.S. government is not
obligated by law to provide support to an instrumentality that it
sponsors, each Fund invests in obligations issued by an instrumentality
of the U.S. government only if Delaware Management Company, Inc. (the
"Manager") or Voyageur Asset Management LLC (the "Sub-Adviser" in the
case of Growth Stock Fund) determines that the instrumentality's credit
risk does not make its securities unsuitable for investment by a Fund.

REPURCHASE AGREEMENTS
The Funds may invest in repurchase agreements. Repurchase
agreements are instruments under which securities are purchased from a
bank or securities dealer with an agreement by the seller to repurchase
the securities. Under a repurchase agreement, the purchaser acquires
ownership of the security but the seller agrees, at the time of sale, to
repurchase it at a mutually agreed-upon time and price. The Funds will
take custody of the collateral under repurchase agreements. Repurchase
agreements may be construed to be collateralized loans by the purchaser
to the seller secured by the securities transferred. The resale price is
in excess of the purchase price and reflects an agreed-upon market rate
unrelated to the coupon rate or maturity of the purchase security. Such
transactions afford an opportunity for the Funds to invest temporarily
available cash. The Funds' risk is limited to the seller's ability to
buy the security back at the agreed-upon sum at the agreed-upon time,
since the repurchase agreement is secured by the underlying obligation.
Should such an issuer default, the investment managers believe that,
barring extraordinary circumstances, the Funds will be entitled to sell
the underlying securities or otherwise receive adequate protection for
its interest in such securities, although there could be a delay in
recovery. The Funds consider the creditworthiness of the bank or dealer
from whom it purchases repurchase agreements. The Funds will monitor
such transactions to assure that the value of the underlying securities
subject to repurchase agreements is at least equal to the repurchase
price. The underlying securities will be limited to those described
above.

The funds in the Delaware Investments family have obtained an
exemption from the joint-transaction prohibitions of Section 17(d) of
the Investment Company Act of 1940 to allow the such Group funds jointly
to invest cash balances. Each Fund of the Mutual Funds III, Inc. may
invest cash balances in a joint repurchase agreement in accordance with
the terms of the Order and subject generally to the conditions described
above.

RESTRICTED AND ILLIQUID SECURITIES
Most of the privately placed securities acquired by a Fund will be
eligible for resale by the Fund without registration pursuant to Rule
144A ("Rule 144A Securities") under the Securities Act of 1933. While
maintaining oversight, the Board of Directors has delegated to the
Manager or Sub-Adviser the day-to-day function of determining whether
individual Rule 144A Securities are liquid for purposes of a Fund's 10%
limitation on investments in illiquid securities. The Board has
instructed the Manager or Sub-Adviser to consider the following factors
in determining the liquidity of a Rule 144A Security: (i) the frequency
of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the
number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; and (iv) the nature of the security and
the nature of the marketplace trades (e.g., the time needed to dispose
of the security, the method of soliciting offers, and the mechanics of
transfer).

Investing in Rule 144A Securities could have the effect of
increasing the level of a Fund's illiquidity to the extent that
qualified institutional buyers become, for a period of time,
uninterested in purchasing these securities. If the Manager determines
that a Rule 144A Security which was previously determined to be liquid
is no longer liquid and, as a result, a Fund's holdings of illiquid
securities exceed the Fund's 10% limit on investment in such securities,
the Manager will determine what action shall be taken to ensure that the
Fund continues to adhere to such limitation.

INVESTMENT TECHNIQUES AND STRATEGIES
Each Fund may purchase put and call options and engage in the
writing of covered call options and secured put options, and employ a
variety of other investment techniques. Specifically, each Fund may
engage in the purchase and sale of stock index future contracts,
interest rate futures contracts, and options on such futures, all as
described more fully below. Such investment policies and techniques may
involve a greater degree of risk than those inherent in more
conservative investment approaches.

The Funds will engage in such transactions only to hedge existing
positions. They will not engage in such transactions for the purposes of
speculation or leverage.

The Funds will not engage in such options or futures transactions
unless they receive any necessary regulatory approvals permitting them
to engage in such transactions.

Options on Securities. To hedge against adverse market shifts, a
Fund may purchase put and call options on securities held in its
portfolio. In addition, a Fund may seek to increase its income in an
amount designed to meet operating expenses or may hedge a portion of its
portfolio investments through writing (that is, selling) "covered" put
and call options. A put option provides its purchaser with the right to
compel the writer of the option to purchase from the option holder an
underlying security at a specified price at any time during or at the
end of the option period. In contrast, a call option gives the purchaser
the right to buy the underlying security covered by the option from the
writer of the option at the stated exercise price. A covered call option
contemplates that, for so long as the Fund is obligated as the writer of
the option, it will own (1) the underlying securities subject to the
option or (2) securities convertible into, or exchangeable without the
payment of any consideration for, the securities subject to the option.
The value of the underlying securities on which covered call options
will be written at any one time by a Fund will not exceed 25% of the
Fund's total assets. A Fund will be considered "covered" with respect to
a put option it writes if, so long as it is obligated as the writer of a
put option, it deposits and maintains with its custodian cash, U.S.
government securities or other liquid high-grade debt obligations having
a value equal to or greater than the exercise price of the option.

Each Fund may purchase options on securities that are listed on
securities exchanges or, with respect to Aggressive Growth Fund, that
are traded over-the-counter. As the holder of a put option, a Fund has
the right to sell the securities underlying the option and as the holder
of a call option, a Fund has the right to purchase the securities
underlying the option, in each case at the option's exercise price at
any time prior to, or on, the option's expiration date. A Fund may
choose to exercise the options it holds, permit them to expire or
terminate them prior to their expiration by entering into closing sale
transactions. In entering into a closing sale transaction, a Fund would
sell an option of the same series as the one it has purchased.

A Fund receives a premium when it writes call options, which
increases the Fund's return on the underlying security in the event the
option expires unexercised or is closed out at a profit. By writing a
call, a Fund limits its opportunity to profit from an increase in the
market value of the underlying security above the exercise price of the
option for as long as the Fund's obligation as writer of the option
continues. A Fund receives a premium when it writes put options, which
increases such Fund's return on the underlying security in the event the
option expires unexercised or is closed out at a profit. By writing a
put, a Fund limits its opportunity to profit from an increase in the
market value of the underlying security above the exercise price of the
option for as long as the Fund's obligation as writer of the option
continues. Thus, in some periods, a Fund will receive less total return
and in other periods greater total return from its hedged positions than
it would have received from its underlying securities if unhedged.

In purchasing a put option, a Fund seeks to benefit from a decline
in the market price of the underlying security, whereas in purchasing a
call option, a Fund seeks to benefit from an increase in the market
price of the underlying security. If an option purchased is not sold or
exercised when it has remaining value, or if the market price of the
underlying security remains equal to or greater than the exercise price,
in the case of a put, or remains equal to or below the exercise price,
in the case of a call, during the life of the option, the Fund will lose
its investment in the option. For the purchase of an option to be
profitable, the market price of the underlying security must decline
sufficiently below the exercise price, in the case of a put, and must
increase sufficiently above the exercise price, in the case of a call,
to cover the premium and transaction costs. Because option premiums paid
by the Fund are small in relation to the market value of the investments
underlying the options, buying options can result in large amounts of
leverage. The leverage offered by trading in options could cause the
Fund's net asset value to be subject to more frequent and wider
fluctuations than would be the case if the Fund did not invest in
options.

Over-the-Counter ("OTC") Options. Aggressive Growth Fund may
purchase OTC options. OTC options differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with
a clearing corporation, and there is a risk of non-performance by the
dealer. However, the premium is paid in advance by the dealer. OTC
options are available for a greater variety of securities and foreign
currencies, and in a wider range of expiration dates and exercise prices
than exchange-traded options. Since there is no exchange, pricing is
normally done by reference to information from a market maker, which
information is carefully monitored or caused to be monitored by the
Manager and verified in appropriate cases.

A writer or purchaser of a put or call option can terminate it
voluntarily only by entering into a closing transaction. In the case of
OTC options, there can be no assurance that a continuous liquid
secondary market will exist for any particular option at any specific
time. Consequently, the Fund may be able to realize the value of an OTC
option it has purchased only by exercising it or entering into a closing
sale transaction with the dealer that issued it. Similarly, when the
Fund writes an OTC option, it generally can close out that option prior
to its expiration only by entering into a closing purchase transaction
with the dealer to which it originally wrote the option. If a covered
call option writer cannot effect a closing transaction, it cannot sell
the underlying security or foreign currency until the option expires or
the option is exercised. Therefore, the writer of a covered OTC call
option may not be able to sell an underlying security even though it
might otherwise be advantageous to do so. Likewise, the writer of a
covered OTC put option may be unable to sell the securities pledged to
secure the put for other investment purposes while it is obligated as a
put writer. Similarly, a purchaser of an OTC put or call option might
also find it difficult to terminate its position on a timely basis in
the absence of a secondary market.

A Fund may purchase and write over-the-counter ("OTC") put and call
options in negotiated transactions. The staff of the Securities and
Exchange Commission has previously taken the position that the value of
purchased OTC options and the assets used as "cover" for written OTC
options are illiquid securities and, as such, are to be included in the
calculation of a Fund's 15% limitation on illiquid securities. However,
the staff has eased its position somewhat in certain limited
circumstances. A Fund will attempt to enter into contracts with certain
dealers with which it writes OTC options. Each such contract will
provide that the Fund has the absolute right to repurchase the options
it writes at any time at a repurchase price which represents the fair
market value, as determined in good faith through negotiation between
the parties, but which in no event will exceed a price determined
pursuant to a formula contained in the contract. Although the specific
details of such formula may vary among contracts, the formula will
generally be based upon a multiple of the premium received by the Fund
for writing the option, plus the amount, if any, of the option's
intrinsic value. The formula will also include a factor to account for
the difference between the price of the security and the strike price of
the option. If such a contract is entered into, the Fund will count as
illiquid only the initial formula price minus the option's intrinsic
value.

A Fund will enter into such contracts only with primary U.S.
government securities dealers recognized by the Federal Reserve Bank of
New York. Moreover, such primary dealers will be subject to the same
standards as are imposed upon dealers with which the Fund enters into
repurchase agreements.

Securities Index Options. In seeking to hedge all or a portion of
its investment, a Fund may purchase and write put and call options on
securities indexes listed on securities exchanges, which indexes include
securities held in the Fund's portfolio.

A securities index measures the movement of a certain group of
stocks or debt securities by assigning relative values to the securities
included in the index. Options on securities indexes are generally
similar to options on specific securities. Unlike options on specific
securities, however, options on securities indexes do not involve the
delivery of an underlying security; the option in the case of an option
on a stock index represents the holder's right to obtain from the writer
in cash a fixed multiple of the amount by which the exercise price
exceeds (in the case of a put) or is less than (in the case of a call)
the closing value of the underlying stock index on the exercise date.

When a Fund writes an option on a securities index, it will
establish a segregated account with its custodian, or a designated sub-
custodian, in which the Fund will deposit cash, U.S. government
securities or other liquid high grade debt obligations in an amount
equal to the market value of the option, and will maintain the account
while the option is open.

Securities index options are subject to position and exercise
limits and other regulations imposed by the exchange on which they are
traded. If a Fund writes a securities index option, it may terminate its
obligation by effecting a closing purchase transaction, which is
accomplished by purchasing an option of the same series as the option
previously written. The ability of a Fund to engage in closing purchase
transactions with respect to securities index options depends on the
existence of a liquid secondary market. Although a Fund generally
purchases or writes securities index options only if a liquid secondary
market for the options purchased or sold appears to exist, no such
secondary market may exist, or the market may cease to exist at some
future date, for some options. No assurance can be given that a closing
purchase transaction can be effected when the Fund desires to engage in
such a transaction.

Risks Relating to Purchase and Sale of Options on Stock Indexes.
Purchase and sale of options on stock indexes by a Fund are subject to
certain risks that are not present with options on securities. Because
the effectiveness of purchasing or writing stock index options as a
hedging technique depends upon the extent to which price movements in
the Fund's portfolio correlate with price movements in the level of the
index rather than the price of a particular stock, whether the Fund will
realize a gain or loss on the purchase or writing of an option on an
index depends upon movements in the level of stock prices in the stock
market generally or, in the case of certain indexes, in an industry or
market segment, rather than movements in the price of a particular
stock. Accordingly, successful use by a Fund of options on indexes will
be subject to the ability of the Manager or the Sub-Adviser, as the case
may be, to correctly predict movements in the direction of the stock
market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual
stocks. In the event a Fund's adviser is unsuccessful in predicting the
movements of an index, such Fund could be in a worse position than had
no hedge been attempted.

Index prices may be distorted if trading of certain stocks included
in the index is interrupted. Trading in index options also may be
interrupted in certain circumstances, such as if trading were halted in
a substantial number of stocks included in the index. If this occurred,
a Fund would not be able to close out options which it had purchased or
written and, if restrictions on exercise were imposed, might be unable
to exercise an option it holds, which could result in substantial losses
to such Fund. However, it will be each Fund's policy to purchase or
write options only on indexes which include a sufficient number of
stocks so that the likelihood of a trading halt in the index is
minimized.

Short Sales Against the Box. Each Fund may sell securities "short
against the box." Whereas a short sale is the sale of a security the
Fund does not own, a short sale is "against the box" if at all times
during which the short position is open, the Fund owns at least an equal
amount of the securities or securities convertible into, or exchangeable
without further consideration for, securities of the same issue as the
securities sold short. Short sales against the box are typically used by
sophisticated investors to defer recognition of capital gains or losses.

Futures Contracts and Options on Futures Contracts. Each Fund may
purchase and sell stock index futures contracts. The purpose of the
acquisition or sale of a futures contract by a Fund is to hedge against
fluctuations in the value of its portfolio without actually buying or
selling securities. The futures contracts in which a Fund may invest
have been developed by and are traded on national commodity exchanges.
Stock index futures contracts may be based upon broad-based stock
indexes such as the S&P 500 or upon narrow-based stock indexes. A buyer
entering into a stock index futures contract will, on a specified future
date, pay or receive a final cash payment equal to the difference
between the actual value of the stock index on the last day of the
contract and the value of the stock index established by the contract.
The Fund may assume both "long" and "short" positions with respect to
futures contracts. A long position involves entering into a futures
contract to buy a commodity, whereas a short position involves entering
into a futures contract to sell a commodity.

The purpose of trading futures contracts is to protect a Fund from
fluctuations in value of its investment securities without necessarily
buying or selling the securities. Because the value of a Fund's
investment securities will exceed the value of the futures contracts
sold by a Fund, an increase in the value of the futures contracts could
only mitigate, but not totally offset, the decline in the value of the
Fund's assets. No consideration is paid or received by a Fund upon
trading a futures contract. Upon trading a futures contract, a Fund will
be required to deposit in a segregated account with its custodian, or
designated sub-custodian, an amount of cash, short-term Government
Securities or other U.S. dollar-denominated, high-grade, short-term
money market instruments equal to approximately 1% to 10% of the
contract amount (this amount is subject to change by the exchange on
which the contract is traded and brokers may charge a higher amount).
This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract that is returned
to the Fund upon termination of the futures contract, assuming that all
contractual obligations have been satisfied; the broker will have access
to amounts in the margin account if the Fund fails to meet its
contractual obligations. Subsequent payments, known as "variation
margin," to and from the broker, will be made daily as the price of the
currency or securities underlying the futures contract fluctuates,
making the long and short positions in the futures contract more or less
valuable, a process known as "marking-to-market." At any time prior to
the expiration of a futures contract, a Fund may elect to close a
position by taking an opposite position, which will operate to terminate
the Fund's existing position in the contract.

Each short position in a futures or options contract entered into
by a Fund is secured by the Fund's ownership of underlying securities.
The Funds do not use leverage when they enter into long futures or
options contracts; each Fund places in a segregated account with its
custodian, or designated sub-custodian, with respect to each of its long
positions, cash or money market instruments having a value equal to the
underlying commodity value of the contract.

The Funds may trade stock index futures contracts to the extent
permitted under rules and interpretations adopted by the Commodity
Futures Trading Commission (the "CFTC"). U.S. futures contracts have
been designed by exchanges that have been designated as "contract
markets" by the CFTC, and must be executed through a futures commission
merchant, or brokerage firm, that is a member of the relevant contract
market. Futures contracts trade on a number of contract markets, and,
through their clearing corporations, the exchanges guarantee performance
of the contracts as between the clearing members of the exchange.

The Funds intend to comply with CFTC regulations and avoid
"commodity pool operator" status. These regulations require that a Fund
use futures and options positions (a) for "bona fide hedging purposes"
(as defined in the regulations) or (b) for other purposes so long as
aggregate initial margins and premiums required in connection with non-
hedging positions do not exceed 5% of the liquidation value of the
Fund's portfolio. The Funds currently do not intend to engage in
transactions in futures contracts or options thereon for speculation,
but will engage in such transactions only for bona fide hedging
purposes.

Risks of Transactions in Futures Contracts and Options on Futures
Contracts. Holding Risks in Futures Contracts Transactions. There are
several risks in using stock index futures contracts as hedging devices.
First, all participants in the futures market are subject to initial
margin and variation margin requirements. Rather than making additional
variation margin payments, investors may close the contracts through
offsetting transactions which could distort the normal relationship
between the index or security and the futures market. Second, the margin
requirements in the futures market are lower than margin requirements in
the securities market, and as a result the futures market may attract
more speculators than does the securities market. Increased
participation by speculators in the futures market may also cause
temporary price distortions. Because of possible price distortion in the
futures market and because of imperfect correlation between movements in
stock indexes or securities and movements in the prices of futures
contracts, even a correct forecast of general market trends may not
result in a successful hedging transaction over a very short period.

Another risk arises because of imperfect correlation between
movements in the value of the futures contracts and movements in the
value of securities subject to the hedge. With respect to stock index
futures contracts, the risk of imperfect correlation increases as the
composition of a Fund's portfolio diverges from the securities included
in the applicable stock index. It is possible that a Fund might sell
stock index futures contracts to hedge its portfolio against a decline
in the market, only to have the market advance and the value of
securities held in the Fund's portfolio decline. If this occurred, the
Fund would lose money on the contracts and also experience a decline in
the value of its portfolio securities. While this could occur, the
Manager and the Sub-Adviser believe that over time the value of a Fund's
portfolio will tend to move in the same direction as the market indexes
and will attempt to reduce this risk, to the extent possible, by
entering into futures contracts on indexes whose movements they believe
will have a significant correlation with movements in the value of the
Fund's portfolio securities sought to be hedged.

Successful use of futures contracts by a Fund is subject to the
ability of the Manager or the Sub-Adviser, as the case may be, to
predict correctly movements in the direction of interest rates or the
market. If a Fund has hedged against the possibility of a decline in the
value of the stocks held in its portfolio or an increase in interest
rates adversely affecting the value of fixed-income securities held in
its portfolio and stock prices increase or interest rates decrease
instead, the Fund would lose part or all of the benefit of the increased
value of its security which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such
situations, if a Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which
reflect the rising market or decline in interest rates. A Fund may have
to sell securities at a time when it may be disadvantageous to do so.

Liquidity of Futures Contracts. A Fund may elect to close some or
all of its contracts prior to expiration. The purpose of making such a
move would be to reduce or eliminate the hedge position held by the
Fund. A Fund may close its positions by taking opposite positions. Final
determinations of variation margin are then made, additional cash as
required is paid by or to the Fund, and the Fund realizes a loss or a
gain.

Positions in futures contracts may be closed only on an exchange or
board of trade providing a secondary market for such futures contracts.
Although the Funds intend to enter into futures contracts only on
exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a liquid secondary market
will exist for any particular contract at any particular time.

In addition, most domestic futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices
during a single trading day. The daily limit establishes the maximum
amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular contract,
no trades may be made that day at a price beyond that limit. The daily
limit governs only price movement during a particular trading day and
therefore does not limit potential losses because the limit may prevent
the liquidation of unfavorable positions. It is possible that futures
contract prices could move to the daily limit for several consecutive
trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and subjecting some futures traders to
substantial losses. In such event, it will not be possible to close a
futures position and, in the event of adverse price movements, a Fund
would be required to make daily cash payments of variation margin. In
such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may partially or completely offset
losses on the futures contract. However, as described above, there is no
guarantee that the price of the securities being hedged will, in fact,
correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.

Risks and Special Considerations of Options on Futures Contracts.
The use of options on interest rate and stock index futures contracts
also involves additional risk. Compared to the purchase or sale of
futures contracts, the purchase of call or put options on futures
contracts involves less potential risk to a Fund because the maximum
amount at risk is the premium paid for the options (plus transactions
costs). The writing of a call option on a futures contract generates a
premium which may partially offset a decline in the value of a Fund's
portfolio assets. By writing a call option, a Fund becomes obligated to
sell a futures contract, which may have a value higher than the exercise
price. Conversely, the writing of a put option on a futures contract
generates a premium, but the Fund becomes obligated to purchase a
futures contract, which may have a value lower than the exercise price.
Thus, the loss incurred by a Fund in writing options on futures
contracts may exceed the amount of the premium received.

The effective use of options strategies is dependent, among other
things, on a Fund's ability to terminate options positions at a time
when the Manager or the Sub-Adviser deems it desirable to do so.
Although a Fund will enter into an option position only if the Manager,
or the Sub-Adviser, as the case may be, believes that a liquid secondary
market exists for such option, there is no assurance that the Fund will
be able to effect closing transactions at any particular time or at an
acceptable price. The Funds' transactions involving options on futures
contracts will be conducted only on recognized exchanges.

A Fund's purchase or sale of put or call options on futures
contracts will be based upon predictions as to anticipated interest
rates or market trends by the Manager or the Sub-Adviser, as the case
may be, which could prove to be inaccurate. Even if the expectations of
the Manager or Sub-Adviser are correct, there may be an imperfect
correlation between the change in the value of the options and of the
Fund's portfolio securities.

Investments in futures contracts and related options by their
nature tend to be more short-term than other equity investments made by
the Funds. Each Fund's ability to make such investments, therefore, may
result in an increase in such Fund's portfolio activity and thereby may
result in the payment of additional transaction costs.

The Internal Revenue Code of 1986, as amended (the "Code"), forbids
each Fund from earning more than 30% of its gross income from the sale
or other disposition of certain investments, including futures contracts
and options thereon, which are owned for less than three months. The
likelihood of violating this 30% test is increased by the amount of
investing a Fund does in futures contracts and related options.
Additionally, the Code requires each Fund to diversify its investment
holdings. The Internal Revenue Service position regarding the treatment
of futures contracts and related options for diversification purposes is
not clear, and the extent to which a Fund may engage in these
transactions may be limited by this requirement. The Code also provides
that, with respect to certain futures contracts and options held by a
Fund at the end of its taxable year, unrealized gain or loss on such
contracts may have to be recognized for tax purposes under a special
system within the Code. The actual gain or loss recognized by the Fund
in an eventual disposition of such contract, however, will be adjusted
by the amount of the gain or loss recognized earlier under the Code's
system. See Accounting and Tax Issues and Distributions and Taxes. For
more information on stock index futures contracts and related options,
see Appendix B.

CREDIT QUALITY
Any bond in which Aggressive Growth Fund and Growth Stock Fund
invest will be rated investment grade. As has been the industry
practice, this determination of credit quality is made at the time a
Fund acquires the bond. However, because it is possible that subsequent
downgrades could occur, if a bond held by a Fund is later downgraded,
the Manager or the Sub-Adviser, as the case may be, under the
supervision of the Board of Directors, will consider whether it is in
the best interest of the Fund's shareholders to hold or to dispose of
the bond. Among the criteria that may be considered by the Manager or
the Sub-Adviser, as the case may be, and the Board are the probability
that the bonds will be able to make scheduled interest and principal
payments in the future, the extent to which any devaluation of the bond
has already been reflected in the Fund's net asset value, and the total
percentage, if any, of bonds currently rated below investment grade held
by the Fund. In no event, however, will a Fund invest more than 5% of
its net assets in bonds rated lower than investment grade.

Non-investment grade securities have moderate to poor protection of
principal and interest payments and have speculative characteristics.
They involve greater risk of default or price declines due to changes in
the issuer's creditworthiness than investment-grade debt securities.
Because the market for lower-rated securities may be thinner and less
active than for higher-rated securities, there may be market price
volatility for these securities and limited liquidity in the resale
market. Market prices for these securities may decline significantly in
periods of general economic difficulty or rising interest rates.

ACCOUNTING AND TAX ISSUES

When a Fund writes a call option, an amount equal to the premium
received by it is included in the section of the Fund's assets and
liabilities as an asset and as an equivalent liability. The amount of
the liability is subsequently "marked to market" to reflect the current
market value of the option written. The current market value of a
written option is the last sale price on the principal Exchange on which
such option is traded or, in the absence of a sale, the mean between the
last bid and asked prices. If an option which a Fund has written expires
on its stipulated expiration date, the Fund reports a realized gain. If
a Fund enters into a closing purchase transaction with respect to an
option which the Fund has written, the Fund realizes a gain (or loss if
the cost of the closing transaction exceeds the premium received when
the option was sold) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. Any such gain or loss is a short-term capital gain or loss
for federal income tax purposes. If a call option which a Fund has
written is exercised, the Fund realizes a capital gain or loss (long-
term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the proceeds from
such sale are increased by the premium originally received.

OTHER TAX REQUIREMENTS

Aggressive Growth Fund and Growth Stock Fund have qualified, and
intend to continue to qualify, as regulated investment companies under
Subchapter M of the Code. Tax-Efficient Equity Fund intends to qualify
as a regulated investment company under Subchapter M of the Code. As
such, a Fund will not be subject to federal income tax, or to any excise
tax, to the extent its earnings are distributed as provided in the Code
and it satisfies other requirements relating to the sources of its
income and diversification of its assets.

In order to qualify as a regulated investment company for federal
income tax purposes, each Fund must meet certain specific requirements,
including:

(i) A Fund must maintain a diversified portfolio of securities, wherein
no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of that Fund's
total assets, and, with respect to 50% of that Fund's total assets, no
investment (other than cash and cash items, U.S. government securities
and securities of other regulated investment companies) can exceed 5% of
that Fund's total assets;

(ii) A Fund must derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, and gains from the
sale or disposition of stock and securities or foreign currencies, or
other income derived with respect to its business of investing in such
stock, securities, or currencies;

(iii) A Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of
its fiscal years, and

(iv) A Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other
assets that have been held by the Fund for less than three months
("short-short income"). The Taxpayer Relief Act of 1997 (the "1997 Act")
repealed the 30% short-short income test for tax years of regulated
investment companies beginning after August 5, 1997; however, this rule
may have continuing effect in some states for purposes of classifying
the Fund as a regulated investment company.

The Code requires a Fund to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital
gain net income earned during the 12 month period ending October 31 (in
addition to amounts from the prior year that were neither distributed
nor taxed to such Fund) to shareholders by December 31 of each year in
order to avoid federal excise taxes. The Funds intend as a matter of
policy to declare and pay sufficient dividends in December or January
(which are treated by shareholders as received in December) but does not
guarantee and can give no assurances that its distributions will be
sufficient to eliminate all such taxes.

The straddle rules of Section 1092 may apply. Generally, the
straddle provisions require the deferral of losses to the extent of
unrecognized gains related to the offsetting positions in the straddle.
Excess losses, if any, can be recognized in the year of loss. Deferred
losses will be carried forward and recognized in the year that
unrealized losses exceed unrealized gains or when the offsetting
position is sold.

The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions."
Under these rules, the Fund must recognize gain (but not loss) on any
constructive sale of an appreciated financial position in stock, a
partnership interest or certain debt instruments. The Fund will
generally be treated as making a constructive sale when it: 1) enters
into a short sale on the same or substantially identical property; 2)
enters into an offsetting notional principal contract; or 3) enters into
a futures or forward contract to deliver the same or substantially
identical property. Other transactions (including certain financial
instruments called collars) will be treated as constructive sales as
provided in Treasury regulations to be published. There are also certain
exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.

INVESTMENT IN FOREIGN CURRENCIES AND FOREIGN SECURITIES--The Funds
are authorized to invest certain limited amounts in foreign securities.
Such investments, if made, will have the following additional tax
consequences to each Fund:

Under the Code, gains or losses attributable to fluctuations in
foreign currency exchange rates which occur between the time a Fund
accrues income (including dividends), or accrues expenses which are
denominated in a foreign currency, and the time a Fund actually collects
such income or pays such expenses generally are treated as ordinary
income or loss. Similarly, on the disposition of debt securities
denominated in a foreign currency and on the disposition of certain
options, futures, forward contracts, gain or loss attributable to
fluctuations in the value of foreign currency between the date of
acquisition of the security or contract and the date of its disposition
are also treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "Section 988" gains or losses, may
increase or decrease the amount of a Fund's net investment company
taxable income, which, in turn, will affect the amount of income to be
distributed to you by a Fund.

If a Fund's Section 988 losses exceed a Fund's other investment
company taxable income during a taxable year, a Fund generally will not
be able to make ordinary dividend distributions to you for that year, or
distributions made before the losses were realized will be
recharacterized as return of capital distributions for federal income
tax purposes, rather than as an ordinary dividend or capital gain
distribution. If a distribution is treated as a return of capital, your
tax basis in your Fund shares will be reduced by a like amount (to the
extent of such basis), and any excess of the distribution over your tax
basis in your Fund shares will be treated as capital gain to you.

The 1997 Act generally requires that foreign income be translated
into U.S. dollars at the average exchange rate for the tax year in which
the transactions are conducted. Certain exceptions apply to taxes paid
more than two years after the taxable year to which they relate. This
new law may require a Fund to track and record adjustments to foreign
taxes paid on foreign securities in which it invests. Under a Fund's
current reporting procedure, foreign security transactions are recorded
generally at the time of each transaction using the foreign currency
spot rate available for the date of each transaction. Under the new law,
a Fund will be required to record at fiscal year end (and at calendar
year end for excise tax purposes) an adjustment that reflects the
difference between the spot rates recorded for each transaction and the
year-end average exchange rate for all of a Fund's foreign securities
transactions. There is a possibility that the mutual fund industry will
be given relief from this new provision, in which case no year-end
adjustments will be required.

The Funds may be subject to foreign withholding taxes on income
from certain of its foreign securities. If more than 50% of the total
assets of a Fund at the end of its fiscal year are invested in
securities of foreign corporations, a Fund may elect to pass-through to
you your pro rata share of foreign taxes paid by a Fund. If this
election is made, you will be: (i) required to include in your gross
income your pro rata share of foreign source income (including any
foreign taxes paid by a Fund); and (ii) entitled to either deduct your
share of such foreign taxes in computing your taxable income or to claim
a credit for such taxes against your U.S. income tax, subject to certain
limitations under the Code. You will be informed by a Fund at the end of
each calendar year regarding the availability of any such foreign tax
credits and the amount of foreign source income (including any foreign
taxes paid by a Fund). If a Fund elects to pass-through to you the
foreign income taxes that it has paid, you will be informed at the end
of the calendar year of the amount of foreign taxes paid and foreign
source income that must be included on your federal income tax return.
If a Fund invests 50% or less of its total assets in securities of
foreign corporations, it will not be entitled to pass-through to you
your pro-rata shares of foreign taxes paid by a Fund. In this case,
these taxes will be taken as a deduction by a Fund, and the income
reported to you will be the net amount after these deductions. The 1997
Act also simplifies the procedures by which investors in funds that
invest in foreign securities can claim tax credits on their individual
income tax returns for the foreign taxes paid by a Fund. These
provisions will allow investors who pay foreign taxes of $300 or less on
a single return or $600 or less on a joint return during any year (all
of which must be reported on IRS Form 1099-DIV from a Fund to the
investor) to claim a tax credit against their U.S. federal income tax
for the amount of foreign taxes paid by a Fund. This process will allow
you, if you qualify, to bypass the burdensome and detailed reporting
requirements on the foreign tax credit schedule (Form 1116) and report
your foreign taxes paid directly on page 2 of Form 1040. You should note
that this simplified procedure will not be available until calendar year
1998.

INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANY SECURITIES--The
Funds may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies
("PFICs"). In general, a foreign corporation is classified as a PFIC if
at least one-half of its assets constitute investment-type assets or 75%
or more of its gross income is investment-type income. If a Fund
receives an "excess distribution" with respect to PFIC stock, the Fund
itself may be subject to U.S. federal income tax on a portion of the
distribution, whether or not the corresponding income is distributed by
a Fund to you. In general, under the PFIC rules, an excess distribution
is treated as having been realized ratably over the period during which
a Fund held the PFIC shares. A Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated to prior
Fund taxable years, and an interest factor will be added to the tax, as
if the tax had been payable in such prior taxable years. In this case,
you would not be permitted to claim a credit on your own tax return for
the tax paid by a Fund. Certain distributions from a PFIC as well as
gain from the sale of PFIC shares are treated as excess distributions.
Excess distributions are characterized as ordinary income even though,
absent application of the PFIC rules, certain distribution might have
been classified as capital gain. This may have the effect of increasing
Fund distributions to you that are treated as ordinary dividends rather
than long-term capital gain dividends.

A Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in
some circumstances, a Fund generally would be required to include in its
gross income its share of the earnings of a PFIC on a current basis,
regardless of whether distributions are received from the PFIC during
such period. If this election were made, the special rules, discussed
above, relating to the taxation of excess distributions, would not
apply. In addition, the 1997 Act provides for another election that
would involve marking-to-market the Fund's PFIC shares at the end of
each taxable year (and on certain other dates as prescribed in the
Code), with the result that unrealized gains would be treated as though
they were realized. The Fund would also be allowed an ordinary deduction
for the excess, if any, of the adjusted basis of its investment in the
PFIC stock over its fair market value at the end of the taxable year.
This deduction would be limited to the amount of any net mark-to-market
gains previously included with respect to that particular PFIC security.
If a Fund were to make this second PFIC election, tax at the Fund level
under the PFIC rules would generally be eliminated.

The application of the PFIC rules may affect, among other things,
the amount of tax payable by a Fund (if any), the amounts distributable
to you by a Fund, the time at which these distributions must be made,
and whether these distributions will be classified as ordinary income or
capital gain distributions to you.

You should be aware that it is not always possible at the time
shares of a foreign corporation are acquired to ascertain that the
foreign corporation is a PFIC, and that there is always a possibility
that a foreign corporation will become a PFIC after a Fund acquires
shares in that corporation. While a Fund will generally seek to avoid
investing in PFIC shares to avoid the tax consequences detailed above,
there are no guarantees that it will do so and it reserves the right to
make such investments as a matter of its fundamental investment policy.

Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should
be aware that any foreign exchange losses realized by a Fund, including
any losses realized on the sale of foreign debt securities, are
generally treated as ordinary losses for federal income tax purposes.
This treatment could increase or reduce a Fund's income available for
distribution to you, and may cause some or all of a Fund's previously
distributed income to be classified as a return of capital.

PERFORMANCE INFORMATION

From time to time, each Fund may state each of its Classes' total
return in advertisements and other types of literature. Any statement of
total return performance data for a Class will be accompanied by
information on the average annual compounded rate of return for that
Class over, as relevant, the most recent one-, five- and ten-year (or
life-of-fund, if applicable) periods. Each Fund may also advertise
aggregate and average total return information for its Classes over
additional periods of time.

In presenting performance information for Class A Shares, the
Limited CDSC applicable to only certain redemptions of those shares will
not be deducted from any computation of total return. See the
Prospectuses for the Fund Classes for a description of the Limited CDSC
and the limited instances in which it applies. All references to a CDSC
in this Performance Information section will apply to Class B Shares or
Class C Shares of the Funds.

Total return performance for each Class will be computed by adding
all reinvested income and realized securities profits distributions plus
the change in net asset value during a specific period and dividing by
the offering price at the beginning of the period. It will not reflect
any income taxes payable by shareholders on the reinvested distributions
included in the calculation. Because securities prices fluctuate, past
performance should not be considered as a representation of the results
which may be realized from an investment in either Fund in the future.

The average annual total rate of return for each Class is based on
a hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be
used for the actual computations:

n
P(1 + T) = ERV

Where: P = a hypothetical initial purchase order of $1,000 from which,
in the case of only Class A Shares, the maximum front-end
sales charge is deducted;

T = average annual total return;

n = number of years; and

ERV = redeemable value of the hypothetical $1,000 purchase at the
end of the period after the deduction of the applicable CDSC,
if any, with respect to Class B Shares and Class C Shares.

Aggregate or cumulative total return is calculated in a similar
manner, except that the results are not annualized. Each calculation
assumes the maximum front-end sales charge, if any, is deducted from the
initial $1,000 investment at the time it is made with respect to Class A
Shares and that all distributions are reinvested at net asset value,
and, with respect to Class B Shares and Class C Shares, reflects the
deduction of the CDSC that would be applicable upon complete redemption
of such shares. In addition, each Fund may present total return
information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.

The performance of Class A Shares, Class B Shares, Class C Shares
and Institutional Class of Aggressive Growth Fund and Growth Stock Fund,
as shown below, is the average annual total return quotations through
April 30, 1998, computed as described above.

The average annual total return for Class A Shares at offer
reflects the maximum front-end sales charge of 4.75% paid on the
purchase of shares. The average annual total return for Class A Shares
at net asset value (NAV) does not reflect the payment of any front-end
sales charge. Pursuant to applicable regulation, total return shown for
the Institutional Classes of the Funds for the periods prior to the
commencement of operations of such Classes is calculated by taking the
performance of the respective Class A Shares and adjusting it to reflect
the elimination of all sales charges. However, for those periods, no
adjustment has been made to eliminate the impact of 12b-1 payments by
the Class A Shares, and performance for the Institutional Classes would
have been affected had such an adjustment been made.

The average annual total return for Class B Shares and Class C
Shares including deferred sales charge reflects the deduction of the
applicable CDSC that would be paid if the shares were redeemed at April
30, 1998. The average annual total return for Class B Shares and Class
C Shares excluding deferred sales charge assumes the shares were not
redeemed at April 30, 1998 and therefore does not reflect the deduction
of a CDSC.

Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future
performance.

Average Annual Total Return
Aggressive Growth Fund(1)

Class A Class A
Shares Shares Institutional
(at Offer) (at NAV) Class(3)

1 year ended 4/30/98 89.11% 98.60% 99.22%

3 years ended 4/30/98 37.18% 39.43% 39.57%

Period 5/16/94(2) through 4/30/98 28.33% 29.92% 30.02%

Average Annual Total Return
Aggressive Growth Fund(1)

Class B Shares Class B Shares Class C Shares Class C Shares
(Including (Excluding (Including (Excluding
Deferred Deferred Deferred Deferred
Sales Charge) Sales Charge) Sales Charge) Sales Charge)

<S> <C> <C> <C> <C> <C>
1 year ended 1 year ended
4/30/98 93.12% 97.12% 4/30/98 95.99% 96.99%

Period 4/16/96(2) 3 years ended
through 4/30/98 46.79% 47.77% 4/30/98 38.29% 38.29%

Period 5/20/94(2)
through 4/30/98 29.02% 29.02%

(1) Reflects the voluntary waivers in effect during the periods.
(2) Date of initial public offering.

(3) Date of initial public offering was August 29, 1997 for Aggressive Growth Fund
Institutional Class.

