VOYAGEUR TAX FREE FUNDS INC, N-30D, 1998-03-03

VOYAGEUR TAX FREE FUNDS INC
N-30D, 1998-03-03

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For Tax-Exempt Income

DELAWARE-VOYAGEUR
Tax-Free Idaho Fund
Tax-Free North Dakota Fund
Tax-Free Oregon Insured Fund
Tax-Free Washington Insured Fund

service and guidance

professional management

1997
Annual
Report

goals

(Variour Photos demonstrating service and guidance, professional
management and goals)

(Logo)

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A TRADITION OF SOUND INVESTING

commitment

A Commitment
To Our Investors

Delaware Investments has a tradition of money management that dates back to
1929. We have a long and distinguished history of helping individuals and
institutions - including some of America's largest pension funds - reach their
financial goals.
Headquartered in Philadelphia, a block from the nation's oldest stock
exchange, the Delaware organization established its first mutual fund in
1938. Delaware International Advisers Ltd., our international affiliate, was
established in 1990 and is headquartered in London.
Delaware Investments offers a full range of mutual funds. We also
manage investments for variable annuity products, unit investment trusts and
closed-end funds, and offer retirement plan services for individuals and
businesses.
Delaware manages more than $40 billion in mutual fund assets and
institutional advisory accounts for more than half-a-million investors. We're
part of a global financial service and investment management business owned
by Lincoln National Corporation, whose subsidiaries manage more than $120
billion in assets.

Fund Objectives

TAX-FREE IDAHO FUND
To seek as high level of current income exempt from federal income tax as is
consistent with preservation of principal.

TAX-FREE NORTH DAKOTA FUND
To seek as high level of current income exempt from federal income tax and
North Dakota state income tax as is consistent with preservation of
principal.

TAX-FREE OREGON INSURED FUND
To seek as high level of current income exempt from federal income tax and
Oregon state income tax as is consistent with preservation of principal.

TAX-FREE WASHINGTON INSURED FUND
To seek as high level of current income exempt from federal income tax as is
consistent with preservation of principal.

tax-exempt
income

(Photo of keyboard)

(Photo of illustration from Tax-Exempt income brochures)

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January 20, 1998

for tax-exempt
income
1

Dear Shareholder:

When Lewis and Clark set out to explore the nation's Northwest nearly two
centuries ago, they encountered unsettling moments along the rapids of the
Missouri River. However, through persistence, effective planning, patience and
discipline, they reached the Pacific.
We are pleased to report that in a year marked by bond market
volatility and fears about inflation, Delaware Investments' four Northwest
municipal bond funds provided results of the first order. Each Fund discussed
in this report outpaced its unmanaged benchmark in fiscal 1997. Tax-Free
Idaho Fund and Tax-Free Washington Insured Fund both achieved the highest
total returns of any funds within their respective peer groups for the 12
months ended December 31, 1997.+
On November 1, 1997, Elizabeth H. Howell, the portfolio manager for
the Idaho, Washington and Oregon funds, also assumed sole responsibility for
the Tax-Free North Dakota Fund from co-manager Mark D. Schierman. She manages
nearly $2 billion in municipal bond assets from her office in Minneapolis.
Despite a modest setback in the spring, fiscal 1997 was a banner year
for municipal bonds. Among the favorable developments during the period were:
o Passage of the Taxpayer Relief Act in July. This lifted the specter of
proposed federal tax legislation that could have made municipal bonds a
less attractive investment option.

In a year marked by bond market volatility and fears about inflation,
Delaware Investments' four Northwest municipal bond funds provided results of
the first order.

TOTAL RETURN
- -------------------------------------------------------------------------------
12 MONTHS ENDED DECEMBER 31, 1997
- -------------------------------------------------------------------------------
Tax-Free Idaho Fund A Class +10.41%
Tax-Free North Dakota Fund A Class +9.43%
Lipper Other States Municipal Debt Fund
Average (67 Funds) +8.44%
- -------------------------------------------------------------------------------
Tax-Free Oregon Insured Fund A Class +9.66%
Lipper Oregon Insured Fund Average (15 Funds) +8.61%
- -------------------------------------------------------------------------------
Tax-Free Washington Insured Fund A Class +10.23%
Lipper Washington Insured Fund Average (8 Funds) +9.24%
- -------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +9.19%
Lehman Brothers Insured Municipal Bond Index +9.58%
- -------------------------------------------------------------------------------

All performance shown above is at net asset value and assumes reinvestment of
distributions. Performance of other classes varies due to different fees and
expenses. For complete performance for all classes, see pages 9 to 12. Each
index shown above is unmanaged. Past performance does not guarantee future
results.

+ Tax-Free Idaho Fund Class A ranked #1 of 67 single-state funds and 3 out of
54 funds for the one-year and lifetime periods ended 12/31/97, according to
Lipper Analytical Services. Tax-Free Washington Insured Fund Class A ranked
#1 out of 8 Washington insured funds and 2 out of 4 funds for the one-year
and three-year periods ended 12/31/97. Rankings are based on total return at
net asset value. Expense limitations were in effect and rankings would have
been lower without the limitations.
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for tax-exempt
income
2

o Rising tax revenues. Thanks to strong job growth and corporate profits many
states, including the four discussed in this report, posted budget surpluses
last year.
o Positive supply/demand factors. The amount of new bonds issued in Idaho,
Oregon and North Dakota dropped in 1997, helping to support higher bond
prices as investor demand remained steady, according to The Bond Buyer.
Although new bond supplies rose sharply in Washington, investor demand was
equally strong.
Your Funds participated in the robust income and total return
potential of the municipal bond market in 1997. We believe we did well
because we went an extra mile to analyze bonds issued by smaller, rural
communities and revenue projects such as water irrigation, nursing homes and
industrial-backed development.
We view the municipal bond market's long-term prospects as
attractive, especially since Washington and many states still tax income at a
higher rate than capital gains. While the Taxpayer Relief Act offered many
benefits to more aggressive equity investors, it provided few breaks to
income-oriented investors. Municipal bonds remain one of the few investments
that provide investors with monthly income potential without increasing their
tax bill.
In our view, the income from municipal bonds and the tax-free
compounding of such income over time has the potential to help heavily taxed
investors reach their financial goals more quickly.
On the pages that follow, Ms. Howell reviews each Fund's performance
and outlines her approach for the coming months. We look forward to reporting
to you again this summer and serving your needs for many years to come.

Sincerely,

/s/ Wayne A. Stork
- -------------------
WAYNE A. STORK
Chairman

/s/ Jeffrey J. Nick
- --------------------
JEFFREY J. NICK
President and Chief Executive Officer

Municipal bonds remain one of the few investments that provide investors with
monthly income potential without increasing their
tax bill.