</TABLE>

Average Annual Total Return
Growth Stock Fund(1)

Class A Shares Class A Shares Institutional
(at Offer) (at NAV) Class(3)
<S> <C> <C> <C>
1 year ended 4/30/98 28.84% 35.27% 36.10%

3 years ended 4/30/98 22.77% 24.77% 25.03%

5 years ended 4/30/98 16.58% 17.73% 17.87%

10 years ended 4/30/98 15.26% 15.82% 15.90%

Period 8/1/85(2) through 4/30/98 16.43% 16.88% 16.93%

</TABLE>

Average Annual Total Return
Growth Stock Fund(1)

Class B Shares Class B Shares Class C Shares Class C Shares
(Including (Excluding (Including (Excluding
Deferred Deferred Deferred Deferred
Sales Charge) Sales Charge) Sales Charge) Sales Charge)

<S> <C> <C> <C> <C> <C>
1 year ended 1 year ended
4/30/98 30.29% 34.29% 4/30/98 33.25% 34.25%

Period 9/8/95(2) Period 10/21/95(2)
through 4/30/98 22.81% 23.61% through 4/30/98 22.76% 22.76%

(1) Reflects the voluntary waivers in effect during the periods.
(2) Date of initial public offering.

(3) Date of initial public offering was August 29, 1997 for Growth Stock Fund
Institutional Class.

</TABLE>

From time to time, each Fund may also quote its Classes' actual
total return performance, dividend results and other performance
information in advertising and other types of literature. This
information may be compared to that of other mutual funds with similar
investment objectives and to stock, bond and other relevant indices or
to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For
example, the performance of a Fund (or Fund Class) maybe compared to
data prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or
to the S&P 500 Index or the Dow Jones Industrial Average.

Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed
mutual funds. Morningstar, Inc. is a mutual fund rating service that
rates mutual funds on the basis of risk-adjusted performance. Rankings
that compare a Fund's performance to another fund in appropriate
categories over specific time periods also may be quoted in advertising
and other types of literature. The S&P 500 Stock Index and the Dow Jones
Industrial Average are industry-accepted unmanaged indices of stocks
which are representative of and used to measure broad stock market
performance. The total return performance reported for these indices
will reflect the reinvestment of all distributions on a quarterly basis
and market price fluctuations. The indices do not take into account any
sales charge or other fees. A direct investment in an unmanaged index is
not possible. In seeking a particular investment objective, a Fund's
portfolio may include common stocks considered by the Manager to be more
aggressive than those tracked by these indices.

The performance of multiple indices compiled and maintained by
statistical research firms, such as Salomon Brothers and Lehman
Brothers, may be combined to create a blended performance result for
comparative purposes. Generally, the indices selected will be
representative of the types of securities in which the Funds may invest
and the assumptions that were used in calculating the blended
performance will be described.

Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term
corporate bonds, intermediate-term government bonds, long-term
government bonds, Treasury bills, the U.S. rate of inflation (based on
the Consumer Price Index), and combinations of various capital markets.
The performance of these capital markets is based on the returns of
different indices. The Funds may use the performance of these capital
markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a
hypothetical investment in any of these capital markets. The risks
associated with the security types in any capital market may or may not
correspond directly to those of the Funds. The Funds may also compare
performance to that of other compilations or indices that may be
developed and made available in the future.

The Funds may include discussions or illustrations of the
potential investment goals of a prospective investor (including
materials that describe general principles of investing, such as asset
allocation, diversification, risk tolerance, and goal setting,
questionnaires designed to help create a personal financial profile,
worksheets used to project savings needs based on assumed rates of
inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of a Fund (such as value investing, market
timing, dollar cost averaging, asset allocation, constant ratio
transfer, automatic account rebalancing, the advantages and
disadvantages of investing in tax-deferred and taxable investments),
economic and political conditions, the relationship between sectors of
the economy and the economy as a whole, the effects of inflation and
historical performance of various asset classes, including but not
limited to, stocks, bonds and Treasury bills. From time to time
advertisements, sales literature, communications to shareholders or
other materials may summarize the substance of information contained in
shareholder reports (including the investment composition of a Fund), as
well as the views as to current market, economic, trade and interest
rate trends, legislative, regulatory and monetary developments,
investment strategies and related matters believed to be of relevance to
a Fund. In addition, selected indices may be used to illustrate historic
performance of selected asset classes. The Funds may also include in
advertisements, sales literature, communications to shareholders or
other materials, charts, graphs or drawings which illustrate the
potential risks and rewards of investment in various investment
vehicles, including but not limited to, stocks, bonds, treasury bills
and shares of a Fund. In addition, advertisements, sales literature,
communications to shareholders or other materials may include a
discussion of certain attributes or benefits to be derived by an
investment in a Fund and/or other mutual funds, shareholder profiles and
hypothetical investor scenarios, timely information on financial
management, tax and retirement planning (such as information on Roth
IRAs and Education IRAs) and investment alternative to certificates of
deposit and other financial instruments. Such sales literature,
communications to shareholders or other materials may include symbols,
headlines or other material which highlight or summarize the information
discussed in more detail therein.

Materials may refer to the CUSIP numbers of the Funds and may
illustrate how to find the listings of the Funds in newspapers and
periodicals. Materials may also include discussions of other Funds,
products, and services.

The Funds may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Funds may compare these
measures to those of other funds. Measures of volatility seek to compare
the historical share price fluctuations or total returns to those of a
benchmark. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. Measures of volatility and correlation may
be calculated using averages of historical data. A Fund may advertise
its current interest rate sensitivity, duration, weighted average
maturity or similar maturity characteristics. Advertisements and sales
materials relating to a Fund may include information regarding the
background and experience of its portfolio managers.

The following tables are examples, for purposes of illustration
only, of cumulative total return performance for Class A Shares, Class B
Shares, Class C Shares and Institutional Classes of each Fund through
April 30, 1998. Pursuant to applicable regulation, total return shown
for the Institutional Classes of the Funds for the periods prior to the
commencement of operations of such Classes is calculated by taking the
performance of the respective Class A Shares and adjusting it to reflect
the elimination of all sales charges. However, for those periods, no
adjustment has been made to eliminate the impact of 12b-1 payments by
the Class A Shares, and performance for the Institutional Classes would
have been affected had such an adjustment been made. For these purposes,
the calculations assume the reinvestment of any realized securities
profits distributions and income dividends paid during the indicated
periods, but does not reflect any income taxes payable by shareholders
on the reinvested distributions. The performance of Class A Shares
reflects the maximum front-end sales charge paid on the purchases of
shares but may also be shown without reflecting the impact of any front-
end sales charge. The performance of Class B Shares and Class C Shares
is calculated both with the applicable CDSC included and excluded. Past
performance is no guarantee of future results. Performance shown for
short periods of time may not be representative of longer term results.

Cumulative Total Return
Aggressive Growth Fund(1)

Class A
Shares Institutional
(at Offer) Class(2)

3 months ended 4/30/98 14.15% 19.93%

6 months ended 4/30/98 15.11%(3) 21.04%

9 months ended 4/30/98 30.90% 37.82%

1 year ended 4/30/98 89.11% 99.22%

Period 5/16/94(4) through 4/30/98 168.47% 182.76%

(1) Reflects the voluntary waivers in effect during the periods.

(2) Date of initial public offering was August 29, 1997 for Aggressive
Growth Fund Institutional Class.
(3) For the six months ended April 30, 1998, cumulative total return for
Aggressive Growth Fund A Class at net asset value was 20.86%.

(4) Date of initial public offering.

Cumulative Total Return
Aggressive Growth Fund(1)

Class B Shares Class B Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)

3 months ended 4/30/98 15.68% 19.68%

6 months ended 4/30/98 16.41% 20.41%

9 months ended 4/30/98 32.70% 36.70%

1 year ended 4/30/98 93.12% 97.12%

Period 4/16/96(2) through 4/30/98 118.90% 121.90%

(1) Reflects the voluntary waivers in effect during the periods.

(2) Date of initial public offering.

Cumulative Total Return
Aggressive Growth Fund(1)

Class C Shares Class C Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)

3 months ended 4/30/98 18.64% 19.64%

6 months ended 4/30/98 19.44% 20.44%

9 months ended 4/30/98 35.58% 36.58%

1 year ended 4/30/98 95.99% 96.99%

3 years ended 4/30/98 164.47% 164.47%

Period 5/20/94(2) through 4/30/98 173.46% 173.46%

(1) Reflects the voluntary waivers in effect during the periods.

(2) Date of initial public offering.

Cumulative Total Return
Growth Stock Fund(1)

Class A
Shares Institutional
(at Offer) Class(2)

3 months ended 4/30/98 1.27% 6.48%

6 months ended 4/30/98 11.38%(3) 17.41%

9 months ended 4/30/98 8.40% 14.51%

1 year ended 4/30/98 28.84% 36.10%

3 years ended 4/30/98 85.06% 95.45%

5 years ended 4/30/98 115.38% 127.53%

10 years ended 4/30/98 313.92% 337.17%

Period 8/1/85(4) through 4/30/98 595.22% 634.47%

(1) Reflects the voluntary waivers in effect during the periods.

(2) Date of initial public offering was August 29, 1997 for Growth Stock
Fund Institutional Class.
(3) For the six months ended April 30, 1998, cumulative total return for
Growth Stock Fund A Class at net asset value was 16.94%.

(4) Date of initial public offering.

Cumulative Total Return
Growth Stock Fund(1)

Class B Shares Class B Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)

3 months ended 4/30/98 2.12% 6.12%

6 months ended 4/30/98 12.48% 16.48%

9 months ended 4/30/98 9.17% 13.17%

1 year ended 4/30/98 30.29% 34.29%

Period 9/8/95(2) through 4/30/98 72.22% 75.22%

(1) Reflects the voluntary waivers in effect during the periods.

(2) Date of initial public offering.

Cumulative Total Return
Growth Stock Fund(1)

Class C Shares Class C Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)

3 months ended 4/30/98 5.09% 6.09%

6 months ended 4/30/98 15.49% 16.49%

9 months ended 4/30/98 12.13% 13.13%

1 year ended 4/30/98 33.25% 34.25%

Period 10/21/95(2) through 4/30/98 67.92% 67.92%

(1) Reflects the voluntary waivers in effect during the periods.

(2) Date of initial public offering.

Cumulative Total Return
Tax-Efficient Equity Fund(1)

Class A
Shares Institutional
(at Offer) (2) Class(3)

3 months ended 4/30/98 5.97% 11.60%

6 months ended 4/30/98 17.00%(4) 23.30%

9 months ended 4/30/98 23.43% 30.12%

Period 6/27/97(5) through 4/30/98 23.43% 30.12%

(1) Reflects the voluntary waivers in effect during the periods.
(2) For the period beginning February 1, 1998 through December 31, 1998,
the Distributor has elected voluntarily to waive 0.05% of the 0.30%
12b-1 plan expenses otherwise payable by the Fund with respect to
Class A Shares. Such waiver will have favorable impact on the
performance of Class A Shares.
(3) Date of initial public offering was August 29, 1997 for Tax-
Efficient Equity Fund Institutional Class.
(4) For the six months ended April 30, 1998, cumulative total return
for Tax-Efficient Equity Fund A Class at net asset value was 22.88%.
(5) Date of initial public offering of Class A Shares.

Cumulative Total Return
Tax-Efficient Equity Fund(1)

Class B Shares Class B Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)

3 months ended 4/30/98 7.04% 11.04%

6 months ended 4/30/98 18.46% 22.46%

9 months ended 4/30/98 24.94% 28.94%

Period 6/27/97(2) through 4/30/98 24.94% 28.94%

(1) Reflects the voluntary waivers in effect during the periods.
(2) Date of initial public offering.

Cumulative Total Return
Tax-Efficient Equity Fund(1)

Class C Shares Class C Shares
(Including (Excluding
Deferred Deferred
Sales Charge) Sales Charge)

3 months ended 4/30/98 10.04% 11.04%

6 months ended 4/30/98 21.46% 22.46%

9 months ended 4/30/98 28.94% 27.94%

Period 6/27/97(2) through 4/30/98 28.94% 27.94%

(1) Reflects the voluntary waivers in effect during the periods.
(2) Date of initial public offering.

Because every investor's goals and risk threshold are different,
the Distributor, as distributor for the Funds and other mutual funds in
the Delaware Investments family, will provide general information about
investment alternatives and scenarios that will allow investors to
assess their personal goals. This information will include general
material about investing as well as materials reinforcing various
industry-accepted principles of prudent and responsible personal
financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has
to attain these goals to his or her risk threshold. In addition, the
Distributor will provide information that discusses the overriding
investment philosophy of the Manager or Sub-Adviser and how that
philosophy impacts, investment disciplines employed in seeking the
objectives of the Funds and other funds in the Delaware Investments
family. The Distributor may also from time to time cite general or
specific information about the institutional clients of the Manager or
Sub-Adviser, including the number of such clients serviced such persons.

THE POWER OF COMPOUNDING

When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's
called the Power of Compounding. Each Fund may include illustrations
showing the power of compounding in advertisements and other types of
literature.

TRADING PRACTICES AND BROKERAGE

Mutual Funds III, Inc. selects brokers or dealers to execute
transactions on behalf of a Fund for the purchase or sale of portfolio
securities on the basis of its judgment of their professional capability
to provide the service. The primary consideration is to have brokers or
dealers execute transactions at best price and execution. Best price and
execution refers to many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability
of execution, the confidentiality and placement accorded the order and
other factors affecting the overall benefit obtained by the account on
the transaction. Some trades are made on a net basis where a Fund either
buys securities directly from the dealer or sells them to the dealer. In
these instances, there is no direct commission charged but there is a
spread (the difference between the buy and sell price) which is the
equivalent of a commission. When a commission is paid, the Fund involved
pays reasonably competitive brokerage commission rates based upon the
professional knowledge of its trading department as to rates paid and
charged for similar transactions throughout the securities industry. In
some instances, the Fund pays a minimal share transaction cost when the
transaction presents no difficulty.

During the past three fiscal years, the aggregate dollar amounts of
brokerage commissions paid by each Fund were as follows:

April 30,
1998 1997 1996

Aggressive Growth Fund $97,366 $6,768 $6,872
Growth Stock Fund 14,280 22,332 28,893
Tax-Efficient Equity Fund(1) 23,745 N/A N/A

(1) Date of initial public offering of Tax-Efficient Equity Fund was
June 27, 1998.

The Manager may allocate out of all commission business generated
by all of the funds and accounts under its management, brokerage
business to brokers or dealers who provide brokerage and research
services. These services include advice, either directly or through
publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities;
furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends;
assisting in determining portfolio strategy; providing computer software
and hardware used in security analyses; and providing portfolio
performance evaluation and technical market analyses. Such services are
used by the Manager in connection with its investment decision-making
process with respect to one or more funds and accounts managed by it,
and may not be used, or used exclusively, with respect to the fund or
account generating the brokerage.

During the fiscal year ended April 30, 1998, portfolio transactions
of the following Funds, in the amounts listed below, resulting in
brokerage commissions in the amounts listed below, were directed to
brokers for brokerage and research services provided:

Portfolio Brokerage
Transactions Commissions
Amounts Amounts

Aggressive Growth Fund $50,379,790 $73,723
Growth Stock Fund 10,021,241 14,280
Tax-Efficient Equity Fund(1) 6,568,075 9,406

(1) Date of initial public offering of Tax-Efficient Equity Fund was
June 27, 1997.

As provided in the 1934 Act and each Fund's Investment Management
Agreement, higher commissions are permitted to be paid to broker/dealers
who provide brokerage and research services than to broker/dealers who
do not provide such services if such higher commissions are deemed
reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers
who provide such brokerage and research services, the Funds believe that
the commissions paid to such broker/dealers are not, in general, higher
than commissions that would be paid to broker/dealers not providing such
services and that such commissions are reasonable in relation to the
value of the brokerage and research services provided. In some
instances, services may be provided to the Manager which constitute in
some part brokerage and research services used by the Manager in
connection with its investment decision-making process and constitute in
some part services used by the Manager in connection with administrative
or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources
for services used by the Manager in connection with administrative or
other functions not related to its investment decision-making process.
In addition, so long as no fund is disadvantaged, portfolio transactions
which generate commissions or their equivalent are allocated to
broker/dealers who provide daily portfolio pricing services to a Fund
and to other funds in the Delaware Investments family. Subject to best
price and execution, commissions allocated to brokers providing such
pricing services may or may not be generated by the funds receiving the
pricing service.

The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its
judgment, joint execution is in the best interest of each participant
and will result in best price and execution. Transactions involving
commingled orders are allocated in a manner deemed equitable to each
account or fund. When a combined order is executed in a series of
transactions at different prices, each account participating in the
order may be allocated an average price obtained from the executing
broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and
funds. Although it is recognized that, in some cases, the joint
execution of orders could adversely affect the price or volume of the
security that a particular account or fund may obtain, it is the opinion
of the Manager and Mutual Funds III, Inc.'s Board of Directors that the
advantages of combined orders outweigh the possible disadvantages of
separate transactions.

Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD"), and subject to
seeking best price and execution, the Funds may place orders with
broker/dealers that have agreed to defray certain expenses of the funds
in the Delaware Investments family such as custodian fees, and may, at
the request of the Distributor, give consideration to sales of such
funds' shares as a factor in the selection of brokers and dealers to
execute Fund portfolio transactions.

PORTFOLIO TURNOVER
Portfolio trading will be undertaken principally to accomplish a
Fund's objective in relation to anticipated movements in the general
level of interest rates. The Funds are free to dispose of portfolio
securities at any time, subject to complying with the Code and the 1940
Act, when changes in circumstances or conditions make such a move
desirable in light of the investment objective. The Funds will not
attempt to achieve or be limited to a predetermined rate of portfolio
turnover, such a turnover always being incidental to transactions
undertaken with a view to achieving a Fund's investment objective.
However, it is generally anticipated that a Fund's portfolio turnover
rate will be less than 100%.

The degree of portfolio activity may affect brokerage costs of a
Fund and taxes payable by a Fund's shareholders to the extent of any net
realized capital gains. Each Fund's portfolio turnover rate is not
expected to exceed 100%; however, under certain market conditions a Fund
may experience a rate of portfolio turnover which could exceed 100%.
Each Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the particular fiscal
year by the monthly average of the value of the portfolio securities
owned by such Fund during the particular fiscal year, exclusive of
securities whose maturities at the time of acquisition are one year or
less. A turnover rate of 100% would occur, for example, if all the
investments in a Fund's portfolio at the beginning of the year were
replaced by the end of the year.

During the past two fiscal years, Aggressive Growth Fund's
portfolio turnover rates were 180% and 356% for 1997 and 1998,
respectively, and Growth Stock Fund's portfolio turnover rates were 29%
and 9% for 1997 and 1998, respectively. For the period June 27, 1997
(date of initial sale) through April 30, 1998, Tax-Efficient Equity
Fund's portfolio turnover rate was 14% (annualized).

Each Fund may hold securities for any period of time. A Fund's
portfolio turnover will be increased if the Fund writes a large number
of call options which are subsequently exercised. The portfolio turnover
rate also may be affected by cash requirements from redemptions and
repurchases of Fund shares. Total brokerage costs generally increase
with higher portfolio turnover rates.

PURCHASING SHARES

The Distributor serves as the national distributor for each Fund's
classes of shares - Class A Shares, Class B Shares, Class C Shares and
the Institutional Class, and has agreed to use its best efforts to sell
shares of each Fund. See the Prospectuses for additional information on
how to invest. Shares of the Funds are offered on a continuous basis,
and may be purchased through authorized investment dealers or directly
by contacting Mutual Funds III, Inc. or the Distributor.

The minimum initial investment generally is $1,000 for Class A
Shares, Class B Shares and Class C Shares. Subsequent purchases of such
classes generally must be at least $100. The initial and subsequent
minimum investments for Class A Shares will be waived for purchases by
officers, directors and employees of any fund in the Delaware
Investments family, the Manager or any of the its affiliates if the
purchases are made pursuant to a payroll deduction program. Shares
purchased pursuant to the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act and shares purchased in connection with an
Automatic Investing Plan are subject to a minimum initial purchase of
$250 and a minimum subsequent purchase of $25. Accounts opened under the
Asset Planner service are subject to a minimum initial investment of
$2,000 per Asset Planner Strategy selected. There are no minimum
purchase requirements for the Funds' Institutional Classes, but certain
eligibility requirements must be satisfied.

Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an
amount that is less than $1,000,000. See Investment Plans for purchase
limitations applicable to retirement plans. Mutual Funds III, Inc. will
reject any purchase order for more than $250,000 of Class B Shares and
$1,000,000 or more of Class C Shares. An investor may exceed these
limitations by making cumulative purchases over a period of time. An
investor should keep in mind, however, that reduced front-end sales
charges apply to investments of $100,000 or more in Class A Shares, and
that Class A Shares are subject to lower annual 12b-1 Plan expenses than
Class B Shares and Class C Shares and generally are not subject to a
CDSC.

Selling dealers are responsible for transmitting orders promptly.
Mutual Funds III, Inc. reserves the right to reject any order for the
purchase of shares of a Fund if in the opinion of management such
rejection is in such Fund's best interests.

The NASD has adopted Conduct Rules, as amended, relating to
investment company sales charges. Mutual Funds III, Inc. and the
Distributor intend to operate in compliance with these rules.

Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%; however, lower front-end sales
charges apply for larger purchases. Class A Shares are also subject to
annual 12b-1 Plan expenses for the life of the investment. The
Distributor has voluntarily elected to waive the payment of 0.05% of the
12b-1 Plan expenses by the Tax-Efficient Equity Fund A Class from
February 1, 1998 through December 31, 1998. As a result, the 12b-1 Plan
expenses payable by Tax-Efficient Equity Fund A Class during the waiver
period will be 0.25%.

Class B Shares are purchased at net asset value and are subject to
a CDSC of: (i) 4% if shares are redeemed within two years of purchase;
(ii) 3% if shares are redeemed during the third or fourth year following
purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth
year following purchase. Class B Shares are also subject to annual 12b-1
Plan expenses which are higher than those to which Class A Shares are
subject and are assessed against Class B Shares for approximately eight
years after purchase. See Automatic Conversion of Class B Shares under
Classes of Shares in the Fund Classes' Prospectuses.

Class C Shares are purchased at net asset value and are subject to
a CDSC of 1% if shares are redeemed within 12 months following purchase.
Class C Shares are also subject to annual 12b-1 Plan expenses for the
life of the investment which are equal to those to which Class B Shares
are subject.

Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales
charge or 12b-1 Plan expenses. See Determining Offering Price and Net
Asset Value and Plans Under Rule 12b-1 for the Fund Classes in this Part
B.

Class A Shares, Class B Shares, Class C Shares and Institutional
Class shares represent a proportionate interest in a Fund's assets and
will receive a proportionate interest in that Fund's income, before
application, as to Class A, Class B and Class C Shares, of any expenses
under that Fund's 12b-1 Plans.

Certificates representing shares purchased are not ordinarily
issued in Class A Shares, unless a shareholder submits a specific
request. Certificates are not issued in the case of Class B Shares or
Class C Shares or in the case of any retirement plan account including
self-directed IRAs. However, purchases not involving the issuance of
certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service
Company, Inc. (the "Transfer Agent"). The investor will have the same
rights of ownership with respect to such shares as if certificates had
been issued. An investor that is permitted to obtain a certificate may
receive a certificate representing full share denominations purchased by
sending a letter signed by each owner of the account to the Transfer
Agent requesting the certificate. No charge is assessed by Mutual Funds
III, Inc. for any certificate issued. A shareholder may be subject to
fees for replacement of a lost or stolen certificate under certain
conditions, including the cost of obtaining a bond covering the lost or
stolen certificate. Please contact the Funds for further information.
Investors who hold certificates representing any of their shares may
only redeem those shares by written request. The investor's
certificate(s) must accompany such request.

ALTERNATIVE PURCHASE ARRANGEMENTS

The alternative purchase arrangements of Class A, Class B and Class
C Shares of each Fund permit investors to choose the method of
purchasing shares that is most suitable for their needs given the amount
of their purchase, the length of time they expect to hold their shares
and other relevant circumstances. Investors should determine whether,
given their particular circumstances, it is more advantageous to
purchase Class A Shares of a Fund and incur a front-end sales charge and
annual 12b-1 Plan expenses of up to a maximum of 0.25% for Aggressive
Growth Fund and Growth Stock Fund and 0.30% for Tax-Efficient Equity
Fund of the average daily net assets of Class A Shares or to purchase
either Class B or Class C Shares of a Fund and have the entire initial
purchase amount invested in the Fund with the investment thereafter
subject to a CDSC and annual 12b-1 Plan expenses.

CLASS A SHARES

Purchases of $100,000 or more of Class A Shares at the offering
price carry reduced front-end sales charges and may include a series of
purchases over a 13-month period under a Letter of Intention signed by
the purchaser. See Front-End Sales Charge Alternative-Class A Shares in
the Prospectuses for the Fund Classes for a table illustrating reduced
front-end sales charge. See also Special Purchase Features -- Class A
Shares, below, for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase
features.

Certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services
and who increase sales of shares of the funds in the Delaware
Investments family may receive an additional commission of up to 0.15%
of the offering price in connection with sales of Class A Shares. Such
dealers must meet certain requirements in terms of organization and
distribution capabilities and their ability to increase sales. The
Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the
additional commission will be paid. Participating dealers may be deemed
to have additional responsibilities under the securities laws.

DEALER'S COMMISSION

As described more fully in the Prospectuses for the Fund Classes,
for initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers
through whom such purchases are effected. See Front-End Sales Charge
Alternative--Class A Shares in the Prospectuses for the Fund Classes for
the applicable schedule and further details.

CONTINGENT DEFERRED SALES CHARGE - Class B Shares and Class C Shares

Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may
be subject to a CDSC at the rates set forth above and Class C Shares
redeemed within 12 months of purchase may be subject to a CDSC of 1%.
CDSCs are charged as a percentage of the dollar amount subject to the
CDSC. The charge will be assessed on an amount equal to the lesser of
the net asset value at the time of purchase of the shares being redeemed
or the net asset value of those shares at the time of redemption. No
CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares
acquired through reinvestment of dividends or capital gains
distributions. See Waiver of Contingent Deferred Sales Charge - Class B
and Class C Shares under Redemption and Exchange in the Prospectuses for
the Fund Classes for a list of the instances in which the CDSC is
waived.

During the seventh year after purchase and, thereafter, until
converted automatically into Class A Shares, Class B Shares will still
be subject to the annual 12b-1 Plan expenses of up to 1% of average
daily net assets of those shares. At the end of approximately eight
years after purchase, the investor's Class B Shares will be
automatically converted into Class A Shares of the same Fund. See
Automatic Conversion of Class B Shares under Classes of Shares in the
Fund Classes' Prospectuses. Such conversion will constitute a tax-free
exchange for federal income tax purposes. See Taxes in the Prospectuses
for the Fund Classes.

PLANS UNDER RULE 12B-1 FOR THE FUND CLASSES
Pursuant to Rule 12b-1 under the 1940 Act, Mutual Funds III, Inc.
has adopted a separate plan for each of the Class A Shares, Class B
Shares and Class C Shares of each Fund (the "Plans"). Each Plan permits
the relevant Fund to pay for certain distribution, promotional and
related expenses involved in the marketing of only the class of shares
to which the Plan applies. The Plans do not apply to Institutional
Classes of shares. Such shares are not included in calculating the
Plans' fees, and the Plans are not used to assist in the distribution
and marketing of shares of Institutional Classes. Shareholders of
Institutional Classes may not vote on matters affecting the Plans.

The Plans permit a Fund, pursuant to its Distribution Agreement, to
pay out of the assets of Class A Shares, Class B Shares and Class C
Shares monthly fees to the Distributor for its services and expenses in
distributing and promoting sales of shares of such classes. These
expenses include, among other things, preparing and distributing
advertisements, sales literature and prospectuses and reports used for
sales purposes, compensating sales and marketing personnel, and paying
distribution and maintenance fees to securities brokers and dealers who
enter into agreements with the Distributor. The Plan expenses relating
to Class B and Class C Shares are also used to pay the Distributor for
advancing the commission costs to dealers with respect to the initial
sale of such shares.

In addition, each Fund may make payments out of the assets of Class
A, Class B and Class C Shares directly to other unaffiliated parties,
such as banks, who either aid in the distribution of shares of, or
provide services to, such classes.

The maximum aggregate fee payable by a Fund under its Plans, and a
Fund's Distribution Agreements, is on an annual basis, up to 0.25% of
Aggressive Growth and Growth Stock Fund's Class A Shares' average daily
net assets for the year and 0.30% of Tax-Efficient Equity Fund's Class A
Shares' average daily net assets for the year, and up to 1% (0.25% of
which are service fees to be paid to the Distributor, dealers and others
for providing personal service and/or maintaining shareholder accounts)
of each of the Class B Shares' and Class C Shares' average daily net
assets for the year. Mutual Funds III, Inc.'s Board of Directors may
reduce these amounts at any time.

All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf
of Class A, Class B and Class C Shares would be borne by such persons
without any reimbursement from such Fund Classes. Subject to seeking
best price and execution, a Fund may, from time to time, buy or sell
portfolio securities from or to firms which receive payments under the
Plans.

From time to time, the Distributor may pay additional amounts from
its own resources to dealers for aid in distribution or for aid in
providing administrative services to shareholders.

The Plans and the Distribution Agreements, as amended, have all
been approved by the Board of Directors of Mutual Funds III, Inc.,
including a majority of the directors who are not "interested persons"
(as defined in the 1940 Act) of Mutual Funds III, Inc. and who have no
direct or indirect financial interest in the Plans, by vote cast in
person at a meeting duly called for the purpose of voting on the Plans
and such Agreements. Continuation of the Plans and the Distribution
Agreements, as amended, must be approved annually by the Board of
Directors in the same manner as specified above.

Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A
Shares, Class B Shares and Class C Shares of the respective Funds and
that there is a reasonable likelihood of the Plan relating to a Fund
Class providing a benefit to that Class. The Plans and the Distribution
Agreements, as amended, may be terminated with respect to a Class at any
time without penalty by a majority of those directors who are not
"interested persons" or by a majority vote of the outstanding voting
securities of the relevant Fund Class. Any amendment materially
increasing the percentage payable under the Plans must likewise be
approved by a majority vote of the outstanding voting securities of the
relevant Fund Class, as well as by a majority vote of those directors
who are not "interested persons." With respect to each Class A Shares'
Plan, any material increase in the maximum percentage payable thereunder
must also be approved by a majority of the outstanding voting securities
Class B Shares of the same Fund. Also, any other material amendment to
the Plans must be approved by a majority vote of the directors including
a majority of the noninterested directors of Mutual Funds III, Inc.
having no interest in the Plans. In addition, in order for the Plans to
remain effective, the selection and nomination of directors who are not
"interested persons" of Mutual Funds III, Inc. must be effected by the
directors who themselves are not "interested persons" and who have no
direct or indirect financial interest in the Plans. Persons authorized
to make payments under the Plans must provide written reports at least
quarterly to the Board of Directors for their review.

For the fiscal year ended April 30, 1998, payments from Class A
Shares, Class B Shares and Class C Shares of Aggressive Growth Fund
amounted to $23,509, $22,292 and $11,107, respectively. Such amounts
were used for the following purposes:

Aggressive Aggressive Aggressive
Growth Fund Growth Fund Growth Fund
A Class B Class C Class

Advertising $ 126 $ --- $ ---
Annual/Semi-Annual Reports 1,899 178 164
Broker Trails 19,060 5,435 2,763
Broker Sales Charges 182 5,026 4,365
Dealer Service Expenses --- 29 42
Interest on Broker Sales
Charges --- 10,573 1,739
Commissions to Wholesalers 1,761 958 1,153
Promotional-Broker Meetings 48 71 129
Promotional-Other 110 --- 120
Prospectus Printing --- 19 160
Telephone 24 --- 10
Wholesaler Expenses 299 3 462
Other --- --- ---

For the fiscal year ended April 30, 1998 payments from Class A
Shares, Class B Shares and Class C Shares of Growth Stock Fund amounted
to $105,214, $12,033 and $9,930, respectively. Such amounts were used
for the following purposes:

Growth Growth Growth
Stock Fund Stock Fund Stock Fund
A Class B Class C Class

Advertising $ 173 $ --- $ ---
Annual/Semi-Annual Reports 202 68 52
Broker Trails 101,681 2,649 2,518
Broker Sales Charges --- 6,441 4,185
Dealer Service Expenses --- 10 158
Interest on Broker Sales
Charges --- 1,981 793
Commissions to Wholesalers 1,299 402 633
Promotional-Broker Meetings --- 109 155
Promotional-Other 855 103 3
Prospectus Printing 578 33 246
Telephone --- 16 8
Wholesaler Expenses 426 221 952
Other --- --- ---

For the period June 27, 1997 (date of initial sale) through April
30, 1998, payments from Class A Shares, Class B Shares and Class C
Shares of Tax-Efficient Equity Fund amounted to $5,325, $13,245 and
$2,491, respectively. Such amounts were used for the following purposes:

Tax-Efficient Tax-Efficient Tax-Efficient
Equity Fund Equity Fund Equity Fund
A Class B Class C Class

Advertising $46 --- ---
Annual/Semi-Annual Reports --- $13 ---
Broker Trails 4,782 3,345 $354
Broker Sales Charges --- 4,344 1,391
Dealer Service Expenses --- --- ---
Interest on Broker Sales Charges --- 4,915 58
Commissions to Wholesalers 43 226 594
Promotional-Broker Meetings --- 7 1
Promotional-Other 242 7 ---
Prospectus Printing 24 130 ---
Telephone --- 6 1
Wholesaler Expenses 188 252 92
Other --- --- ---

OTHER PAYMENTS TO DEALERS -- CLASS A, CLASS B AND CLASS C SHARES

From time to time, at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of Fund Classes exceed
certain limits as set by the Distributor, may receive from the
Distributor an additional payment of up to 0.25% of the dollar amount of
such sales. The Distributor may also provide additional promotional
incentives or payments to dealers that sell shares of the funds in the
Delaware Investments family. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold
or may sell certain amounts of shares.

Payments to dealers made in connection with seminars, conferences
or contests relating to the promotion of Fund shares may be in an amount
up to 100% of the expenses incurred or awards made. The Distributor may
also pay a portion of the expense of preapproved dealer advertisements
promoting the sale of shares of the funds in the Delaware Investments
family.

SPECIAL PURCHASE FEATURES--CLASS A SHARES

BUYING CLASS A SHARES AT NET ASSET VALUE
Class A Shares may be purchased without a front-end sales charge
under the Dividend Reinvestment Plan and, under certain circumstances,
the Exchange Privilege and the 12-Month Reinvestment Privilege.

Current and former officers, directors and employees of Mutual
Funds III, Inc., any other fund in the Delaware Investments family, the
Manager, the Manager's affiliates, or any of the Manager's affiliates
that may in the future be created, legal counsel to the funds, and
registered representatives and employees of broker/dealers who have
entered into Dealer's Agreements with the Distributor may purchase Class
A Shares of the Funds and any such class of shares of any of the other
funds in the Delaware Investments family, including any fund that may be
created, at the net asset value per share. Family members of such
persons at their direction, and any employee benefit plan established by
any of the foregoing funds, corporations, counsel or broker/dealers may
also purchase Class A Shares at net asset value. Class A Shares may also
be purchased at net asset value by current and former officers,
directors and employees (and members of their families) of the Dougherty
Financial Group LLC.

Purchases of Class A Shares may also be made by clients of
registered representatives of an authorized investment dealer at net
asset value within 12 months after the registered representative changes
employment, if the purchase is funded by proceeds from an investment
where a front-end sales charge, contingent deferred sales charge or
other sales charge has been assessed. Purchases of Class A Shares may
also be made at net asset value by bank employees who provide services
in connection with agreements between the bank and unaffiliated brokers
or dealers concerning sales of shares of the funds in the Delaware
Investments family. In addition, purchases of Class A Shares may be
made by financial institutions investing for the account of their trust
customers when they are not eligible to purchase shares of a Fund's
institutional class. Officers, directors and key employees of
institutional clients of the Manager or any of its affiliates may
purchase Class A Shares at net asset value. Moreover, purchases may be
effected at net asset value for the benefit of the clients of brokers,
dealers and registered investment advisers affiliated with a broker or
dealer, if such broker, dealer or investment adviser has entered into an
agreement with the Distributor providing specifically for the purchase
of Class A Shares in connection with special investment products, such
as wrap accounts or similar fee based programs.

Purchases of Class A Shares at net asset value may also be made by
the following: financial institutions investing for the account of
their trust customers if they are not eligible to purchase shares of the
institutional class of the fund; and any group retirement plan
(excluding defined benefit pension plans), or such plans of the same
employer, for which plan participant records are maintained on the
Delaware Investment & Retirement Services, Inc. ("DIRSI") proprietary
record keeping system that (i) has in excess of $500,000 of plan assets
invested in Class A Shares of Delaware Investments funds and any stable
value product available through Delaware Investments, or (ii) is
sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a
fund in the Delaware Investments family and such employer has properly
represented to DIRSI in writing that it has the requisite number of
employees and has received written confirmation back from DIRSI.

Investors in Delaware-Voyageur Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class
A Shares of any of the funds in the Delaware Investments family at net
asset value.

The Fund must be notified in advance that an investment qualifies
for purchase at net asset value.

LETTER OF INTENTION

The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases
made within a 13-month period pursuant to a written Letter of Intention
provided by the Distributor and signed by the purchaser, and not legally
binding on the signer or Mutual Funds III, Inc., which provides for the
holding in escrow by the Transfer Agent of 5% of the total amount of
Class A Shares intended to be purchased until such purchase is completed
within the 13-month period. A Letter of Intention may be dated to
include shares purchased up to 90 days prior to the date the Letter is
signed. The 13-month period begins on the date of the earliest purchase.
If the intended investment is not completed, except as noted below, the
purchaser will be asked to pay an amount equal to the difference between
the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total
shares purchased. If such payment is not made within 20 days following
the expiration of the 13-month period, the Transfer Agent will surrender
an appropriate number of the escrowed shares for redemption in order to
realize the difference. Such purchasers may include the value (at
offering price at the level designated in their Letter of Intention) of
all their shares of the Funds and of any class of any of the other
mutual funds in the Delaware Investments family (except shares of any
fund in the Delaware Investments family which do not carry a front-end
sales charge, CDSC or Limited CDSC, other than shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with the ownership
of variable insurance products, unless they were acquired through an
exchange from a fund in the Delaware Investments family which carried a
front-end sales charge, CDSC or Limited CDSC) previously purchased and
still held as of the date of their Letter of Intention toward the
completion of such Letter.

Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales
charge on investments of Class A Shares made by the plan. The aggregate
investment level of the Letter of Intention will be determined and
accepted by the Transfer Agent at the point of plan establishment. The
level and any reduction in front-end sales charge will be based on
actual plan participation and the projected investments in Delaware
Investments funds that are offered with a front-end sales charge, CDSC
or Limited CDSC for a 13-month period. The Transfer Agent reserves the
right to adjust the signed Letter of Intention based on this acceptance
criteria. The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual investments
exceed the anticipated level and equal an amount that would qualify the
plan for further discounts, any front-end sales charges will be
automatically adjusted. In the event this Letter of Intention is not
fulfilled within the 13-month period, the plan level will be adjusted
(without completing another Letter of Intention) and the employer will
be billed for the difference in front-end sales charges due, based on
the plan's assets under management at that time. Employers may also
include the value (at offering price at the level designated in their
Letter of Intention) of all their shares intended for purchase that are
offered with a front-end sales charge, CDSC or Limited CDSC of any
class. Class B Shares and Class C Shares of a Fund and other funds in
the Delaware Investments family which offer corresponding classes of
shares may also be aggregated for this purpose.