Your Funds' Portfolio Manager

Prior to joining the Delaware-Voyageur family, Elizabeth H. Howell had managed
municipal bond funds at Voyageur Asset Management for six years. She has more
than 13 years experience that includes serving as a fixed-income portfolio
manager at Windsor Financial Group. She has also held investment management
positions at Lommis Sayles & Co. and Eaton Vance Management. Ms. Howell has an
MBA from Babson College.
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for tax-exempt
income
3
Portfolio Manager's Review

DELAWARE INVESTMENTS' MUNICIPAL BOND funds in Idaho, North Dakota, Oregon and
Washington provided exceptional total returns during fiscal 1997 despite
substantial interest rate volatility and renewed efforts in Washington, D.C. to
cut income taxes.
Passage of the Taxpayer Relief Act this past summer marked a turning
point for the bond market because it removed a legislative uncertainty for
investors. By retaining high tax rates on bond interest and dividends,
Washington reinforced the value of municipal bonds as a way to potentially
increase investment income without the pain of federal income tax rates as
high as 39.6%.
During 1997, increased demand for municipal bonds from both
individual investors and institutions led to higher bond prices even as the
supply of newly issued municipal securities rose 19.2% to $220.5 billion,
according to The Bond Buyer, a trade publication. Many communities took
advantage of falling interest rates to refinance debt.
In managing each Fund, we sought to achieve good structure - a
prudent combination of average coupon, call date, and effective maturity, the
characteristics that represent each portfolio's mathematical underpinnings.
Longer-than-average durations in each Fund helped us benefit from rising bond
prices when interest rates fell sharply during the second half.
Generally, we focused on bonds that were selling at a discount to
their face value, with good call protection features and long maturities.
These securities did well during 1997's low inflation environment and
declining interest rates.

Q. How do market conditions affect duration?

a. When interest rates drop, bonds are more likely to trade at prices that
reflect their call dates, if any. Therefore, after a bond market rally, a bond
held in a mutual fund will generally have a shorter average effective maturity
and duration, or sensitivity to interest rates. When we anticipate a bond rally,
we strive to manage each Fund's duration so that it remains slightly longer
than a Fund's peers and benchmarks.
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for tax-exempt
income
4

TAX-FREE IDAHO FUND
STRATEGIC POSITIONING
By positioning Tax-Free Idaho Fund for a decline in interest rates, we
provided an exceptional total return of +10.41% for the 12 months ended
December 31, 1997 (for Class A shares at net asset value with distributions
reinvested). The Fund's results were significantly higher than the returns of
both its unmanaged benchmark and the average of its peers.
For most of the year, we kept the Fund's duration longer than both
the Lehman Brothers Municipal Index and other mutual funds investing in Idaho
bonds. We believe this allowed the Fund to provide higher-than-average income
and capture a substantial amount of the municipal market's total return
potential.
Tax-Free Idaho Fund also did well because we held a substantial
portion of its portfolio (41.7%) in unrated bonds and bonds rated BBB. Prices
of these securities rose to a greater degree than bonds rated A to AAA in
1997.
As of December 31, 1997, some 14.8% of the bonds in your Fund's
portfolio did not have credit ratings. Partly this reflects the fact that
Idaho has an unusual municipal bond market, which provides us with
attractive investment opportunities. Our research has helped us avoid credit
problems and increased your Fund's income potential.
Idaho, with a population of just 1 million, is primarily a rural
state, and many of the bond issues available to investors are for municipal
projects in small towns. These issues are often too small to make it
economical to obtain credit ratings from agencies such Moody's or Standard &
Poor's. Indeed, the state issued just $489 million in new bonds in 1997,
according to The Bond Buyer, a 7% decline from a year earlier. Only Montana
and Wyoming issued fewer bonds last year.
In selecting securities for the Fund's portfolio, we carefully
evaluate creditworthiness and only purchase unrated bonds that we conclude
would qualify for an investment grade rating if the issuer sought one. In
other words, we seek overlooked gems. Our approach is to balance bonds that
produce an above-average interest rate with bonds that are rated and can
contribute to the Fund's total return. During 1997 Idaho's unemployment rate
fell to 5.1%, the lowest level since 1969. State economists expect Idaho to
grow faster than the national economy over the next several

idaho

TAX-FREE IDAHO FUND
PORTFOLIO HIGHLIGHTS AND ASSET MIX
- -------------------------------------------------------------------------------
DECEMBER 31, 1997

Hospitals 14.8%
General Obligation 10.6%
Pollution Control 17.7%
Housing 11.1%
Water/Sewer 3.2%
Higher Education 4.8%
City Agencies 1.1%
Industrial Development 3.8%
Other Revenue Bonds 28.0%
Cash Equivalents 4.9%

Average Effective Maturity 8.9 years
Average Effective Duration 6.6 years
Average Quality A
Thirty-Day Current SEC Yield* 4.04%
- -------------------------------------------------------------------------------
*For Class A shares based on Securities and Exchange Commission guidelines.
Thirty-day current SEC yields for B and C classes were 3.92% and 3.93%,
respectively.

Approximately x.xx% of the income generated by Tax-Free Idaho Fund during fiscal
1997 was subject to the alternative minimum tax.
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for tax-exempt
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5

years, aided by continuing expansion of the state's high technology sector.
This includes companies such as Micron Technology, the world's largest maker
of random access memory chips. Personal income - the amount of money Idaho
residents have to spend after taxes - has been growing at about a 5.5% rate,
according to Standard & Poor's.
Although the bond market enjoyed a huge rally this past fall and the
U.S. economy remains relatively strong, we believe rates are likely to drop
even farther in 1998 as the impact of the Asian crisis may push domestic
inflation even lower. Our sector positioning as of December 31, 1997 was
similar to what it was six months earlier. We reduced our weighting in
industrial development bonds and reallocated assets to areas we believed
offered better value.

TAX-FREE NORTH DAKOTA FUND
STRATEGIC POSITIONING
For the 12 months ended December 31, 1997, Tax-Free North Dakota Fund
provided a total return of +9.43% (for Class A shares with distributions
reinvested at net asset value).
We did well relative to our benchmark because we positioned the Fund
for a decline in interest rates. Our average
duration was longer than the Lehman Brothers Municipal Bond Index for much of
the year. This allowed us to generate an attractive level of income and
participate in the bond market's autumn price rally.
The supply of new bonds issued in North Dakota is fairly limited,
reflecting the state's relatively small population - about 642,000 people.
Only $566 million in new bonds were issued in 1997, a 3% decline from a year
earlier.
Economic growth in North Dakota and confidence in the state's bond
market remained strong in 1997 despite flooding this past spring in some
portions of the state. North Dakota's unemployment rate was just 1.9% in
1997, second lowest rate of joblessness in the country, U.S. government
figures show. Financial services firms and others have been adding back
office jobs such as credit card servicing centers. The state's economy is
also benefiting from reform of the state's workers' compensation system a few
years ago. North Dakota's general obligation bonds are rated AA - by Standard
& Poor's. The state posted a budget surplus of $109 million in 1997.
As of December 31, 1997, more than half of the Fund's net assets were
allocated

north
dakota

TAX-FREE NORTH DAKOTA FUND
PORTFOLIO HIGHLIGHTS AND ASSET MIX
- --------------------------------------------------------------------------------
DECEMBER 31, 1997

Housing 26.5%
Power Authority 14.7%
Transportation 4.8%
Higher Education 3.4%
Hospital 29.2%
State Building Authority 9.4%
Other Revenue Bonds 7.7%
General Obligation Bonds 1.6%
Industrial Development 1.7%
Pre-Refunded Bonds 1.0%

Average Effective Maturity 8.7 years
Average Effective Duration 6.7 years
Average Quality AA
Thirty-Day Current SEC Yield* 4.20%
- --------------------------------------------------------------------------------

*For Class A shares based on Securities and Exchange Commission guidelines.
Thirty-day current SEC yield for B and C classes was 3.62%.