COMBINED PURCHASES PRIVILEGE

In determining the availability of the reduced front-end sales
charge previously set forth with respect to Class A Shares, purchasers
may combine the total amount of any combination of Class A Shares, Class
B Shares and/or Class C Shares of the Funds, as well as shares of any
other class of any of the other funds in the Delaware Investments family
(except shares of any Delaware Investments fund which do not carry a
front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with
the ownership of variable insurance products, unless they were acquired
through an exchange from a Delaware Investments fund which carried a
front-end sales charge, CDSC or Limited CDSC). In addition, assets held
in any stable value product available through Delaware Investments may
be combined with other Delaware Investments fund holdings.

The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under
21; or a trustee or other fiduciary of trust estates or fiduciary
accounts for the benefit of such family members (including certain
employee benefit programs).

RIGHT OF ACCUMULATION

In determining the availability of the reduced front-end sales
charge with respect to Class A Shares, purchasers may also combine any
subsequent purchases of Class A Shares, Class B Shares and Class C
Shares of a Fund, as well as shares of any other class of any of the
other funds in the Delaware Investments funds which offer such classes
(except shares of any fund in the Delaware Investments family which do
not carry a front-end sales charge, CDSC or Limited CDSC, other than
shares of Delaware Group Premium Fund, Inc. beneficially owned in
connection with the ownership of variable insurance products, unless
they were acquired through an exchange from a Delaware Investments fund
which carried a front-end sales charge, CDSC or Limited CDSC). If, for
example, any such purchaser has previously purchased and still holds
Class A Shares and/or shares of any other of the classes described in
the previous sentence with a value of $40,000 and subsequently purchases
$60,000 at offering price of additional shares of Class A Shares, the
charge applicable to the $60,000 purchase would currently be 3.75%. For
the purpose of this calculation, the shares presently held shall be
valued at the public offering price that would have been in effect were
the shares purchased simultaneously with the current purchase. Investors
should refer to the table of sales charges for Class A Shares to
determine the applicability of the Right of Accumulation to their
particular circumstances.

12-MONTH REINVESTMENT PRIVILEGE

Holders of Class A Shares of a Fund (and of the Institutional
Classes holding shares which were acquired through an exchange from one
of the other mutual funds in the Delaware Investments family offered
with a front-end sales charge) who redeem such shares have one year from
the date of redemption to reinvest all or part of their redemption
proceeds in Class A Shares of that Fund or in Class A Shares of any of
the other funds in the Delaware Investments family, subject to
applicable eligibility and minimum purchase requirements, in states
where shares of such other funds may be sold, at net asset value without
the payment of a front-end sales charge. This privilege does not extend
to Class A Shares where the redemption of the shares triggered the
payment of a Limited CDSC. Persons investing redemption proceeds from
direct investments in mutual funds in the Delaware Investments family
offered without a front-end sales charge will be required to pay the
applicable sales charge when purchasing Class A Shares. The reinvestment
privilege does not extend to a redemption of either Class B Shares or
Class C Shares.

Any such reinvestment cannot exceed the redemption proceeds (plus
any amount necessary to purchase a full share). The reinvestment will be
made at the net asset value next determined after receipt of remittance.
A redemption and reinvestment could have income tax consequences. It is
recommended that a tax adviser be consulted with respect to such
transactions. Any reinvestment directed to a fund in which the investor
does not then have an account will be treated like all other initial
purchases of a fund's shares. Consequently, an investor should obtain
and read carefully the prospectus for the fund in which the investment
is intended to be made before investing or sending money. The prospectus
contains more complete information about the fund, including charges and
expenses.

Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Funds' shareholder servicing agent,
about the applicability of the Limited CDSC (see Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange in the Fund Classes'
Prospectuses) in connection with the features described above.

GROUP INVESTMENT PLANS

Group Investment Plans that are not eligible to purchase shares of
the Institutional Classes may also benefit from the reduced front-end
sales charges for investments in Class A Shares, based on total plan
assets. If a company has more than one plan investing in the Delaware
Investments family of funds, then the total amount invested in all plans
would be used in determining the applicable front-end sales charge
reduction upon each purchase, both initial and subsequent, upon
notification to the Fund in which the investment is being made at the
time of each such purchase. Employees participating in such Group
Investment Plans may also combine the investments made in their plan
account when determining the applicable front-end sales charge on
purchases to non-retirement investment accounts of Delaware Investments
if they so notify the Fund in connection with each purchase. For other
retirement plans and special services, see Retirement Plans for the Fund
Classes under Investment Plans.

THE INSTITUTIONAL CLASSES
The Institutional Class of each Fund is available for purchase only
by: (a) retirement plans introduced by persons not associated with
brokers or dealers that are primarily engaged in the retail securities
business and rollover individual retirement accounts from such plans;
(b) tax-exempt employee benefit plans of the Manager, the Sub-Adviser or
their affiliates and securities dealer firms with a selling agreement
with the Distributor; (c) institutional advisory accounts of the
Manager, the Sub-Adviser or their affiliates and those having client
relationships with Delaware Investment Advisers, a division of the
Manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts; (d) a
bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program
that requires payment to the financial institution of a Rule 12b-1 fee;
and (e) registered investment advisers investing on behalf of clients
that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a
broker or dealer and derives compensation for its services exclusively
from its clients for such advisory services.

Shares of the Institutional Classes are available for purchase at
net asset value, without the imposition of a front-end or contingent
deferred sales charge and are not subject to Rule 12b-1 expenses.

INVESTMENT PLANS

REINVESTMENT PLAN/OPEN ACCOUNT
Unless otherwise designated by shareholders in writing, dividends
from net investment income and distributions from realized securities
profits, if any, will be automatically reinvested in additional shares
of the respective Fund Class in which an investor has an account (based
on the net asset value in effect on the reinvestment date) and will be
credited to the shareholder's account on that date. All dividends and
distributions of the Institutional Classes are reinvested in the
accounts of the holders of such shares (based on the net asset value in
effect on the reinvestment date). A confirmation of each distribution
from realized securities profits, if any, will be mailed to shareholders
in the first quarter of the fiscal year.

Under the Reinvestment Plan/Open Account, shareholders may purchase
and add full and fractional shares to their plan accounts at any time
either through their investment dealers or by sending a check or money
order to the specific Fund and Class in which shares are being
purchased. Such purchases, which must meet the minimum subsequent
purchase requirements set forth in the Prospectuses and this Part B, are
made, for Class A Shares at the public offering price, and for Class B
Shares, Class C Shares and Institutional Class shares at the net asset
value, at the end of the day of receipt. A reinvestment plan may be
terminated at any time. This plan does not assure a profit nor protect
against depreciation in a declining market.

REINVESTMENT OF DIVIDENDS IN OTHER FUNDS IN THE DELAWARE INVESTMENTS
FAMILY

Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A,
Class B and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments
family, including the Funds, in states where their shares may be sold.
Such investments will be at net asset value at the close of business on
the reinvestment date without any front-end sales charge or service fee.
The shareholder must notify the Transfer Agent in writing and must have
established an account in the fund into which the dividends and/or
distributions are to be invested. Any reinvestment directed to a fund in
which the investor does not then have an account will be treated like
all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in
which the investment is intended to be made before investing or sending
money. The prospectus contains more complete information about the fund,
including charges and expenses. See also Additional Methods of Adding to
Your Investment - Dividend Reinvestment Plan under How to Buy Shares in
the Prospectuses for the Fund Classes.

Subject to the following limitations, dividends and/or
distributions from other funds in the Delaware Investments family may be
invested in shares of the Funds, provided an account has been
established. Dividends from Class A Shares may not be directed to Class
B Shares or Class C Shares. Dividends from Class B Shares may only be
directed to other Class B Shares and dividends from Class C Shares may
only be directed to other Class C Shares.

This option is not available to participants in the following
plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and
Money Purchase Pension Plans, 401(k) Defined Contribution Plans, or
403(b)(7) or 457 Deferred Compensation Plans.

INVESTING BY ELECTRONIC FUND TRANSFER
Direct Deposit Purchase Plan -- Investors may arrange for a Fund to
accept for investment in Class A, Class B or Class C Shares, through an
agent bank, preauthorized government or private recurring payments. This
method of investment assures the timely credit to the shareholder's
account of payments such as social security, veterans' pension or
compensation benefits, federal salaries, Railroad Retirement benefits,
private payroll checks, dividends, and disability or pension fund
benefits. It also eliminates lost, stolen and delayed checks.

Automatic Investing Plan -- Shareholders of Class A, Class B and
Class C Shares may make automatic investments by authorizing, in
advance, monthly payments directly from their checking account for
deposit into their Fund account. This type of investment will be handled
in either of the following ways. (1) If the shareholder's bank is a
member of the National Automated Clearing House Association ("NACHA"),
the amount of the investment will be electronically deducted from his or
her account by Electronic Fund Transfer ("EFT"). The shareholder's
checking account will reflect a debit each month at a specified date
although no check is required to initiate the transaction. (2) If the
shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.

This option is not available to participants in the following
plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and
Money Purchase Pension Plans, 401(k) Defined Contribution Plans, or
403(b)(7) or 457 Deferred Compensation Plans.

* * *

Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent
investments under such Plans must be for $25 or more. An investor
wishing to take advantage of either service must complete an
authorization form. Either service can be discontinued by the
shareholder at any time without penalty by giving written notice.

Payments to a Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account
after such payments should have been terminated by reason of death or
otherwise. Any such payments are subject to reclamation by the federal
government or its agencies. Similarly, under certain circumstances,
investments from private sources may be subject to reclamation by the
transmitting bank. In the event of a reclamation, a Fund may liquidate
sufficient shares from a shareholder's account to reimburse the
government or the private source. In the event there are insufficient
shares in the shareholder's account, the shareholder is expected to
reimburse the Fund.

DIRECT DEPOSIT PURCHASES BY MAIL
Shareholders may authorize a third party, such as a bank or
employer, to make investments directly to their Fund accounts. A Fund
will accept these investments, such as bank-by-phone, annuity payments
and payroll allotments, by mail directly from the third party. Investors
should contact their employers or financial institutions who in turn
should contact Mutual Funds III, Inc. for proper instructions.

WEALTH BUILDER OPTION

Shareholders can use the Wealth Builder Option to invest in the
Fund Classes through regular liquidations of shares in their accounts in
other mutual funds in the Delaware Investments family. Shareholders of
the Fund Classes may elect to invest in one or more of the other mutual
funds in the Delaware Investments family through the Wealth Builder
Option. See Wealth Builder Option and Redemption and Exchange in the
Prospectuses for the Fund Classes.

Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated
from their account and invested automatically into other mutual funds in
the Delaware Investments family, subject to the conditions and
limitations set forth in the Fund Classes' Prospectuses. The investment
will be made on the 20th day of each month (or, if the fund selected is
not open that day, the next business day) at the public offering price
or net asset value, as applicable, of the fund selected on the date of
investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.

Periodic investment through the Wealth Builder Option does not
insure profits or protect against losses in a declining market. The
price of the fund into which investments are made could fluctuate. Since
this program involves continuous investment regardless of such
fluctuating value, investors selecting this option should consider their
financial ability to continue to participate in the program through
periods of low fund share prices. This program involves automatic
exchanges between two or more fund accounts and is treated as a purchase
of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax
consequences of exchanges. Shareholders can terminate their
participation at any time by giving written notice to their Fund.

This option is not available to participants in the following
plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and
Money Purchase Pension Plans, 401(k) Defined Contribution Plans, or
403(b)(7) or 457 Deferred Compensation Plans. This option also is not
available to shareholders of the Institutional Classes.

RETIREMENT PLANS FOR THE FUND CLASSES

An investment in a Fund may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) deferred compensation plan, Individual Retirement
Account ("IRA") and the new Roth IRA and Education IRA.

Among the retirement plans the Delaware Investments offers, Class B
Shares are available for investment only by Individual Retirement
Accounts, SIMPLE IRAs, Roth IRAs, Education IRAs, Simplified Employee
Pension Plans, Salary Reduction Simplified Employee Pension Plans and
403(b) and 457 Deferred Compensation Plans. The CDSC may be waived on
certain redemptions of Class B Shares and Class C Shares. See Waiver of
Contingent Deferred Sales Charge under Redemption and Exchange in the
Prospectus for Class B Shares and Class C Shares for a list of the
instances in which the CDSC is waived.

Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares
must be in an amount that is less than $1,000,000 for such plans. The
maximum purchase limitations apply only to the initial purchase of
shares by the retirement plan.

Minimum investment limitations generally applicable to other
investors do not apply to retirement plans other than Individual
Retirement Accounts, for which there is a minimum initial purchase of
$250 and a minimum subsequent purchase of $25 regardless of which Class
is selected. Retirement plans may be subject to plan establishment fees,
annual maintenance fees and/or other administrative or trustee fees.
Fees are based upon the number of participants in the plan as well as
the services selected. Additional information about fees is included in
retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide
services to such plans.

Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders.
Certain retirement plans may qualify to purchase Institutional Class
Shares. For additional information on any of the Plans and Delaware's
retirement services, call the Shareholder Service Center telephone
number.

It is advisable for an investor considering any one of the
retirement plans described below to consult with an attorney, accountant
or a qualified retirement plan consultant. For further details,
including applications for any of these plans, contact your investment
dealer or the Distributor.

Taxable distributions from the retirement plans described below may
be subject to withholding.

Please contact your investment dealer or the Distributor for the
special application forms required for the plans described below.

PROTOTYPE PROFIT SHARING OR MONEY PURCHASE PENSION PLANS

Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of organizations.
These plans can be maintained as Section 401(k), profit sharing or money
purchase pension plans. Contributions may be invested only in Class A
Shares and Class C Shares.

INDIVIDUAL RETIREMENT ACCOUNT ("IRA")

A document is available for an individual who wants to establish an
IRA and make contributions which may be tax-deductible, even if the
individual is already participating in an employer-sponsored retirement
plan. Even if contributions are not deductible for tax purposes, as
indicated below, earnings will be tax-deferred. In addition, an
individual may make contributions on behalf of a spouse who has no
compensation for the year; however, participation may be restricted
based on certain income limits.

IRA DISCLOSURES
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that
can be utilized depending on the individual's circumstances. A new Roth
IRA and Education IRA are available in addition to the existing
deductible IRA and non-deductible IRA.

DEDUCTIBLE AND NON-DEDUCTIBLE IRAS
An individual can contribute up to $2,000 in his or her IRA each
year. Contributions may or may not be deductible depending upon the
taxpayer's adjusted gross income ("AGI") and whether the taxpayer is an
active participant in an employer sponsored retirement plan. Even if a
taxpayer is an active participant in an employer sponsored retirement
plan, the full $2,000 is still available if the taxpayer's AGI is below
$30,000 ($50,000 for taxpayers filing joint returns) for years beginning
after December 31, 1997. A partial deduction is allowed for married
couples with income between $50,000 and $60,000, and for single
individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available
for contributions to IRAs by taxpayers whose AGI after IRA deductions
exceeds the maximum income limit established for each year and who are
active participants in an employer sponsored retirement plan.

Taxpayers who are not allowed deductions on IRA contributions still
can make non-deductible IRA contributions of as much as $2,000 for each
working spouse and defer taxes on interest or other earnings from the
IRAs.

Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined
AGI is below $150,000. The maximum deductible IRA contribution for a
married individual who is not an active participant, but whose spouse
is, is phased out for combined AGI between $150,000 and $160,000.

CONDUIT (ROLLOVER) IRAS
Certain individuals who have received or are about to receive
eligible rollover distributions from an employer-sponsored retirement
plan or another IRA may rollover the distribution tax-free to a Conduit
IRA. The rollover of the eligible distribution must be completed by the
60th day after receipt of the distribution; however, if the rollover is
in the form of a direct trustee-to-trustee transfer without going
through the distributee's hand, the 60-day limit does not apply.

A distribution qualifies as an "eligible rollover distribution" if
it is made from a qualified retirement plan, a 403(b) plan or another
IRA and does not constitute one of the following:

(i) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the
employee and his/her designated beneficiary;

(ii) Substantially equal installment payments for a period certain of
10 or more years;

(iii) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;

(iv) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the
employee; and

(v) A distribution of after-tax contributions which is not includable
in income.

ROTH IRAS
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA.
The $2,000 annual limit is reduced by any contributions to a deductible
or nondeductible IRA for the same year. The maximum contribution that
can be made to a Roth IRA is phased out for single filers with AGI
between $95,000 and $110,000, and for couples filing jointly with AGI
between $150,000 and $160,000. Qualified distributions from a Roth IRA
would be exempt from federal taxes. Qualified distributions are
distributions (1) made after the five-taxable year period beginning with
the first taxable year for which a contribution was made to a Roth IRA
and (2) that are (a) made on or after the date on which the individual
attains age 59 1/2, (b) made to a beneficiary on or after the death of
the individual, (c) attributed to the individual being disabled, or (d)
for a qualified special purpose (e.g., first time homebuyer expenses).

Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated
earnings.

Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA.
Earnings and contributions from a deductible IRA are subject to a tax
upon conversion; however, no 10% excise tax for early withdrawal would
apply. If the conversion is done prior to January 1, 1999, then the
income from the conversion can be included in income ratably over a
four-year period beginning with the year of conversion.

EDUCATION IRAs
For taxable years beginning after December 31, 1997, an Education
IRA has been created exclusively for the purpose of paying qualified
higher education expenses. Taxpayers can make non-deductible
contributions up to $500 per year per beneficiary. The $500 annual limit
is in addition to the $2,000 annual contribution limit applicable to
IRAs and Roth IRAs. Eligible contributions must be in cash and made
prior to the date the beneficiary reaches age 18. Similar to the Roth
IRA, earnings would accumulate tax-free. There is no requirement that
the contributor be related to the beneficiary, and there is no limit on
the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for
the same beneficiaries, however, the contribution limit of all
contributions for a single beneficiary cannot exceed $500 annually.

This $500 annual contribution limit for Education IRAs is phased
out ratably for single contributors with modified AGI between $95,000
and $110,000, and for couples filing jointly with modified AGI of
between $150,000 and $160,000. Individuals with modified AGI above the
phase-out range are not allowed to make contributions to an Education
IRA established on behalf of any other individual.

Distributions from an Education IRA are excludable from gross
income to the extent that the distribution does not exceed qualified
higher education expenses incurred by the beneficiary during the year
the distribution is made regardless of whether the beneficiary is
enrolled at an eligible educational institution on a full-time, half-
time, or less than half-time basis.

Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of
such a distribution will be includible in gross income of the
beneficiary and subject to an additional 10% penalty tax if the
distribution is not for qualified higher educations expenses. Tax-free
(and penalty-free) transfers and rollovers of account balances from one
Education IRA benefiting one beneficiary to another Education IRA
benefiting a different beneficiary (as well as redesignations of the
named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or
rollover is made before the time the old beneficiary reaches age 30 and
the new beneficiary reaches age 18.

A company or association may establish a Group IRA or Group Roth
IRA for employees or members who want to purchase shares of the Fund.

Investments generally must be held in the IRA until age 59 1/2 in
order to avoid premature distribution penalties, but distributions
generally must commence no later than April 1 of the calendar year
following the year in which the participant reaches age 70 1/2.
Individuals are entitled to revoke the account, for any reason and
without penalty, by mailing written notice of revocation to Delaware
Management Trust Company within seven days after the receipt of the IRA
Disclosure Statement or within seven days after the establishment of the
IRA, except, if the IRA is established more than seven days after
receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the
year received. Excess contributions removed after the tax filing
deadline, plus extensions, for the year in which the excess
contributions were made are subject to a 6% excise tax on the amount of
excess. Premature distributions (distributions made before age 59 1/2,
except for death, disability and certain other limited circumstances)
will be subject to a 10% excise tax on the amount prematurely
distributed, in addition to the income tax resulting from the
distribution. For information concerning the applicability of a CDSC
upon redemption of Class B Shares and Class C Shares, see Contingent
Deferred Sales Charge - Class B Shares and Class C Shares under Classes
of Shares in the Prospectus for Class B Shares and Class C Shares.

Effective January 1, 1997, the 10% premature distribution penalty
will not apply to distributions from an IRA that are used to pay medical
expenses in excess of 7.5% of adjusted gross income or to pay health
insurance premiums by an individual who has received unemployment
compensation for 12 consecutive weeks. In addition, effective January 1,
1998, the new law allows for premature distribution without a 10%
penalty if (i) the amounts are used to pay qualified higher education
expenses (including graduate level courses) of the taxpayer, the
taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer,
taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse. A qualified first-time homebuyer is someone who has
had no ownership interest in a residence during the past two years. The
aggregate amount of distribution for first-time home purchases
cannot exceed a lifetime cap of $10,000.

SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP/IRA")

A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of
all eligible employees. Each of the Classes is available for investment
by a SEP/IRA.

SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN ("SAR/SEP")

Although new SAR/SEP plans may not be established after December
31, 1996, existing plans may continue to be maintained by employers
having 25 or fewer employees. An employer may elect to make additional
contributions to such existing plans.

PROTOTYPE 401(K) DEFINED CONTRIBUTION PLAN

Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans.
Plan documents are available to enable employers to establish a plan. An
employer may also elect to make profit sharing contributions and/or
matching contributions with investments in only Class A Shares and Class
C Shares or certain other funds in the Delaware Investments family.
Purchases under the Plan may be combined for purposes of computing the
reduced front-end sales charge applicable to Class A Shares as set forth
in the table the Prospectuses for the Fund Classes.

DEFERRED COMPENSATION PLAN FOR PUBLIC SCHOOLS AND NON-PROFIT
ORGANIZATIONS ("403(B)(7)")

Section 403(b)(7) of the Code permits public school systems and
certain non-profit organizations to use mutual fund shares held in a
custodial account to fund deferred compensation arrangements for their
employees. A custodial account agreement is available for those
employers who wish to purchase shares of any of the Classes in
conjunction with such an arrangement. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge
applicable to Class A Shares as set forth in the table the Prospectuses
for the Fund Classes.

DEFERRED COMPENSATION PLAN FOR STATE AND LOCAL GOVERNMENT EMPLOYEES
("457")

Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation
plan for their employees who wish to participate. This enables employees
to defer a portion of their salaries and any federal (and possibly
state) taxes thereon. Such plans may invest in shares of the Fund.
Although investors may use their own plan, there is available a Delaware
Investments 457 Deferred Compensation Plan. Interested investors should
contact the Distributor or their investment dealers to obtain further
information. Purchases under the Plan may be combined for purposes of
computing the reduced front-end sales charge applicable to Class A
Shares as set forth in the table the Prospectuses for the Fund Classes.

SIMPLE IRA

A SIMPLE IRA combines many of the features of an IRA and a 401(k)
Plan but is easier to administer than a typical 401(k) Plan. It requires
employers to make contributions on behalf of their employees and also
has a salary deferral feature that permits employees to defer a portion
of their salary into the plan on a pre-tax basis. A SIMPLE IRA is
available only to plan sponsors with 100 or fewer employees.

SIMPLE 401(k)

A SIMPLE 401(k) is like a regular 401(k) except that it is
available only to plan sponsors 100 or fewer employees and, in exchange
for mandatory plan sponsor contributions, discrimination testing is not
required.

DETERMINING OFFERING PRICE AND NET ASSET VALUE

Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased
after receipt of the order by the Fund, its agent or certain other
authorized persons. See Distribution and Service under Investment
Management Agreements and Sub-Advisory Agreements. Orders for purchases
of Class B Shares, Class C Shares and Institutional Class shares are
effected at the net asset value per share next calculated by the Fund in
which shares are being purchased after receipt of the order by the Fund,
its agent or designee. Selling dealers are responsible for transmitting
orders promptly.

The offering price for Class A Shares consists of the net asset
value per share plus any applicable front-end sales charges. Offering
price and net asset value are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open. The New York Stock Exchange is
scheduled to be open Monday through Friday throughout the year except
for the days when the following holidays are observed: New Year's Day,
Presidents' Day, Martin Luther King, Jr.'s Birthday, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
When the New York Stock Exchange is closed, the Funds will generally be
closed, pricing calculations will not be made and purchase and
redemption orders will not be processed.

An example showing how to calculate the net asset value per share
and, in the case of Class A Shares, the offering price per share, will
be included in the Funds' financial statements which are incorporated by
reference into this Part B.

Each Fund's net asset value per share is computed by adding the
value of all the Fund's securities and other assets, deducting any
liabilities of the Fund, and dividing by the number of Fund shares
outstanding. Expenses and fees are accrued daily. Portfolio securities,
except for bonds, which are primarily traded on a national or foreign
securities exchange are valued at the last sale price on that exchange.
Options are valued at the last reported sales price or, if no sales are
reported, at the mean between bid and asked prices. Securities not
traded on a particular day, over-the-counter securities and government
and agency securities are valued at the mean value between bid and asked
prices. Money market instruments having a maturity of less than 60 days
are valued at amortized cost. Debt securities (other than short-term
obligations) are valued on the basis of valuations provided by a pricing
service when such prices are believed to reflect the fair value of such
securities. Use of a pricing service has been approved by the Board of
Directors. Subject to the foregoing, securities for which market
quotations are not readily available and other assets are valued at fair
value as determined in good faith and in a method approved by the Board
of Directors.

Each Class of a Fund will bear, pro-rata, all of the common
expenses of that Fund. The net asset values of all outstanding shares of
each Class of a Fund will be computed on a pro-rata basis for each
outstanding share based on the proportionate participation in that Fund
represented by the value of shares of that Class. All income earned and
expenses incurred by a Fund will be borne on a pro-rata basis by each
outstanding share of a Class, based on each Class' percentage in that
Fund represented by the value of shares of such Classes, except that the
Institutional Classes will not incur any of the expenses under the
relevant Fund's 12b-1 Plans and Class A, Class B and Class C Shares
alone will bear the 12b-1 Plan expenses payable under their respective
Plans. Due to the specific distribution expenses and other costs that
will be allocable to each Class, the net asset value of each Class of a
Fund will vary.

REDEMPTION AND REPURCHASE

Any shareholder may require a Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the
shares are registered, to the Fund at 1818 Market Street, Philadelphia,
PA 19103. In addition, certain expedited redemption methods described
below are available when stock certificates have not been issued.
Certificates are issued for Class A Shares and Institutional Class
shares only if a shareholder specifically requests them. Certificates
are not issued for Class B Shares or Class C Shares. If stock
certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid
to the shareholder at the address of record, the request must be signed
by all owners of the shares or the investment dealer of record, but a
signature guarantee is not required. When the redemption is for more
than $50,000, or if payment is made to someone else or to another
address, signatures of all record owners are required and a signature
guarantee may be required. Each signature guarantee must be supplied by
an eligible guarantor institution. Each Fund reserves the right to
reject a signature guarantee supplied by an eligible institution based
on its creditworthiness. The Funds may request further documentation
from corporations, retirement plans, executors, administrators, trustees
or guardians.

In addition to redemption of Fund shares, the Distributor, acting
as agent of the Funds, offers to repurchase Fund shares from
broker/dealers acting on behalf of shareholders. The redemption or
repurchase price, which may be more or less than the shareholder's cost,
is the net asset value per share next determined after receipt of the
request in good order by the respective Fund, its agent or certain other
authorized persons (see Distribution and Service under Investment
Management Agreements and Sub-Advisory Agreement), subject to any
applicable CDSC or Limited CDSC. This is computed and effective at the
time the offering price and net asset value are determined. See
Determining Offering Price and Net Asset Value. The Funds and the
Distributor end their business days at 5 p.m., Eastern time. This offer
is discretionary and may be completely withdrawn without further notice
by the Distributor.

Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at
the net asset value per share computed that day (subject to the
applicable CDSC or Limited CDSC), if the repurchase order was received
by the broker/dealer from the shareholder prior to the time the offering
price and net asset value are determined on such day. The selling dealer
has the responsibility of transmitting orders to the Distributor
promptly. Such repurchase is then settled as an ordinary transaction
with the broker/dealer (who may make a charge to the shareholder for
this service) delivering the shares repurchased.

Certain redemptions of Class A Shares purchased at net asset value
may result in the imposition of a Limited CDSC. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange in the Prospectuses for the
Fund Classes. Class B Shares are subject to a CDSC of: (i) 4% if shares
are redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase; (iii) 2% if
shares are redeemed during the fifth year following purchase; and (iv)
1% if shares are redeemed during the sixth year following purchase.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within
12 months following purchase. See Contingent Deferred Sales Charge -
Class B Shares and Class C Shares under Classes of Shares in the
Prospectuses for the Fund Classes. Except for the applicable CDSC or
Limited CDSC and, with respect to the expedited payment by wire
described below for which, in the case of the Fund Classes, there is
currently a $7.50 bank wiring cost, neither the Funds nor the Funds'
Distributor charges a fee for redemptions or repurchases, but such fees
could be charged at any time in the future.

Payment for shares redeemed will ordinarily be mailed the next
business day, but in no case later than seven days, after receipt of a
redemption request in good order; provided, however, that each
commitment to mail or wire redemption proceeds by a certain time, as
described below, is modified by the qualifications described in the next
paragraph.

Each Fund will process written or telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have
already settled. A Fund will honor redemption requests as to shares for
which a check was tendered as payment, but a Fund will not mail or wire
the proceeds until it is reasonably satisfied that the check has
cleared. This potential delay can be avoided by making investments by
wiring Federal Funds.

If a shareholder has been credited with a purchase by a check which
is subsequently returned unpaid for insufficient funds or for any other
reason, the Fund involved will automatically redeem from the
shareholder's account the shares purchased by the check plus any
dividends earned thereon. Shareholders may be responsible for any losses
to a Fund or to the Distributor.

In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a
result of which disposal by a Fund of securities owned by it is not
reasonably practical, or it is not reasonably practical for a Fund
fairly to value its assets, or in the event that the SEC has provided
for such suspension for the protection of shareholders, a Fund may
postpone payment or suspend the right of redemption or repurchase. In
such case, the shareholder may withdraw the request for redemption or
leave it standing as a request for redemption at the net asset value
next determined after the suspension has been terminated.

Payment for shares redeemed or repurchased may be made either in
cash or kind, or partly in cash and partly in kind. Any portfolio
securities paid or distributed in kind would be valued as described in
Determining Offering Price and Net Asset Value. Subsequent sale by an
investor receiving a distribution in kind could result in the payment of
brokerage commissions. However, Mutual Funds III, Inc. has 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 net asset value of such Fund during any 90-day period for
any one shareholder.

The value of a Fund's investments is subject to changing market
prices. Thus, a shareholder reselling shares to a Fund may sustain
either a gain or loss, depending upon the price paid and the price
received for such shares.

SMALL ACCOUNTS
Before a Fund involuntarily redeems shares from an account that,
under the circumstances noted in the relevant Prospectus, has remained
below the minimum amounts required by the Funds' Prospectuses and sends
the proceeds to the shareholder, the shareholder will be notified in
writing that the value of the shares in the account is less than the
minimum required and will be allowed 60 days from the date of notice to
make an additional investment to meet the required minimum. See The
Conditions of Your Purchase under How to Buy Shares in the Funds'
Prospectuses. Any redemption in an inactive account established with a
minimum investment may trigger mandatory redemption. No CDSC or Limited
CDSC will apply to the redemptions described in this paragraph.

* * *

Each Fund has made available certain redemption privileges, as
described below. The Funds reserve the right to suspend or terminate
these expedited payment procedures upon 60 days' written notice to
shareholders.

EXPEDITED TELEPHONE REDEMPTIONS
Shareholders of the Fund Classes or their investment dealers of
record wishing to redeem any amount of shares of $50,000 or less for
which certificates have not been issued may call the Shareholder Service
Center at 800-523-1918 or, in the case of shareholders of the
Institutional Classes, their Client Services Representative at 800-828-
5052 prior to the time the offering price and net asset value are
determined, as noted above, and have the proceeds mailed to them at the
address of record. Checks payable to the shareholder(s) of record will
normally be mailed the next business day, but no later than seven days,
after the receipt of the redemption request. This option is only
available to individual, joint and individual fiduciary-type accounts.

In addition, redemption proceeds of $1,000 or more can be
transferred to your predesignated bank account by wire or by check by
calling the phone numbers listed above. An authorization form must have
been completed by the shareholder and filed with the relevant Fund
before the request is received. Payment will be made by wire or check to
the bank account designated on the authorization form as follows:

1. PAYMENT BY WIRE: Request that Federal Funds be wired to the bank
account designated on the authorization form. Redemption proceeds will
normally be wired on the next business day following receipt of the
redemption request. There is a $7.50 wiring fee (subject to change)
charged by CoreStates Bank, N.A. which will be deducted from the
withdrawal proceeds each time the shareholder requests a redemption from
Class A Shares, Class B Shares and Class C Shares. If the proceeds are
wired to the shareholder's account at a bank which is not a member of
the Federal Reserve System, there could be a delay in the crediting of
the funds to the shareholder's bank account.

2. PAYMENT BY CHECK: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally
be mailed the next business day, but no later than seven days, from the
date of the telephone request. This procedure will take longer than the
Payment by Wire option (1 above) because of the extra time necessary for
the mailing and clearing of the check after the bank receives it.

REDEMPTION REQUIREMENTS: In order to change the name of the bank
and the account number it will be necessary to send a written request to
the relevant Fund and a signature guarantee may be required. Each
signature guarantee must be supplied by an eligible guarantor
institution. The Funds reserve the right to reject a signature guarantee
supplied by an eligible institution based on its creditworthiness.

To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank
account designated on the authorization form.

If expedited payment under these procedures could adversely affect
a Fund, such Fund may take up to seven days to pay the shareholder.

Neither the Funds nor the Funds' Transfer Agent is responsible for
any shareholder loss incurred in acting upon written or telephone
instructions for redemption or exchange of Fund shares which are
reasonably believed to be genuine. With respect to such telephone
transactions, each Fund will follow reasonable procedures to confirm
that instructions communicated by telephone are genuine (including
verification of a form of personal identification) as, if it does not,
such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received
by shareholders of the Fund Classes are generally tape recorded. A
written confirmation will be provided for all purchase, exchange and
redemption transactions initiated by telephone.

SYSTEMATIC WITHDRAWAL PLANS
Shareholders of Class A, Class B and Class C Shares who own or
purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may
establish a Systematic Withdrawal Plan for monthly withdrawals of $25 or
more, or quarterly withdrawals of $75 or more, although the Funds do not
recommend any specific amount of withdrawal. This $5,000 minimum does
not apply for a Fund's prototype retirement plans. Shares purchased with
the initial investment and through reinvestment of cash dividends and
realized securities profits distributions will be credited to the
shareholder's account and sufficient full and fractional shares will be
redeemed at the net asset value calculated on the third business day
preceding the mailing date.

Checks are dated either the 1st or the 15th of the month, as
selected by the shareholder (unless such date falls on a holiday or a
weekend), and are normally mailed within two business days. Both
ordinary income dividends and realized securities profits distributions
will be automatically reinvested in additional shares of the Class at
net asset value. This plan is not recommended for all investors and
should be started only after careful consideration of its operation and
effect upon the investor's savings and investment program. To the extent
that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the
plan, the withdrawal payments will represent a return of capital and the
share balance may, in time, be depleted, particularly in a declining
market.

The sale of shares for withdrawal payments constitutes a taxable
event and a shareholder may incur a capital gain or loss for federal
income tax purposes. This gain or loss may be long-term or short-term
depending on the holding period for the specific shares liquidated.
Premature withdrawals from retirement plans may have adverse tax
consequences.

Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases
of Class A Shares through a periodic investment program in a fund
managed by the Manager must be terminated before a Systematic Withdrawal
Plan with respect to such shares can take effect, except if the
shareholder is a participant in one of our retirement plans or is
investing in Delaware Investments funds which do not carry a sales
charge. Redemptions of Class A Shares pursuant to a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the purchase was
made at net asset value and a dealer's commission has been paid on that
purchase. Redemptions of Class B Shares or Class C Shares pursuant to a
Systematic Withdrawal Plan may be subject to a CDSC, unless the annual
amount selected to be withdrawn is less than 12% of the account balance
on the date that the Systematic Withdrawal Plan was established. See
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares
and Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
under Redemption and Exchange in the Prospectuses for the Fund Classes.
Shareholders should consult their financial advisers to determine
whether a Systematic Withdrawal Plan would be suitable for them.

An investor wishing to start a Systematic Withdrawal Plan must
complete an authorization form. If the recipient of Systematic
Withdrawal Plan payments is other than the registered shareholder, the
shareholder's signature on this authorization must be guaranteed. Each
signature guarantee must be supplied by an eligible guarantor
institution. The Funds reserve the right to reject a signature guarantee
supplied by an eligible institution based on its creditworthiness. This
plan may be terminated by the shareholder or the Transfer Agent at any
time by giving written notice.

The Systematic Withdrawal Plan is not available for the
Institutional Classes.

DISTRIBUTIONS AND TAXES

Aggressive Growth Fund and Growth Stock Fund have qualified, and
intend to continue to qualify, as regulated investment companies under
Subchapter M of the Code. Tax-Efficient Equity Fund intends to qualify
as a regulated investment company under Subchapter M of the Code. As
such, a Fund will not be subject to federal income tax on net investment
income and net realized capital gains which are distributed to
shareholders.

Each Class of shares of a Fund will share proportionately in the
investment income and expenses of the Fund, except that Class A Shares,
Class B Shares and Class C Shares alone will incur distribution fees
under their respective 12b-1 Plans.

Mutual Funds III, Inc. currently intends to make annual
payments from each Fund's net investment income. Distributions of net
capital gains, if any, realized on sales of investments will be
distributed annually during the quarter following the close of the
fiscal year.

All dividends and any capital gains distributions will be
automatically credited to the shareholder's account in additional shares
of the same Class unless, in the case of shareholders in the Fund
Classes, the shareholder requests in writing that such dividends and/or
distributions be paid in cash. Dividend payments of $1.00 or less will
be automatically reinvested, notwithstanding a shareholder's election to
receive dividends in cash. If such a shareholder's dividends increase to
greater than $1.00, the shareholder would have to file a new election in
order to begin receiving dividends in cash again.

Any check in payment of dividends or other distributions which
cannot be delivered by the United States Post Office or which remains
uncashed for a period of more than one year may be reinvested in the
shareholder's account at the then-current net asset value and the
dividend option may be changed from cash to reinvest. A Fund may deduct
from a shareholder's account the costs of the Fund's effort to locate a
shareholder if a shareholder's mail is returned by the Post Office or
the Fund is otherwise unable to locate the shareholder or verify the
shareholder's mailing address. These costs may include a percentage of
the account when a search company charges a percentage fee in exchange
for their location services.

Persons not subject to tax will not be required to pay taxes on
distributions.

Dividends from investment income and short-term capital gains
distributions are treated by shareholders as ordinary income for federal
income tax purposes, whether received in cash or in additional shares.
Distributions of long-term capital gains, if any, are taxable to
shareholders as long-term capital gains, regardless of the length of
time an investor has held such shares, and these gains are currently
taxed at long-term capital gain rates described below. The tax status of
dividends and distributions paid to shareholders will not be affected by
whether they are paid in cash or in additional shares. The Fund is
treated as a single tax entity and capital gains for the Fund will be
calculated separately from the other funds of Mutual Funds III, Inc..

Under the Taxpayer Relief act of 1997 (the "1997 Act"), the Fund is
required to track its sales of portfolio securities and to report its
capital gain distributions to you according to the following categories
of holding periods:

"MID-TERM CAPITAL GAINS" OR "28 PERCENT RATE GAIN": securities sold by
the Fund after July 28, 1997 that were held more than one year but not
more than 18 months. These gains will be taxable to individual investors
at a maximum rate of 28%.

"1997 ACT LONG-TERM CAPITAL GAINS" OR "20 PERCENT RATE GAIN":
securities sold by the Fund between May 7, 1997 and July 28, 1997 that
were held for more than 12 months, and securities sold by the Fund after
July 28, 1997 that were held for more than 18 months. These gains will
be taxable to individual investors at a maximum rate of 20% for
investors in the 28% or higher federal income tax brackets, and at a
maximum rate of 10% for investors in the 15% federal income tax bracket.

"QUALIFIED 5-YEAR GAINS": For individuals in the 15% bracket, qualified
5-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individuals who are subject
to tax at higher rate brackets, qualified 5-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than 5 years. Taxpayers subject to tax at a higher rate brackets
may also make an election for shares held on January 1, 2001 to
recognize gain on their shares (any loss is disallowed) in order to
qualify such shares as qualified 5-year property as though purchased
after December 31, 2000. These gains will be taxable to individual
investors at a maximum rate of 18% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 8% for investors
in the 15% federal income tax bracket when sold after the 5 year holding
period.

A portion of the Fund's dividends may qualify for the dividends-
received deduction for corporations provided in the federal income tax
law. The portion of dividends paid by the Fund that so qualifies will be
designated each year in a notice mailed to Fund shareholders, and cannot
exceed the gross amount of dividends received by such Fund from domestic
(U.S.) corporations that would have qualified for the dividends-received
deduction in the hands of the Fund if the Fund was a regular
corporation. The availability of the dividends-received deduction is
subject to certain holding period and debt financing restrictions
imposed under the Code on the corporation claiming the deduction. Under
the 1997 Act, the amount that the Fund may designate as eligible for the
dividends-received deduction will be reduced or eliminated if the shares
on which the dividends earned by the Fund were debt-financed or held by
the Fund for less than a 46-day period during a 90-day period beginning
45 days before the ex-dividend date and ending 45 days after the ex-
dividend date. Similarly, if your Fund shares are debt-financed or held
by you for less than a 46-day period during a 90-day period beginning 45
days before the ex-dividend date and ending 45 days after the ex-
dividend date, then the dividends-received deduction for Fund dividends
on your shares may also be reduced or eliminated. Even if designated as
dividends eligible for the dividends-received deduction, all dividends
(including any deducted portion) must be included in your alternative
minimum taxable income calculation. For the fiscal year ended April 30,
1998, 00% of the Aggressive Growth Fund's dividends from net investment
income and 00% of Growth Stock Fund's dividends from net investment
income qualified for the corporate dividends-received deduction.

Shareholders will be notified annually by Mutual Funds III, Inc. as
to the federal income tax status of dividends and distributions paid by
the Fund.

See also Other Tax Requirements under Accounting and Tax Issues.

INVESTMENT MANAGEMENT AGREEMENTS AND SUB-ADVISORY AGREEMENT

The Manager, located at One Commerce Square, Philadelphia, PA
19103, furnishes investment management services to the Funds, subject to
the supervision and direction of Mutual Funds III, Inc.'s Board of
Directors. The Sub-Adviser, located at 90 South Seventh Street, Suite
4400, Minneapolis, MN 55402, serves as a Sub-Adviser to Growth Stock
Fund and is responsible for the day-to-day investment management of the
Fund.

The Manager and its predecessors have been managing the funds in
the Delaware Investments family since 1938. On April 30, 1998, the
Manager and its affiliates within Delaware Investments, including
Delaware International Advisers Ltd., were managing in the aggregate
more than $45 billion in assets in the various institutional or
separately managed (approximately $27,330,570,000) and investment
company (approximately $17,733,730,000) accounts.

Because Lincoln National's acquisition of DFG resulted in a change
of control of Voyageur, Aggressive Growth and Growth Stock Funds'
previous investment advisory agreements with Voyageur were "assigned",
as that term is defined by the Investment Company Act of 1940, and the
previous agreements therefore terminated upon the completion of the
acquisition. The Board of Directors of those Funds unanimously approved
new advisory agreements at a meeting held in person on February 14,
1997, and called for a shareholders meeting to approve the new
agreements. At a meeting held on April 11, 1997, the shareholders of
Aggressive Growth Fund and Growth Stock Fund approved its respective
Investment Management Agreement with the Manager, an indirect wholly-
owned subsidiary of LNC, to become effective after the close of business
on April 30, 1997, the date the acquisition was completed. At that
meeting, shareholders of Voyageur Growth Stock Fund also approved a Sub-
Advisory Agreement between the Manager and the Sub-Adviser to take
effect at the same time as the Investment Management Agreement.

Beginning May 1, 1997, Delaware Management Company became the
Funds' investment manager, and for Growth Stock Fund, Voyageur Asset
Management LLC became the sub-adviser. The Investment Management
Agreement into which each Fund's investment manager has entered and, in
the case of Voyageur Growth Stock Fund, the Sub-Advisory Agreement
between the Manager and the Sub-Adviser, have an initial term of two
years and may be renewed each year only so long as such renewal and
continuance are specifically approved at least annually by the Board of
Directors or by vote of a majority of the outstanding voting securities
of the Fund to which the Agreement relates, and only if the terms and
the renewal thereof have been approved by the vote of a majority of the
directors of Mutual Funds III, Inc. who are not parties thereto or
interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval. Each Agreement is terminable
without penalty on 60 days' notice by the directors of Mutual Funds III,
Inc. or by the Manager. Each Agreement will terminate automatically in
the event of its assignment.

Under their respective Investment Management Agreements, Aggressive
Growth Fund and Growth Stock Fund each pay the Manager a monthly
investment advisory fee equivalent on an annual basis to 1.00% of their
average daily net assets. Under Tax-Efficient Equity Fund's Investment
Management Agreement, the Fund pays the Manager a monthly investment
advisory fee equivalent on an annual basis to 0.75% on the first $500
million, 0.725% on the next $500 million and 0.70% on the average daily
net assets in excess of $1 billion.

Beginning June 9, 1997, the Manager elected voluntarily to waive
that portion, if any, of the annual management fees payable by a Fund
and to pay certain expenses of that Fund to the extent necessary to
ensure that the Total Operating Expenses of Class A Shares, Class B
Shares, Class C Shares and Institutional Class shares of the Fund
(exclusive of taxes, interest, brokerage commissions, extraordinary
expenses but including 12b-1 fees, as applicable) do not exceed, on an
annual basis, the amounts noted below through December 31, 1998:

Institutional
Class A Class B Class C Class

Aggressive Growth Fund 1.75% 2.50% 2.50% 1.50%
Growth Stock Fund 1.75% 2.50% 2.50% 1.50%
Tax-Efficient Equity Fund 1.50% 2.20% 2.20% 1.20%

Pursuant to the terms of a Sub-Advisory Agreement with the Manager,
the Sub-Adviser participates in the management of Growth Stock Fund's
assets, is responsible for day-to-day investment management of the Fund,
makes investment decisions for the Fund in accordance with the Fund's
investment objectives and stated policies and places orders on behalf of
the Fund to effect the investment decisions made. The Manager continues
to have ultimate responsibility for all investment advisory services in
connection with the management of the Fund pursuant to the Investment
Management Agreement and supervises the Sub-Adviser's performance of
such services. For the services provided to the Manager, the Manager
pays the Sub-Adviser an annual sub-advisory fee equal to 0.50% of Growth
Stock Fund's average daily net assets.

On April 30, 1998, the total net assets of the Funds were as
follows:

Aggressive Growth Fund - $56,747,645
Growth Stock Fund - $45,009,609
Tax-Efficient Fund were $24,307,561.

Investment management fees incurred for the last three fiscal years
with respect to each Fund follows. Prior to May 1, 1997 fees were paid
to the Funds' previous investment manager, Voyageur Fund Managers, Inc.

FUND APRIL 30, 1998 APRIL 30, 1997 APRIL 30, 1996
<S> <C> <C> <C>
Aggressive Growth Fund $155,146 earned $56,982 earned $34,256 incurred
$71,189 paid $10,532 paid $9,256 paid
$83,957 waived $46,450 waived $25,000 waived

Growth Stock Fund $412,380 earned $332,347 incurred $222,957 incurred
$378,549 paid $332,347 paid $197,957 paid
$33,831 waived $-0- waived $25,000 waived

Tax-Efficient Equity
Fund(1) $54,805 earned N/A N/A
$17,083 paid N/A N/A
$37,772 waived N/A N/A

(1) Date of initial public offering was June 27, 1997.

</TABLE>

Under the general supervision of the Board of Directors, the Manager
makes and executes all investment decisions for the Funds. The Manager
pays the salaries of all directors, officers and employees of Mutual
Funds III, Inc. who are affiliated with the Manager. Each Fund pays all
of its other expenses.

DISTRIBUTION AND SERVICE
The Distributor, Delaware Distributors, L.P., located at 1818
Market Street, Philadelphia, PA 19103, serves as the national
distributor of each Fund's shares under separate a Distribution
Agreement dated April 30, 1997 for Aggressive Growth Fund and Growth
Stock Fund and June 26, 1997 for Tax-Efficient Equity Fund. The
Distributor is an affiliate of the Manager and bears all of the costs of
promotion and distribution, except for payments by the Funds on behalf
of Class A, Class B and Class C Shares under their respective 12b-1
Plans. The Distributor is an indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc.

The Transfer Agent, Delaware Service Company, Inc., another
affiliate of the Manager located at 1818 Market Street, Philadelphia, PA
19103, serves as the Funds' shareholder servicing, dividend disbursing
and transfer agent pursuant to an Amended and Restated Shareholders
Services Agreement dated as of June 26, 1997. The Transfer Agent also
provides accounting services to the Funds pursuant to the terms of a
separate Fund Accounting Agreement. The Transfer Agent is also an
indirect, wholly owned subsidiary of Delaware Management Holdings, Inc.

The Funds have authorized one or more brokers to accept on their
behalf purchase and redemption orders in addition to the Transfer Agent.
Such brokers are authorized to designate other intermediaries to accept
purchase and redemption orders on the behalf of the Funds. For purposes
of pricing, the Funds will be deemed to have received a purchase or
redemption order when an authorized broker or, if applicable, a broker's
authorized designee, accepts the order. Investors may be charged a fee
when effecting transactions through a broker or agent.

OFFICERS AND DIRECTORS

The business and affairs of Mutual Funds III, Inc. are managed
under the direction of its Board of Directors.

Certain officers and directors of Mutual Funds III, Inc. hold
identical positions in each of the other funds in the Delaware
Investments family. On May 31, 1998, Mutual Funds III, Inc.'s officers
and directors owned less than 1% of the outstanding shares of each Class
of each Fund.

As of May 31, 1998, management believes the following shareholders
held 5% or more of the outstanding shares of a Class:

Class Name and Address of Account Share Amount Percentage
<S> <C> <C> <C>

Aggressive Merrill Lynch, Pierce, Fenner & Smith 271,592 13.52%
Growth Fund For the Sole Benefit of its Customers
A Class Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246

Aggressive Merrill Lynch, Pierce, Fenner & Smith 234,729 20.13%
Growth Fund For the Sole Benefit of its Customers
B Class Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246

Aggressive Merrill Lynch, Pierce, Fenner & Smith 163,981 43.24%
Growth Fund For the Sole Benefit of its Customers
C Class Attn: Fund Administration
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246

Aggressive RS DMC Employee Profit Sharing Plan 99,522 88.78%
Growth Fund Delaware Management Company P/S Trust
Institutional c/o Rick Seidel
Class 1818 Market Street
Philadelphia, PA 19103

Growth Stock Merrill Lynch, Pierce, Fenner & Smith 6,414 9.84%
Fund For the Sole Benefit of its Customers
B Class Attn: Fund Administration
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246

Growth Stock Merrill Lynch, Pierce, Fenner & Smith 6,706 17.41%
Fund For the Sole Benefit of its Customers
C Class Attn: Fund Administration

4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246

Emery Jahnke 3,703 9.61%
Ann Jahnke JT TEN
2402 Lilac Lane
Fargo, ND 58102

Growth Stock RS DMTC P/S Plan 24,592 98.58%
Fund Columbia Diagnostics Inc. P/S Class
Institutional Attn: Retirement Plans
Class 1818 Market Street
Philadelphia, PA 19103

Tax-Efficient Merrill Lynch, Pierce, Fenner & Smith 81,668 8.77%
Equity Fund For the Sole Benefit of its Customers
B Class Attention: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246

Tax-Efficient Merrill Lynch, Pierce, Fenner & Smith 49,068 16.30%
Equity Fund For the Sole Benefit of its Customers
C Class Attention: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246

Donaldson Lufkin Jenrette 35,884 11.92%
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303

Donaldson Lufkin Jenrette 16,532 5.49%
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303

Tax-Efficient Delaware Management Business
Equity Fund Trust-DIA 1.0 100.00%
Institutional Attn: Joseph H. Hastings
Class 1818 Market Street, 17th Floor
Philadelphia, PA 19103

</TABLE>

DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust),
Delaware Management Company, Inc. , Delaware Investment Advisers (a
series of Delaware Management Business Trust), Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Management Trust Company, Delaware International Holdings Ltd.,
Founders Holdings, Inc., Delaware International Advisers Ltd., Delaware
Capital Management, Inc. and Delaware Investment & Retirement Services,
Inc. are direct or indirect, wholly owned subsidiaries of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National was completed. DMH
and the Manager are indirect, wholly owned subsidiaries, and subject to
the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.

As noted under Investment Management Agreements and Sub-Advisory
Agreement, after the close of business on April 30, 1997, Voyageur
became an indirect, wholly owned subsidiary of Lincoln National as a
result of Lincoln National's acquisition of DFG.

Directors and principal officers of Mutual Funds III, Inc. are
noted below along with their ages and their business experience for the
past five years. Unless otherwise noted, the address of each officer and
director is One Commerce Square, Philadelphia, PA 19103.

*WAYNE A. STORK (60)

Chairman and Director and/or Trustee of Mutual Funds III, Inc., 33 other
investment companies in the Delaware Investments family and Delaware
Capital Management, Inc.

Chairman, President, Chief Executive Officer and Director of DMH Corp.,
Delaware Distributors, Inc.and Founders Holdings, Inc.

Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director/Trustee of Delaware Management Company, Inc. and Delaware
Management Business Trust

Chairman, President, Chief Executive Officer and Chief Investment
Officer of Delaware Management Company (a series of Delaware Management
Business Trust)

Chairman, Chief Executive Officer and Chief Investment Officer of
Delaware Investment Advisers (a series of Delaware Management Business
Trust)

Chairman, Chief Executive Officer and Director of Delaware International
Advisers Ltd., Delaware International Holdings Ltd. and Delaware
Management Holdings, Inc.

President and Chief Executive Officer of Delvoy, Inc.

Chairman of Delaware Distributors, L.P.

Director of Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.

During the past five years, Mr. Stork has served in various executive
capacities at different times within
the Delaware organization.

- -----------------------------
*Director affiliated with the Funds' investment manager and considered
an "interested person" as defined in the 1940 Act.

*JEFFREY J. NICK (45)

President, Chief Executive Officer and Director of Mutual Funds III,
Inc. and 33 other investment companies in the Delaware Investments
family

President and Director of Delaware Management Holdings, Inc.

President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc.

President of Lincoln Funds Corporation

Director of Delaware International Advisers Ltd.

From 1992 to 1996, Mr. Nick was Managing Director of Lincoln National UK
plc and from 1989 to 1992, he was Senior Vice President responsible for
corporate planning and development for Lincoln National
Corporation.

RICHARD G. UNRUH, JR. (58)

Executive Vice President of Mutual Funds III, Inc., 33 other investment
companies in the Delaware Investments family, Delaware Management
Holdings, Inc., Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware Capital Management, Inc.

President of Delaware Investment Advisers (a series of Delaware
Management Business Trust)

Executive Vice President and Director/Trustee of Delaware Management
Company, Inc. and Delaware Management Business Trust

Director of Delaware International Advisers Ltd.

During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.

PAUL E. SUCKOW (50)

Executive Vice President/Chief Investment Officer, Fixed Income of
Mutual Funds III, Inc., 33 other investment companies in the Delaware
Investments family, Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business
Trust) and Delaware Management Holdings, Inc.

Executive Vice President and Director of Founders Holdings, Inc.

Executive Vice President of Delaware Capital Management, Inc. and
Delaware Management Business Trust

Director of Founders CBO Corporation

Director of HYPPCO Finance Company Ltd.

Before returning to Delaware Investments in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for Oppenheimer
Management Corporation, New York, NY from 1985 to 1992. Prior to that,
Mr. Suckow was a fixed-income portfolio manager for Delaware
Investments.

- ---------------------------
*Director affiliated with the Funds' investment manager and considered
an "interested person" as defined in the 1940 Act.

DAVID K. DOWNES (58)

Executive Vice President, Chief Operating Officer, Chief Financial
Officer of Mutual Funds III, Inc., 33 other investment companies in the
Delaware Investments family, Delaware Management Holdings, Inc.,
Founders CBO Corporation, Delaware Capital Management, Inc., Delaware
Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business
Trust) and Delaware Distributors, L.P.

Executive Vice President, Chief Financial Officer, Chief Administrative
Officer and Trustee of Delaware Management Business Trust

Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Founders Holdings, Inc. and Delvoy, Inc.

President, Chief Executive Officer, Chief Financial Officer and Director
of Delaware Service Company, Inc.

President, Chief Operating Officer, Chief Financial Officer and Director
of Delaware International Holdings Ltd.

Chairman, Chief Executive Officer and Director of Delaware Management
Trust Company and Delaware Investment & Retirement Services, Inc.

Director of Delaware International Advisers Ltd.

Vice President of Lincoln Funds Corporation

During the past five years, Mr. Downes has served in various executive
capacities at different times within the Delaware organization.

WALTER P. BABICH (70)

Director and/or Trustee of Mutual Funds III, Inc. and 33 other
investment companies in the Delaware Investments family.

460 North Gulph Road, King of Prussia, PA 19406

Board Chairman, Citadel Constructors, Inc.

From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from
1988 to 1991, he was a partner of I&L Investors.

ANTHONY D. KNERR (59)

Director and/or Trustee of Mutual Funds III, Inc. and 33 other
investment companies in the Delaware Investments family.

500 Fifth Avenue, New York, NY 10110

Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was
also a lecturer in English at the University. In addition, Mr. Knerr was
Chairman of The Publishing Group, Inc., New York, from 1988 to 1990. Mr.
Knerr founded The Publishing Group, Inc. in 1988.

ANN R. LEVEN (57)

Director and/or Trustee of Mutual Funds III, Inc. and 33 other
investment companies in the Delaware Investments family.

785 Park Avenue, New York, NY 10021

Treasurer, National Gallery of Art

From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of
the Smithsonian Institution, Washington, DC, and from 1975 to 1992, she
was Adjunct Professor of Columbia Business School.

W. THACHER LONGSTRETH (77)

Director and/or Trustee of Mutual Funds III, Inc. and 33 other
investment companies in the Delaware Investments family.

City Hall, Philadelphia, PA 19107
Philadelphia City Councilman.

THOMAS F. MADISON (62)

Director and/or Trustee of Mutual Funds III, Inc. and 33 other
investment companies in the Delaware Investments family.

200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402

President and Chief Executive Officer, MLM Partners, Inc.

Mr. Madison has also been Chairman of the Board of Communications
Holdings, Inc. since 1996. From February to September 1994, Mr. Madison
served as Vice Chairman--Office of the CEO of The Minnesota Mutual Life
Insurance Company and from 1988 to 1993, he was President of U.S. WEST
Communications--Markets.

CHARLES E. PECK (72)

Director and/or Trustee of Mutual Funds III, Inc. and 33 other
investment companies in the Delaware Investments family.

P.O. Box 1102, Columbia, MD 21044

Secretary/Treasurer, Enterprise Homes, Inc.

From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of
The Ryland Group, Inc., Columbia, MD.

GEORGE M. CHAMBERLAIN, JR. (51)

Senior Vice President, Secretary and General Counsel of Mutual Funds
III, Inc., 33 other investment companies in the Delaware Investments
family, Delaware Distributors, L.P., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust) and
Delaware Management Holdings, Inc.

Senior Vice President, Secretary, General Counsel and Director/Trustee
of DMH Corp., Delaware Management Company, Inc., Delaware Distributors,
Inc., Delaware Service Company, Inc., Founders Holdings, Inc., Delaware
Investment & Retirement Services, Inc., Delaware Capital Management,
Inc., Delvoy, Inc. and Delaware Management Business Trust

Executive Vice President, Secretary, General Counsel and Director of
Delaware Management Trust Company

Senior Vice President and Director of Delaware International Holdings
Ltd.

Director of Delaware International Advisers Ltd.

Secretary of Lincoln Funds Corporation

Attorney.

During the past five years, Mr. Chamberlain has served in various
executive capacities at different times within the Delaware
organization.

JOSEPH H. HASTINGS (48)

Senior Vice President/Corporate Controller of Mutual Funds III, Inc., 33
other investment companies in the Delaware Investments family and
Founders Holdings, Inc.

Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc.,DMH Corp., Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Capital Management, Inc.,
Delaware International Holdings Ltd., Delvoy, Inc. and Delaware
Management Business Trust

Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.

Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company

Senior Vice President/Assistant Treasurer of Founders CBO Corporation

Treasurer of Lincoln Funds Corporation

During the past five years, Mr. Hastings has served in various executive
capacities at different times within the Delaware organization.

MICHAEL P. BISHOF (35)

Senior Vice President/Treasurer of Mutual Funds III, Inc., 33 other
investment companies in the Delaware Investments family and Founders
Holdings, Inc.

Senior Vice President/Investment Accounting of Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware Service Company, Inc.

Senior Vice President and Treasurer/Manager of Investment Accounting of
Delaware Distributors, L.P. and Delaware Investment Advisers (a series
of Delaware Management Business Trust)

Senior Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.

Assistant Treasurer of Founders CBO Corporation

Before joining Delaware Investments in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a Vice
President for CS First Boston Investment Management, New York, NY from
1993 to 1994 and an Assistant Vice President for Equitable Capital
Management Corporation, New York, NY from 1987 to 1993.

GERALD S. FREY (52)

Vice President/Senior Portfolio Manager of the Funds, of seven other
investment companies in the Delaware Investments family, Delaware
Management Company (a series of Delaware Management Business Trust) and
Delaware Management Company, Inc.

Before joining Delaware Investments in 1996, Mr. Frey was a Senior
Director with Morgan Grenfell Capital Management, New York, NY from
1986-1995.

GEORGE H BURWELL (36)

Before joining Delaware Investments in 1992, Mr. Burwell was a portfolio
manager for Midlantic Bank,New Jersey. In addition, he was a security
analyst for Balis & Zorn, New York and for First Fidelity Bank, New
Jersey.

The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received
from the Mutual Funds III, Inc. and the total compensation received from
all investment companies in the Delaware Investments family for which he
or she serves as a director or trustee for the fiscal year ended April
30, 1998 and an estimate of annual benefits to be received upon
retirement under the Delaware Group Retirement Plan for
Directors/Trustees as of April 30, 1998. Only the independent
directors/trustees of the Fund receive compensation from the Fund.

Pension or Total Compensation
Retirement Estimated from the
Aggregate Benefits Annual Investment
Compensation Accrued as Benefits Companies in
from the Part of Fund Upon Delaware
Name Mutual Funds III, Inc. Expenses Retirement(1) Investments(2)
<S> <C> <C> <C> <C>
W. Thacher Longstreth $880 None $38,500 $62,618
Ann R. Leven $898 None $38,500 $68,561
Walter P. Babich $895 None $38,500 $67,285
Anthony D. Knerr $895 None $38,500 $67,285
Charles E. Peck $785 None $38,500 $59,473
Thomas F. Madison $880 None $38,500 $62,618

</TABLE>

(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time
of his or her retirement from the Board, has attained the age of 70 and
served on the Board for at least five continuous years, is entitled to
receive payments from each investment company in the Delaware
Investments family for which he or she serves as a director or trustee
for a period equal to the lesser of the number of years that such person
served as a director or trustee or the remainder of such person's life.
The amount of such payments will be equal, on an annual basis, to the
amount of the annual retainer that is paid to directors/trustees of each
investment company at the time of such person's retirement. If an
eligible director/trustee retired as of April 30, 1998, he or she would
be entitled to annual payments totaling $38,500, in the aggregate, from
all of the investment companies in the Delaware Investments family for
which he or she served as director or trustee, based on the number of
investment companies in the Delaware Investments family as of that date.

(2) Each independent director currently receives a total annual retainer
fee of $38,500 for serving as a director or trustee for all 34
investment companies in Delaware Investments, plus $3,145 for each Board
Meeting attended. Ann R. Leven, Walter P. Babich, and Anthony D. Knerr
serve on the Fund's audit committee; Ms. Leven is the chairperson.
Members of the audit committee currently receive additional annual
compensation of $5,000 from all investment companies, in the aggregate,
with the exception of the chairperson, who receives $6,000.

EXCHANGE PRIVILEGE

The exchange privileges available for shareholders of the Classes
and for shareholders of classes of other funds in the Delaware
Investments family are set forth in the relevant prospectuses for such
classes. The following supplements that information. Each Fund may
modify, terminate or suspend the exchange privilege upon 60 days' notice
to shareholders.

All exchanges involve a purchase of shares of the fund into which
the exchange is made. As with any purchase, an investor should obtain
and carefully read that fund's prospectus before buying shares in an
exchange. The prospectus contains more complete information about the
fund, including charges and expenses. A shareholder requesting an
exchange will be sent a current prospectus and an authorization form for
any of the other mutual funds in the Delaware Investments family.
Exchange instructions must be signed by the record owner(s) exactly as
the shares are registered.

An exchange constitutes, for tax purposes, the sale of one fund and
the purchase of another. The sale may involve either a capital gain or
loss to the shareholder for federal income tax purposes.

In addition, investment advisers and dealers may make exchanges
between funds in the Delaware Investments family on behalf of their
clients by telephone or other expedited means. This service may be
discontinued or revised at any time by the Transfer Agent. Such exchange
requests may be rejected if it is determined that a particular request
or the total requests at any time could have an adverse effect on any of
the funds. Requests for expedited exchanges may be submitted with a
properly completed exchange authorization form, as described above.

TELEPHONE EXCHANGE PRIVILEGE

Shareholders owning shares for which certificates have not been
issued or their investment dealers of record may exchange shares by
telephone for shares in other mutual funds in the Delaware Investments
family. This service is automatically provided unless the relevant Fund
receives written notice from the shareholder to the contrary.

Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523-1918 or, in the case of
shareholders of the Institutional Classes, their Client Services
Representative at 800-828-5052, to effect an exchange. The shareholder's
current Fund account number must be identified, as well as the
registration of the account, the share or dollar amount to be exchanged
and the fund into which the exchange is to be made. Requests received on
any day after the time the offering price and net asset value are
determined will be processed the following day. See Determining Offering
Price and Net Asset Value. Any new account established through the
exchange will automatically carry the same registration, shareholder
information and dividend option as the account from which the shares
were exchanged. The exchange requirements of the fund into which the
exchange is being made, such as sales charges, eligibility and
investment minimums, must be met. (See the prospectus of the fund
desired or inquire by calling the Transfer Agent or, as relevant, your
Client Services Representative.) Certain funds are not available for
retirement plans.

The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-
term swings in the securities market through frequent transactions in
and out of the funds in the Delaware Investments family. Telephone
exchanges may be subject to limitations as to amounts or frequency. The
Transfer Agent and each Fund reserve the right to record exchange
instructions received by telephone and to reject exchange requests at
any time in the future.

As described in the Funds' Prospectuses, neither the Funds nor the
Transfer Agent is responsible for any shareholder loss incurred in
acting upon written or telephone instructions for redemption or exchange
of Fund shares which are reasonably believed to be genuine.

RIGHT TO REFUSE TIMING ACCOUNTS

With regard to accounts that are administered by market timing
services ("Timing Firms") to purchase or redeem shares based on changing
economic and market conditions ("Timing Accounts"), each Fund will
refuse any new timing arrangements, as well as any new purchases (as
opposed to exchanges) in funds in the Delaware Investments family from
Timing Firms. Each Fund reserves the right to temporarily or permanently
terminate the exchange privilege or reject any specific purchase order
for any person whose transactions seem to follow a timing pattern who:
(i) makes an exchange request out of the Fund within two weeks of an
earlier exchange request out of the Fund, or (ii) makes more than two
exchanges out of the Fund per calendar quarter, or (iii) exchanges
shares equal in value to at least $5 million, or more than 1/4 of 1% of
the Fund's net assets. Accounts under common ownership or control,
including accounts administered so as to redeem or purchase shares based
upon certain predetermined market indicators, will be aggregated for
purposes of the exchange limits.

RESTRICTIONS ON TIMED EXCHANGES

Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight funds in the Delaware
Investments family: (1) Decatur Income Fund, (2) Decatur Total Return
Fund, (3) Delaware Fund, (4) Limited-Term Government Fund, (5) Tax-Free
USA Fund, (6) Delaware Cash Reserve, (7) Delchester Fund and (8) Tax-
Free Pennsylvania Fund. No other funds in the Delaware Investments
family are available for timed exchanges. Assets redeemed or exchanged
out of Timing Accounts in Delaware Investments funds not listed above
may not be reinvested back into that Timing Account. Each Fund reserves
the right to apply these same restrictions to the account(s) of any
person whose transactions seem to follow a timing pattern (as described
above).

Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the
Manager's judgment, the Fund would be unable to invest effectively in
accordance with its investment objectives and policies, or would
otherwise potentially be adversely affected. A shareholder's purchase
exchanges may be restricted or refused if a Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's assets.
In particular, a pattern of exchanges that coincide with a "market
timing" strategy may be disruptive to a Fund and therefore may be
refused.

Except as noted above, only shareholders and their authorized
brokers of record will be permitted to make exchanges or redemptions.

* * *

Following is a summary of the investment objectives of the other
funds in the Delaware Investments family:

DELAWARE FUND seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-
oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and
capital growth. Devon Fund seeks current income and capital appreciation
by investing primarily in income-producing common stocks, with a focus
on common stocks the Manager believes have the potential for above
average dividend increases over time.

TREND FUND seeks long-term growth by investing in common stocks
issued by emerging growth companies exhibiting strong capital
appreciation potential.

SMALL CAP VALUE FUND seeks capital appreciation by investing
primarily in common stocks whose market values appear low relative to
their underlying value or future potential.

DELCAP FUND seeks long-term capital growth by investing in common
stocks and securities convertible into common stocks of companies that
have a demonstrated history of growth and have the potential to support
continued growth.

DELCHESTER FUND seeks as high a current income as possible by
investing principally in high-yield, high risk corporate bonds, and also
in U.S. government securities and commercial paper. STRATEGIC INCOME
FUND seeks to provide investors with high current income and total
return by using a multi-sector investment approach, investing
principally in three sectors of the fixed-income securities markets:
high-yield, higher risk securities, investment grade fixed-income
securities and foreign government and other foreign fixed-income
securities. HIGH-YIELD OPPORTUNITIES FUND seeks to provide investors
with total return and, as a secondary objective, high current income.

U.S. GOVERNMENT FUND seeks high current income by investing
primarily in long-term debt obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.

LIMITED-TERM GOVERNMENT FUND seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities and instruments secured by such securities. U.S.
GOVERNMENT MONEY FUND seeks maximum current income with preservation of
principal and maintenance of liquidity by investing only in short-term
securities issued or guaranteed as to principal and interest by the U.S.
government, its agencies or instrumentalities, and repurchase agreements
collateralized by such securities, while maintaining a stable net asset
value.

DELAWARE CASH RESERVE seeks the highest level of income consistent
with the preservation of capital and liquidity through investments in
short-term money market instruments, while maintaining a stable net
asset value.

TAX-FREE USA FUND seeks high current income exempt from federal
income tax by investing in municipal bonds of geographically-diverse
issuers. TAX-FREE INSURED FUND invests in these same types of securities
but with an emphasis on municipal bonds protected by insurance
guaranteeing principal and interest are paid when due. TAX-FREE USA
INTERMEDIATE FUND seeks a high level of current interest income exempt
from federal income tax, consistent with the preservation of capital by
investing primarily in municipal bonds.

TAX-FREE MONEY FUND seeks high current income, exempt from federal
income tax, by investing in short- term municipal obligations, while
maintaining a stable net asset value.

TAX-FREE NEW JERSEY FUND seeks a high level of current interest
income exempt from federal income tax and New Jersey state and local
taxes, consistent with preservation of capital. TAX-FREE OHIO FUND seeks
a high level of current interest income exempt from federal income tax
and Ohio state and local taxes, consistent with preservation of capital.
TAX-FREE PENNSYLVANIA FUND seeks a high level of current interest income
exempt from federal and, to the extent possible, certain Pennsylvania
state and local taxes, consistent with the preservation of capital.

INTERNATIONAL EQUITY FUND seeks to achieve long-term growth without
undue risk to principal by investing primarily in international
securities that provide the potential for capital appreciation and
income. GLOBAL BOND FUND seeks to achieve current income consistent with
the preservation of principal by investing primarily in global fixed-
income securities that may also provide the potential for capital
appreciation. GLOBAL ASSETS FUND seeks to achieve long-term total return
by investing in global securities which will provide higher current
income than a portfolio comprised exclusively of equity securities,
along with the potential for capital growth. EMERGING MARKETS FUND seeks
long-term capital appreciation by investing primarily in equity
securities of issuers located or operating in emerging countries.

U.S. GROWTH FUND seeks to maximize capital appreciation by
investing in companies of all sizes which have low dividend yields,
strong balance sheets and high expected earnings growth rates relative
to their industry. OVERSEAS EQUITY FUND seeks to maximize total return
(capital appreciation and income), principally through investments in an
internationally diversified portfolio of equity securities. NEW PACIFIC
FUND seeks long-term capital appreciation by investing primarily in
companies which are domiciled in or have their principal business
activities in the Pacific Basin.

FOUNDATION FUNDS are "fund of funds" which invest in other funds in
the Delaware Investments family (referred to as "Underlying Funds").
FOUNDATION FUNDS INCOME PORTFOLIO seeks a combination of current income
and preservation of capital with capital appreciation by investing in
primarily a mix of fixed income and domestic equity securities,
including fixed income and domestic equity Underlying Funds. FOUNDATION
FUNDS BALANCED PORTFOLIO seeks capital appreciation with current income
as a secondary objective by investing primarily in domestic equity and
fixed income securities, including domestic equity and fixed income
Underlying Funds. FOUNDATION FUNDS GROWTH PORTFOLIO seeks long term
capital growth by investing primarily in equity securities, including
equity Underlying Funds, and, to a lesser extent, in fixed income
securities, including fixed-income Underlying Funds.

DELAWARE GROUP PREMIUM FUND, INC. offers 16 funds available
exclusively as funding vehicles for certain insurance company separate
accounts. DECATUR TOTAL RETURN SERIES seeks the highest possible total
rate of return by selecting issues that exhibit the potential for
capital appreciation while providing higher than average dividend
income. Delchester Series seeks as high a current income as possible by
investing in rated and unrated corporate bonds, U.S. government
securities and commercial paper. CAPITAL RESERVES SERIES seeks a high
stable level of current income while minimizing fluctuations in
principal by investing in a diversified portfolio of short- and
intermediate-term securities. CASH RESERVE SERIES seeks the highest
level of income consistent with preservation of capital and liquidity
through investments in short-term money market instruments. DELCAP
SERIES seeks long-term capital appreciation by investing its assets in a
diversified portfolio of securities exhibiting the potential for
significant growth. DELAWARE SERIES seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-
oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and
capital growth. INTERNATIONAL EQUITY SERIES seeks long-term growth
without undue risk to principal by investing primarily in equity
securities of foreign issuers that provide the potential for capital
appreciation and income. SMALL CAP VALUE SERIES seeks capital
appreciation by investing primarily in small-cap common stocks whose
market values appear low relative to their underlying value or future
earnings and growth potential. Emphasis will also be placed on
securities of companies that may be temporarily out of favor or whose
value is not yet recognized by the market. TREND SERIES seeks long-term
capital appreciation by investing primarily in small-cap common stocks
and convertible securities of emerging and other growth-oriented
companies. These securities will have been judged to be responsive to
changes in the market place and to have fundamental characteristics to
support growth. Income is not an objective. GLOBAL BOND SERIES seeks to
achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. STRATEGIC INCOME SERIES
seeks high current income and total return by using a multi-sector
investment approach, investing primarily in three sectors of the fixed-
income securities markets: high-yield, higher risk securities;
investment grade fixed-income securities; and foreign government and
other foreign fixed-income securities. DEVON SERIES seeks current income
and capital appreciation by investing primarily in income-producing
common stocks, with a focus on common stocks that the investment manager
believes have the potential for above-average dividend increases over
time. EMERGING MARKETS SERIES seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers
located or operating in emerging countries. CONVERTIBLE SECURITIES
SERIES seeks a high level of total return on its assets through a
combination of capital appreciation and current income by investing
primarily in convertible securities. SOCIAL AWARENESS SERIES seeks to
achieve long-term capital appreciation by investing primarily in equity
securities of medium to large-sized companies expected to grow over time
that meet the Series' "Social Criteria" strategy. REIT SERIES seeks to
achieve maximum long-term total return, with capital appreciation as a
secondary objective, by investing in securities of companies primarily
engaged in the real estate industry.

DELAWARE-VOYAGEUR US GOVERNMENT SECURITIES FUND seeks to provide a
high level of current income consistent with the prudent investment risk
by investing in U.S. Treasury bills, notes, bonds, and other obligations
issued or unconditionally guaranteed by the full faith and credit of the
U.S. Treasury, and repurchase agreements fully secured by such
obligations.

DELAWARE-VOYAGEUR TAX-FREE ARIZONA INSURED FUND seeks to provide a
high level of current income exempt from federal income tax and the
Arizona personal income tax, consistent with the preservation of
capital. DELAWARE-VOYAGEUR MINNESOTA INSURED FUND seeks to provide a
high level of current income exempt from federal income tax and the
Minnesota personal income tax, consistent with the preservation of
capital.

DELAWARE-VOYAGEUR TAX-FREE MINNESOTA INTERMEDIATE FUND seeks to
provide a high level of current income exempt from federal income tax
and the Minnesota personal income tax, consistent with preservation of
capital. The Fund seeks to reduce market risk by maintaining an average
weighted maturity from five to ten years.

DELAWARE-VOYAGEUR TAX-FREE CALIFORNIA INSURED FUND seeks to
provide a high level of current income exempt from federal income tax
and the California personal income tax, consistent with the preservation
of capital. DELAWARE-VOYAGEUR TAX-FREE FLORIDA INSURED FUND seeks to
provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund will seek to
select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. DELAWARE-VOYAGEUR TAX-FREE
FLORIDA FUND seeks to provide a high level of current income exempt from
federal income tax, consistent with the preservation of capital. The
Fund will seek to select investments that will enable its shares to be
exempt from the Florida intangible personal property tax. DELAWARE-
VOYAGEUR TAX-FREE KANSAS FUND seeks to provide a high level of current
income exempt from federal income tax, the Kansas personal income tax
and the Kansas Intangible personal property tax, consistent with the
preservation of capital. DELAWARE-VOYAGEUR TAX-FREE MISSOURI INSURED
FUND seeks to provide a high level of current income exempt from federal
income tax and the Missouri personal income tax, consistent with the
preservation of capital. DELAWARE-VOYAGEUR TAX-FREE NEW MEXICO FUND
seeks to provide a high level of current income exempt from federal
income tax and the New Mexico personal income tax, consistent with the
preservation of capital. DELAWARE-VOYAGEUR TAX-FREE OREGON INSURED FUND
seeks to provide a high level of current income exempt from federal
income tax and the Oregon personal income tax, consistent with the
preservation of capital. DELAWARE-VOYAGEUR TAX-FREE UTAH FUND seeks to
provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. DELAWARE-VOYAGEUR TAX-FREE
WASHINGTON INSURED FUND seeks to provide a high level of current income
exempt from federal income tax, consistent with the preservation of
capital.