Approximately x.xx% of the income generated by Tax-Free North Dakota Fund during
fiscal 1997 was subject to the alternative minimum tax.
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6

to two sectors - hospital and housing bonds. We believe these areas offer
superior income potential. Since 1996, we have increased our weighting in
hospital bonds and slightly decreased our allocation to utility bonds,
reflecting our belief that the health care sector represents a somewhat
greater long-term value.
In an effort to mitigate credit risks in the year ahead, we have
focused on higher quality North Dakota bonds. As of year's end, nearly
two-thirds of your Fund's portfolio was invested in bonds rated AAA and AA,
the two highest credit ratings available. Generally, we like to buy both
rated and unrated bonds. We believe rated bonds enable us to fine-tune
duration while unrated bonds provide us with an opportunity to analyze
credits and provide above-average income potential.

TAX-FREE OREGON INSURED FUND
STRATEGIC POSITIONING
Tax-Free Oregon Insured Fund provided a total return of +9.66% for the 12
months ended December 31, 1997 (for Class A shares with distributions
reinvested at net asset value).
Our performance was stronger than both the Fund's unmanaged benchmark
and the average of our peers. The major reason for our above-average results was
that we kept the Fund's duration longer than the Lehman Brothers Municipal Bond
Index and most of our competitors.
Your Fund's returns also reflect high investor demand and relatively
low supply of new municipal securities in the state. In 1997, new bond
issuance dropped 22.4% to $1.6 billion, according to The Bond Buyer. Only
Vermont had a larger percentage decline last year. Municipal bonds can be
especially attractive to Oregon residents because the state has a steep top
marginal income tax rate of 9%. In 1997, Oregon bonds traded at premium to
other states because of the limited supply available.
Oregon's economy grew at a steady pace last year, although the
state's unemployment rate of 5.3% remained above the national average U.S.
government figures show. Oregon's general obligation bond rating remained a
solid AA and the state posted a $607 million dollar surplus in its latest
fiscal report. To help preserve principal, the Fund focuses on bonds that are
insured by a municipal bond insurance company.
Since December our emphasis has been on bonds with discount coupons,

oregon

TAX-FREE OREGON INSURED FUND
PORTFOLIO HIGHLIGHTS AND ASSET MIX
- --------------------------------------------------------------------------------
DECEMBER 31, 1997

Cash Equivalents 1.8%
Power Authority 6.3%
Higher Education 10.3%
Hospital 7.4%
Transportation 7.1%
Water/Sewer 14.8%
Other Revenue Bonds 17.9%
General Obligation Bonds 31.6%
Pre-Refunded Bonds 2.8%

Average Effective Maturity 9.2 years
Average Effective Duration 7.5 years
Average Quality AAA
Thirty-Day Current SEC Yield* 4.17%
- --------------------------------------------------------------------------------
*For Class A shares based on Securities and Exchange Commission guidelines.
Thirty-day SEC yield for B and C classes was 3.59%.

Approximately x.xx% of the income generated by Tax-Free Oregon Insured Fund
during fiscal 1997 was subject to the alternative minimum tax.

(Photo of glasses pen and keyboard)

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7

good call projection, and long maturities. We believe pursuing this strategy
allowed the Fund to perform well despite 1997's volatile interest rate
environment.
As of December 31, 1997, your Fund's duration was about a year
shorter than at mid-year. Although the bond market enjoyed a huge rally this
past fall, we believe interest rates could move even lower in 1998. Our
sector allocation as of year's end was relatively unchanged from June.

TAX-FREE WASHINGTON
INSURED FUND
STRATEGIC POSITIONING
Tax-Free Washington Insured Fund provided exceptional results in fiscal 1997.
For the 12 months ended December 31, 1997, the Fund's total return was
+10.23% (for Class A shares plus reinvested distributions at net asset
value).
The State of Washington issued substantially more municipal bonds in
1997 than a year ago. Supply rose 48%
to $6.2 billion, making the state one of the nation's top 10 issuers of new
tax-exempt debt according to The Bond Buyer. Strong investor demand and high
credit quality of these new bonds helped stabilize bond prices.
Washington is one of a handful of states that does not have an income
tax. For Washington residents, two of the primary advantages of owning
municipal bond funds are lower federal income taxes and portfolio
diversification. The state is home to many investors in high federal tax
brackets, per capita income ranks 15th nationwide.
Tax-Free Washington Insured Fund did well relative to the Lehman
Index and its peers during the period because we positioned the Fund for a
decline in interest rates. The Fund's duration was longer than the Index for
most of the year. This allowed us to achieve a high total rate of return as
bond prices rose in summer and autumn. Our emphasis was on bonds with
discount coupons, good call projection, and long maturities. The Fund focuses
on bonds that are insured by one of the major municipal bond insurance
companies.
During the year, we substantially reduced our asset allocation to
bonds in the utility industry and increased our weighting in the housing
sector. This reflects our optimism about the growth prospects of the Seattle
area in the coming years, and consequent demand for housing.

washington

TAX-FREE WASHINGTON INSURED FUND
PORTFOLIO HIGHLIGHTS AND ASSET MIX
- --------------------------------------------------------------------------------
JUNE 30, 1997

Cash Equivalents 4.5%
Power Authority 9.3%
Higher Education 12.6%
Industrial Development 2.4%
General Obligation 20.4%
Hospital 12.5%
Housing 27.6%
Water/Sewer 10.7%

Average Effective Maturity 8.9 years
Average Effective Duration 7.1 years
Average Quality AAA
Thirty-Day Current SEC Yield* 4.57%
- --------------------------------------------------------------------------------
*For Class A shares based on Securities and Exchange Commission guidelines.
Thirty-day SEC yield for B and C classes was 4.00%.

Approximately x.xx% of the income generated by Tax-Free Washington Insured Fund
during fiscal 1997 was subject to the alternative minimum tax.

(Photo of keyboard)
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for tax-exempt
income
8

The Washington area, more than many other regions of the country, depends
on foreign trade. Located halfway between Tokyo and London, Seattle is the
nation's fourth largest port and is three to four times more dependent on
exports than any other region in the U.S. according to the Seattle Chamber of
Commerce.
Fiscal problems and currency devaluations along the Pacific Rim will
undoubtedly have an impact on Washington's economy in the year ahead. But we
believe the state's bond investors need not lose sleep over the issue. State
business leaders have said they believe continuing strength in
domestic-oriented industries such as technology, tourism and health services
can help cushion the effects of reduced export demand from emerging Asian
countries.
In our view, a modest slowdown could actually help reduce the
region's annual inflation rate, which for much of the 1990s has been running
slightly higher than the national average. More restrained consumer prices
would help preserve the purchasing power of Washington residents' investment
dollars.

SUMMARY OUTLOOK
In our opinion, the long-term outlook for Northwest bond markets remains
bright. Despite production bottlenecks and short-term setbacks in export
demand for major employers such as the Boeing Co. and several high-technology
companies, the region's economy is healthy and vibrant.
The municipal bond market rallied substantially in 1997. Still, we
believe selected securities in Northwestern states offer solid income
opportunities and relatively moderate credit risk. For investors in high tax
brackets, municipal bonds offer a way to both diversify an equity portfolio
and reduce taxes on annual investment income.
U.S. job growth has continued at a brisk pace while the labor force
participation rate - the proportion of people who have or are looking for a job
- - reached a record level of more than 67% of working age Americans in December.
While this trend has served to boost state tax revenues and reduce
social expenses, it suggests that the Federal Reserve Board needs to remain
vigilant to prevent consumer prices from rising too much. We believe the
Asian crisis could help keep U.S. consumer prices caged within a range of 1%
to 2.6% as more inexpensive imported goods come to our shores. Given our low
inflation expectation, real rates of return on U.S. municipal bonds appear
rewarding. Even though nominal U.S. interest rates are at a near 25-year low,
in our view real rates of return after inflation still appear attractive.

Elizabeth H. Howell
Vice President/Senior Portfolio Manager
January 20, 1998

Continuing strength in Washington's domestic-oriented industries such as
biotechnology, tourism and health services may help cushion the effects of
reduced export demand from emerging Asian countries.

outlook

(Photo of family on beach)

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for tax-exempt
income
9

Tax-Free Idaho Fund's Performance
Growth of a $10,000 Investment
Total Return January 4, 1995 To December 31, 1997

TAX-FREE IDAHO FUND A CLASS
- --------------------------------------------------------------------------------
Lipper
Other States
Municipal Bond
Lehman Brothers Fund Average
Tax-Free Idaho Municipal Bond Index (67 Funds)
Jan. 4 '95 $ 9,625 $10,000 $10,000
Jan. 31 '95 $ 9,846 $10,000 $10,000
Feb. 28 '95 $10,128 $10,291 $10,298
Mar. 31 '95 $10,265 $10,409 $10,383
Apr. 30 '95 $10,277 $10,421 $10,394
May 31 '95 $10,611 $10,754 $10,683
June 30 '95 $10,483 $10,660 $10,562
July 31 '95 $10,523 $10,761 $10,628
Aug. 31 '95 $10,633 $10,897 $10,749
Sept. 30 '95 $10,744 $10,966 $10,823
Oct. 31 '95 $10,915 $11,126 $10,988
Nov. 30 '95 $11,107 $11,310 $11,169
Dec. 31 '95 $11,263 $11,419 $11,294
Jan. 31 '96 $11,345 $11,505 $11,353
Feb. 28 '96 $11,260 $11,428 $11,271
Mar. 31 '96 $11,052 $11,282 $11,104
Apr. 30 '96 $11,018 $11,250 $11,064
May 31 '96 $11,036 $11,245 $11,088
June 30 '96 $11,159 $11,368 $11,185
July 31 '96 $11,262 $11,471 $11,275
Aug. 31 '96 $11,269 $11,468 $11,284
Sept. 30 '96 $11,435 $11,629 $11,435
Oct. 31 '96 $11,558 $11,760 $11,544
Nov. 30 '96 $11,747 $11,975 $11,727
Dec. 31 '96 $11,753 $11,925 $11,689
Jan. 31 '97 $11,760 $11,948 $11,706
Feb. 28 '97 $11,863 $12,058 $11,811
Mar. 31 '97 $11,685 $11,897 $11,664
Apr. 30 '97 $11,812 $11,997 $11,765
May 31 '97 $12,016 $12,177 $11,928
June 30 '97 $12,164 $12,307 $12,043
July 31 '97 $12,502 $12,648 $12,351
Aug. 31 '97 $12,387 $12,528 $12,232
Sept. 30 '97 $12,561 $12,677 $12,365
Oct. 31 '97 $12,668 $12,758 $12,434
Nov. 30 '97 $12,764 $12,834 $12,508
Dec. 31 '97 $13,029 $13,021 $12,685

Chart assumes $10,000 invested January 4, 1995, and includes the effect of a
3.75% sales charge and the reinvestment of distributions. Performance of other
Fund classes will vary due to differing charges and expenses. Past performance
does not guarantee future results.

<PAGE>

TAX-FREE IDAHO FUND PERFORMANCE
- --------------------------------------------------------------------------------
Average Annual Returns through December 31, 1997

Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 1/4/95)
Excluding Sales Charge +10.65% +10.41%
Including Sales Charge +9.25% +6.23%
- --------------------------------------------------------------------------------
Class B (Est. 3/16/95)
Excluding Sales Charge +8.38% +9.87%
Including Sales Charge +7.44% +5.87%
- --------------------------------------------------------------------------------
Class C (Est. 1/11/95)
Excluding Sales Charge +9.57% +9.49%
Including Sales Charge +9.57% +8.49%
- --------------------------------------------------------------------------------

Performance for all Funds includes reinvestment of distributions and applicable
sales charge as described below. Return and share value will fluctuate so that
shares when redeemed may be worth more or less than the original cost. Past
performance is not a guarantee of future results. Performance for Class B and C
shares excluding sales charge assumes either contingent sales charges did not
apply or the investment was not redeemed. Returns reflect a voluntary expense
limitation in effect at the time. Returns would have been lower without the
limitation.