DELAWARE-VOYAGEUR TAX-FREE FLORIDA INTERMEDIATE FUND seeks to
provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund will seek to
select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. The Fund seeks to reduce
market risk by maintaining an average weighted maturity from five to ten
years.

DELAWARE-VOYAGEUR TAX-FREE ARIZONA FUND seeks to provide a high
level of current income exempt from federal income tax and the Arizona
personal income tax, consistent with the preservation of capital.
DELAWARE-VOYAGEUR TAX-FREE CALIFORNIA FUND seeks to provide a high level
of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital.
DELAWARE-VOYAGEUR TAX-FREE IOWA FUND seeks to provide a high level of
current income exempt from federal income tax and the Iowa personal
income tax, consistent with the preservation of capital. DELAWARE-
VOYAGEUR TAX-FREE IDAHO FUND seeks to provide a high level of current
income exempt from federal income tax and the Idaho personal income tax,
consistent with the preservation of capital. DELAWARE-VOYAGEUR MINNESOTA
HIGH YIELD MUNICIPAL BOND FUND seeks to provide a high level of current
income exempt from federal income tax and the Minnesota personal income
tax primarily through investment in medium and lower grade municipal
obligations. NATIONAL HIGH YIELD MUNICIPAL FUND seeks to provide a high
level of income exempt from federal income tax, primarily through
investment in medium and lower grade municipal obligations. DELAWARE-
VOYAGEUR TAX-FREE NEW YORK FUND seeks to provide a high level of current
income exempt from federal income tax and the personal income tax of the
state of New York and the city of New York, consistent with the
preservation of capital. DELAWARE-VOYAGEUR TAX-FREE WISCONSIN FUND seeks
to provide a high level of current income exempt from federal income tax
and the Wisconsin personal income tax, consistent with the preservation
of capital.

DELAWARE-VOYAGEUR TAX-FREE COLORADO FUND seeks to provide a high
level of current income exempt from federal income tax and the Colorado
personal income tax, consistent with the preservation of capital.

DELAWARE-VOYAGEUR TAX-FREE MINNESOTA FUND seeks to provide a high
level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with the preservation of capital.
DELAWARE-VOYAGEUR TAX-FREE NORTH DAKOTA FUND seeks to provide a high
level of current income exempt from federal income tax and the North
Dakota personal income tax, consistent with the preservation of capital.

For more complete information about any of the funds in the
Delaware Investments family funds, including charges and expenses, you
can obtain a prospectus from the Distributor. Read it carefully before
you invest or forward funds.

Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).

GENERAL INFORMATION

The Manager is the investment manager of the Funds. The Manager
also provides investment management services to certain of the other
funds in the Delaware Investments family. While investment decisions of
the Funds are made independently from those of the other funds and
accounts, investment decisions for such other funds and accounts may be
made at the same time as investment decisions for the Funds.

The Manager, or its affiliate Delaware International Advisers Ltd.,
also manages the investment options for Delaware Medallion (sm) III
Variable Annuity. Medallion is issued by Allmerica Financial Life
Insurance and Annuity Company (First Allmerica Financial Life Insurance
Company in New York and Hawaii). Delaware Medallion offers a variety of
investment series ranging from domestic equity funds, international
equity and bond funds and domestic fixed income funds. Each investment
series available through Medallion utilizes an investment strategy and
discipline the same as or similar to one of the mutual funds in the
Delaware Investments family as available outside the annuity. See
Delaware Group Premium Fund, Inc., above.

Access persons and advisory persons of the funds in the Delaware
Investments family, as those terms are defined in SEC Rule 17j-1 under
the 1940 Act, who provide services to the Manager, Delaware
International Advisers Ltd. or their affiliates, are permitted to engage
in personal securities transactions subject to the exceptions set forth
in Rule 17j-1 and the following general restrictions and procedures:
(1) certain blackout periods apply to personal securities transactions
of those persons; (2) transactions must receive advance clearance and
must be completed on the same day as the clearance is received; (3)
certain persons are prohibited from investing in initial public
offerings of securities and other restrictions apply to investments in
private placements of securities; (4) opening positions may only be
closed-out at a profit after a 60-day holding period has elapsed; and
(5) the Compliance Officer must be informed periodically of all
securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.

The Distributor acts as national distributor for each of the Funds
and for the other mutual funds in the Delaware Investments family. Prior
to May 31, 1997, Voyageur Fund Distributors, Inc. served as the national
distributor for the Funds. In its capacity as such, VFD or DDLP, as
applicable, received net commissions from each Fund on behalf of Class A
Shares, after reallowances to dealers, as follows:

AGGRESSIVE GROWTH FUND

FISCAL TOTAL AMOUNT AMOUNTS NET
YEAR OF UNDERWRITING REALLOWED COMMISSION
ENDED COMMISSION TO DEALERS TO VFD/DDLP

4/30/98 $539,592 $448,884 $90,708
4/30/97 11,275 10,057 1,218
4/30/96 4,299 3,691 608

GROWTH STOCK FUND

FISCAL TOTAL AMOUNT AMOUNTS NET
YEAR OF UNDERWRITING REALLOWED COMMISSION
ENDED COMMISSION TO DEALERS TO VFD/DDLP

4/30/98 $54,276 $45,298 $8,978
4/30/97 74,010 63,921 10,089
4/30/96 44,067 37,405 6,662

TAX-EFFICIENT EQUITY FUND

FISCAL TOTAL AMOUNT AMOUNTS NET
YEAR OF UNDERWRITING REALLOWED COMMISSION
ENDED COMMISSION TO DEALERS TO DDLP

4/30/98(1) $212,088 $175,433 $36,655

(1) Date of initial public offering was June 27, 1997.

VFD or DDLP, as applicable, received Limited CDSC payments with
respect to Class A Shares of each Fund as follows:

Limited CDSC Payments

Tax-Efficient
Fiscal Aggressive Growth Growth Stock Equity
Year Ended Fund A Class Fund A Class Fund A Class(1)

4/30/98 $-0- $1,926 $-0-
4/30/97 -0- -0- N/A
4/30/96 -0- -0- N/A

(1) Date of initial public offering was June 27, 1997.

VFD or DDLP, as applicable, received CDSC payments with respect to
Class B Shares of each Fund as follows:

CDSC Payments

Tax-Efficient
Fiscal Aggressive Growth Growth Stock Equity
Year Ended Fund B Class(1) Fund B Class (2) Fund A Class(3)

4/30/98 $8,533 $8,324 $310
4/30/97 508 414 N/A
4/30/96 -0- -0- N/A

(1) Date of initial public offering was April 16, 1996.
(2) Date of initial public offering was September 8, 1995.

(3) Date of initial public offering was June 27, 1997.

VFD or DDLP, as applicable, received CDSC payments with respect to
Class C Shares of each Fund as follows:

CDSC Payments

Tax-Efficient
Fiscal Aggressive Growth Growth Stock Equity
Year Ended Fund C Class(1) Fund C Class (2) Fund C Class(3)

4/30/98 $1,220 $55 $19
4/30/97 $-0- $-0- N/A
4/30/96 130 -0- N/A

(1) Date of initial public offering was May 20, 1994.
(2) Date of initial public offering was October 21, 1995.

(3) Date of initial public offering was June 27, 1997.

Effective as of May 1, 1997, all such payments described above have been
paid to the Distributor.

The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for each Fund and for
the other mutual funds in the Delaware Investments family. The Transfer
Agent is paid a fee by each Fund for providing these services consisting
of an annual per account charge of $5.50 plus transaction charges for
particular services according to a schedule. Compensation is fixed each
year and approved by the Board of Directors, including a majority of the
unaffiliated directors. The Transfer Agent also provides accounting
services to each Fund. Those services include performing all functions
related to calculating each Fund's net asset value and providing all
financial reporting services, regulatory compliance testing and other
related accounting services. For its services, the Transfer Agent is
paid a fee based on total assets of all funds in the Delaware
Investments family for which it provides such accounting services. Such
fee is equal to 0.25% multiplied by the total amount of assets in the
complex for which the Transfer Agent furnishes accounting services,
where such aggregate complex assets are $10 billion or less, and 0.20%
of assets if such aggregate complex assets exceed $10 billion. The fees
are charged to each fund, including each Fund, on an aggregate pro-rata
basis. The asset-based fee payable to the Transfer Agent is subject to a
minimum fee calculated by determining the total number of investment
portfolios and associated classes.

Norwest Bank Minnesota, N.A. ("Norwest"), Sixth Street & Marquette
Avenue, Minneapolis, Minnesota 55402 is custodian of Aggressive Growth
and Growth Stock Funds' securities and cash. The Chase Manhattan Bank
("Chase"), 4 Chase Metrotech Center, Brooklyn, NY 11245, is custodian of
Tax-Efficient Equity Fund's securities and cash. As custodian for a
Fund, Norwest or, as relevant, Chase maintains a separate account or
accounts for the Fund; receives, holds and releases portfolio securities
on account of the Fund; receives and disburses money on behalf of the
Fund; and collects and receives income and other payments and
distributions on account of the Fund's portfolio securities.

CAPITALIZATION
Mutual Funds III, Inc. has a present authorized capitalization of 10
trillion shares of capital stock with a $.01 par value per share.

The Board of Directors has allocated the following number of shares
to each Fund and their respective classes:

Aggressive Growth Fund 10 billion
A Class 1 billion
B Class 1 billion
C Class 1 billion
Institutional Class 1 billion

Growth Stock Fund 10 billion
A Class 1 billion
B Class 1 billion
C Class 1 billion
Institutional Class 1 billion

Tax-Efficient Equity Fund 10 billion
A Class 1 billion
B Class 1 billion
C Class 1 billion
Institutional Class 1 billion

While shares of Mutual Funds III, Inc. have equal voting rights on
matters affecting the Funds, each Fund would vote separately on any
matter which it is directly affected by, such as any change in its
fundamental investment policies and as otherwise prescribed by the 1940
Act. Shares of each Fund have a priority in that Fund's assets, and in
gains on and income from the portfolio of that Fund.

All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable and, except as described above,
have equal voting rights.

Shares of each Class of a Fund represent a proportionate interest in the
assets of such Fund, and have the same voting and other rights and
preferences as the other classes of that Fund, except that shares of a
Fund's Institutional Class may not vote on any matter affecting the Fund
Classes' Plans under Rule 12b-1. Similarly, as a general matter,
shareholders of Class A Shares, Class B Shares and Class C Shares of a
Fund may vote only on matters affecting the 12b-1 Plan that relates to
the Class of shares that they hold. However, Class B Shares may vote on
any proposal to increase materially the fees to be paid by a Fund under
the 12b-1 Plan relating to its Class A Shares. General expenses of a
Fund will be allocated on a pro-rata basis to the classes according to
asset size, except that expenses of the 12b-1 Plans of each Fund's Class
A, Class B and Class C Shares will be allocated solely to those classes.

Beginning June 9, 1997, the names of Voyageur Aggressive Growth Fund
changed to Aggressive Growth Fund series, Voyageur Growth Stock Fund
changed to Growth Stock Fund series and Voyageur Tax-Efficient Equity
Fund changed to Tax-Efficient Equity Fund series. Beginning August 29,
1997, each Fund began offering Institutional Class shares.

NONCUMULATIVE VOTING
MUTUAL FUNDS III, INC.'S SHARES HAVE NONCUMULATIVE VOTING RIGHTS WHICH
MEANS THAT THE HOLDERS OF MORE THAN 50% OF THE SHARES OF MUTUAL FUNDS
III, INC. VOTING FOR THE ELECTION OF DIRECTORS CAN ELECT ALL THE
DIRECTORS IF THEY CHOOSE TO DO SO, AND, IN SUCH EVENT, THE HOLDERS OF
THE REMAINING SHARES WILL NOT BE ABLE TO ELECT ANY DIRECTORS.

This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.

APPENDIX A -- RATINGS

EARNINGS AND DIVIDEND RANKINGS FOR COMMON STOCKS
Standard & Poor's Ratings Group. The investment process involves
assessment of various factors -- such as product and industry position,
corporate resources and financial policy -- with results that make some
common stocks more highly esteemed than others. In this assessment,
Standard & Poor's believes that earnings and dividend performance is the
end result of the interplay of these factors and that, over the long
run, the record of this performance has a considerable bearing on
relative quality. The rankings, however, do not pretend to reflect all
of the factors, tangible or intangible, that bear on stock quality.

Relative quality of bonds or other debt, that is, degrees of protection
for principal and interest, called creditworthiness, cannot be applied
to common stocks, and therefore rankings are not to be confused with
bond quality ratings which are arrived at by a necessarily different
approach.

Growth and stability of earnings and dividends are deemed key elements
in establishing Standard & Poor's earnings and dividend rankings for
common stocks, which are designed to capsulize the nature of this record
in a single symbol. It should be noted, however, that the process also
takes into consideration certain adjustments and modifications deemed
desirable in establishing such rankings.

The point of departure in arriving at these rankings is a computerized
scoring system based on per-share earnings and dividend records of the
most recent ten years -- a period deemed long enough to measure
significant time segments of secular growth, to capture indications of
basic change in trend as they develop, and to encompass the full peak-
to-peak range of the business cycle. Basic scores are computed for
earnings and dividends, then adjusted as indicated by a set of
predetermined modifiers for growth, stability within long-term trend,
and cyclicality. Adjusted scores for earnings and dividends are then
combined to yield a final score.

Further, the ranking system makes allowance for the fact that, in
general, corporate size imparts certain recognized advantages from an
investment standpoint. Conversely, minimum size limits (in terms of
corporate sales volume) are set for the various rankings, but the system
provides for making exceptions where the score reflects an outstanding
earnings-dividend record.

The final score for each stock is measured against a scoring matrix
determined by analysis of the scores of a large and representative
sample of stocks. The range of scores in the array of this sample has
been aligned with the following ladder of rankings:

A+ Highest B+ Average C Lowest
A High B Below Average D In Reorganization
A- Above Average B- Lower

NR signifies no ranking because of insufficient data or because the
stock is not amenable to the ranking process.

The positions as determined above may be modified in some instances by
special considerations, such as natural disasters, massive strikes, and
non-recurring accounting adjustments.

A ranking is not a forecast of future market price performance, but is
basically an appraisal of past performance of earnings and dividends,
and relative current standing. These rankings must not be used as market
recommendations; a high-score stock may at times be so overpriced as to
justify its sale, while a low-score stock may be attractively priced for
purchase. Rankings based upon earnings and dividend records are no
substitute for complete analysis. They cannot take into account
potential effects of management changes, internal company policies not
yet fully reflected in the earnings and dividend record, public
relations standing, recent competitive shifts, and a host of other
factors that may be relevant to investment status and decision.

COMMERCIAL PAPER RATINGS
Standard & Poor's Ratings Group. Commercial paper ratings are graded
into four categories, ranging from "A" for the highest quality
obligations to "D" for the lowest. Issues assigned the A rating are
regarded as having the greatest capacity for timely payment. Issues in
this category are further refined with designation 1, 2, and 3 to
indicate the relative degree of safety. The "A-1" designation indicates
that the degree of safety regarding timely payment is very strong.

Moody's Investors Service, Inc. Moody's commercial paper ratings are
opinions of the ability of the issuers to repay punctually promissory
obligations not having an original maturity in excess of nine months.
Moody's makes no representation that such obligations are exempt from
registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued
in conformity with any applicable law. Moody's employs the following
three designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers:

Prime-1 Superior capacity for repayment of short-term promissory
obligations.
Prime-2 Strong capacity for repayment of short-term promissory
obligations.
Prime-3 Acceptable capacity for repayment of short-term promissory
obligations.

CORPORATE BOND RATINGS
Standard & Poor's Ratings Group. Its ratings for corporate bonds have
the following definitions:

Investment grade:
Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

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

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

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

Speculative Grade:
Debt rated "BB," "B," "CCC" and "CC" and "C" is regarded, as having
predominantly speculative characteristics with respect to capacity to
pay interest and repay principal. "BB" indicates the least degree of
speculation and "C" the highest. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major exposures to adverse conditions.

Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in
the top four categories (AAA, AA, A, BBB, commonly known as "Investment
Grade" ratings) generally are regarded as eligible for bank investment.
Also, the laws of various states governing legal investments impose
certain rating or other standards for obligations eligible for
investment by savings banks, trust companies, insurance companies and
fiduciaries generally.

Moody's Investors Service, Inc. Its ratings for corporate bonds include
the following:

Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.

Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk appear
somewhat larger than in Aaa securities.

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

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

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

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

Bonds which are 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.

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

Bonds which are 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.

PREFERRED STOCK RATING
Standard & Poor's Ratings Group. Its ratings for preferred stock have
the following definitions:

An issue rated "AAA" has the highest rating that may be assigned by
Standard& Poor's to a preferred stock issue and indicates an extremely
strong capacity to pay the preferred stock obligations.

A preferred stock issue rated "AA" also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated "AAA."

An issue rated "A" is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.

An issue rated "BBB" is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the
"A" category.

Preferred stock rate "BB," "B," and "CCC" are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
preferred stock obligations. "BB" indicates the lowest degree of
speculation and "CCC" the highest degree of speculation. While such
issues will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse conditions.

The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.

A preferred stock rated "C" is a non-paying issue.

A preferred stock rated "D" is a non-paying issue with the issuer in
default on debt instruments.

"NR" indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.

Moody's Investors Service, Inc. Its ratings for preferred stock include
the following:

An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the
least risk of dividend impairment within the universe of preferred
stocks.

An issue which is rated "aa" is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the
foreseeable future.

An issue which is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in
the "aaa" and "aa" classifications, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.

An issue which is rated "baa" is considered to be medium-grade, neither
highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length
of time.

An issue which is rated "ba" is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse
periods. Uncertainty of position characterizes preferred stocks in this
class.

An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.

An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the
future status of payments.

An issue which is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual
payment.

An issue rated "c" is the lowest rated class of preferred or preference
stock. Issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.

APPENDIX B--STOCK INDEX FUTURES CONTRACTS AND RELATED OPTIONS

STOCK INDEX FUTURES CONTRACTS

To the extent described in the Prospectus and Statement of Additional
Information, each Fund may purchase and sell stock index futures
contracts, options thereon and options on stock indexes. Stock index
futures contracts are commodity contracts listed on commodity exchanges.
They presently include contracts on the Standard & Poor's 500 Stock
Index (the "S&P 500 Index") and such other broad stock market indexes as
the New York Stock Exchange Composite Stock Index and the Value Line
Composite Stock Index, as well as narrower "sub-indexes" such as the S&P
100 Energy Stock Index and the New York Stock Exchange Utilities Stock
Index. A stock index assigns relative values to common stocks included
in the index and the index fluctuates with the value of the common
stocks so included. A futures contract is a legal agreement between a
buyer or seller and the clearing house of a futures exchange in which
the parties agree to make a cash settlement on a specified future date
in an amount determined by the stock index on the last trading day of
the contract. The amount is a specified dollar amount (usually $100 or
$500) times the difference between the index value on the last trading
day and the value on the day the contract was struck.

For example, the S&P 500 Index consists of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The S&P 500
Index assigns relative weightings to the common stocks included in the
Index, and the Index fluctuates with changes in the market values of
those common stocks. In the case of S&P 500 Index futures contracts, the
specified multiple is $500. Thus, if the value of the S&P 500 Index were
150, the value of one contract would be $75,000 (150 x $500). Unlike
other futures contracts, a stock index futures contract specifies that
no delivery of the actual stocks making up the index will take place.
Instead, settlement in cash must occur upon the termination of the
contract with the settlement amount being the difference between the
contract price and the actual level of the stock index at the expiration
of the contract. For example (excluding any transaction costs), if a
Fund enters into one futures contract to buy the S&P 500 Index at a
specified future date at a contract value of 150 and the S&P 500 Index
is at 154 on that future date, the Fund will gain $500 x (154-150) or
$2,000. If a Fund enters into one futures contract to sell the S&P 500
Index at a specified future date at a contract value of 150 and the S&P
500 Index is at 152 on that future date, the Fund will lose $500 x (152-
150) or $1,000.

Unlike the purchase or sale of an equity security, no price would be
paid or received by a Fund upon entering into stock index futures
contracts. Upon entering into a contract, a Fund would be required to
deposit with its custodian in a segregated account in the name of the
futures broker an amount of cash or U.S. Treasury bills equal to a
portion of the contract value. This amount is known as "initial margin."
The nature of initial margin in futures transactions is different from
that of margin in security transactions in that futures contract margin
does not involve borrowing funds by the Fund to finance the
transactions. Rather, the initial margin is in the nature of a
performance bond or good faith deposit on the contract that is returned
to the Fund upon termination of the contract, assuming all contractual
obligations have been satisfied.

Subsequent payments, called "variation margin," to and from the broker
would be made on a daily basis as the price of the underlying stock
index fluctuates, making the long and short positions in the contract
more or less valuable, a process known as "marking to the market." For
example, when a Fund enters into a contract in which it benefits from a
rise in the value of an index and the price of the underlying stock
index has risen, such Fund will receive from the broker a variation
margin payment equal to that increase in value. Conversely, if the price
of the underlying stock index declines, such Fund would be required to
make a variation margin payment to the broker equal to the decline in
value.

Each Fund intends to use stock index futures contracts and related
options for hedging and not for speculation. Hedging permits a Fund to
gain rapid exposure to or protect itself from changes in the market. For
example, a Fund may find itself with a high cash position at the
beginning of a market rally. Conventional procedures of purchasing a
number of individual issues entail the lapse of time and the possibility
of missing a significant market movement. By using futures contracts,
the Fund can obtain immediate exposure to the market and benefit from
the beginning stages of a rally. The buying program can then proceed,
and once it is completed (or as it proceeds), the contracts can be
closed. Conversely, in the early stages of a market decline, market
exposure can be promptly offset by entering into stock index futures
contracts to sell units of an index and individual stocks can be sold
over a longer period under cover of the resulting short contract
position.

Each Fund may enter into contracts with respect to any stock index or
sub-index. To hedge a Fund's portfolio successfully, however, such Fund
must enter into contracts with respect to indexes or sub-indexes whose
movements will have a significant correlation with movements in the
prices of such Fund's portfolio securities.

Options on Stock Index Futures Contracts. To the extent described in the
Prospectus and Statement of Additional Information each Fund may
purchase and sell put and call options on stock index futures contracts
which are traded on a recognized exchange or board of trade as a hedge
against changes in the market, and will enter into closing transactions
with respect to such options to terminate existing positions. An option
on a stock index futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a stock index
futures contract at a specified exercise price at any time prior to the
expiration date of the option. A call option gives the purchaser of such
option the right to buy, and it obliges its writer to sell, a specified
underlying futures contract at a specified exercise price at any time
prior to the expiration date of the option. A purchaser of a put option
has the right to sell, and the writer has the obligation to buy, such
contract at the exercise price during the option period. Upon exercise
of an option, the delivery of the futures position by the writer of the
option to the holder of the option will be accompanied by delivery of
the accumulated balance in the writer's future margin account, which
represents the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract. If an option
is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash equal to the
difference between the exercise price of the option and the closing
price of the stock index futures contract on the expiration date. Each
Fund will pay a premium for purchasing options on stock index futures
contracts. Because the value of the option is fixed at the point of
sale, there are no daily cash payments to reflect changes in the value
of the underlying contract; however, the value of the option does change
daily and that change would be reflected in the net asset value of a
Fund. In connection with the writing of options on stock index futures
contracts, a Fund will make initial margin deposits and make or receive
maintenance margin payments that reflect changes in the market value of
such options. Premiums received from the writing of an option are
included in initial margin deposits.

Purchase of Put Options on Futures Contracts. Each Fund will purchase
put options on futures contracts if the Fund's investment adviser or
sub-adviser anticipates a market decline. A put option on a stock index
futures contract becomes more valuable as the market declines. By
purchasing put options on stock index futures contracts at a time when a
Fund's investment adviser or sub-adviser expects the market to decline,
such Fund will seek to realize a profit to offset the loss in value of
its portfolio securities.

Purchase of Call Options on Futures Contracts. A Fund will purchase call
options on stock index futures contracts if the Fund's investment
adviser anticipates a market rally. The purchase of a call option on a
stock index futures contract represents a means of obtaining temporary
exposure to market appreciation at limited risk. A call option on such a
contract becomes more valuable as the market appreciates. A Fund will
purchase a call option on a stock index futures contract to hedge
against a market advance when the Fund is holding cash. A Fund can take
advantage of the anticipated rise in the value of equity securities
without actually buying them until the market is stabilized. At that
time, the options can be liquidated and the Fund's cash can be used to
buy portfolio securities.

Writing Call Options on Futures Contracts. A Fund will write call
options on stock index futures contracts if the Fund's investment
adviser anticipates a market decline. As the market declines, a call
option on such a contract becomes less valuable. If the futures contract
price at expiration of the option is below the exercise price, the
option will not be exercised and the Fund will retain the full amount of
the option premium. Such amount provides a partial hedge against any
decline that may have occurred in the Fund's portfolio securities.

Writing Put Options on Futures Contracts. A Fund will write put options
on stock index futures contracts if the Fund's investment adviser
anticipates a market rally. As the market appreciates, a put option on a
stock index futures contract becomes less valuable. If the futures
contract price at expiration of the option has risen due to market
appreciation and is above the exercise price, the option will not be
exercised and the Fund will retain the full amount of the option
premium. Such amount can then be used by a Fund to buy portfolio
securities when the market has stabilized.

Risks Relating to Options on Stock Index Futures Contracts. Compared to
the purchase or sale of futures contracts, the purchase of call or put
options on futures contracts involves less potential risk to a Fund
because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances when a
purchase of a call or put option on a futures contract would result in a
loss to a Fund when the purchase or sale of a futures contract would not
result in a loss, such as when there is no movement in the underlying
index.

The writing of a put or call option on a futures contract involves risks
similar to those relating to transactions in futures contracts as
described in the Prospectus and Statement of Additional Information. By
writing a call option, a Fund, in exchange for the receipt of a premium,
becomes obligated to sell a futures contract, which may have a value
higher than the exercise price. Conversely, the writing of a put option
on a futures contract generates a premium, but the Fund becomes
obligated to purchase a futures contract, which may have a value lower
than the exercise price. The loss incurred by the Fund in writing
options on futures contracts may exceed the amount of the premium
received.

The holder or writer of an option on a futures contract may terminate
its position by selling or purchasing an offsetting option of the same
series. There is no guarantee that such closing transactions can be
effected. A Fund's ability to establish and close out positions on such
options will be subject to the development and maintenance of a liquid
market.

Finally, a Fund's purchase or sale of put or call options on stock index
futures contracts will be based upon predictions as to anticipated
market trends by the Fund's investment adviser or sub-adviser, which
could prove to be inaccurate. Even if the expectations of the Fund's
investment adviser or sub-adviser are correct, there may be an imperfect
correlation between the change in the value of the options and of the
Fund's portfolio securities.

FINANCIAL STATEMENTS

Ernst & Young LLP serves as the independent auditors for Voyageur Mutual
Funds III, Inc. - Tax-Efficient Equity Fund and, in its capacity as
such, audits the annual financial statements of the Fund. Beginning May
1, 1997, Ernst & Young LLP began serving in such capacity for Voyageur
Mutual Funds III, Inc. - Aggressive Growth Fund and Growth Stock Fund.
KPMG Peat Marwick LLP previously served as the independent auditors for
the Aggressive Growth Fund and Growth Stock Fund and, in its capacity as
such, audited the annual financial statements of these Funds.

Each Fund's Statement of Net Assets, Statement of Operations, Statement
of Changes in Net Assets, Financial Highlights and Notes to Financial
Statements, as well as the reports of Ernst & Young LLP, independent
auditors, for the fiscal year ended April 30, 1998 are included in
Voyageur Mutual Funds III, Inc.'s Annual Reports to shareholders. The
financial statements and financial highlights, the notes relating
thereto and the reports of Ernst & Young LLP listed above are
incorporated by reference from the Annual Reports into this Part B. The
Aggressive Growth Fund's and Growth Stock Fund's Statements of Changes
in Net Assets for the year ended April 30, 1997, and the Financial
Highlights for the periods presented through April 30, 1997, were
audited by KPMG Peat Marwick LLP whose report, dated June 13, 1997,
expressed an unqualified opinion on those statements and financial
highlights.

Delaware Investments includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-
exempt funds, money market funds, global and international funds and
closed-end funds give investors the ability to create a portfolio that
fits their personal financial goals. For more information, shareholders
of the Fund Classes should contact their financial adviser or call
Delaware Investments at 800-523-1918, and shareholders of the
Institutional Class should contact Delaware Investments at 800-828-5052.

INVESTMENT MANAGER

Delaware Management Company

One Commerce Square
Philadelphia, PA 19103

SUB-ADVISER
Growth Stock Fund:
Voyageur Asset Management LLP
90 South Seventh Street, Suite 4400
Minneapolis, MN 55402

NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103

SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103

INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103

CUSTODIANS
Tax-Efficient Equity Fund:
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245

Aggressive Growth Fund
Growth Stock Fund:
Norwest Bank Minnesota, N.A.
Sixth Street & Marquette Avenue
Minneapolis, MN 55402

AGGRESSIVE GROWTH FUND
GROWTH STOCK FUND
TAX-EFFICIENT EQUITY FUND

A CLASSES

B CLASSES

C CLASSES

INSTITUTIONAL CLASSES

CLASSES OF VOYAGEUR
MUTUAL FUNDS III, INC.

PART B

STATEMENT OF
ADDITIONAL INFORMATION

JUNE 29, 1998

[LOGO OMITTED: DELAWARE INVESTMENTS]

PART C
Other Information

Item 24. Financial Statements and Exhibits

(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Accountant's Report

* The financial statements and Accountant's Report listed above
relating to Aggressive Growth Fund, Growth Stock Fund and Tax-Efficient
Equity Fund are incorporated into this filing by reference into the
Funds' Part B from the Registrant's Annual Reports for the fiscal year
ended April 30, 1998.

(b) Exhibits:
(1) Articles of Incorporation.
(a) Amended and Restated Articles of Incorporation
(November 22, 1993) incorporated into this filing
by reference to Post-Effective Amendment No. 25
filed September 1, 1995.
(b) Certification of Designation (April 28, 1994)
incorporated into this filing by reference to Post-
Effective Amendment No. 25 filed September 1, 1995.
(c) Certification of Designation (August 24, 1995)
incorporated into this filing by reference to Post-
Effective Amendment No. 25 filed September 1, 1995.
(d) Certification of Designation (August 25, 1995)
incorporated into this filing by reference to Post-
Effective Amendment No. 25 filed September 1, 1995.
(e) Articles of Correction (July 27, 1994) incorporated
into this filing by reference to Post-Effective
Amendment No. 25 filed September 1, 1995.
(f) Certification of Designation (January 23, 1997)
incorporated into this filing by reference to Post-
Effective Amendment No. 29 filed February 18, 1997.
(g) Certificate of Designation (June 30, 1997) attached
as Exhibit.
(2) By-Laws. By-Laws, as amended, (October 30, 1996)
incorporated into this filing by reference to Post-
Effective Amendment No. 29 filed February 18, 1997.
(3) Voting Trust Agreement. Inapplicable.
(4) Copies of All Instruments Defining the Rights of Holders.
(a) Articles of Incorporation and Articles Supplementary.
(i) Article 7 and Article 8(d) of Amended and
Restated Articles of Incorporation
(November 22, 1993) incorporated into this
filing by reference to Post-Effective
Amendment No. 25 filed September 1, 1995.
(ii) Certificate of Designation (April 28, 1994)
incorporated into this filing by reference
to Post-Effective Amendment No. 25 filed
September 1, 1995.
(iii) Certificate of Designation (August 24, 1995)
incorporated into this filing by reference
to Post-Effective Amendment No. 25 filed
September 1, 1995.
(iv) Certificate of Designation (August 25, 1995)
incorporated into this filing by reference
to Post-Effective Amendment No. 25 filed
September 1, 1995.
(v) Certificate of Designation (January 23, 1997)
incorporated into this filing by reference
to Post-Effective Amendment No. 29 filed
February 18, 1997.
(v) Certificate of Designation (June 30, 1997)
included as Exhibit 24(b)(1)(g).
(b) By-Laws.
(i) Article Second, Article Fifth, Article Sixth
and Article Twelfth incorporated into this
filing by reference to Post-Effective
Amendment No. 29 filed February 18, 1997.
(5) Investment Management Agreement.
(a) Executed Investment Management Agreement
(April 30, 1997) between Delaware Management
Company, Inc. and the Registrant on behalf
of Aggressive Growth Fund and Growth Stock Fund
incorporated into this filing by reference to
Post-Effective Amendment No. 30 filed
June 27, 1997.
(b) Executed Investment Management Agreement
(June 26, 1997) between Delaware Management
Company, Inc. and the Registrant on behalf of
Tax-Efficient Equity Fund incorporated into
this filing by reference to Post-Effective
Amendment No. 30 filed June 27, 1997.
(c) Executed Investment Sub-Advisory Agreement
(April 30, 1997) between Delaware Management Company,
Inc. and Voyageur Asset Management LLC on behalf
of Growth Stock Fund incorporated into this filing
by reference to Post-Effective Amendment No. 30
filed June 27, 1997.
(6) (a) Distribution Agreements.
(i) Executed Distribution Agreement
(April 30, 1997) between Delaware Distributors,
L.P. and the Registrant on behalf of
Aggressive Growth Fund and Growth Stock Fund
incorporated into this filing by reference
to Post-Effective Amendment No. 30 filed
June 27, 1997.
(ii) Executed Distribution Agreement
(June 26, 1997) between Delaware Distributors,
L.P. and the Registrant on behalf of
Tax-Efficient Equity Fund incorporated into
this filing by reference to Post-Effective
Amendment No. 30 filed June 27, 1997.
(b) Administration and Service Agreement Form of
Administration and Service Agreement (as amended
November 1995) (Module) incorporated into this
filing by reference to Post-Effective Amendment
No. 30 filed June 27, 1997.
(c) Dealer's Agreement. Dealer's Agreement, as amended,
(November 1995) (Module) incorporated into this
filing by reference to Post-Effective Amendment
No. 30 filed June 27, 1997.
(d) Mutual Fund Agreement for the Delaware Group of
Funds, as amended, (November 1995) (Module)
incorporated into this filing by reference to
Post-Effective Amendment No. 30 filed June 27,
1997.
(7) Bonus, Profit Sharing, Pension Contracts.
(a) Amended and Restated Profit Sharing Plan (November 17,
1994) attached as Exhibit.
(b) Amendment to Profit Sharing Plan (December 21, 1995)
attached as Exhibit.
(8) Custodian Agreement.
(a) Custodian Contract with Norwest Bank Minnesota N.A.
and the Registrant on behalf of Aggressive Growth
Fund and Growth Stock Fund (May 16, 1994)
incorporated into this filing by reference to
Post-Effective Amendment No. 25 filed September 1,
1995.
(b) Custodian Agreement between The Chase Manhattan
Bank and the Registrant on behalf of Tax-Efficient
Equity Fund (1997) (Module) incorporated into
this filing by reference to Post-Effective Amendment
No. 30 filed June 27, 1997.
(i) Letter of notice (June 26, 1997) to add Tax-
Efficient Equity Fund to Custodian Agreement
between The Chase Manhattan Bank and the
Registrant attached as Exhibit.
(9) Other Material Contracts.
(a) Executed Shareholder Services Agreement
(April 30, 1997) between Delaware Service Company,
Inc. and the Registrant on behalf of the Aggressive
Growth Fund, Growth Stock Fund and Tax-Efficient
Equity Fund incorporated into this filing by
reference to Post-Effective Amendment No. 30
filed June 27, 1997.
(b) Executed Fund Accounting Agreement (April 30, 1997)
between Delaware Service Company, Inc. and the
Registrant on behalf of each Fund incorporated
into this filing by reference to Post-Effective
Amendment No. 30 filed June 27, 1997.
(i) Executed Amendment No. 8 (December 18, 1997)
to Delaware Group of Funds Fund Accounting
Agreement attached as Exhibit.
(ii) Executed Amendment No. 9 (March 31, 1998)
to Delaware Group of Funds Fund Accounting
Agreement attached as Exhibit.
(10) Opinion of Counsel. Attached as Exhibit.
(11) Consent of Auditors. Attached as Exhibit.
(12) Inapplicable.
(13) Letter of Investment Intent. Incorporated into this
filing by reference to Pre-Effective Amendment No. 1.
(14) Inapplicable.
***(15) Plans under Rule 12b-1.
(a) Plan under Rule 12b-1 for Class A (April 30, 1997)
on behalf of Aggressive Growth Fund and Growth
Stock Fund incorporated into this filing by
reference to Post-Effective Amendment No. 30
filed June 27, 1997.
(b) Plan under Rule 12b-1 for Class B (April 30, 1997)
on behalf of Aggressive Growth Fund and Growth
Stock Fund incorporated into this filing by
reference to Post-Effective Amendment No. 30
filed June 27, 1997.
(c) Plan under Rule 12b-1 for Class C (April 30, 1997)
on behalf of Aggressive Growth Fund and Growth
Stock Fund attached incorporated into this filing
by reference to Post-Effective Amendment No. 30
filed June 27, 1997.
(d) Plan under Rule 12b-1 for Class A (June 26, 1997)
on behalf of Tax-Efficient Equity Fund incorporated
into this filing by reference to Post-Effective
Amendment No. 30 filed June 27, 1997.
(e) Plan under Rule 12b-1 for Class B (June 26, 1997)
on behalf of Tax-Efficient Equity Fund incorporated
into this filing by reference to Post-Effective
Amendment No. 30 filed June 27, 1997.
(f) Plan under Rule 12b-1 for Class C (June 26, 1997)
on behalf of Tax-Efficient Equity Fund incorporated
into this filing by reference to Post-Effective
Amendment No. 30 filed June 27, 1997.
(16) Schedules of Computation for each Performance
Quotation
(a) Schedules of Computation of Fund Performance for
Aggressive Growth Fund and Growth Stock Fund
incorporated into this filing by reference to
Post-Effective Amendment No. 31 filed
August 27, 1997 and Post-Effective Amendment
No. 32 filed December 29 , 1997.
(17) Financial Data Schedules. Attached as Exhibit.
(18) Plan under Rule 18f-3.
(a) Plan under Rule 18f-3 (April 30, 1997) incorporated
into this filing by reference to Post-Effective
Amendment No. 30 filed June 27, 1997.
(19) Other: Directors' Power of Attorney. Attached as
Exhibit.

*** Relates to Class A, Class B and Class C Shares of Aggressive Growth
Fund, Growth Stock Fund and Tax-Efficient Equity Fund only.

Item 25. Persons Controlled by or under Common Control with
Registrant. None.

Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
--------------- ---------------
Voyageur Mutual Funds III, Inc's
Growth Stock Fund:

Growth Stock Fund A Class
Common Stock Par Value 2,426 Accounts
$.01 Per Share as of May 31, 1998

Growth Stock Fund B Class
Common Stock Par Value 280 Accounts
$.01 Per Share as of May 31, 1998

Growth Stock Fund C Class
Common Stock Par Value 105 Accounts
$.01 Per Share as of May 31, 1998

Growth Stock Fund Institutional Class
Common Stock Par Value 3 Accounts
$.01 Per Share as of May 31, 1998

Voyageur Mutual Funds III, Inc.'s
Aggressive Growth Fund:

Aggressive Growth Fund A Class
Common Stock Par Value 3,980 Accounts
$.01 Per Share as of May 31, 1998

Aggressive Growth Fund B Class
Common Stock Par Value 2,929 Accounts
$.01 Per Share as of May 31, 1998

Aggressive Growth Fund C Class
Common Stock Par Value 646 Accounts
$.01 Per Share as of May 31, 1998

Aggressive Growth Fund Institutional Class
Common Stock Par Value 11 Account
$.01 Per Share as of May 31, 1998

Voyageur Mutual Funds III, Inc.'s
Tax-Efficient Equity Fund:

Tax-Efficient Equity Fund A Class
Common Stock Par Value 662 Accounts
$.01 Per Share as of May 31, 1998

Tax-Efficient Equity Fund B Class
Common Stock Par Value 428 Accounts
$.01 Per Share as of May 31, 1998

Tax-Efficient Equity Fund C Class
Common Stock Par Value 140 Accounts
$.01 Per Share as of May 31, 1998

Tax-Efficient Equity Fund Institutional Class
Common Stock Par Value 1 Account
$.01 Per Share as of May 31, 1998

Item 27. Indemnification.
Incorporated into this filing by reference to
Post-Effective Amendment No. 29 filed February 18, 1997.

Item 28. Business and Other Connections of Investment Adviser.

(a) Delaware Management Company, a series of Delaware Management
Business Trust, (the "Manager") serves as investment manager
to the Registrant and also serves as investment manager or
sub-adviser to certain of the other funds in the Delaware
Investments family (Delaware Group Equity Funds I, Inc.,
Delaware Group Equity Funds II, Inc., Delaware Group Equity
Funds III, Inc., Delaware Group Equity Funds IV, Inc.,
Delaware Group Equity Funds V, Inc., Delaware Group
Government Fund, Inc., Delaware Group Income Funds, Inc.,
Delaware Group Limited-Term Government Funds, Inc., Delaware
Group Cash Reserve, Inc., Delaware Group Tax-Free Fund,
Inc., Delaware Group State Tax-Free Income Trust, Delaware
Group Tax-Free Money Fund, Inc., Delaware Group Premium
Fund, Inc., Delaware Group Global & International Funds,
Inc., Delaware Pooled Trust, Inc., Delaware Group Adviser
Funds, Inc., Delaware Group Foundation Funds, Delaware
Group Dividend and Income Fund, Inc., Delaware Group
Global Dividend and Income Fund, Inc., Voyageur Tax-Free
Funds, Inc., Voyageur Intermediate Tax-Free Funds, Inc.,
Voyageur Insured Funds, Inc., Voyageur Funds, Inc.,
Voyageur Investment Trust, Voyageur Investment Trust II,
Voyageur Mutual Funds, Inc., Voyageur Mutual Funds II,
Inc., Voyageur Arizona Municipal Income Fund, Inc., Voyageur
Colorado Insured Municipal Income Fund, Inc., Voyageur
Florida Insured Municipal Income Fund, Voyageur Minnesota
Municipal Fund, Inc., Voyageur Minnesota Municipal Fund II,
Inc. and Voyageur Minnesota Municipal Fund III, Inc.)
In addition, certain directors of the Manager also serve as
directors/trustees of the other funds in the Delaware
Investments family and certain officers are also officers
of these other funds. A company owned by the Manager's
parent company acts as principal underwriter to the mutual
funds in the Delaware Investments family (see Item 29 below)
and another such company acts as the shareholder servicing,
dividend disbursing, accounting servicing and transfer agent
for all of the mutual funds in the Delaware Investments
family.

The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:

Name and Principal Positions and Offices with the Manager and
Business Address* its Affiliates and Other Positions and
Offices Held

Wayne A. Stork Chairman of the Board, President, Chief Executive
Officer and Chief Investment Officer of Delaware
Management Company (a series of Delaware Management
Business Trust); Chairman of the Board, President,
Chief Executive Officer, Chief Investment Officer
and Director/Trustee of Delaware Management
Company, Inc. and Delaware Management Business
Trust; Chairman of the Board, President, Chief
Executive Officer and Director of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings,
Inc.; Chairman, Chief Executive Officer and
Chief Investment Officer of Dealware Investment
Advisers (a series of Delaware Management
Business Trust); Chairman, Chief Executive Officer
and Director of Delaware International Holdings
Ltd. and Delaware International Advisers Ltd.;
Chairman of the Board and Director of the
Registrant, each of the other funds in the
Delaware Investments family, Delaware Management
Holdings, Inc., and Delaware Capital Management,
Inc.; Chairman of Delaware Distributors, L.P.;
President and Chief Executive Officer of Delvoy,
Inc.; and Director and/or Trustee of Delaware
Service Company, Inc. and Delaware Investment
& Retirement Services, Inc.

Richard G. Unruh, Jr. Executive Vice President of the Registrant, each
of the other funds in the Delaware Investments
family, Delaware Management Holdings, Inc.,
Delaware Capital Management, Inc. and Delaware
Management Company (a series of Delaware
Management Business Trust); Executive Vice
President and Director/Trustee of Delaware
Management Company, Inc. and Delaware Management
Business Trust; President of Delaware Investment
Advisers (a series of Delaware Management Business
Trust); and Director of Delaware International
Advisers Ltd.

Board of Directors, Chairman of Finance
Committee, Keystone Insurance Company
since 1989, 2040 Market Street, Philadelphia,
PA; Board of Directors, Chairman of Finance
Committee, AAA Mid Atlantic, Inc. since 1989,
2040 Market Street, Philadelphia, PA; Board of
Directors, Metron, Inc. since 1995, 11911
Freedom Drive, Reston, VA

Paul E. Suckow Executive Vice President/Chief Investment Officer,
Fixed Income of Delaware Management Company,
Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware
Management Business Trust), the Registrant, each
of the other funds in the Delaware Investments
family and Delaware Management Holdings, Inc.;
Executive Vice President and Director of
Founders Holdings, Inc.; Executive Vice President
of Delaware Capital Management, Inc. and Delaware
Management Business Trust; and Director of
Founders CBO Corporation.

Director, HYPPCO Finance Company Ltd.

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

David K. Downes Executive Vice President, Chief Operating Officer
and Chief Financial Officer of the Registrant
and each of the other funds in the Delaware
Investments family, Delaware Management Holdings,
Inc., Founders CBO Corporation, Delaware Capital
Management, Inc., Delaware Management Company
(a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series
of Delaware Management Business Trust) and
Delaware Distributors, L.P.; Executive Vice
President, Chief Operating Officer, Chief
Financial Officer and Director of Delaware
Management Company, Inc., DMH Corp, Delaware
Distributors, Inc., Founders Holdings, Inc.
and Delvoy, Inc.; Executive Vice President,
Chief Financial Officer, Chief Administrative
Officer and Trustee of Delaware Management
Business Trust; President, Chief Executive
Officer, Chief Financial Officer and Director
of Delaware Service Company, Inc.; President,
Chief Operating Officer, Chief Financial
Officer and Director of Delaware International
Holdings Ltd.; Chairman, Chief Executive Officer
and Director of Delaware Investment & Retirement
Services, Inc.; Chairman and Director of
Delaware Management Trust Company; Director of
Delaware International Advisers Ltd.; and Vice
President of Lincoln Funds Corporation

Chief Executive Officer and Director of
Forewarn, Inc. since 1993, 8 Clayton Place,
Newtown Square, PA

George M.
Chamberlain, Jr. Senior Vice President, Secretary and General
Counsel of the Registrant, each of the other
funds in the Delaware Investments family,
Delaware Distributors, L.P., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware
Management Holdings, Inc.; Senior Vice President,
General Counsel, Secretary and Director/Trustee of
Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc., Delaware
Capital Management, Inc., Delaware Investment &
Retirement Services, Inc., Delvoy, Inc. and
Delaware Management Business Trust; Senior Vice
President and Director of Delaware International
Holdings Ltd.; Executive Vice President, Secretary,
General Counsel and Director of Delaware Management
Trust Company; Director of Delaware International
Advisers Ltd.; Secretary of Lincoln Funds Corporation

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held

Richard J. Flannery Senior Vice President/Corporate and International
Affairs of the Registrant, each of the other funds
in the Delaware Investments family, Delaware
Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors,
Inc., Delaware Distributors, L.P., Delaware
Management Trust Company, Delaware Capital Management,
Inc., Delaware Service Company, Inc., Delaware
Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) and
Delaware Investment & Retirement Services, Inc.;
Executive Vice President/Corporate & International
Affairs and Director of Delaware International Holdings
Ltd.; Senior Vice President/Corporate and International
Affairs and Director of Founders Holdings, Inc. and
Delvoy, Inc.; Senior Vice President of Founders CBO
Corporation; and Director of Delaware International
Advisers Ltd.

Director, HYPPCO Finance Company Ltd.

Limited Partner of Stonewall Links, L.P. since 1991,
Bulltown Rd., Elverton, PA; Director and Member of
Executive Committee of Stonewall Links, Inc. since
1991, Bulltown Rd., Elverton, PA

Michael P. Bishof Senior Vice President/Investment Accounting of
Delaware Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business Trust)
and Delaware Service Company, Inc.; Senior Vice President
and Treasurer of the Registrant, each of the other funds
in the Delaware Investments family and Founders Holdings,
Inc.; Senior Vice President and Treasurer/ Manager,
Investment Accounting of Delaware Distributors, L.P. and
Delaware Investment Advisers (a series of Delaware
Management Business Trust); Assistant Treasurer of
Founders CBO Corporation; and Senior Vice President and
Manager of Investment Accounting of Delaware
International Holdings Ltd.

Joseph H. Hastings Senior Vice President/Corporate Controller and
Treasurer of Delaware Management Holdings, Inc., DMH
Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Capital Management, Inc.,
Delaware Distributors, L.P., Delaware Service Company,
Inc., Delaware International Holdings Ltd., Delaware
Management Company (a series of Delaware Management
Business Trust), Delvoy, Inc. and Delaware Management
Business Trust; Senior Vice President/Corporate
Controller of the Registrant, each of the other
funds in the Delaware Investments family and Founders
Holdings, Inc.; Executive Vice President, Chief
Financial Officer and Treasurer of Delaware
Management Trust Company; Chief Financial Officer
and Treasurer of Delaware Investment & Retirement
Services, Inc.; Senior Vice President/Assistant
Treasurer of Founders CBO Corporation; and Treasurer
of Lincoln Funds Corporation.

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held

Michael T. Taggart Senior Vice President/Facilities Management and
Administrative Services of Delaware Management Company,
Inc. and Delaware Management Company (a series of
Delaware Management Business Trust)

Douglas L. Anderson Senior Vice President/Operations of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment and Retirement
Services, Inc. and Delaware Service Company, Inc.;
Senior Vice President/Operations and Director of
Delaware Management Trust Company

James L. Shields Senior Vice President/Chief Information Officer of
Delaware Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Service Company, Inc. and Delaware
Investment & Retirement Services, Inc.

Eric E. Miller Vice President, Assistant Secretary and Deputy
General Counsel of the Registrant and each of the
other funds in the Delaware Investments family,
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust),
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Distributors, L.P., Delaware Distributors
Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Founders Holdings, Inc.,
Delaware Capital Management, Inc. and Delaware
Investment & Retirement Services, Inc.; Assistant
Secretary of Delaware Management Business Trust; and
Vice President and Assistant Secretary of Delvoy, Inc.

Richelle S. Maestro Vice President and Assistant Secretary of the
Registrant, each of the other funds in the Delaware
Investments family, Delaware Management Company,
Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management
Business Trust), Delaware Management Holdings, Inc.,
Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., DMH Corp.,
Delaware Management Trust Company, Delaware Capital
Management, Inc., Delaware Investment & Retirement
Services, Inc., Founders Holdings, Inc. and Delvoy,
Inc.; Vice President and Secretary of Delaware
International Holdings Ltd.; and Secretary of
Founders CBO Corporation

Partner of Tri-R Associates since 1989, 10001
Sandmeyer Lane, Philadelphia, PA

Richard Salus 1 Vice President/Assistant Controller of Delaware
Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust) and
Delaware Management Trust Company

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held

Bruce A. Ulmer Vice President/Director of LNC Internal Audit of
the Registrant, each of the other funds in the
Delaware Investments family, Delaware Management
Company, Inc., Delaware Management Company (a
series of Delaware Management Business Trust),
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.; Vice
President/Director of Internal Audit of Delvoy,
Inc.

Joel A. Ettinger 2 Vice President/Director of Taxation of the
Registrant, each of the other funds in the Delaware
Investments family, Delaware Management Company,
Inc., Delaware Management Company (a series of
Delaware Management Business Trust) and Delaware
Management Holdings, Inc.

Christopher Adams Vice President/Strategic Planning of Delaware
Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust)
and Delaware Service Company, Inc.

Susan L. Hanson Vice President/Strategic Planning of Delaware
Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust) and
Delaware Service Company, Inc.

Dennis J. Mara 3 Vice President/Acquisitions of Delaware Management
Company, Inc. and Delaware Management Company (a
series of Delaware Management Business Trust)

Scott Metzger Vice President/Business Development of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and Delaware Service Company, Inc.

Lisa O. Brinkley Vice President/Compliance of the Registrant,
Delaware Management Company, Inc., each of the
other funds in the Delaware Investments family,
Delaware Management Company (a series of Delaware
Management Business Trust), DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware Capital Management, Inc.
and Delaware Investment & Retirement Services, Inc.;
Vice President/Compliance Officer of Delaware
Management Business Trust; and Vice President of
Delvoy, Inc.

Mary Ellen Carrozza Vice President/Client Services of Delaware Management
Company, Inc., Delaware Management Company (a
series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust) and the Registrant

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held

Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and 23
investment companies in the Delaware Investments
family; Vice President of Founders Holdings, Inc.;
and Treasurer, Assistant Secretary and Director of
Founders CBO Corporation

Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and 22 investment
companies in the Delaware Investments family; Vice
President of Founders Holdings, Inc.; and President
and Director of Founders CBO Corporation

Gary A. Reed Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust), 20 investment companies
in the Delaware Investments family and Delaware
Capital Management, Inc.

Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware
Management Business Trust), 20 investment companies
in the Delaware Investments family and Delaware
Capital Management, Inc.

Roger A. Early Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), 20 other
investment companies in the Delaware Investments
family

Mitchell L. Conery 4 Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), 20 investment
companies in the Delaware Investments family and
Delaware Capital Management, Inc.

George H. Burwell Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant and 9 other investment
companies in the Delaware Investments family

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held

Cynthia Isom Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), 18 investment companies in the Delaware
Investments family

John B. Fields Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the Registrant,
9 other investment companies in the Delaware
Investments family, Delaware Capital Management,
Inc. and Trustee of Delaware Management Business
Trust

Gerald S. Frey 5 Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the Registrant
and 9 other investment companies in the Delaware
Investments family

Christopher Beck 6 Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the Registrant
and 9 other investment companies in the Delaware
Investments family

Elizabeth H. Howell 7 Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), seven investment companies in the Delaware
Investments family

Andrew M.
McCullagh, Jr. 8 Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) eight investment companies in the Delaware
Investments family

Babak Zenouzi Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant and 12 other investment
companies in the Delaware Investments family

Paul Grillo Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and 20 investment
companies in the Delaware Investments family

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held

Marshall T. Bassett Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), the Registrant
and 9 other investment companies in the Delaware
Investments family

John Heffern Vice President/Portfolio Manager of Delaware
Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust), the Registrant and 9 other investment
companies in the Delaware Investments family

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

1 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
2 TAX PRINCIPAL, Ernst & Young LLP prior to April 1998.
3 CORPORATE CONTROLLER, IIS prior to July 1997.
4 INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
5 SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to
June 1996.
6 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
7 SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to
May 1997.
8 SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset
Management LLC prior to May 1997.

PART C - Other Information
(Continued)

(b) Voyageur Asset Management LLC serves as sub-adviser (the "Sub-
Adviser") for Growth Stock Fund. The Sub-Adviser also serves as sub-
adviser to Voyageur Funds, Inc. The Sub-Adviser is an indirect
wholly-owned subsidiary of Dougherty Financial Group LLC ("DFG"),
which is owned 50% by Michael E. Dougherty and 50% equally by James
A. Pohlad, Robert C. Pohlad and William M. Pohlad (the "Pohlads").
Mr. Dougherty co-founded the predecessor of DFG in 1977 and has
served as DFG's Chairman of the Board and Chief Executive Officer
since inception. The Sub-Adviser serves as adviser or sub-adviser
to other investment companies and administers numerous private
accounts and together with its affiliates managed approximately
$8 billion in assets as of April 30, 1997. The Sub-Adviser's
principal business address is 90 South Seventh Street, Suite 4400,
Minneapolis, Minnesota 55402.

Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held

John G. Taft Chairman of the Board, Director and Chief
Executive Officer of Voyageur Asset Management LLC

Edward J. Kohler Director and President of Voyageur Asset
Management LLC

Steven B. Johansen Director, Treasurer and Chief Financial Officer of
Voyageur Asset Management LLC

Thomas J. Abood Secretary of Voyageur Asset Management LLC

*Business address of each is 90 South Seventh Street, Suite 4400,
Minneapolis, Minnesota 55402.

PART C - Other Information
(Continued)

Item 29. Principal Underwriters.

(a) Delaware Distributors, L.P. serves as principal underwriter for all
the mutual funds in the Delaware Investments family.

(b) Information with respect to each director, officer or partner of
principal underwriter:

Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant

Delaware
Distributors, Inc. General Partner None

Delaware
Investment Advisers Limited Partner None

Delaware Capital
Management, Inc. Limited Partner None

Wayne A. Stork Chairman Chairman

Bruce D. Barton President and Chief
Executive Officer None

David K. Downes Executive Vice President, Executive Vice President,
Chief Operating Officer Chief Operating Officer
and Chief Financial and Chief Financial
Officer Officer

George M.
Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary/General Counsel Secretary/General
Counsel

Richard J.
Flannery Senior Vice President/ Senior Vice President/
Corporate and Corporate and
International Affairs International Affairs

Joseph H. Hastings Senior Vice President/ Senior Vice President/
Corporate Controller Corporate Controller
& Treasurer

Terrence P.
Cunningham Senior Vice President/ None
Financial Institutions

Thomas E. Sawyer Senior Vice President/ None
National Sales Director

Mac McAuliffe Senior Vice President/ None
Sales Manager, Western
Division

* Business address of each is 1818 Market Street, Philadelphia, PA 19103.

Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant

J. Chris Meyer Senior Vice President/ None
Director Product
Management

William M. Kimbrough Senior Vice President/
Wholesaler None

Daniel J. Brooks Senior Vice President/
Wholesaler None

Bradley L. Kolstoe Senior Vice President/
Western Division Sales
Manager None

Henry W. Orvin Senior Vice President/
Eastern Division Sales
Manager None

Michael P. Bishof Senior Vice President Senior Vice
and Treasurer/Manager, President/Treasurer
Investment Accounting

Eric E. Miller Vice President/Assistant Vice President/Assistant
Secretary/ Deputy Secretary/Deputy
General Counsel General Counsel

Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary

Lisa O. Brinkley Vice President/Compliance Vice President/
Compliance

Daniel H. Carlson Vice President/Strategic
Marketing None

Diane M. Anderson Vice President/Plan
Record Keeping
and Administration None

Anthony J. Scalia Vice President/Defined
Contribution Sales,
SW Territory None

Courtney S. West Vice President/Defined
Contribution Sales,
NE Territory None

Denise F.
Guerriere Vice President/
Client Services None

Gordon E. Searles Vice President/
Client Services None

Lori M. Burgess Vice President/
Client Services None

Julia R. Vander Els Vice President/
Participant Services None

Jerome J. Alrutz Vice President/
Retail Sales None

* Business address of each is 1818 Market Street, Philadelphia,
PA 19103.

Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant

Scott Metzger Vice President/ Vice President/
Business Development Business Development

Stephen C. Hall Vice President/
Institutional Sales None

Gregory J. McMillan Vice President/
National Accounts None

Holly W. Reimel Vice President/
Manager, National
Accounts None

Christopher H.
Price Vice President/Manager,
Insurance None

Stephen J.
DeAngelis Vice President/Product
Development None

Andrew W. Whitaker Vice President/
Financial Institutions None

Jesse Emery Vice President/
Marketing
Communications None

Darryl S. Grayson Vice President,
Broker/Dealer
Internal Sales None

Dinah J. Huntoon Vice President/
Product Manager Equity None

Soohee Lee Vice President/Fixed
Income Product Management None

Michael J. Woods Vice President/UIT Product
Management None

Ellen M. Krott Vice President/Marketing None

Dale L. Kurtz Vice President/Marketing
Support None

David P. Anderson Vice President/Wholesaler None

Lee D. Beck Vice President/Wholesaler None

Gabriella Bercze Vice President/Wholesaler None

Terrence L. Bussard Vice President/Wholesaler None

* Business address of each is 1818 Market Street, Philadelphia,
PA 19103.

Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant

William S. Carroll Vice President/Wholesaler None

William L. Castetter Vice President/Wholesaler None

Thomas J. Chadie Vice President/Wholesaler None

Thomas C. Gallagher Vice President/Wholesaler None

Douglas R. Glennon Vice President/Wholesaler None

Ronald A. Haimowitz Vice President/Wholesaler None

Christopher L.
Johnston Vice President/Wholesaler None

Michael P. Jordan Vice President/Wholesaler None

Jeffrey A. Keinert Vice President/Wholesaler None

Thomas P. Kennett Vice President/ Wholesaler None

Debbie A. Marler Vice President/Wholesaler None

Nathan W. Medin Vice President/Wholesaler None

Roger J. Miller Vice President/Wholesaler None

Patrick L. Murphy Vice President/Wholesaler None

Stephen C. Nell Vice President/Wholesaler None

Julia A. Nye Vice President/Wholesaler None

Joseph T. Owczarek Vice President/Wholesaler None

Mary Ellen
Pernice-Fadden Vice President/Wholesaler None

Mark A. Pletts Vice President/Wholesaler None

Philip G. Rickards Vice President/Wholesaler None

Laura E. Roman Vice President/Wholesaler None

Linda Schulz Vice President/Wholesaler None

* Business address of each is 1818 Market Street, Philadelphia,
PA 19103.

Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant

Edward B. Sheridan Vice President/Wholesaler None

Robert E. Stansbury Vice President/Wholesaler None

Julia A. Stanton Vice President/Wholesaler None

Larry D. Stone Vice President/Wholesaler None

Edward J. Wagner Vice President/Wholesaler None

Wayne W. Wagner Vice President/Wholesaler None

John A. Wells Vice President/Marketing
Technology None

Scott Whitehouse Vice President/Wholesaler None

* Business address of each is 1818 Market Street, Philadelphia,
PA 19103.

PART C - Other Information
(Continued)

Item 30. Location of Accounts and Records.

All accounts and records are maintained in Philadelphia at 1818 Market
Street, Philadelphia, PA 19103 or One Commerce Square, Philadelphia, PA
19103 or 90 South Seventh Street, Suite 4400, Minneapolis,
Minnesota 55402.

Item 31. Management Services. None.

Item 32. Undertakings.

(a) Not Applicable.

(b) Not Applicable.

(c) 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.

(d) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of
removal of any director when requested in writing to do so by
the record holders of not less than 10% of the outstanding
shares.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Registrant certifies that it
meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in this City of
Philadelphia, Commonwealth of Pennsylvania on this 24th day of
June, 1998.

VOYAGEUR MUTUAL FUNDS III, INC.

By /s/WAYNE A. STORK
Wayne A. Stork
Chairman

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:

<S> <C> <C>
Signature Title Date
- ------------------------------------- --------------------- -------

/S/ WAYNE A. STORK Chairman and
- ------------------------------------- Director June 24, 1998
Wayne A. Stork
Executive Vice
President/Chief
Operating Officer/
Chief Financial
Officer

/S/ DAVID K. DOWNES (Principal Financial
- ------------------------------------- Officer and Principal
David K. Downes Accounting Officer) June 24, 1998

/S/WALTER P. BABICH * Director June 24, 1998
- -------------------------------------
Walter P. Babich

/S/ANTHONY D. KNERR * Director June 24, 1998
- -------------------------------------
Anthony D. Knerr

/S/ANN R. LEVEN * Director June 24, 1998
- -------------------------------------
Ann R. Leven

/S/W. THACHER LONGSTRETH * Director June 24, 1998
- -------------------------------------
W. Thacher Longstreth

/S/THOMAS F. MADISON * Director June 24, 1998
- -------------------------------------
Thomas F. Madison

/S/JEFFREY J. NICK * Director June 24, 1998
- -------------------------------------
Jeffrey J. Nick

/S/CHARLES E. PECK * Director June 24, 1998
- -------------------------------------
Charles E. Peck

*By /S/WAYNE A. STORK
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated

</TABLE>

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Exhibits

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

INDEX TO EXHIBITS

Exhibit No. Exhibit
- ------------------------------
EX-99.B1G Certificate of Designation (June 30, 1997)

EX-99.B7 Amended and Restated Profit Sharing Plan
(Module Name
PROF_SHARE_PLAN)

EX-99.B7B Amendment to Profit Sharing Plan
(Module Name
AMEND_PROF_SHAR)

EX-99.B8BI Letter of Notice (June 26, 1997) to add
Tax-Efficient Equity Fund to Custodian Agreement
between the Chase Manhattan Bank and the Registrant

EX-99.B9BI Executed Amendment No. 8 (December 18, 1997) to
Delaware Group of Funds Fund Accounting Agreement

EX-99.B9BII Executed Amendment No. 9 (March 31, 1998) to
Delaware Group of Funds Fund Accounting Agreement

EX-99.B10 Opinion of Counsel

EX-99.B11 Consent of Auditors

EX-27 Financial Data Schedules

EX-99.B19 Directors' Power of Attorney

EXHIBIT 99.B1G
Exhibit 24 (b) (1) (g)

CERTIFICATE OF DESIGNATION
OF SERIES OF COMMON SHARES

The undersigned, Secretary of Voyageur Mutual Funds III, Inc., a
Minnesota corporation (the "Corporation"), hereby certifies that the following
is a true, complete and correct copy of resolutions duly adopted at a meeting of
the Board of Directors of the Corporation held June 19, 1997.

WHEREAS, the total authorized number of shares of the Corporation is
ten trillion, all of which shares are common shares, par value $.01 per share,
as set forth in the Corporation's Amended and Restated Articles of Incorporation
(the "Articles");

WHEREAS, pursuant to Section 5(a) of the Articles, certain of such
authorized shares have been designated as to series, including ten billion which
have been designated as Series A Common Shares, ten billion which have been
designated as Series B Common Shares and ten billion which have been designated
as Series E Common Shares;

WHEREAS, pursuant to Section 5(b) of the Articles, the shares of each
Series may be classified by the Board of Directors in one or more classes with
such relative rights and preferences as shall be stated or expressed in a
resolution or resolutions providing for the issue of any such class or classes
as may be adopted from time to time by the Board of Directors of the
Corporation; and

WHEREAS, of the ten billion Shares designated as Series A Common
Shares, one billion have been designated Series A, Class A Common Shares, one
billion have been designated as Series A, Class B Common Shares, one billion
have been designated as Series A, Class C Common Shares, and the rest remain
undesignated as to class.

WHEREAS, of the ten billion Shares designated as Series B Common
Shares, one billion have been designated Series B, Class A Common Shares, one
billion have been designated as Series B, Class B Common Shares, one billion
have been designated as Series B, Class C Common Shares, and the rest remain
undesignated as to class.

WHEREAS, of the ten billion Shares designated as Series E Common
Shares, one billion have been designated Series E, Class A Common Shares, one
billion have been designated as Series E, Class B Common Shares, one billion
have been designated as Series E, Class C Common Shares, and the rest remain
undesignated as to class.

NOW, THEREFORE, BE IT RESOLVED, that of the seven billion Series A
Common Shares remaining undesignated as to class, one billion are hereby
designated as Series A, Institutional Class Common Shares and the remaining
six billion Series A Common Shares shall remain undesignated as to class.

FURTHER RESOLVED, that of the seven billion Series B Common Shares
remaining undesignated as to class, one billion are hereby designated as Series
B, Institutional Class Common Shares and the remaining six billion Series B
Common Shares shall remain undesignated as to class.

FURTHER RESOLVED, that of the seven billion Series E Common Shares
remaining undesignated as to class, one billion are hereby designated as Series
E, Institutional Class Common Shares and the remaining six billion Series E
Common Shares shall remain undesignated as to class.

FURTHER RESOLVED, that the Institutional Class Common Shares designated
by these resolutions shall have the relative rights and preferences set forth in
the Articles. As provided in the Articles, Institutional Class Common Shares
designated by these resolutions may be subject to such charges and expenses
(including, by way of example but not by way of limitation, such front-end and
deferred sales charges as may be permitted under the Investment Company Act of
1940 (the "1940 Act") and the rules of the National Association of Securities
Dealers, Inc., and expenses under Rule 12b-1 plans, administrative plans,
service plans or other plans or arrangements, however designated) adopted from
time to time by the Board of Directors of the Corporation in accordance, to the
extent applicable, with the 1940 Act, which charges and expenses may differ from
those applicable to another Class within the respective Series, and all of the
charges and expenses to which a Class is subject shall be borne by such Class
and shall be appropriately reflected in determining the net asset value and the
amounts payable with respect to dividends and distributions on, and redemptions
or liquidation of, such Class.

FURTHER RESOLVED, that the officers of the Corporation are hereby
authorized and directed to file with the office of the Secretary of State of the
State of Minnesota a Certificate of Designation setting forth the relative
rights and preferences of the Series A, Series B and Series E Institutional
Class Common Shares, as required by Section 302A.401, Subd. 3(b) of the
Minnesota Statutes.

IN WITNESS WHEREOF, the undersigned has signed this Certificate on
behalf of Voyageur Mutual Funds III, Inc. this 30th day of June, 1997.
---

/s/George M. Chamberlain, Jr.
___________________________
George M. Chamberlain, Jr.
Secretary

<PAGE>

PROFIT SHARING PLAN

DELAWARE GROUP DELAWARE FUND, INC.

SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989

<PAGE>

PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.

SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989

TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I
PURPOSE CLAUSE . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE III
ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN . . . . . . . . . . . . . . 6

ARTICLE IV
CONTRIBUTIONS TO PLAN . . . . . . . . . . . . . . . . . 7

ARTICLE V
ALLOCATION OF CONTRIBUTIONS . . . . . . . . . . . . . . 12

ARTICLE VI
RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . 14

ARTICLE VII
DISABILITY BENEFITS . . . . . . . . . . . . . . . . . . 14

ARTICLE VIII
DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . 14

ARTICLE IX
OTHER SEPARATION FROM SERVICE . . . . . . . . . . . . . 16

ARTICLE X
METHOD OF PAYMENT . . . . . . . . . . . . . . . . . . . 18

ARTICLE XI
ADMINISTRATION OF PLAN . . . . . . . . . . . . . . . . 26

ARTICLE XII
AMENDMENT, CONSOLIDATION, MERGER
OR TERMINATION . . . . . . . . . . . . . . . . . . . . 29

(i)

<PAGE>

ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 30

ARTICLE XIV
LOANS . . . . . . . . . . . . . . . . . . . . . . . . . 31

ARTICLE XV
LIMITATIONS ON ALLOCATIONS . . . . . . . . . . . . . . 32

ARTICLE XVI
TOP HEAVY DEFINITIONS AND RULES . . . . . . . . . . . . 36

(ii)

<PAGE>

PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989

ARTICLE I

PURPOSE CLAUSE
--------------
This Profit Sharing Plan and the Trust Agreement forming a part hereof are
established for the benefit of the employees of Delaware Group Delaware Fund,
Inc. and the other investment companies of the Delaware Group of Funds to
promote in them a strong interest in the successful operation of the business
and to provide for them an opportunity for accumulation of funds for their
retirement benefit.

ARTICLE II

DEFINITIONS
-----------
When used herein, the following words shall have the following meanings
unless the context clearly indicates otherwise:

2.1 "Administrative Committee" or "Committee" shall mean the Administrative
Committee with authority and responsibility to manage and direct the operation
and administration of this Plan. "Administrative Committee" shall be deemed to
also mean "Administrator" and "Plan Administrator" as defined in ERISA.

2.2 "Anniversary Date" shall mean the first day of each Plan Year.

2.3 "Beneficiary" shall mean the person or persons designated by a
Participant to receive benefits upon the death of said Participant pursuant to
Article VIII.

2.4 "Board of Directors" shall mean the Board of Directors of the Employer.

2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.

2.6 "Effective Date" of the Plan shall mean October 1, 1983. The Effective
Date of this amended and restated Plan shall mean April 1, 1989, except where
indicated otherwise.

2.7 "Eligibility Computation Period" shall mean the period of twelve (12)

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consecutive months beginning on the date an Employee first performs an Hour of
Service upon hire or rehire after a One Year Break in Service, and any Plan Year
following such date of hire or date of rehire following a One Year Break in
Service.

2.8 "Eligibility Year of Service" shall mean the Eligibility Computation
Period during which the Employee performs one thousand (1,000) or more Hours of
Service. Eligibility Years of Service shall include an Employee's prior service
with Delaware Management Company, Inc. or any Entity required to be aggregated
with Delaware Management Company, Inc. under Sections 414(b) or(c) of the Code.

2.9 "Employee" shall mean any person employed by the Employer or by any
affiliated Entity which adopts this Plan; provided, however, no person covered
by a collective bargaining agreement under which the Employer has participated
in good faith bargaining concerning retirement benefits shall be considered an
Employee for the purposes of this Plan. Any Leased Employee shall not be
considered an Employee for purposes of the Plan.

2.10 "Employer" shall mean Delaware Group Delaware Fund, Inc. and any other
affiliated investment company which adopts this Plan. Effective October 1, 1987,
and solely for purposes of determining periods of service for eligibility for
participation and vesting, the term "Employer" shall include any corporation
which is a member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Employer; any trade or business (whether
or not incorporated) which is under common control (as defined in Section 414(c)
of the Code) with the Employer; any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined in Section 414(m)
of the Code) which includes the Employer; and any other Entity required to be
aggregated with the Employer pursuant to regulations under Section 414(o) of the
Code.

2.11 "Employer Contribution Account" shall mean a Participant's account
derived from Employer contributions and the earnings thereon.

2.12 "Entity" shall mean an individual, partnership, corporation or
unincorporated organization.

2.13 "ERISA" shall mean the Employee Retirement Income Security Act of 1974
and the Regulations promulgated thereunder by either the Department of Labor or
Treasury.

2.14 "Hour of Service" shall mean:

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(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours will be credited to the
Employee for the computation period in which the duties are performed; and

(b) Each hour for which an Employee is paid, or entitled to payment, by the
Employer on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, military service or leave of absence. No more than 501 Hours of Service
will be credited under this paragraph for any single continuous period (whether
or not such period occurs in a single computation period); and

(c) Each hour for which back pay, regardless of mitigation of damages, is
either awarded or agreed to by the Employer. The same Hours of Service will not
be credited both under paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c). These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.

(d) Hours of Service will be calculated on the basis described in
Department of Labor Regulations Section 2530.200b-2(b) and (c).

(e) Solely for purposes of determining whether a Break in Service has
occurred, for participation and vesting purposes, an individual who is absent
from work for maternity or paternity reasons will receive credit for the Hours
of Service which would otherwise have been credited to such individual. In the
event these hours cannot be determined, eight (8) Hours of Service per day will
be used. For purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence (i) by reason of the pregnancy of the
individual, (ii) by reason of the birth of a child of the individual, (iii) by
reason of the placement of a child with the individual in connection with the
adoption of the child by such individual, or (iv) for purposes of caring for the
child for a period beginning immediately following such birth or placement.
However, in no event will the hours treated as Hours of Service under this
paragraph (e), by reason of any pregnancy or placement, exceed 501 hours. The
Hours of Service credited under this paragraph will be credited (i) in the Plan
Year in which the absence begins if the crediting is necessary to prevent a
Break in Service in that period, or (ii) in all other cases, in the following
Plan Year.

(f) Effective for Plan Years beginning on or after April 1, 1994, an
Employee shall be credited with 45 Hours of Service for each week for which he
would be required to be credited with at least one Hour of Service under
paragraphs (a)-(e) above.

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<PAGE>

2.15 "Leased Employee" shall mean any person described in Section 414(n) of
the Code who is not an employee of the Employer who, pursuant to an agreement
between the Employer and any other person, has performed service for the
Employer (or for any related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full-time basis for a period of at
least one year and such services are of a type historically performed by
employees in the Employer's business field.

2.16 "Named Fiduciary" shall be the Administrative Committee and the
Trustee or Trustees serving from time to time and any other person who is
specifically so designated by the Board of Directors.

2.17 "Normal Retirement Date" shall mean the date on which a Participant
shall reach age 65.

2.18 "One Year Break in Service" or "Break in Service" shall mean a Plan
Year during which an Employee has or was separated from employment with Employer
and has completed 500 or less Hours of Service.

2.19 "Participant" shall mean any Employee who meets the eligibility
requirements under Article III or any Employee who is or may become eligible to
receive a benefit under the Plan or whose Beneficiaries may be eligible to
receive any such benefit.

2.20 "Participant Contribution Account" shall mean a Participant's account
derived from his voluntary contributions and the earnings thereon.

2.21 "Plan" shall mean the Employer's Profit Sharing Plan set forth in this
document and all subsequent amendments thereto.

2.22 "Plan Compensation" shall mean as of each Anniversary Date, the basic
compensation received by an Employee from the Employer during the preceding Plan
Year, including salary, draw, overtime and bonuses, but excluding contributions
to this or any other deferred compensation plan. Plan Compensation includes
salary reduction contributions paid by the Employer on the Employee's behalf to
a cafeteria plan, within the meaning of Section 125 of the Code, maintained by
the Employer. Effective for Plan Years beginning on or after April 1, 1994, Plan
Compensation shall mean the sum of (a) the total earnings which are received by
the Employee from the Employer for the preceding Plan Year and which are
required to be reported as wages on the Employee's Form W-2 (in the wages, tips
and other compensation box) and (b) the total amount contributed by the

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<PAGE>

Employer on behalf of the Employee pursuant to a salary reduction agreement
which is not includable in the gross income of the Employee under Sections 125
or 402 (e)(3) of the Code, but excluding all of the following items (even if
includable in gross income): reimbursements or other expense allowances, fringe
benefits (cash and non-cash), moving expenses, deferred compensation and welfare
benefits.

For Plan Years beginning on or after April 1, 1989, the Plan Compensation
of each Participant taken into account under the Plan shall not exceed $200,000,
as adjusted by the Secretary of the Treasury. In determining the Plan
Compensation of a Participant for purposes of the limitations set forth in the
preceding sentence, the rules of Section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the spouse
of the Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the Plan Year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is exceeded, then
the limitation shall be prorated among the affected individuals in proportion to
each such individual's Plan Compensation as determined under this Section 2.22
prior to the application of this limitation. Effective for Plan Years beginning
on or after January 1, 1994, the Plan Compensation of a Participant shall not
exceed $150,000, as adjusted at the time and manner prescribed by Section 401
(a)(17)(B) of the Code.

2.23 "Plan Year" shall mean a twelve-month period beginning on April 1st
and ending on March 31st. For the Plan Years beginning before April 1, 1989 and
after December 31, 1986, the term Plan Year means a twelve month period
beginning October 1st and ending September 30th, except that the Plan Year
beginning October 1, 1988 is a short year which ends March 31, 1989.

2.24 "Total and Permanent Disability" shall mean incapacity, resulting from
injury or disease, of a Participant to perform any work for Employer and shall
be presumed permanent after the same has continued uninterrupted for six months
as certified by a qualified physician selected by the Administrative Committee.