Class A shares have a 3.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a deferred
sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
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income
10

Tax-Free North Dakota Fund's Performance
Growth of a $10,000 Investment
Total Return April 1, 1991 To December 31, 1997

TAX-FREE NORTH DAKOTA FUND A CLASS
- -------------------------------------------------------------------------------
Tax-Free Lehman Brothers Lipper Other States
North Dakota Municipal Bond Municipal Debt Fund
Fund A Class Index Average (67 Funds)
Apr. '91 $ 9,625 $10,000 $10,000
Jun. '91 $ 9,887 $10,079 $10,070
Sept. '91 $10,228 $10,470 $10,389
Dec. '91 $10,513 $10,822 $10,643
Mar. '92 $10,560 $10,854 $10,659
Jun. '92 $10,928 $11,266 $10,982
Sept. '92 $11,131 $11,565 $11,210
Dec. '92 $11,532 $11,776 $11,453
Mar. '93 $11,979 $12,213 $11,840
Jun. '93 $12,313 $12,613 $12,211
Sept. '93 $12,662 $13,039 $12,626
Dec. '93 $12,816 $13,222 $12,761
Mar. '94 $12,356 $12,496 $12,098
Jun. '94 $12,231 $12,634 $12,153
Sept. '94 $12,351 $12,721 $12,218
Dec. '94 $12,115 $12,539 $11,960
Mar. '95 $12,981 $13,425 $12,801
Jun. '95 $13,257 $13,748 $13,022
Sept. '95 $13,666 $14,143 $13,343
Dec. '95 $14,273 $14,727 $13,924
Mar. '96 $14,043 $14,550 $13,690
Jun. '96 $14,151 $14,661 $13,789
Sept. '96 $14,488 $14,998 $14,097
Dec. '96 $14,828 $15,380 $14,411
Mar. '97 $14,768 $15,344 $14,381
Jun. '97 $15,314 $15,873 $14,847
Sept. '97 $15,779 $16,350 $15,244
Dec. '97 $16,237 $16,793 $15,639

Chart assumes $10,000 invested April 1, 1991, and includes the effect of a
3.75% sales charge and the reinvestment of distributions. Performance of
other Fund classes will vary due to differing charges and expenses. Past
performance does not guarantee future results.

TAX-FREE NORTH DAKOTA FUND PERFORMANCE
- -------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 1997
Lifetime Five Year One Year
- -------------------------------------------------------------------------------
Class A (Est. 4/1/91)
Excluding Sales Charge +8.04% +7.08% +9.43%
Including Sales Charge +7.43% +6.27% +5.36%
- -------------------------------------------------------------------------------
Class B (Est. 5/10/94)
Excluding Sales Charge +7.90% +8.82%
Including Sales Charge +7.22% +4.82%
- -------------------------------------------------------------------------------
Class C (Est. 7/29/95)
Excluding Sales Charge +7.37% +8.57%
Including Sales Charge +7.37% +7.57%
- -------------------------------------------------------------------------------
Please turn to page 9 for important additional information. All performance
includes reinvestment of distributions and applicable sales charges as described
on page 9. Past performance is not a guarantee of future results.
<PAGE>
for tax-exempt
income
11

Tax-Free Oregon Insured Fund's Performance
Growth of a $10,000 Investment
Total Return August 1, 1993 To December 31, 1997

TAX-FREE OREGON INSURED FUND A CLASS
- -------------------------------------------------------------------------------

Tax-Free Oregon Lehman Brothers Lipper Oregon Municipal
Insured Fund Insured Municipal Debt Fund Average
A Class Bond Index (15 Funds)
Aug. '93 $ 9,625 $10,000 $10,000
Sept. '93 $ 9,861 $10,335 $10,112
Dec. '93 $ 9,979 $10,479 $10,266
Mar. '94 $ 9,502 $ 9,822 $ 9,676
Jun. '94 $ 9,388 $ 9,944 $ 9,677
Sept. '94 $ 9,414 $ 9,997 $ 9,704
Dec. '94 $ 9,217 $ 9,853 $ 9,589
Mar. '95 $ 9,949 $10,610 $10,287
Jun. '95 $10,143 $10,857 $10,479
Sept. '95 $10,427 $11,168 $10,744
Dec. '95 $10,941 $11,681 $11,201
Mar. '96 $10,667 $11,502 $10,994
Jun. '96 $10,700 $11,591 $11,067
Sept. '96 $11,025 $11,865 $11,313
Dec. '96 $11,286 $12,178 $11,555
Mar. '97 $11,216 $12,124 $11,521
Jun. '97 $11,611 $12,556 $11,863
Sept. '97 $11,975 $12,957 $12,232
Dec. '97 $12,418 $13,342 $12,549

Chart assumes $10,000 invested August 1, 1993, and includes the effect of a
3.75% sales charge and the reinvestment of distributions. Performance of
other Fund classes will vary due to differing charges and expenses. Past
performance does not guarantee future results.

TAX-FREE OREGON INSURED FUND PERFORMANCE
- -------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 1997
Lifetime One Year
- -------------------------------------------------------------------------------
Class A (Est. 8/1/93)
Excluding Sales Charge +5.93% +9.66%
Including Sales Charge +5.02% +5.59%
- -------------------------------------------------------------------------------
Class B (Est. 10/24/95)
Excluding Sales Charge +5.83% +8.90%
Including Sales Charge +5.15% +4.90%
- -------------------------------------------------------------------------------
Class C (Est. 7/7/95)
Excluding Sales Charge +7.02% +8.75%
Including Sales Charge +7.02% +8.31%
- -------------------------------------------------------------------------------
Please turn to page 9 for important additional information. All performance
includes reinvestment of distributions and applicable sales charges as
described on page 9. Past performance is not a guarantee of future results.
<PAGE>

for tax-exempt
income
12

Tax-Free Washington Insured Fund's Performance
Growth of a $10,000 Investment
Total Return August 1, 1993 To December 31, 1997

TAX-FREE WASHINGTON INSURED FUND A CLASS
- -------------------------------------------------------------------------------
Tax-Free Washington Lehman Brothers Lipper Washington
Insured Fund Insured Municipal Municipal Debt
A Class Bond Index Fund Average (8 Funds)
Aug. '93 $ 9,625 $10,000 $10,000
Sept. '93 $10,297 $10,335 $10,146
Dec. '93 $10,372 $10,479 $10,237
Mar. '94 $ 9,921 $ 9,822 $ 9,537
Jun. '94 $ 9,831 $ 9,944 $ 9,549
Sept. '94 $ 9,882 $ 9,997 $ 9,580
Dec. '94 $ 9,587 $ 9,853 $ 9,372
Mar. '95 $10,394 $10,610 $10,153
Jun. '95 $10,669 $10,857 $10,396
Sept. '95 $10,941 $11,168 $10,670
Dec. '95 $11,499 $11,681 $11,207
Mar. '96 $11,250 $11,502 $10,983
Jun. '96 $11,344 $11,591 $11,068
Sept. '96 $11,666 $11,865 $11,366
Dec. '96 $11,957 $12,178 $11,618
Mar. '97 $11,901 $12,124 $11,537
Jun. '97 $12,354 $12,556 $11,965
Sept. '97 $12,756 $12,957 $12,339
Dec. '97 $13,226 $13,342 $12,694

TAX-FREE WASHINGTON INSURED FUND
- -------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 1997
Lifetime One Year
- -------------------------------------------------------------------------------
Class A (Est. 8/1/93)
Excluding Sales Charge +7.46% +10.23%
Including Sales Charge +6.53% +6.11%
- -------------------------------------------------------------------------------
Class B (Est. 10/24/95)
Excluding Sales Charge +7.32% +9.38%
Including Sales Charge +6.05% +5.38%
- -------------------------------------------------------------------------------
Class C (Est. 4/21/95)
Excluding Sales Charge +7.61% +9.31%
Including Sales Charge +7.61% +8.31%
- -------------------------------------------------------------------------------

Please turn to page 9 for important additional information. All performance
includes reinvestment of distributions and applicable sales charges as
described on page 9. Past performance is not a guarantee of future results.
<PAGE>
for tax-exempt income 13

Financial Statements
Delaware-Voyageur
Tax-Free Idaho Fund
Statement of Net Assets
December 31, 1997
- -------------------------------------------------------------------------------
Principal Market
Amount Value
---------- ------
Municipal Bonds - 95.13%
General Obligation Bonds - 10.58%
Ada and Canyon County School District
#2 5.60% 7/30/12 ............................. $1,325,000 $1,415,604
Bonner County Local Improvement District
#93-1 6.20% 4/30/05 .......................... 150,000 153,620
Bonner County Local Improvement District
#93-2 6.35% 4/30/06 .......................... 185,000 189,449
Bonner County Local Improvement District
#93-3 6.40% 4/30/07 .......................... 195,000 199,694
Bonner County Local Improvement District
#93-4 6.50% 4/30/08 .......................... 110,000 112,644
Bonner County Local Improvement District
#93-5 6.50% 4/30/10 .......................... 100,000 102,404
Canyon County Independent School District
#131 5.50% 7/30/12 (MBIA) ..................... 100,000 103,627
Coeur D' Alene Local Improvement District #6
Series 1995 6.00% 7/1/09 ...................... 85,000 90,989
Coeur D' Alene Local Improvement District #6
Series 1996 6.05% 7/1/10 ...................... 90,000 96,107
Coeur D' Alene Local Improvement District #6
Series 1997 6.10% 7/1/12 ...................... 40,000 42,790
Coeur D' Alene Local Improvement District #6
Series 1998 6.10% 7/1/14 ...................... 45,000 47,915
*Gooding Lincoln Independent School District
#231 6.30% 2/1/14-04 (FSA) .................... 100,000 110,862
Madison County 5.40% 8/1/14 (FSA) .............. 300,000 310,722
Puerto Rico Commonwealth 5.375% 7/1/25 ......... 1,250,000 1,253,200
Sun Valley 5.20% 8/1/09 ....................... 180,000 186,676
-----------
4,416,303
-----------
Higher Education Revenue Bonds - 4.78%
Idaho State University Student Fee Bonds
5.80% 4/1/20 (MBIA) .......................... 550,000 581,955
University Of Idaho 5.85%
4/1/11 (FSA) ................................. 1,300,000 1,413,594
-----------
1,995,549
-----------
Hospital Revenue Bonds - 14.79%
Idaho Health Facilities Authority Revenue
Bonner General Hospital 6.50% 10/1/28 ......... 1,500,000 1,559,790
Idaho Health Facilities Revenue Bannock
Medical Center 6.125% 5/1/25 .................. 1,500,000 1,593,570
Idaho Health Facilities Revenue Bannock
Medical Center 6.375% 5/1/17 .................. 1,695,000 1,864,602
Idaho Magic Valley Health Facilities 5.625%
12/1/13 (AMBAC) .............................. 500,000 522,820
Idaho St. Alphonsus Health Facility 6.25%
12/1/22 ...................................... 590,000 630,940
-----------
6,171,722
-----------
Housing Revenue Bonds - 11.08%
Idaho State Housing Agency Multi-Family
Place Plaza 6.50% 12/1/36 (FHA) ............... 995,000 1,067,217
Idaho State Housing Finance Authority Single
Family Series E 6.35% 7/1/15 (FHA) ............ 350,000 372,820
<PAGE>

Principal Market
Amount Value
--------- ------
MUNICIPAL BONDS (Continued)
Housing Revenue Bonds (Continued)
Idaho State Housing Finance Authority Single
Family Series A1 6.85% 7/1/12 .................. $ 90,000 $ 97,176
Idaho State Housing Finance Authority Single
Family Series G-2 6.15% 7/1/15 ................. 1,500,000 1,575,824
Idaho State Housing Finance Authority Single
Family Series A 6.10% 7/1/16 (FHA) ............. 370,000 389,203
Idaho State Housing Finance Authority Single
Family Series A 6.05% 7/1/13 (AMBAC) ........... 445,000 469,907
Idaho State Housing Finance Authority Single
Family Series E 6.60% 7/1/11.................... 155,000 168,894
Idaho State Housing Finance Authority Single
Family Series B 6.45% 7/1/15 (FHA) ............. 200,000 213,912
Idaho State Housing Finance Authority Single
Family Series C-2 6.35% 7/1/15 ................. 255,000 270,573
-----------
4,625,526
-----------
Industrial Development Revenue
Bonds - 3.79%
Idaho State Water Resource Boise Water
7.25% 12/1/21 ................................. 100,000 108,491
Meridan EDA for Hi-Micro 5.85% 8/15/11 .......... 1,250,000 1,311,025
Puerto Rico Industrial Medical Environmental
Revenue-Pepsico Project 6.25% 11/15/13 ......... 150,000 164,955
-----------
1,584,471
-----------
Lease/Certificates of Participation -
2.50%
North Idaho College Dorm Housing-Certificates
of Participation 6.45% 10/1/16 ................. 1,000,000 1,045,450
-----------
1,045,450
-----------
Pollution Control Revenue Bonds -
17.73%
Nez Perce County, Idaho Pollution Control Revenue
Refunding-Potlatch Project 6.00% 10/1/24 ....... 5,500,000 5,862,615
Power County Idaho Pollution Control Revenue
FMC Project 5.625% 10/1/14 ..................... 1,500,000 1,536,780
-----------
7,399,395
-----------
Transportation Revenue Bonds -
0.84%
Guam Highway 6.30% 5/1/12 (FSA) ................. 150,000 162,770
Puerto Rico Highway Revenue Series W
5.50% 7/1/15 .................................. 175,000 186,597
-----------
349,367
-----------
Utility Revenue Bonds - 3.97%
Puerto Rico Electric Power Authority 6.00%
7/1/16 (FSA) .................................. 100,000 108,674
Puerto Rico Electric Power Authority Series X
5.50% 7/1/25 .................................. 1,375,000 1,395,185
Puerto Rico Telephone Revenue Authority
5.50% 1/1/22.................................... 150,000 152,255
----------
1,656,114
----------
<PAGE>
14 for tax-exempt income