2.25 "Trustee" or "Trustees" shall mean the trustee or trustees named in
the Trust Agreement attached hereto and forming a part hereof, or any successor
thereto.

2.26 "Trust Fund" or "Fund" shall mean all property held pursuant to the
Trust Agreement.

2.27 "Valuation Date" means the last day of each Plan Year and such other
quarterly, monthly or daily dates as determined by the Administrative Committee.

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<PAGE>

2.28 "Year of Service" shall mean a Plan Year during which an Employee
completes at least 1,000 Hours of Service; provided, however, that for the
period from October 1, 1988 through March 31, 1990, an Employee shall be given
credit for a Year of Service if he completes 1,000 Hours of Service during the
period October 1, 1988 to September 30, 1989 and shall be given credit for an
additional Year of Service if he completes 1,000 Hours of Service during the
period April 1, 1989 to March 31, 1990. For purposes of determining a
Participant's nonforfeitable right to his Employer Contribution Account, Years
of Service shall include an Employee's prior service with Delaware Management
Company, Inc. or any other Entity required to be aggregated with Delaware
Management Company, Inc. under Sections 414(b) or (c) of the Code. An Employee
shall also receive credit for a Year of Service if he completes 1000 or more
Hours of Service during his initial Eligibility Computation Period.

2.29 Whenever used herein, the masculine provision includes the feminine
and the singular includes the plural.

ARTICLE III

ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN
--------------------------
3.1 Each Employee who was a Participant on March 31, 1989 shall continue as
a Participant. Each other Employee shall be eligible to participate in this Plan
on the first day of the Plan Year within which he completes one Eligibility Year
of Service.

3.2 Any Participant who returns to service after a Break in Service shall
be admitted to the Plan as a Participant on his date of re-employment.

3.3 Within 60 days of each Anniversary Date of this Plan, the Employer
shall furnish the Administrator a list showing all eligible Employees, the date
of employment, the Years of Service, the Plan Compensation of each eligible
Employee and the date of termination of any terminated Employees.

3.4 Notwithstanding the provisions of Section 3.1 to the contrary, if an
Employee is employed by the Employer on March 31, 1989 and has completed by such
date 1,000 or more Hours of Service during an Eligibility Computation Period
which began on or before October 1, 1988, such Employee shall be eligible to
participate in the Plan on October 1, 1988.

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<PAGE>

ARTICLE IV

CONTRIBUTIONS TO PLAN
---------------------
4.1 Each participating Employer may contribute to the Plan's Trust Fund for
each taxable year an amount, if any, determined in accordance with a resolution
of the Board of Directors adopted before the date prescribed by law for filing
its Federal income tax return for such taxable year (including extensions
thereof); provided, however, that no contributions shall be made for any year in
excess of the amount deductible for such year under provisions of the Code and
regulations thereunder as then in effect. For Plan Years beginning on or after
April 1, 1989, the Employer may make contributions regardless of whether or not
it has Net Profits and Earnings for its tax year.

4.2 For Plan Years beginning before April 1, 1989, Net Profits and Earnings
in any one year of operations means the net income before provisions for Federal
and State income taxes as determined by the certified public accountants
employed by the Employer in accordance with generally accepted accounting
principles of open-end management investment companies.

4.3 For each taxable year, the contributions shall accrue on the
Anniversary Date thereof, but shall not be considered as accruing during the
said taxable year prior to the Anniversary Date thereof.

4.4 The Trust Fund shall not be diverted to any use other than the
exclusive benefit of eligible Employees and their Beneficiaries.

4.5 Effective August 1, 1991, a Participant may not make voluntary
contributions to his Participant Contribution Account. Prior to August 1, 1991,
a Participant may make voluntary contributions to his Participant Contribution
Account. Such contributions may be made by payroll deductions or in such other
manner and subject to such procedures as the Administrator may prescribe. No
Participant may contribute more than ten percent of his aggregate Plan
Compensation for all Plan Years during which he participated in the Plan.

4.6 Notwithstanding the provisions of Article IX, a Participant shall have
a nonforfeitable interest in all voluntary contributions made by him and in any
increase in his account attributable to such contributions.

4.7 A Participant shall have the right to withdraw the total amount of his
voluntary contributions at any time; provided, however, that such withdrawal

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shall be permissible only with respect to the amount of such Participant's
voluntary contributions and not to any increase in his account attributable to
such contributions. No Participant shall be permitted to make withdrawals of
his voluntary contributions more than four times in any one calendar year.
Effective as of the date of adoption of this amended and restated Plan, a
Participant shall be permitted to make withdrawals as frequently as monthly of
all or a portion of his voluntary contributions, including the earnings
thereon.

4.8 The Fund may accept rollover contributions on behalf of an Employee
(including an Employee who has not satisfied the requirements to be eligible to
participate) from any other plan maintained for his benefit which satisfies the
requirements of a tax-qualified plan, or a rollover individual retirement
account; provided, however, that such rollovers are permitted by and effected in
accordance with the requirements of the Code. The Administrative Committee may
as a condition of acceptance of such rollovers demand such information, opinions
and statements as it deems necessary to assure that such rollovers conform to
the requirements of the federal tax laws.

4.9 An Employee for whom a rollover has been made shall be deemed a
Participant with respect to the amount contributed and shall have a
nonforfeitable interest in such amount and any increases attributable to it. Any
such rollovers shall be held in a special account for the Participant segregated
from other assets held by the fund. Such contributions will be administered and
distributed pursuant to the provisions of this Plan.

4.10 The following special non-discrimination rules pertaining to voluntary
contributions shall be applicable for Plan Years beginning on or after October
1, 1987 and before April 1, 1990.

(a) For any Plan Year, the Contribution Percentage for all Highly
Compensated Employees will not exceed the greater of (i) or (ii) as follows:

(i) The Contribution Percentage for all Non-Highly Compensated Employees,
times 1.25; or

(ii) The lesser of the Contribution Percentage for all Non-Highly
Compensated Employees, times 2.0, provided that the Contribution Percentage for
all Highly Compensated Employees may not exceed the Contribution Percentage for
all Non-Highly Compensated Employees by more than two (2) percentage points or
such lesser amount as the Secretary of Treasury will prescribe to prevent the
multiple use of this alternative limitation with respect to any Highly
Compensated Employee.

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<PAGE>

(b) Distribution of Excess Aggregate Contributions.

(i) Excess Aggregate Contributions, plus any income and minus any loss
allocable thereto, will be distributed no later than the last day of each Plan
Year to Participants to whose accounts Excess Aggregate Contributions were
allocated for the preceding Plan Year.

(ii) For the Plan Year beginning on October 1, 1987, the income or loss
allocable to Excess Aggregate Contributions shall be determined under any
reasonable method, which method shall be applied on a consistent basis for all
Participants. For Plan Years beginning after 1987, the income or loss allocable
to Excess Aggregate Contributions shall be the sum of (A) and (B) below:

(A) The income or loss for the Plan Year allocable to the Participant's
voluntary contribution Account multiplied by a fraction, the numerator of which
is the Participant's Excess Aggregate Contributions for the year, and the
denominator of which is the balance of the Participant's voluntary contribution
account as of the end of the Plan Year, minus income (or plus losses) allocable
to such account.

(B) The income or loss for the period between the end of the Plan Year and
the date of the distribution allocable to the Participant's voluntary
contribution account multiplied by the fraction described in (A), above.

In lieu of using the formula described in (B), the income or loss for the
period between the end of the Plan Year and the date of the distribution
allocable to Excess Aggregate Contributions for the year may be calculated under
the following alternative method, provided such method is applied on a
consistent basis for all Participants: ten percent (10%) of the amount
determined under (A), above, multiplied by the number of whole calendar months
that have elapsed since the end of the Plan Year. For this purpose, if a
distribution of Excess Aggregate Contributions is made after the 15th day of a
month, that month will be counted as a whole month.

(i) "Contribution Percentage" means, for a group of Participants, the
average of the following ratios (calculated separately) for each Participant in
the group:

(A) The sum of voluntary contributions made on behalf of each Participant
for the Plan Year; over

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(B) The Participant's Compensation for that Plan Year, whether or not the
Participant was a Participant for the entire Plan Year.

The Contribution Percentage for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have voluntary employee
contributions or employer matching contributions allocated to his account under
two or more plans described in Section 401(a) of the Code or arrangements
described in Section 401(k) of the Code that are maintained by the employer or
an entity that is required to be aggregated with the employer pursuant to
Sections 414(b), (c), (m), or (o) of the Code will be determined as if all such
contributions were made under a single plan. If a Highly Compensated Employee
participates in two or more arrangements described in Section 401(k) of the Code
that have different plan years, all such arrangements ending with or within the
same calendar year shall be treated as a single arrangement.

For purposes of determining the Contribution Percentage of a Participant
who is a five-percent owner or one of the ten most Highly Compensated Employees,
the Contribution Percentage and compensation of such Participant will include
the Contribution Percentage and Compensation of Family Members, and such Family
Members will be disregarded in determining the Contribution Percentage for
Participants who are Non-Highly Compensated Employees.

Voluntary contributions will be considered made for a Plan Year if made by
the date specified in the applicable regulations and allocated to a
Participant's account for the Plan Year.

The determination and treatment of the Contribution Percentage of any
Participant will satisfy such other requirements as may be prescribed by
Secretary of the Treasury.

In the event that this Plan satisfies the requirements of Sections 401(m),
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of such Sections only if
aggregated with this Plan, then this Section 4.10 will be applied by determining
the Contribution Percentages of eligible Participants as if all such plans were
a single plan. For plan years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Section 401(m) of the Code only if they have the
same plan year.

(ii) "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of:

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(A) The aggregate Contribution Percentage amounts taken into account in
computing the numerator of the Contribution Percentage actually made on behalf
of Highly Compensated Employees for such Plan Year; over

(B) The maximum Contribution Percentage amounts permitted by the
Contribution Percentage limits set forth in this Section 4.10 (determined by
reducing contributions made on behalf of Highly Compensated Employees in order
of their Contribution Percentages beginning with the highest of such
percentages).

(iii) "Family Member" means an individual described in Section 414(q)(6)(B)
of the Code.

(iv) "Highly Compensated Employee" means a highly compensated active
employee or a highly compensated former employee, as described below.

A highly compensated active employee includes any employee who performs
service for the employer during the determination year and who, during the
look-back year: (i)received compensation from the employer in excess of $75,000
(as adjusted pursuant to Section 415(d) of the Code); (ii) received compensation
from the employer in excess of $50,000 (as adjusted pursuant to Section 415(d)
of the Code) and was a member of the top-paid group for such year; or (iii) was
an officer of the employer and received compensation during such year that is
greater than 50 percent of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term Highly Compensated Employee also includes:
(i) employees who are both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and the
employee is one of the 100 employees who received the most compensation from the
Employer during the determination year; and (ii) employees who are five percent
owners at any time during the look-back year or determination year.

If no officer has satisfied the compensation requirement of (iii) above
during either a determination year or a look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee.

For this purpose, the determination year shall be the Plan Year. The
look-back shall be the twelve (12)-month period immediately preceding the
determination year.

A highly compensated former employee includes any employee who separated
from service (or was deemed to have separated) prior to the determination year,
performs no service for the employer during the determination year, and was a
highly compensated active employee for either the separation year or any
determination year ending on or after the employee's fifty-fifth (55th)
birthday.

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<PAGE>

If an employee is, during a determination year or look-back year, a Family
Member of either a five percent owner who is an active or former employee or a
Highly Compensated Employee who is one of the ten (10) most Highly Compensated
Employees ranked on the basis of compensation paid by the Employer during such
year, then the Family Member and the five percent owner or top-ten (10) Highly
Compensated Employee shall be aggregated. In such case, the Family Member and
five percent owner or top-ten Highly Compensated Employee shall be treated as a
single employee receiving compensation and Plan contributions or benefits equal
to the sum of such compensation and contributions or benefits of the Family
Member and five percent owner or ten (10) most Highly Compensated Employee.

The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of employees in the top-paid group,
the top one hundred (100) employees, a five percent owner, the number of
employees treated as officers and the compensation that is considered, will be
made in accordance with Section 414(q) of the Code and the regulations
thereunder.

(v) "Compensation" means all of an Employee's compensation, as that term is
defined in Article XV, Limitations on Allocations, and shall include elective
contributions that are made by the Employer on behalf of the Employee and which
are not includable in income under Section 125 of the Code. Compensation shall
be subject to the limitation of Section 401(a)(17) of the Code.

ARTICLE V

ALLOCATION OF CONTRIBUTIONS
---------------------------
5.1 A separate and complete accounting shall be maintained for each
Participant which shall set forth the amount credited to or forfeited from his
Employer Contribution Account and his Participant Contribution Account. Employer
contributions and Participant contributions shall be allocated among investment
companies managed by Delaware Management Company, Inc. Each Participant shall
file a written notice with the Committee thereby making an election as to what
proportion of his contributions, including both contributions made by the
Employer and voluntary contributions, shall be allocated to the eligible
investment company funds, as announced from time to time by the Committee. Each
Participant shall have the right to change the investment allocation of his
contributions and his accumulated account balance, in accordance with rules and
procedures as announced from time to time by the Committee, provided changes are
subject to any limitations imposed on the right of exchange by the investment
media.

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5.2 The Employer's contributions and any forfeitures for each Plan Year
shall be credited to the Employer Contribution Accounts of Participants who are
employed by the Employer on the Anniversary Date and allocated in the proportion
that the Plan Compensation of each Participant bears to the total Plan
Compensation of all Participants for such Plan Year. A Participant who
terminates employment on the Anniversary Date shall be treated as employed by
the Employer on the Anniversary Date. All voluntary contributions made by a
Participant prior to August 1, 1991 shall be credited to his Participant
Contribution Account.

5.3 As of the Anniversary Date, each Participant's Employer Contribution
Account and his Participant Contribution Account shall be valued at its fair
market value. For the purposes of paying benefits to a Participant, his accounts
shall be valued on the most recent Valuation Date as determined by the
Administrative Committee.

5.4 Income when earned less expenses, if any, when charged, shall be
credited to or charged against each Participant's account, in accordance with
the self-directed investments selected by the Participant.

5.5 The Committee shall, as of each Anniversary Date, determine the total
amount of forfeitures which accrued during the Plan Year and shall add the
forfeited amount to the Employer's annual contribution for the purposes of
reallocation to the remaining Participants as provided in Section 5.2.

5.6 Any allocation made and credited to the account of a Participant under
this Article shall not cause such Participant to have any right, title or
interest in or to any assets of the Trust Fund except at the time or times, and
under the terms and conditions, expressly provided for in this Plan.

5.7 (a) In the case of a contribution to the Plan which is made by the
Employer because of a mistake of fact, the Employer may, within one year after
the payment of such contribution, withdraw such contribution from the Trust
Fund.

(b) Employer contributions to the Plan are expressly conditioned on the
deductibility of such contributions under Section 404 of the Code. To the extent
such contributions are disallowed, the Employer may, within one year of the
disallowance of the deduction, withdraw such contribution from the Trust Fund.

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ARTICLE VI

RETIREMENT BENEFITS
-------------------
6.1 Upon attaining Normal Retirement Date, a Participant shall have a fully
vested and nonforfeitable right to his entire Employer Contribution Account and
shall be entitled to retire and upon so retiring shall be entitled to the
commencement of the payment of his benefits, consisting of the balance of his
accounts, in accordance with the method of payment elected pursuant to Article
X.

6.2 A Participant who retires after his Normal Retirement Date shall
continue to be a Participant in the Plan until his actual retirement and shall
be eligible to share in the allocation of Employer contributions as provided in
Section 5.2.

ARTICLE VII

DISABILITY BENEFITS
-------------------
7.1 If the employment of a Participant has been terminated prior to his
retirement date because of Total and Permanent Disability, such Participant
shall be entitled to receive his entire Participant Contribution Account and his
entire Employer Contribution Account in accordance with the manner elected under
Article X.

7.2 Upon a Participant's cessation of Total and Permanent Disability and
upon his return to work for Employer before all of his account has been
distributed, no further payments shall be made therefrom by reason of the
disability. A Participant shall have no right or obligation to repay any amount
distributed to him pursuant to Section 7.1.

ARTICLE VIII

DEATH BENEFITS
--------------
8.1 Notwithstanding anything stated in the Plan to the contrary, if a
Participant dies prior to receiving the entire nonforfeitable amount credited to
his accounts, all such undistributed nonforfeitable amounts shall be paid to the
Participant's surviving spouse, unless there is no surviving spouse or the
surviving spouse consents in writing to the payment of death benefits to another
Beneficiary. A spouse's consent must satisfy the following requirements:

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(a) the consent must be in writing;

(b) the consent must be witnessed by a member of the Administrative
Committee or a notary public;

(c) the consent must approve a designation of a specific Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without spousal consent, or the spouse expressly permits
designations by the Participant without any further spousal consent; and

(d) the consent acknowledges the effect of the Participant's designation of
Beneficiary. If a consent permits designations by the Participant without any
requirement of further consent by such spouse, it must acknowledge that the
spouse has the right to limit consent to a specific Beneficiary and that the
spouse voluntarily elects to relinquish such right.

Written consent of a spouse need not be obtained if the Participant
establishes to the satisfaction of the Committee that there is no spouse or that
the spouse cannot be located. Any such designation may be changed from time to
time by the Participant by filing a new designation with the Committee, provided
the spousal consent requirements above are satisfied.

8.2 Each Participant may file with the Committee a designation of
Beneficiary to receive amounts payable under this Plan upon his death. The
designation may be changed from time to time by the Participant, except that a
married Participant may not name a Beneficiary other than his spouse without a
written consent which satisfies the requirements of Section 8.1. If no
designation has been filed, or all designated Beneficiaries have predeceased the
Participant, then any amounts payable shall be paid to his surviving spouse. If
there is no surviving spouse, any amounts payable shall be paid to his estate.

8.3 If at, after or during the time when a benefit is payable to any
Beneficiary, the Administrative Committee, upon request of the Trustee or at its
own instance, mails by registered or certified mail to the Beneficiary at the
Beneficiary's last known address a written demand for his then address, or for
satisfactory evidence of his continued life or both, and, if the Beneficiary
shall fail to furnish the information to the Committee within 3 years from the
mailing of the demand, then the Committee shall distribute the remaining
benefits to the Beneficiary next entitled thereto under Section 8.3 above as if
the Beneficiary designated by the Participant or Section 8.3 were then deceased.

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ARTICLE IX

OTHER SEPARATION FROM SERVICE
-----------------------------
9.1 (a) If a Participant separates from service other than under Articles
VI, VII or VIII, he shall be entitled to receive a lump sum distribution of his
entire Participant Contribution Account and his entire nonforfeitable Employer
Contribution Account. Such distribution shall be made upon the written request
of the Participant and shall be made as soon as practicable following the
Participant's separation from service, but not later than the close of the
second Plan which such separation occurs.

(b) If the non-forfeitable portion of the Participant's Employer
Contribution Account and his Participant Contribution Account exceeds $3500 (or
ever exceeded $3500 at the time of an earlier distribution), and the Participant
does not consent in writing to receive a lump sum distribution of his accounts
by the close of the second Plan Year following his separation from service, no
distribution shall be made to the Participant until he attains his Normal
Retirement Date. Regardless of whether the Participant consents in writing, if
the non-forfeitable portion of the Participant's Employer Contribution Account
and Participant Contribution Account does not exceed $3500 (or did not exceed
$3500 at the time of a prior distribution), a lump sum distribution shall be
made to the Participant of the entire value of the non-forfeitable portion of
his accounts not later than the end of the second Plan Year following his
separation from service.

(c) If a distribution is made to the Participant of the nonforfeitable
portion of his Employer Contribution Account upon his separation from service,
the non-vested portion of his Account, if any, will be treated as a forfeiture
and reallocated to remaining Participants as provided in Section 5.2. If the
Participant does not receive a distribution of his Employer Contribution Account
upon his separation from service, such Account shall be held for the Participant
until he attains Normal Retirement Date and the non-vested portion of the
Account shall be treated as a forfeiture when the Participant sustains five
consecutive One Year Breaks in Service.

(d) In the event a Participant who is less than fully vested in his
Employer Contribution Account receives a distribution of his vested interest in
such Account upon his separation from service, and such Participant subsequently
returns to employment of the Employer, the Participant's Employer Contribution
Account will be restored to the value of the Account on the date of the
distribution if the Participant repays to the Trustees the full amount of such

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distribution before the earlier of five consecutive One-Year Breaks in Service
or five years after the Participant's date of reemployment. Restoration of the
forfeited amount of a Participant's Account shall be made from forfeitures or
Employer contributions.

9.2 (a) In the event a Participant separates from service with the Employer
for reasons other than retirement, disability, death or a layoff by the
Employer, he shall have a nonforfeitable right to the amount credited to his
Employer Contribution Account in accordance with the following schedule:

Completed Years of Service Percentage
-------------------------- ----------
At least But less than
0 1 0%
1 2 20%
2 3 40%
3 4 60%
4 5 80%
5 or more 100%

(b) A Participant shall have a wholly vested and nonforfeitable right to
his Employer Contribution Account upon separation from service on account of
retirement on or after the Normal Retirement Date, Total and Permanent
Disability, death while in the employ of the Employer or layoff by the Employer.
For purposes of this Section 9.2, the term "layoff" shall mean any involuntary
separation from service other than separation due to cause. If a Participant
separates from service with the Employer, the non-vested portion of his Employer
Contribution Account, if any, shall be forfeited upon the death of the
Participant.

(c) If the Employer amends the Plan in a manner which directly or
indirectly affects the computation of a Participant's nonforfeitable percentage,
each Participant who completes an Hour of Service in any Plan Year beginning
after December 31, 1988 and who has at least three Years of Service may elect
after the adoption of such amendment to have his nonforfeitable interest
computed under the Plan without regard to such amendment. The period during
which the election may be made shall commence the day the amendment is adopted
and shall end on later of:

(i) sixty (60) days after the amendment is adopted;

(ii) sixty (60) days after the amendment becomes effective; or

(iii) sixty (60) days after the Participant is issued written notice of the
amendment by the Employer or the Committee.

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9.3 (a) In the case of a Participant who has a Break in Service, Years of
Service completed before such Break shall not be counted until the Participant
has completed a Year of Service for the purpose of determining his
nonforfeitable percentage of the amount credited to his Employer Contribution
Account after such Break in Service.

(b) Years of Service completed on reemployment and after separation from
service with the Employer in connection with which he has five consecutive One
Year Breaks in Service shall not be counted for purposes of determining such
Participant's nonforfeitable percentage right to amounts credited to his
Employer Contribution Account before such Break in Service.

ARTICLE X

METHOD OF PAYMENT
-----------------
10.1 At the request of a Participant, the form of benefit payments may be
one of the following in cash:

(a) in a lump sum payment; or

(b) in periodic, monthly, quarterly, semi-annual or annual installments
over a period certain not exceeding the Participant's life expectancy or the
joint life expectancy of the Participant and his designated Beneficiary. If
periodic installments are to be paid, a Participant's account shall be invested
in the investment company funds available under the Plan as designated by the
Participant.

If periodic installments are paid over the life expectancy of the
Participant or joint life expectancy of the Participant and a designated
Beneficiary, a Participant may elect, prior to the time distributions begin,
whether or not to have his life expectancy and his Beneficiary's life expectancy
(if the Beneficiary is his spouse) annually recalculated. In the absence of such
election, life expectancies will not be recalculated.

10.2 In no event shall payments of benefits under this Plan commence later
than sixty (60) days after the close of the Plan Year in which the latest of the
following events occur:

(a) the Participant attains age sixty-five (65); or

(b) the Participant completes ten years of participation in the Plan; or

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10.3 (a) Notwithstanding the other requirements of this Plan, distributions
on behalf of any Participant, including a five percent (5%) owner, may be made
in accordance with all of the following requirements (regardless of when such
distribution commences):

(i) The distribution by the Trust Fund is one which would not have
disqualified such Trust under Section 401(a)(9) of the Code as in effect prior
to amendment by the Deficit Reduction Act of 1984.

(ii) The distribution is in accordance with a method of distribution
designated by the Participant whose interest is being distributed or, if the
Participant is deceased, by a Beneficiary of such Participant.

(iii) Such designation was in writing, was signed by the Participant or the
Beneficiary, and was made before January 1, 1984.

(iv) The Participant had accrued a benefit under the Plan as of December
31, 1983.

(v) The method of distribution designated by the Participant or the
Beneficiary specifies the time at which distribution will commence, the period
over which distributions will be made, and in the case of any distribution upon
the Participant's death, the Beneficiaries of the Participant listed in order of
priority.

(b) A distribution upon death will not be covered by this Section unless
the information in the designation contains the required information described
above with the respect to the distributions to be made upon the death of the
Participant.

(c) For any distribution which commenced before January 1, 1984, but
continues after December 31, 1983, the Participant, or the Beneficiary, to whom
such distribution is being made, will be presumed to have designated the method
of distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in subsections (a)(i) and (v) above.

(d) If a designation is revoked, any subsequent distribution must satisfy
the requirements of Section 401(a)(9) of the Code. Any changes in the
designation will be considered to be revocation of the designation. However, the
mere substitution or addition of another Beneficiary (one not named in the

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designation) under the designation will not be considered to be revocation
of the designation, so long as such substitution or addition does not alter the
period over which distributions are to be made under the designation, either
directly or indirectly (for example, by altering the relevant measuring life).

10.4 Required Distributions. All distributions required under this Section
10.4 shall be determined and made in accordance with the proposed regulations
under Section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed
regulations.

(a) Required beginning date. The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's required
beginning date.

(b) Limits on Distribution Periods. As of the first distribution calendar
year, distributions, if not made in a single-sum, may only be made over one of
the following periods (or a combination thereof):

(1) a period certain not extending beyond the life expectancy of the
Participant, or

(2) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.

(c) Determination of amount to be distributed each year. If the
Participant's interest is to be distributed in other than a single sum, the
following minimum distribution rules shall apply on or after the required
beginning date:

(1) If a Participant's benefit is to be distributed over (i) a period not
extending beyond the life expectancy of the Participant or the joint life and
last survivor expectancy of the Participant and the Participant's designated
beneficiary or (ii) a period not extending beyond the life expectancy of the
designated beneficiary, the amount required to be distributed for each calendar
year, beginning with distributions for the first distribution calendar year,
must at least equal the quotient obtained by dividing the Participant's benefit
by the applicable life expectancy.

(2) For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated beneficiary, the method of
distribution selected must assure that at least fifty percent (50%) of the
present value of the amount available for distribution is paid within the life
expectancy of the Participant.

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(3) For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with distributions for the first distribution
calendar year, shall not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the applicable life expectancy or (2)
if the Participant's spouse is not the designated beneficiary, the applicable
divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of
the proposed regulations. Distributions after the death of the Participant shall
be distributed using the applicable life expectancy in (c)(i)(A) above as the
relevant divisor without regard to proposed regulations Section 1.401(a)(9)-2.

(4) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's required
beginning date. The minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which the
Participant's required beginning date occurs, must be made on or before December
31 of that distribution calendar year.

(d) Death Distribution Provisions.

(1) Distribution beginning before death. If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.

(2) Distribution beginning after death. If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth (5th) anniversary of the Participant's death except to the
extent that the Participant or his designated beneficiary elects to receive
distributions in accordance with (i) or (ii) below:

(i) if any portion of the Participant's interest is payable to a designated
beneficiary, distributions may be made over a period certain not greater than
the life expectancy of the designated beneficiary commencing on or before
December 31 of the calendar year immediately following the calendar year in
which the Participant died;

(ii) if the designated beneficiary is the Participant's surviving spouse,
the date distributions are required to begin in accordance with (i) above shall
not be earlier than the later of (1) December 31 of the calendar year
immediately following the calendar year in which the Participant died and (2)
December 31 of the calendar year in which the Participant would have attained
age 70 1/2.

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If the Participant has not made an election pursuant to Section 10.4(d)(2)
by the time of his or her death, the Participant's designated beneficiary must
elect the method of distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to begin under this
Section 10.4(d), or (2) December 31 of the calendar year which contains the
fifth (5th) anniversary of the date of death of the Participant. If the
Participant has no designated beneficiary, or if the designated beneficiary does
not elect a method of distribution, distribution of the Participant's entire
interest must be completed by December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death.

(3) For purposes of Section 10.4(d)(2) above, if the surviving spouse dies
after the Participant, but before payments to such spouse begin, the provisions
of Section 10.4(d)(2), with the exception of subparagraph (ii) therein, shall be
applied as if the surviving spouse were the Participant.

(4) For purposes of Section 10.4(d), distribution of a Participant's
interest is considered to begin on the Participant's required beginning date
(or, if Section 10.4(d)(3) above is applicable, the date distribution is
required to begin to the surviving spouse pursuant to Section 10.4(d)(3) above).

(e) Definitions.

(1) Applicable life expectancy. The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Participant (or
designated beneficiary) as of the Participant's (or designated beneficiary's)
birthday in the applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first calculated. If life
expectancy is being recalculated, the applicable life expectancy will be the
life expectancy as so recalculated. The applicable calendar year shall be the
first distribution calendar year and if life expectancy is being recalculated,
such succeeding calendar year.

(2) Designated beneficiary. The individual who is designated as the
beneficiary under the Plan in accordance with Section 401(a)(9) and the proposed
regulations thereunder.

(3) Distribution calendar year. A calendar year for which a minimum
distribution is required. For distributions beginning before the Participant's
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year which contains the Participant's required beginning
date. For distributions beginning after the Participant's death, the first
distribution calendar year is the calendar year in which distributions are
required to begin pursuant to Section 10.4(d) above.

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(4) Life expectancy. Life expectancy and joint and last survivor expectancy
are computed by use of the expected return multiples in Tables V and VI of
Section 1.72-9 of the income tax regulations. Unless otherwise elected by the
Participant by the time distributions are required to begin, life expectancies
shall not be recalculated annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent years. The life
expectancy of a nonspouse designated beneficiary may not be recalculated. A
spousal designated beneficiary may not elect to have his or her life expectancy
recalculated with respect to any distribution paid pursuant to Section
10.4(d)(2).

(5) Participant's benefit.

(i) The Participant's account balance as of the last valuation date in the
calendar year immediately preceding the distribution calendar year (valuation
calendar year) increased by the amount of any contributions or forfeitures
allocated to the account balance as of dates in the valuation calendar year
after the valuation date and decreased by distributions made in the valuation
calendar year after the valuation date.

(ii) For purposes of paragraph (i) above, if any portion of the minimum
distribution for the first distribution calendar year is made in the second
distribution calendar year on or before the required beginning date, the amount
of the minimum distribution made in the second distribution calendar year shall
be treated as if it had been made in the immediately preceding distribution
calendar year.

(6) Required beginning date.

(i) General rule. The required beginning date of a Participant is the first
day of April of the calendar year following the calendar year in which the
Participant attains age 70 1/2.

(ii) Transitional rules. The required beginning date of a Participant who
attains age 70 1/2 before January 1, 1988, shall be determined in accordance
with (A) or (B) below:

(A) Non-five (5)-percent owners. The required beginning date of a
Participant who is not a five (5)-percent owner is the first day of April of the
calendar year following the calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.

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(B) Five (5)-percent owners. The required beginning date of a Participant
who is a five (5)-percent owner during any year beginning after December 31,
1979, is the first day of April following the later of:

(I) the calendar year in which the Participant attains age 70 1/2, or

(II) the earlier of the calendar year with or within which ends the Plan
Year in which the Participant becomes a five (5)-percent owner, or the calendar
year in which the Participant retires.

The required beginning date of a Participant who is not a five (5)-percent
owner who attains age 70 1/2 during 1988 and who has not retired as of January
1, 1989, is April 1, 1990.

(iii) Five (5)-percent owner. A Participant is treated as a five
(5)-percent owner for purposes of this section if such Participant is a five
(5)-percent owner as defined in Section 416(i) of the Code (determined in
accordance with Section 416 but without regard to whether the Plan is top-heavy)
at any time during the Plan Year ending with or within the calendar year in
which such owner attains age 66 1/2 or any subsequent Plan Year.

(iv) Once distributions have begun to a five (5)-percent owner under this
section, they must continue to be distributed, even if the Participant ceases to
be a five (5)-percent owner in a subsequent year.

10.5 Restrictions on Distributions Prior to Normal Retirement Date. If the
value of a Participant's vested account balance exceeds (or at the time of any
prior distribution exceeded) $3,500, the Participant must consent to any
distribution made to him before he attains the Normal Retirement Date. The
consent of the Participant shall be obtained in writing within the 90-day period
ending on the date benefits are paid. The Committee shall notify the Participant
of his right to defer any distribution until the Participant attains the Normal
Retirement Date (or would have attained the Normal Retirement Date if not
deceased). Such notification shall include a general description of the material
features, and an explanation of the relative values of, the optional forms of
benefit available under the Plan in a manner that would satisfy the notice
requirements of Section 417(a)(3) of the Code below, and shall be provided no
less than 30 days and no more than 90 days prior to the date benefits are paid.
The consent of the Participant shall not be required to the extent that a
distribution is required to satisfy Sections 401(a)(9) or 415 of the Code. A
distribution may be paid to the Participant less than 30 days after the notice
described in this Section 10.5 is given to him, provided that the Administrative
Committee clearly informs the Participant that he has the right to a period of

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at least 30 days after receiving the notice to consider the decision of
whether or not to elect the distribution and the Participant, after receiving
the notice, affirmatively elects to receive a distribution. In addition, subject
to Section 10.7, upon termination of this Plan, the Participant's entire account
balance may be distributed without the Participant's consent to the Participant
or transferred to another defined contribution plan (other than an employee
stock ownership plan, as defined in Section 4975(e)(7) of the Code) within the
same controlled group as the Employer.

10.6 Withdrawals upon Attainment of Age 59-1/2. Upon the attainment of age
59-1/2, a Participant who is fully vested in his Employer Contribution Account
will be entitled to withdraw once a Plan Year all or any portion of his account
balance in a single sum. Any withdrawal by a Participant under this Section 10.6
will be made only after the Participant files a written request with the
Administrative Committee pursuant to such terms and conditions as the Committee
may prescribe.

10.7 Direct Rollovers

(a) This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Administrative Committee to have
any portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.

(b) Definitions.

(i) Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).

(ii) Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in section 408(a) of the Code, an individual

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retirement annuity described in section 408(b) of the Code, an annuity plan
described in section 403(a) of the Code, or a qualified trust described in
section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.

(iii) Distributee: A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse or former
spouse who is the alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.

(iv) Direct rollover: A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.

ARTICLE XI

ADMINISTRATION OF PLAN
----------------------
11.1 (a) This Plan shall be administered by a Committee which shall consist
of not less than two nor more than five members.

(b) The Committee shall serve without compensation from the Plan. Vacancies
may be filled by the Chief Executive Officer of Delaware Group Delaware Fund,
Inc. on an interim basis, until action to fill the vacancy is taken by the Board
of Directors of Delaware Group Delaware Fund, Inc.

(1) shall act by affirmative vote of a majority of its members at a meeting
called with five days notice or in writing without a meeting;

(2) shall appoint a Secretary who may be but need not be one of its own
members. He shall keep complete records of the administration of the Plan;

(3) may authorize each and any one of its members to perform routine acts
and to sign documents on its behalf.

11.2 The Committee may appoint such persons or committees, employ such
attorneys, agents, accountants, investment managers, consultants, actuaries, and
other specialists as it deems necessary or desirable to advise or assist

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it in the performance of its duties hereunder and the Committee may rely upon
their respective written opinions or certificates. To the extent such persons
are empowered by written notification from the Committee to perform duties
defined in ERISA as fiduciary duties, such empowerment shall constitute a
delegation of fiduciary responsibility for purposes of determining the
co-fiduciary liability under ERISA. The Committee shall review the performance
of any such persons periodically.

11.3 Administration of the Plan shall consist of interpreting and carrying
out the provisions of this Plan. The Committee shall determine the eligibility
of Employees to participate in this Plan, their rights while Participants in
this Plan and the nature and amount of benefits to be received therefrom. The
Committee shall decide any disputes which may arise under this Plan and the
Trust Agreement. The Committee may provide rules and regulations for the
administration of the Plan consistent with its terms and provisions. Any
construction or interpretation of the Plan and any determination of fact in
administering the Plan made in good faith by the Committee shall be final and
conclusive for all Plan purposes. The Committee shall have the discretionary
authority to determine eligibility for benefits and to construe the terms of the
Plan.

11.4 (a) The Committee shall prescribe a form for the presentation of
claims under the terms of this Plan and/or Trust Agreement.

(b) Upon presentation to the Committee of a claim on the prescribed form,
the Committee shall make a determination of the validity thereof. If the
determination is adverse to the claimant, the Committee shall furnish to the
claimant within 90 days after the receipt of the claim a written notice setting
forth the following:

(1) The specific reason or reasons for the denial;

(2) Specific reference to pertinent provisions of the Plan on which the
denial is based;

(3) A description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such material or
information is necessary; and

(4) Appropriate information as to the steps to be taken if the claimant
wishes to submit his or her claim for review.

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(c) In the event of a denial of a claim, the claimant or his duly
authorized representative may appeal such denial to the Committee for a full and
fair review of the adverse determination. Claimant's request for review must be
in writing and made to the Committee within 60 days after receipt by claimant of
the written notification required under Section 11.4(b); provided, however, such
60 day period shall be extended if circumstances so warrant. Claimant or his
duly authorized representative may submit issues and comments in writing which
shall be given full consideration by the Committee in his review.

(d) The Committee may, in its sole discretion, conduct a hearing. A request
for a hearing made by claimant will be given full consideration. At such
hearing, the claimant shall be entitled to appear and present evidence and be
represented by counsel.

(e) A decision on a request for review shall be made by the Committee not
later than 60 days after receipt of the request; provided, however, in the event
of a hearing or other special circumstances, such decision shall be made not
later than 120 days after receipt of such request. If it is necessary to extend
the period of time for making a decision beyond 60 days after the receipt of the
request, the claimant shall be notified in writing of the extension of time
prior to the beginning of such extension.

(f) The Committee's decision on review shall state in writing the specific
reasons and references to the Plan provisions on which it is based. Such
decision shall be promptly provided to the claimant. If the decision on review
is not furnished in accordance with the foregoing, the claim shall be deemed
denied on review.

11.5 The Committee shall have the power to allocate its responsibilities
among its several members, except that all matters involving the hearing of and
decision on the claims and the review of the determination of benefits shall be
made by the full Committee; provided, however, that no member of the Committee
shall participate in any matter relating solely to himself.

11.6 To the extent required by law, the Committee shall give notice in
writing to all interested parties of any amendment of this Plan and/or Trust
Agreement and of any application to any government agency for any determination
of the effect of any such amendment on the Plan within the jurisdiction of that
agency.

11.7 (a) The Committee shall administer the Plan and the Trust Agreement
forming a part thereof under uniform rules of general application.

(b) The Committee or any member thereof:

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(1) May serve under the Plan and/or the Trust Agreement in one or more
fiduciary capacities, as that term is defined in ERISA; and

(2) May resign by giving written notice thereof to the Chief Executive
Officer of Delaware Group Delaware Fund, Inc. not less than fifteen (15) days
before the effective date of such resignation; and

(3) May be removed at any time, without cause, by the Board of Directors of
Delaware Group Delaware Fund, Inc.