Tax-Free Idaho Fund
Statement of Net Assets (Continued)
- -------------------------------------------------------------------------------
Principal Market
Amount Value
--------- ------
MUNICIPAL BONDS (Continued)

Water And Sewer Revenue Bonds - 3.24%
Chubbuck Water Revenue 6.35% 4/1/08 .......... $ 125,000 $ 133,409
Chubbuck Water Revenue 6.40% 4/1/10 .......... 135,000 143,648
McCall Water Revenue 5.85% 3/1/16 (FSA) ...... 1,000,000 1,076,190
-----------
1,353,247
-----------
Other Revenue Bonds - 21.83%
Ammon, Idaho Urban Renewal Agency Revenue
6.25% 8/1/18 ................................ 445,000 476,003
Ammon, Idaho Urban Renewal Tax Increment
Revenue 5.875% 8/1/17 ....................... 350,000 367,882
Boise Urban Renewal Tax Increment
Revenue 6.125% 9/1/15 ....................... 2,500,000 2,655,550
Boise Urban Renewal Tax Increment Revenue
6.125% 9/1/15 ............................... 2,040,000 2,166,928
Hayden,Idaho Improvement District 95
Special Assessment 6.30% 5/1/12 ............. 115,000 115,128
Hayden,Idaho Improvement District 95
Special Assessment 6.35% 5/1/13 ............. 120,000 120,133
Hayden,Idaho Improvement District 95
Special Assessment 6.40% 5/1/14 ............. 125,000 125,139
Hayden,Idaho Improvement District 95
Special Assessment 6.50% 5/1/15 ............. 125,000 125,139
Pocatello Development Authority and Tax
Increment Revenue 7.25% 12/1/08 ............. 1,700,000 1,768,799
Puerto Rico Public Building Authority Revenue
Series M 5.50% 7/1/21 ....................... 1,175,000 1,190,804
-----------
9,111,505
-----------
Total Municipal Bonds (cost $37,209,516) ..... 39,708,649
-----------

Short Term Investments - 2.74%
Norwest Advantage Municipal Money Market Fund 1,142,000 1,142,000
-----------
Total Short Term Investments (cost $1,142,000) 1,142,000
-----------

Total market value of securities owned
(cost $38,351,516) - 97.87% ................................ $40,850,649
Receivables and other assets net of
liabilities - 2.13% ........................................ 890,369
-----------
Net assets applicable to 3,646,544
shares ($0.01 par value) outstanding - 100.00% .............. $41,741,018
===========

Net asset value - tax-free idaho fund a class
($33,788,382 / 2,951,170 shares) ........................... $ 11.45
===========
Net asset value - tax-free idaho fund b class
($6,827,415 / 596,960 shares) .............................. $ 11.44
===========
Net asset value - tax-free idaho fund c class
($1,125,221 / 98,414 shares) ............................... $ 11.43
===========
- -----------
*Pre-Refunded Bond - The stated maturity is followed by the year in which the
bond is pre-refunded.
<PAGE>
- -------------------------------------------------------------------------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
FHA - Insured by the Federal Housing Authority
FSA - Insured by the Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association

Components of net assets at December 31, 1997:
Common Stock, $0.01 par value, 100,000,000,000 shares
authorized to the Fund with 10,000,000,000 shares
allocated to Tax-Free Idaho Fund A Class,
10,000,000,000 shares allocated to the Tax-Free Idaho
Fund B Class and 10,000,000,000 shares allocated to
the Tax-Free Idaho Fund C Class .............................. $39,229,394
Accumulated net realized gain on investments ................. 12,491
Net unrealized appreciation of investments .................... 2,499,133
-----------
Total net assets .............................................. $41,741,018
===========

Net asset value and offering price per share -
tax-free Idaho fund a class:
Net asset value A Class (A) .................................. $ 11.45
Sales charge (3.75% of offering price, or
3.93% of amount invested per share) (B) ...................... 0.45
-----------
Offering price ................................................ $ 11.90
===========

(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See Buying Shares in the current Prospectus for purchases of $100,000 or
more.

See accompanying notes

Delaware-Voyageur
Tax-Free North Dakota Fund
Statement of net assets
December 31, 1997
- -------------------------------------------------------------------------------
Principal Market
Amount Value
--------- ------
Municipal Bonds - 99.63%
General Obligation Bonds - 1.59%
Grand Forks Sewer Revenue 6.70% 6/1/07 ............ $ 270,000 $ 289,675
North Dakota State Real Estate 6.00% 9/1/13 ....... 215,000 217,694
----------
507,369
----------
Higher Education Revenue
Bonds - 3.37%
Burleigh County University Facilities University of
Mary Project 7.125% 12/1/11 ...................... 250,000 267,095
North Dakota State University Housing and
Auxiliary Facility 6.30% 4/1/07 .................. 250,000 269,313
North Dakota State University Housing and
Auxiliary Facility 6.50% 4/1/12 .................. 500,000 540,000
----------
1,076,408
----------
Hospital Revenue Bonds - 29.16%
Bismarck Hospital Alexius Medical Center
6.90% 5/1/06 (AMBAC) ............................ 500,000 550,750
Bismarck Hospital Medical Center One Inc. .........
7.50% 5/1/13 (MBIA) ............................. 250,000 265,625
Cando, ND Nursing Facility Revenue - Towner County
Medical Center Project 7.125% 8/1/22 ............. 1,000,000 1,028,610
Carrington, ND Health Facility Revenue for
Carrington Health Center 6.25% 11/15/15 .......... 500,000 534,490
<PAGE>
for tax-exempt income 15