ARTICLE XII

AMENDMENT, CONSOLIDATION, MERGER OR TERMINATION
-----------------------------------------------
12.1 Delaware Group Delaware Fund, Inc. may amend the Plan and the Trust
Agreement in any manner and at any time by action of its Board of Directors;
provided, however, that no amendment shall deprive any Participant or his
Beneficiary of any vested interest he may have hereunder unless the amendment is
for the purpose of conforming the Plan to the requirements of the Code or any
other applicable law. No amendment which affects the rights, responsibilities or
duties of the Trustee may be made without the Trustee's written consent. No
amendment shall be made to the Plan which has the effect of eliminating or
reducing an early retirement benefit or a retirement-type subsidy, eliminating
an optional form of benefit or decreasing a Participant's account balance with
respect to benefits attributable to service before the amendment. Further, if
the vesting schedule of the Plan is amended, in the case of an Employee who is a
Participant as of the later of the date such amendment is adopted or the date it
becomes effective, the nonforfeitable percentage (determined as of such date) of
such Employee's right to his Employer derived account balance will not be less
than his percentage computed under the Plan without regard to such amendment.

12.2 Any Participant on the effective date of an amendment who is not
actively participating in the Plan on such effective date shall not benefit from
an amendment unless otherwise required by law or unless such amendment is
specifically made applicable to such Participant.

12.3 In the event of any merger or consolidation with, or transfer of
assets or liabilities to, any other plan, each Participant shall be entitled to
a benefit after the merger, consolidation or transfer (if the Plan then
terminated) which is not less than the benefits he would have been entitled to
receive immediately before the merger, consolidation or transfer (if the Plan
had then terminated).

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<PAGE>

12.4 The Employer intends to continue the Plan indefinitely but reserves
the right to discontinue contributions, terminate or partially terminate the
Plan at any time. In the event of a complete discontinuance of contributions,
termination or partial termination of the Plan, the interests of all
Participants affected shall become nonforfeitable. Upon termination of the Plan,
the Employer shall in its complete discretion notify the Trustee to either hold
all assets of the Trust Fund and make payments in accordance with the terms of
the Plan or distribute to each Participant his net account balance in a lump sum
payment in cash or kind. The Employer's contribution to the Trust Fund or the
income thereof shall not be paid to, or shall not revert to Employer and shall
not be used for any purpose other than the exclusive benefit of the Participants
or their Beneficiaries.

ARTICLE XIII

MISCELLANEOUS
-------------
13.1 To the extent permitted by law, it is a condition of the Plan that the
benefits provided hereunder shall not be subject to assignment, anticipation,
alienation, attachment, levy or transfer, and any attempt to do so shall not be
recognized. The preceding sentence shall also apply to the creation, assignment
or recognition of a right to any benefit payable with respect to a Participant
pursuant to a domestic relations order, unless such order is determined to be a
qualified domestic relations order as defined in Section 414(p) of the Code. If
provided by the terms of a qualified domestic relations order, a distribution of
benefits may be made from the Plan to the alternate payee under such order in a
single lump sum as soon as practicable following the determination by the
Administrative Committee that the order constitutes a qualified domestic
relations order. Payment of benefits may be made to the alternate payee even
though the Participant identified in the order has not attained the earliest
retirement age under the Plan. For purposes of this Section 13.1, the "earliest
retirement age" means the earlier of (i) the date in which the Participant is
entitled to a distribution under the Plan or (ii) the later of the date the
Participant attains age 50 or the earliest date on which the Participant would
begin receiving benefits if the Participant separated from service.

13.2 Nothing herein contained shall be deemed to give any Employee the
right to be retained in the employ of Employer or to interfere with the right of
the Employer to discharge any Employee at any time, nor shall it be deemed to
give the Employer the right to require any Employee to remain in its employ, nor
shall it interfere with the Employee's right to terminate his employment at any
time.

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<PAGE>

13.3 All expenses incurred by the Trustees in the administration of the
Fund, including but not limited to the compensation of counsel, accountants,
Trustees, other agents or fiduciaries, shall be charged against the Employer,
unless otherwise paid by the Fund.

13.4 This Plan shall be interpreted in accordance with the laws of the
Commonwealth of Pennsylvania, except to the extent superseded by ERISA as in
effect from time to time.

ARTICLE XIV

LOANS
-----
14.1 The Committee, in its sole discretion, may direct the Trustees to make
a loan to a Participant, who is a party-in-interest, as defined in Section 3(14)
of ERISA, from the Participant's account balance upon receipt of a written
request from the Participant. The total amount of any such loan (when added to
the outstanding balance of all other loans to the Participant under the Plan or
any other qualified plan of the Employer) shall not exceed the lesser of $50,000
or 50% of the Participant's vested account balance. The $50,000 limitation shall
be reduced by the excess, if any, of the highest outstanding balance of loans to
the Participant from the Plan during the one-year period ending on the day
before the date on which such loan was made over the outstanding balance of
loans from the Plan to the Participant on the date that such loan was made.

14.2 A request by a Participant for a loan shall be made in writing to the
Committee and shall specify the amount of the loan. The terms and conditions on
which the Committee shall approve loans under the Plan shall be applied on a
reasonably equivalent basis with respect to all Participants. If a Participant's
request for a loan is approved by the Committee, the Committee shall furnish the
Trustees with written instructions directing the Trustees to make the loan in a
lump sum payment of cash to the Participant. In making any loan payment under
this Article XIV, the Trustees shall be fully entitled to rely on the
instructions furnished by the Committee, and shall be under no duty to make any
inquiry or investigation with respect thereto.

14.3 Loans shall be made on such terms and subject to such limitations as
the Committee may prescribe from time to time, provided that any such loan shall
be evidenced by a written note, shall bear a reasonable rate of interest on the
unpaid principal thereof, shall be adequately secured, and shall be repaid by
the Participant over a period not to exceed five years.
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<PAGE>

14.4 Any loan to a Participant under the Plan shall be secured by the
pledge of not more than 50% percent of the Participant's right, title and
interest in his vested account balance. Such pledge shall be evidenced by the
execution of a promissory note by the Participant.

14.5 The Committee shall have the sole responsibility for insuring that a
Participant timely makes all loan repayments, and for notifying the Trustees in
the event of any default by the Participant on the loan. Each loan repayment
shall be paid to the Trustees, and shall be accompanied by written instructions
from the Committee that identifies the Participant on whose behalf the loan
repayment is being made. Repayment of loans shall be made solely by means of
payroll deductions, or such other manner approved by the Committee.

14.6 In the event of a default by a Participant on a loan repayment, all
remaining principal payments on the loan shall be immediately due and payable.
The Committee shall be authorized (to the extent permitted by law) to take any
and all actions necessary and appropriate to enforce collection of an unpaid
loan. However, in the event of a default, foreclosure on the note and attachment
of security will not occur until a distributable event occurs under the Plan.

14.7 Upon the occurrence of a Participant's retirement or death, or earlier
distribution of benefits, the unpaid balance of any loan, including any unpaid
interest, shall be deducted from any payment or distribution from the Trust Fund
to which such Participant or his Beneficiary may be entitled and his vested
interest in his account shall be reduced.

14.8 A loan to a Participant shall be considered an investment of the
separate account(s) of the Participant from which the loan is made. All loan
repayments shall be credited to such separate account(s) and reinvested in the
investment company fund designated by the Participant.

14.9 A loan may not be made to a Participant who owns (or is considered as
owning within the meaning of Section 318(a)(1) of the Internal Revenue Code)
more than 5% of the outstanding stock of the Employer.

14.10 For loans granted or renewed on or after the last day of first Plan
Year beginning on or after January 1, 1989, the Committee shall issue written
loan guidelines, which shall form part of the Plan, describing the procedures
and conditions for making loans, and may revise those guidelines at any time,
and for any reason.

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<PAGE>

ARTICLE XV

LIMITATIONS ON ALLOCATIONS
--------------------------
15.1 The provisions of this Article XV shall be effective for limitation
years beginning after December 31, 1986.

(a) Notwithstanding any provisions of this Plan to the contrary, the annual
additions which may be credited to a Participant's account for any limitation
year will not exceed the lesser of the maximum permissible amount or any other
limitation contained in this Plan.

(b) As soon as is administratively feasible after the end of the limitation
year, the maximum permissible amount for the limitation year will be determined
on the basis of the Participant's actual compensation for the limitation year.

(c) In the event that it is determined that because of the allocation of
forfeitures, a reasonable error in estimating a Participant's annual
compensation or under other limited facts and circumstances permitted by the
Commissioner of the Internal Revenue Service, if there is an excess amount the
excess will be disposed of as follows:

(1) If the Participant is covered by the Plan at the end of the limitation
year, the excess amount shall be used to reduce employer contributions
(including any allocation of forfeitures) for such Participant in the next
limitation year, and each succeeding limitation year if necessary;

(2) If the Participant is not covered by the Plan at the end of the
limitation year, the excess amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future employer
contributions (including allocation of any forfeitures) for all remaining
Participants in the next limitation year, and each succeeding limitation year if
necessary;

(3) If a suspense account is in existence at any time during the limitation
year pursuant to this Section, it will not participate in the allocation of
investment gains and losses. The entire amount allocated to Participants from a
suspense account, including any such gains or other income or less any losses is
considered an annual addition.

(d) For the purpose of applying the limitations under this Article, all
defined contribution plans maintained by the employer are to be considered as a
single plan.

15.2 Definitions. For purposes of this Article only, the following
definitions and rules of interpretation will apply:

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<PAGE>

(a) "annual additions" -- The sum of the following amounts credited to a
Participant's account for the limitation year:

(1) employer contributions;

(2) forfeitures;

(3) voluntary Employee contributions;

(4) amounts allocated after March 31, 1984, to an individual medical
account, as defined in Section 415(1)(1) of the Code, which is part of a pension
or annuity maintained by the employer;

(5) amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee, as defined in Section 419A(d)(3) of the Code, under a welfare benefit
fund as defined in Section 419(e) of the Code, maintained by the employer; and

(6) excess amounts applied under this Article in the limitation year to
reduce employer contributions.

(b) "compensation" -- a Participant's earned income, wages, salaries, and
fees for professional services and other amounts received (without regard to
whether an amount is paid in cash) for personal services actually rendered in
the course of employment with the employer to the extent that the amounts are
includable in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits,
reimbursements and expense allowances), and excluding the following:

(1) Employer contributions to a plan of deferred compensation which are not
includable in the Employee's gross income for the taxable year in which
contributed, or Employer contributions under a simplified employee pension to
the extent such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;

(2) Amounts realized from the exercise of a nonqualified stock option, or
when restricted stock (or property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;

(3) Amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and

-37-

<PAGE>

(4) Other amounts which received special tax benefits, or contributions
made by the employer (whether or not under a salary reduction agreement) towards
the purchase of an annuity described in Section 403(b) of the Code (whether or
not the amounts are actually excludable from the gross income of the Employee);
and

(5) Any contribution for medical benefits (within the meaning of Section
419A(f)(2) of the Code) after separation from service which is otherwise treated
as an annual addition; and

(6) Any amount otherwise treated as an annual addition under Section
415(i)(1) of the Code.

For purposes of applying the limitations of this Article, compensation for
a limitation year is the compensation actually paid or includable in gross
income during such year.

Notwithstanding the preceding sentence, compensation for a Participant who
is permanently and totally disabled (as defined in Section 37(e)(3) of the Code)
is the compensation such Participant would have received for the limitation year
if the Participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed compensation for
the disabled Participant may be taken into account only if the Participant is
not an officer, an owner, or highly compensated, and contributions made on
behalf of such Participant are nonforfeitable when made.

(c) "employer" -- The Employer that adopts this Plan, and all members of a
controlled group of corporations (as defined in Section 414(b) of the Code as
modified by Section 415(h) of the Code), all commonly controlled trades or
businesses (as defined in Section 414(c) of the Code as modified by Section
415(h) of the Code), or affiliated service groups (as defined in Section 414(m)
of the Code) of which the adopting Employer is a part.

(d) "excess amount" -- The excess of the Participant's annual additions for
the limitation year over the maximum permissible amount.

(e) "limitation year" -- Effective April 2, 1989, the twelve-month period
beginning April 2 and ending April 1. Prior to April 2, 1989, the limitation
year is the twelve-month period from November 1 through the following October
31, except the limitation year beginning November 1, 1988 shall end April 1,
1989.

-38-

<PAGE>

(f) "maximum permissible amount" -- The lesser of $30,000 (or, if greater,
1/4 of the dollar limitation in effect under Section 415(b)(1)(A) of the Code)
or twenty-five percent (25%) of the Participant's compensation for the
limitation year.

ARTICLE XVI

TOP HEAVY DEFINITIONS AND RULES
-------------------------------
16.1 Key employee. An Employee or former Employee, (or the Beneficiary of
such an Employee or former Employee) who at any time during the determination
period was:

(a) An officer of the Employer having an annual compensation greater than
fifty percent (50%) of the amount in effect under Section 415(b)(1)(A) of the
Code for any such Plan Year;

(b) One of the ten Employees having annual compensation from the Employer
of more than the limitation in effect under Section 415(c)(1)(A) of the Code and
owning (or considered as owning within the meaning of Section 318 of the Code)
the largest interests in the Employer;

(c) A person owning (or considered as owning within the meaning of Section
318 of the Code) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more then five percent (5%) of the total combined
voting power of ail stock of the Employer, or

(d) A person who has annual compensation from the Employer of more than
$150,000 and who would be described in (c) hereof if one percent (1%) were
substituted for five percent (5%).

For purposes of (a) above, no more than fifty (50) Employees (or, if lesser, the
greater of three or ten percent of the Employees will be treated as officers.)
For purposes of (b), if two Employees have the same interest in the Employer,
the Employee having greater annual compensation from the Employer will be
treated as having a larger interest. For purposes of this Article the term
"compensation" shall have the same meaning as provided for in Article XV.

The determination period is the Plan Year containing the determination date
as defined in Section 16.8, and the four (4) preceding Plan Years. The
determination of who is a key employee will be made in accordance with the rules
and regulations under Section 416(i)(1) of the Code.

16.2 Non-key employee. Any Employee who is not a key employee. In addition,
any Beneficiary of a non-key employee will be treated as a non-key employee.

-39-

<PAGE>

16.3 Permissive aggregation group. The required aggregation group of plans
plus any other plan or plans of the Employer, which considered as a group with
the required aggregation group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.

16.4 Required aggregation group.

(a) Each qualified plan of the Employer in which at least one key employee
participates or participated at any time during the determination period
(regardless of whether the plan has terminated), and

(b) Any other qualified plan of the Employer which enables a plan described
in (a) to meet the requirements of Sections 401 (a)(4) and 410 of the Code.

16.5 Top-heavy plan. This Plan is top-heavy for any Plan Year if any of the
following conditions exist;

(a) If the top-heavy ratio for this Plan exceeds sixty percent (60%) and
this Plan is not part of any required aggregation group or permissive
aggregation group of plans.

(b) If this Plan is part of a required aggregation group of plans but not
part of a permissive aggregation group and the top-heavy ratio for the required
aggregation group of plans exceeds sixty percent (60%).

(c) If this Plan is a part of a permissive aggregation group of plans and
the top-heavy ratio for the required aggregation group exceeds sixty percent
(60%) and the top-heavy ratio for the permissive aggregation group exceeds sixty
percent (60%).

16.6 Super top-heavy plan. For any Plan Year in which this Plan would be a
Top-Heavy Plan pursuant to Section 16.5 above if "ninety percent (90%)" were
substituted for "sixty percent (60%)" at each place where "sixty percent (60%)"
appears therein.

16.7 Top-heavy ratio.

(a) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and has not maintained any
defined benefit plan which during the five (5) year period ending on the
determination date has or has had accrued benefits, the top-heavy ratio for this
Plan alone or for the required or permissive aggregation group as appropriate is
a fraction, the numerator of which is the sum of the account balances of all key
employees as of the determination date (including any part of any account
balance distributed in the five (5) year period ending on the determination

-40-

<PAGE>

date), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five (5) Year
period ending on the determination date), both computed in accordance with
Section 416 of the Code and the regulations thereunder. Both the numerator and
denominator of the top-heavy ratio are increased to reflect any contribution not
actually made as of the determination date, but which is required to be taken
into account on that date under Section 416 of the Code and the regulations
thereunder.

(b) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and maintains or has maintained
one or more defined benefit plans which during the five (5) year period ending
on the Determination Date has or has had any accrued benefits, the top-heavy
ratio for any required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all key employees determined
in accordance with (2) above, and the present value of accrued benefits under
the aggregated defined benefit plan or plans for all key employees as of the
determination date, and the denominator of which is the sum of the account
balances under the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (a) above, and the present value of
accrued benefits under the aggregated defined benefit plan or plans for all
Participants as of the determination dates, all determined in accordance with
Section 416 of the Code and the regulations thereunder. The accrued benefits
under a defined benefit plan in both the numerator and denominator of the
top-heavy ratio are increased for any distribution of an accrued benefit made in
the five year period ending on the determination date.

(c) For the purposes of (a) and (b) above, the value of account balances
and the present value of accrued benefits will be determined as of the most
recent valuation date that falls within or ends with the twelve (12) month
period ending on the determination date, except as provided in Section 416 of
the Code and the regulations thereunder for the first and second plan years of a
defined benefit plan. The account balances and accrued benefits of a Participant
(1) who is a non-key employee but who was a key employee in a prior year, or (2)
who has not been credited with at least one Hour of Service with any Employer
maintaining the Plan at any time during the five (5) year period ending on the
determination date will be disregarded. The calculation of the top-heavy ratio,
and the extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with Section 416 of the Code and the
regulations thereunder. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the determination dates
that fall within the same calendar year. If any individual has not received
-41-

<PAGE>

any compensation from any employer maintaining the plan (other than benefits
under the Plan) at any time during the five (5) year period ending on the
determination date, any accrued benefit for such individual (and the account
of such individual) will not be taken into account.

Effective for Plan Years beginning after December 31, 1986, the accrued
benefit of a Participant other than a key employee shall be determined under (i)
the method, if any, that uniformly applies for accrual purposes under all
defined benefit plans maintained by the Employer or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the slowest accrual
rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code.

16.8 Determination date. With respect to any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that Plan Year.

16.9 Valuation date. The last day of the Plan Year.

16.10 Present value. Present value will be based upon the interest and
mortality rates specified in the Employer's defined benefit plan.

16.11 Minimum Allocation.

(a) If in any Plan Year the Plan is a Top Heavy Plan and the Employer does
not maintain any qualified defined benefit plan in addition to this Plan, except
as provided in (b) and (c) below, the Employer contributions and forfeitures
allocated on behalf of any Participant who is a non-key employee will not be
less than the lesser of three percent (3%) of such Participant's compensation or
the largest percentage of Employer contributions and forfeitures, as a
percentage of the first $200,000 of the key employee's compensation (as defined
in Section 15.2(b)), and as limited by Section 401(a)(17) of the Code, allocated
on behalf of any key employee for that year. The minimum allocation is
determined without regard to any Social Security contributions. This minimum
allocation will be made even though, under other Plan provisions, the
Participant would not otherwise be entitled to receive an allocation, or would
have received a lesser allocation for the year because of the Participant's
failure to complete 1,000 Hours of Service. The minimum allocation (if any)
required under this paragraph (a) shall be made to this Plan only to the extent
such allocation is not made for the Participant under any other defined
contribution plan(s) maintained by the Employer.

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<PAGE>

(b) In the event the Employer maintains a qualified defined benefit plan(s)
in addition to this Plan, the Employer will provide a minimum allocation at
least equal to five percent (5%) of compensation (as defined in Section 15.2(b))
to each non-key employee, entitled under (a) above to receive a minimum
allocation, who is covered under this Plan and the qualified defined benefit
plan(s). If this Plan enables a defined benefit plan to meet the requirements of
Section 401(a) or 410 of the Code, the minimum allocation described in (a) above
must be at least three percent (3%) of a Participant's compensation, regardless
of the largest percentage of Employer contributions and forfeitures of a key
employee's compensation.

(c) The provisions in (a) and (b) above will not apply to any Participant
who was not employed by the Employer on the last day of the Plan Year.

(d) The minimum allocation required under this Section 16.11 (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Sections 411(a)(3)(B) or 411(a)(3)(D) of the Code.

IN WITNESS WHEREOF, Delaware Group Delaware Fund, Inc. has caused this
amended and restated Plan, effective April 1, 1989, to be executed by its duly
authorized officers and its corporate seal to be impressed hereon this 17th day
of November, 1994.

Attest: DELAWARE GROUP DELAWARE FUND, INC.

/s/ George M. Chamberlain, Jr. By: /s/Brian F. Wruble
- ------------------------------ -------------------------
George M. Chamberlain, Jr. Brian F. Wruble
Senior Vice President/Secretary President and Chief
Executive Officer

-43-

AMENDMENT NO. 1
TO THE
SECOND AMENDMENT AND RESTATEMENT OF THE
PROFIT SHARING PLAN OF
DELAWARE GROUP DELAWARE FUND, INC.
EFFECTIVE APRIL 1, 1989

This Amendment is made this 21st day of December, 1995, by Delaware
Group Delaware fund, Inc. (the "Employer").

WITNESSETH:
-----------

WHEREAS, the Employer adopted the second amendment and restatement of
the Profit Sharing Plan of Delaware Management Company, Inc. (the "Plan"),
effective April 1, 1989; and

WHEREAS, the Employer desires to clarify the provisions of the Plan
pertaining to the crediting of service for vesting purposes.

NOW THEREFORE, Section 2.28 of the Plan is hereby amended as follows:

"2.28 "Year of Service" shall mean the completion by an Employee of
1,000 or more Hours of Service during his initial Eligibility
Computation Period and during any Plan Year, beginning with the Plan
Year which commences after the Employee first performs an Hour of
Service. However, for the period from October 1, 1988 through March 31,
1990, an Employee shall be given credit for a Year of Service if he
completes 1,000 Hours of Service during the period October 1, 1988 to
September 30, 1989 and shall be given credit for an additional Year of
Service if he completes 1,000 Hours of Service during the period April
1, 1989 to March 31, 1990. For purposes of determining a Participant's
nonforfeitable right to his Employer Contribution Account, Years of
Service shall include an Employee's prior service with Delaware
Management Company, Inc. or any other Entity required to be aggregated
with Delaware Management Company, Inc. under Sections 414(b) or (c) of
the Code."

IN WITNESS WHEREOF, the Employer has caused this Amendment to be
executed by its duly authorized officers and its corporate seal to be impressed
hereon the date first written above.

ATTEST: DELAWARE GROUP DELAWARE FUND, INC.

/s/ George M. Chamberlain, Jr. By: /s/ Wayne A. Stork
- ------------------------------- -------------------------
Senior Vice President/Secretary Chairman

EX-99.B8BI
Exhibit 24(b)(8)(b)(I)

As of June 26, 1997

VIA UPS OVERNIGHT
- -----------------

The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245

Attention: Global Custody Division

Re: Global Custody Agreement, Effective May 1, 1996
between The Chase Manhattan Bank and those registered
investment companies (and on behalf of certain series
thereof), listed on Schedule A attached thereto ("Agreement")
-------------
Ladies and Gentlemen:

Pursuant to the provisions of Section 1 of the Agreement, the
undersigned, on behalf of Voyageur Mutual Funds III, Inc. for the
benefit of the Tax-Efficient Equity Fund series ("Series") hereby
appoints The Chase Manhattan Bank to provide custodial services for
the Series under and in accordance with the terms of the Agreement
and accordingly, requests that the Series be added to Schedule A to
the Agreement effective June 26, 1997. Kindly acknowledge your
agreement to provide such services and to add the Series to Schedule
A by signing in the space provided below.

VOYAGEUR MUTUAL FUNDS III, INC.
on behalf of Tax-Efficient Equity
Fund series

By: /s/David K. Downes
-----------------------------
David K. Downes
Its: Executive Vice President
Chief Operating Officer
Chief Financial Officer
AGREED:

THE CHASE MANHATTAN BANK

/s/Rosemary M. Stidmon
By:
------------------------------
Rosemary M. Stidmon, Vice President
Its:
-----------------------------

EX-99.B8BI
Exhibit 24(b)(9)(b)(i)

AMENDMENT NO. 8
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)

Delaware Group Cash Reserve, Inc.

Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund

Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)

Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund

Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund

Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)

- --------------------
*Except as otherwise noted, all Portfolios included on this
Schedule A are Existing Portfolios for purposes of the compensation
described on Schedule B to that Fund Accounting Agreement between
Delaware Service Company, Inc. and the Delaware Group of Funds dated
as of August 19, 1996 ("Agreement"). All portfolios added to this
Schedule A by amendment executed by a Company on behalf of such
Portfolio hereof shall be a New Portfolio for purposes of Schedule B
to the Agreement.

Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)

Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )

Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)

Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)

Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund

Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap
Portfolio)
The Defensive Equity Utility Portfolio
(deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)

Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series

Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund

Delaware Group Tax-Free Money Fund, Inc.

Delaware Group State Tax-Free Income Trust (formerly DMCT
Tax-Free Income Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)

Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)

Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)

Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)

Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)

Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)

Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)

Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)

Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)

Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)

Dated as of December 18, 1997

DELAWARE SERVICE COMPANY, INC.

/s/David K. Downes
By:________________________
David K. Downes
President, Chief Executive Officer and Chief
Financial Officer

DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.

/s/ Wayne A. Stork
By: ________________________
Wayne A. Stork
Chairman

EX-99.B9BII
Exhibit 24 (b)(19)(II)

AMENDMENT NO. 9
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Cash Reserve, Inc.

Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund

Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)

Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund

Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund

Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)

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

*Except as otherwise noted, all Portfolios included on this
Schedule A are Existing Portfolios for purposes of the compensation
described on Schedule B to that Fund Accounting Agreement between
Delaware Service Company, Inc. and the Delaware Group of Funds dated
as of August 19, 1996 ("Agreement"). All portfolios added to this
Schedule A by amendment executed by a Company on behalf of such
Portfolio hereof shall be a New Portfolio for purposes of
Schedule B to the Agreement.

Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)

Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)

Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)

Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)

Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund

Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered
January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)

Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Value Series

Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund

Delaware Group Tax-Free Money Fund, Inc.

Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free
Income Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)

Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)

Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)

Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)

Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)

Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)

Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)

Dated as of March 31, 1998

DELAWARE SERVICE COMPANY, INC.

/s/David K. Downes
By:________________________
David K. Downes
President, Chief Executive Officer and Chief Financial Officer

/s/ Wayne A. Stork
By: ________________________
Wayne A. Stork
Chairman

EX-99.B10
Exhibit 24(b)(10)

Law Offices

Stradley, Ronon, Stevens & Young, LLP

2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Fax: (215) 5648120

Voyageur Mutual Funds III, Inc.
1818 Market Street
Philadelphia, Pennsylvania 19103

Re: Legal Opinion-Securities Act of 1933

Ladies and Gentlemen:

We have examined the Amended and Restated Articles of Incorporation (the
"Articles") of Voyageur Mutual Funds III, Inc. (the "Fund"), a series
corporation organized under Minnesota law on November 22, 1993, the
By-Laws of the Fund, all as amended to date, and the various pertinent
corporate proceedings we deem material. We have also examined the
Notification of Registration and the Registration Statements filed under
the Investment Company Act of 1940 (the "Investment Company Act") and
the Securities Act of 1933 (the "Securities Act"), all as amended to
date, as well as other items we deem material to this opinion.

The Fund is authorized by the Articles to issue ten trillion
(10,000,000,000,000) shares of common stock at a par value of $.01 per
share. The Fund issues shares of the Aggressive Growth Fund, the Growth
Stock Fund, and the Tax-Efficient Equity Fund. The Articles also empower
the Board to designate any additional series or classes and allocate
shares to such series or classes.

The Fund has filed with the U.S. Securities and Exchange Commission, a
registration statement under the Securities Act, which registration
statement is deemed to register an indefinite number of shares of the
Fund pursuant to the provisions of Rule 24f-2 under the Investment
Company Act. You have further advised us that the Fund has filed, and
each year hereafter will timely file, a Notice pursuant to Rule 24f-2
perfecting the registration of the shares sold by the Fund during each
fiscal year during which such registration of an indefinite number of
shares remains in effect.

You have also informed us that the shares of the Fund have been, and
will continue to be, sold in accordance with the Fund's usual method of
distributing its registered shares, under which prospectuses are made
available for delivery to offerees and purchasers of such shares in
accordance with Section 5(b) of the Securities Act.

Based upon the foregoing information and examination, so long as the
Fund remains a valid and subsisting entity under the laws of its state
of organization, and the registration of an indefinite number of shares
of the Fund remains effective, the authorized shares of the Fund when
issued for the consideration set by the Board of Directors pursuant to
the Articles, and subject to compliance with Rule 24f-2, will be legally
outstanding, fully-paid, and non-assessable shares, and the holders of
such shares will have all the rights provided for with respect to such
holding by the Articles and the laws of the State of Minnesota.

We hereby consent to the use of this opinion, in lieu of any other, as
an exhibit to the Registration Statement of the Fund, along with any
amendments thereto, covering the registration of the shares of the Fund
under the Securities Act and the applications, registration statements
or notice filings, and amendments thereto, filed in accordance with the
securities laws of the several states in which shares of the Fund are
offered, and we further consent to reference in the registration
statement of the Fund to the fact that this opinion concerning the
legality of the issue has been rendered by us.

Very truly yours,

STRADLEY, RONON, STEVENS & YOUNG, LLP

BY: /S/Bruce G. Leto
Bruce G. Leto

EX-99.B11
Exhibit 24(b)(11)

Consent of Ernst & Young LLP, Independent Auditors

We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the
Statement of Additional Information and to the incorporation by
reference in this Post-Effective Amendment No. 33 to the Registration
Statement (Form N-1A) (No. 2-95928) of Voyageur Mutual Funds III, Inc.
of our report dated May 29, 1998, included in the 1998 Annual Report to
shareholders.

Philadelphia, Pennsylvania
June 24, 1998

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

Report of Independent Auditors

To the Shareholders and Board of Directors
Voyageur Mutual Funds III, Inc. - Aggressive Growth Fund
Voyageur Mutual Funds III, Inc. - Growth Stock Fund

We have audited the accompanying statements of net assets of Aggressive
Growth Fund and Growth Stock Fund (the "Funds") as of April 30, 1998,
and the related statements of operations, statements of changes in net
assets and financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
statements of changes in net assets for the year ended April 30, 1997
and the financial highlights for the periods presented through April 30,
1997 were audited by other auditors whose report thereon dated June 13,
1997 expressed an unqualified opinion on those statements and financial
highlights.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of April 30,
1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the 1998 financial statements and financial highlights
present fairly, in all material respects, the financial position of each
of the respective Funds at April 30, 1998, and the results of their
operations, the changes in their net assets, and their financial
highlights for the year then ended, in conformity with generally
accepted accounting principles.

/s/Ernst & Young LLP
- -------------------
Ernst & Young LLP

Philadelphia, Pennsylvania
May 29, 1998

Report of Independent Auditors

To the Shareholders and Board of Directors
Voyageur Mutual Funds III, Inc. - Tax-Efficient Equity Fund

We have audited the accompanying statement of net assets of Voyageur
Mutual Funds III, Inc. - Tax-Efficient Equity Fund (the "Fund") as of
April 30, 1998, and the related statement of operations, the statement
of changes in net assets and the financial highlights for the period
June 27, 1997 (commencement of operations) to April 30, 1998. These
financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of April 30,
1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Voyageur Mutual Funds III, Inc. - Tax-Efficient
Equity Fund at April 30, 1998, and the results of its operations, the
changes in its net assets, and its financial highlights for the period
June 27, 1997 (commencement of operations) to April 30, 1998, in
conformity with generally accepted accounting principles.

/s/Ernst & Young LLP
- --------------------
Ernst & Young LLP

Philadelphia, Pennsylvania
May 29, 1998

EX-99.B11
EXHIBIT 24(B)(11)

KPMG PEAT MARWICK LLP

4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Voyageur Mutual Funds III, Inc.:

We consent to the use of our report dated June 13, 1997 included
herein and to the reference to our Firm under the heading
"FINANCIAL STATEMENTS" in the Statement of Additional Information.

/S/KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP

Minneapolis, Minnesota
June 26, 1998

Member Firm of
KPMG International

KPMG PEAT MARWICK LLP

4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Voyageur Mutual Funds III, Inc.:

We have audited the accompanying statements of changes in net assets
of Aggressive Growth Fund and Growth Stock Funds (portfolios within
Voyageur Mutual Funds III, Inc.) for the year ended April 30, 1997,
and the financial highlights for the periods presented through April
30, 1997. The statements of changes in net assets and the financial
highlights are the responsibility of Fund management. Our
responsibility is to express an opinion on the statements of changes
in net assets and the financial highlights based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the
changes in net assets of Aggressive Growth Fund and Growth Stock
Funds for the year ended April 30, 1997, and the financial highlights
for the periods stated in the first paragraph above, in conformity
with generally accepted accounting principles.

/S/KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP

Minneapolis, Minnesota
June 13, 1997

Member Firm of
KPMG International

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 011
<NAME> GROWTH STOCK FUND A CLASS
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> APR-30-1998
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<DISTRIBUTIONS-OF-INCOME> 182,519
<DISTRIBUTIONS-OF-GAINS> 2,605,794
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<ACCUMULATED-GAINS-PRIOR> 944,979
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<GROSS-ADVISORY-FEES> 412,380
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 356,894
<AVERAGE-NET-ASSETS> 38,895,514
<PER-SHARE-NAV-BEGIN> 25.340
<PER-SHARE-NII> .029
<PER-SHARE-GAIN-APPREC> 8.591
<PER-SHARE-DIVIDEND> .140
<PER-SHARE-DISTRIBUTIONS> 1.99
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 31.830
<EXPENSE-RATIO> 1.750
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 012
<NAME> GROWTH STOCK FUND B CLASS
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 28,022,985
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<EXPENSES-NET> 735,443
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<REALIZED-GAINS-CURRENT> 3,217,814
<APPREC-INCREASE-CURRENT> 8,777,754
<NET-CHANGE-FROM-OPS> 12,013,425
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 83,774
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24,380
<NUMBER-OF-SHARES-REDEEMED> 13,459
<SHARES-REINVESTED> 2,689
<NET-CHANGE-IN-ASSETS> (12,101)
<ACCUMULATED-NII-PRIOR> 129,542
<ACCUMULATED-GAINS-PRIOR> 944,979
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 412,380
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 356,894
<AVERAGE-NET-ASSETS> 1,342,419
<PER-SHARE-NAV-BEGIN> 24.930
<PER-SHARE-NII> (.165)
<PER-SHARE-GAIN-APPREC> 8.425
<PER-SHARE-DIVIDEND> .000
<PER-SHARE-DISTRIBUTIONS> 1.99
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 31.200
<EXPENSE-RATIO> 2.500
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 013
<NAME> GROWTH STOCK FUND C CLASS
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 28,022,985
<INVESTMENTS-AT-VALUE> 45,328,367
<RECEIVABLES> 778,072
<ASSETS-OTHER> 103,995
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 46,210,434
<PAYABLE-FOR-SECURITIES> 1,017,170
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 183,655
<TOTAL-LIABILITIES> 1,200,825
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 26,330,126
<SHARES-COMMON-STOCK> 35,653
<SHARES-COMMON-PRIOR> 58,543
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,374,101
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17,305,382
<NET-ASSETS> 1,112,101
<DIVIDEND-INCOME> 706,430
<INTEREST-INCOME> 46,870
<OTHER-INCOME> 0
<EXPENSES-NET> 735,443
<NET-INVESTMENT-INCOME> 17,857
<REALIZED-GAINS-CURRENT> 3,217,814
<APPREC-INCREASE-CURRENT> 8,777,754
<NET-CHANGE-FROM-OPS> 12,013,425
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 64,003
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</TABLE>

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 014
<NAME> GROWTH STOCK FUND INSTITUTIONAL CLASS
<MULTIPLIER> 1

<S> <C>
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<AVG-DEBT-OUTSTANDING> 0
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</TABLE>

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 031
<NAME> AGGRESSIVE GROWTH FUND A CLASS
<MULTIPLIER> 1

<S> <C>
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<PERIOD-END> APR-30-1998
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</TABLE>

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 032
<NAME> AGGRESSIVE GROWTH FUND B CLASS
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 49,885,472
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</TABLE>

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 033
<NAME> AGGRESSIVE GROWTH FUND C CLASS
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 49,885,472
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<PER-SHARE-NII> (.071)
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</TABLE>

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 034
<NAME> AGGRESSIVE GROWTH FUND INSTITUTIONAL CLASS
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 49,885,472
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</TABLE>

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 051
<NAME> TAX-EFFICIENT EQUITY FUND A CLASS

<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 21,899,399
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<NET-INVESTMENT-INCOME> (5,588)
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</TABLE>

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 052
<NAME> TAX-EFFICIENT EQUITY FUND B CLASS

<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 21,899,399
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</TABLE>

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 053
<NAME> TAX-EFFICIENT EQUITY FUND C CLASS

<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
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</TABLE>

<ARTICLE> 6
<CIK> 0000763749
<NAME> VOYAGEUR MUTUAL FUNDS III, INC.
<SERIES>
<NUMBER> 054
<NAME> TAX-EFFICIENT EQUITY FUND INSTITUTIONAL CLASS

<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> APR-30-1998
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<TOTAL-ASSETS> 25,471,906
<PAYABLE-FOR-SECURITIES> 989,795
<SENIOR-LONG-TERM-DEBT> 174,550
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 1,164,345
<SENIOR-EQUITY> 22,118
<PAID-IN-CAPITAL-COMMON> 21,868,108
<SHARES-COMMON-STOCK> 1
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (81,781)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,499,116
<NET-ASSETS> 11
<DIVIDEND-INCOME> 80,036
<INTEREST-INCOME> 35,794
<OTHER-INCOME> 0
<EXPENSES-NET> 121,418
<NET-INVESTMENT-INCOME> (5,588)
<REALIZED-GAINS-CURRENT> (81,781)
<APPREC-INCREASE-CURRENT> 2,499,116
<NET-CHANGE-FROM-OPS> 2,411,747
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 176,471
<NUMBER-OF-SHARES-REDEEMED> 176,470
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 24,307,561
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 54,805
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 159,140
<AVERAGE-NET-ASSETS> 1,295,458
<PER-SHARE-NAV-BEGIN> 8.500
<PER-SHARE-NII> 0.033
<PER-SHARE-GAIN-APPREC> 2.527
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
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<EXPENSE-RATIO> 2.200
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</TABLE>

EX-99.B19
Exhibit 24(b)(19)

POWER OF ATTORNEY

Each of the undersigned, a member of the Boards of
Directors/Trustees of the Delaware Group Funds listed on Exhibit A
to this Power of Attorney, hereby constitutes and appoints on behalf
of each of the Funds listed on Exhibit A, Wayne A. Stork, Jeffrey J.
Nick and Walter P. Babich and any one of them acting singly, his
true and lawful attorneys-in-fact, in his name, place, and stead, to
execute and cause to be filed with the Securities and Exchange
Commission and other federal or state government agency or body,
such registration statements, and any and all amendments thereto as
either of such designees may deem to be appropriate under the
Securities Act of 1933, as amended, the Investment Company Act of
1940, as amended, and all other applicable federal and state
securities laws.

IN WITNESS WHEREOF, the undersigned have executed this
instrument as of this 18th day of December, 1997.

/s/Walter P. Babich /s/Thomas F. Madison
- ---------------------- --------------------
Walter P. Babich Thomas F. Madison

/s/Anthony D. Knerr /s/Jeffrey J. Nick
- ---------------------- --------------------
Anthony D. Knerr Jeffrey J. Nick

/s/Ann R. Leven /s/Charles E. Peck
- ---------------------- --------------------
Ann R. Leven Charles E. Peck

/s/W. Thacher Longstreth /s/Wayne A. Stork
- ---------------------- --------------------
W. Thacher Longstreth Wayne A. Stork

POWER OF ATTORNEY

EXHIBIT A
DELAWARE GROUP FUNDS

DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.