Tax-Free North Dakota Fund
Statement of Net Assets (Continued)
- -------------------------------------------------------------------------------
Principal Market
Amount Value
--------- ------
Municipal Bonds (Continued)
Hospital Revenue Bonds (Continued)
Cass County, ND Health Facility Revenue for Catholic
Health Villa-Nazareth Project 6.25% 11/15/14 ...... $1,000,000 $1,071,220
Fargo Hospital Facility St. Luke's Hospital,
Series 1992 6.50% 6/1/15 .......................... 1,000,000 1,084,020
Grand Forks North Dakota Senior Housing
Revenue 4000 Valley Square Project
6.25% 12/1/34 ..................................... 2,000,000 2,018,940
Grand Forks United Hospital Obligated Group
6.125% 12/1/14 (MBIA) ............................ 225,000 248,231
Grand Forks United Hospital Obligated Group
6.25% 12/1/19 (MBIA) ............................. 250,000 274,520
Killdeer North Dakota Nursing Care Revenue-
Hill Top Home of Comfort 6.00% 11/1/12 ............ 850,000 865,054
Valley City, North Dakota Congregate Housing
Revenue (Bridgeview Estates Project) 7.25%
8/1/22 ........................................... 300,000 305,328
Ward County, ND Health Care Facility Revenue-
Trinity Obligated Group, Ser96A 6.00%
7/1/11 ........................................... 1,000,000 1,052,600
-----------
9,299,388
-----------
Housing Revenue Bonds - 26.46%
Grand Forks Multifamily Housing Authority
Revenue-Ryan House Section 8 6.30%
3/1/22 ........................................... 305,000 327,445
Minot Single Family Mortgage 7.70% 8/1/10 .......... 260,000 277,956
North Dakota Housing Finance Authority Single
Family Mortgage Series A 6.30% 7/1/16 ............. 1,975,000 2,107,720
North Dakota Housing Finance Authority Single
Family Mortgage 6.25% 1/1/172...................... 240,000 2,386,630
North Dakota Single Housing Finance Agency
Single Family Mortgage Series A 6.75%
7/1/12 (FHA) ..................................... 170,000 181,637
North Dakota State Housing Finance Agency
Revenue 6.125% 12/1/15 (FNMA) ..................... 500,000 532,225
North Dakota State Housing Finance Agency
Revenue Multifamily 6.15% 12/1/17 (FNMA) .......... 1,300,000 1,382,147
North Dakota State Housing Finance Authority
Single Family Mortgage Series A 6.95%
7/1/12 ........................................... 325,000 349,556
North Dakota State Housing Finance Agency
Single Family Mortgage Series E 6.30%
1/1/15 (FNMA) .................................... 835,000 893,233
-----------
8,438,549
-----------
Industrial Development Revenue
Bonds - 1.70%
Mercer County Pollution Control Otter Tail Power
Company Project 6.90% 2/1/19........................ 500,000 541,845
-----------
541,845
-----------
Power Authority Revenue Bonds -
14.72%
Mercer County Pollution Control Revenue
Montana-Dakota Utilities Company Project
6.65% 6/1/22 (FGIC) ............................... 500,000 552,385
<PAGE>
Principal Market
Amount Value
--------- ------
Municipal Bonds (Continued)
Power Authority Revenue Bonds (Continued)
Mercer County Pollution Control Revenue for
Basin Electric Power ............................. $ 1,250,000 $ 1,355,863
Morton County Pollution Control Revenue for
Montana-Dakota Utilities Company Project
6.65% 6/1/22 (FGIC) ............................. 750,000 828,578
Oliver County Pollution Control Revenue, Sq.
Butte Electric Co-op 7.00% 12/31/10 .............. 160,000 159,982
Puerto Rico Electric Power Authority 5.25%
7/1/21 .......................................... 1,800,000 1,797,570
-----------
4,694,378
-----------
*Pre-Refunded Bonds/Escrowed to
Maturity - 1.00%
Devils Lake Public School District #1 6.80%
5/1/11-99 ....................................... 100,000 103,490
Fargo Park District Revenue 7.25%
11/1/11-00 ...................................... 200,000 216,596
-----------
320,086
-----------
Transportation Revenue
Bonds - 4.79%
Puerto Rico Commonwealth Highway &
Transportation Authority Series Y 5.50%
7/1/26 .......................................... 1,500,000 1,528,710
-----------
1,528,710
-----------
Other Revenue Bonds - 16.84%
North Dakota Building Authority Revenue 6.00%
12/1/14 (FSA) ................................... 1,310,000 1,405,342
North Dakota Building Authority Revenue 6.10%
12/1/16 (FSA) ................................... 1,480,000 1,582,860
North Dakota State Municipal Bond Bank 6.25%
12/1/11 ......................................... 450,000 461,390
North Dakota State Student Loan 7.00%
7/1/05 (AMBAC) .................................. 200,000 208,972
Puerto Rico Public Buildings Authority Revenue
Guaranteed Government Facilities - Series B
5.00% 7/1/27 .................................... 1,750,000 1,712,987
-----------
5,371,551
-----------
Total Municipal Bonds
(cost $29,767,783) ............................................ $31,778,284
Total market value of securities owned
(cost $29,767,783) - 99.63% ................................... $31,778,284
Receivables and other assets net of
liabilities - 0.37% ........................................... 116,549
Net assets applicable to 2,816,340 shares
($0.01 par value) outstanding - 100.00%......................... $31,894,833

Net asset value - tax-free north dakota fund a class
($30,965,358/2,734,261 shares) ................................ $ 11.32
===========
Net asset value - tax-free north dakota fund b class
($888,650 / 78,471 shares) .................................... $ 11.32
===========
Net asset value - tax-free north dakota fund c class
($40,825 / 3,608 shares) ...................................... $ 11.32
===========
- --------------
* For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
<PAGE>

16 for tax-exempt income

Tax-Free North Dakota Fund
Statement of Net Assets (Continued)
- -------------------------------------------------------------------------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Authority
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by the Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association

Components of net assets at December 31, 1997:
Common Stock, $0.01 par value, 10,000,000,000 shares
authorized to the Fund with 1,000,000,000 shares allocated
to Tax-Free North Dakota Fund A Class, 1,000,000,000 shares
allocated to the Tax-Free North Dakota Fund B Class and
1,000,000,000 shares allocated to the Tax-Free North Dakota
Fund C Class ................................................. $ 30,008,487
Accumulated net realized loss on investments ................. (124,155)
Net unrealized appreciation of investments .................... 2,010,501
------------
Total net assets .............................................. $ 31,894,833
============
Net asset value and offering price per share -
tax-free north dakota fund a class
Net asset value A Class (A) .................................. $ 11.32
Sales charge (3.75% of offering price, or 3.89% of amount
invested per share) (B) ..................................... 0.44
------------
Offering price ................................................ $ 11.76
============

- ------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See Buying Shares in the current Prospectus for purchases of $100,000 or
more.

See accompanying notes
<PAGE>

Delaware-Voyageur
Tax-Free Oregon Insured Fund
Statement of net assets
December 31, 1997
- -------------------------------------------------------------------------------
Principal Market
Amount Value
--------- ------
Municipal Bonds - 98.20%
General Obligation Bonds - 29.63%
Chemeketa Community College 5.80%
6/1/12 (FGIC) ................................ $1,500,000 $1,629,645
Hermiston Water Bonds 6.20%
8/1/24 (AMBAC) ............................... 500,000 540,190
Lane County School District #19 (Springfield)
6.00% 10/15/14 (FGIC).......................... 500,000 566,680
Lincoln County School District 5.25%
6/15/12 (FGIC) ............................... 1,450,000 1,512,075
Malheur County Jail 6.30%
12/1/12 (MBIA ) .............................. 500,000 561,390
Multnomah County School District #3
(Park Rose) 5.50% 12/1/11 (FGIC) .............. 500,000 526,570
Multnomah County School District #39
(Corbett) 6.00% 12/1/13 (MBIA) ................ 500,000 540,665
North Unit Irrigation District 5.75%
6/1/16 (MBIA) ................................ 1,000,000 1,060,030
Portland 5.75% 6/1/15 (MBIA).................... 500,000 525,775
Tillamook County 6.25% 1/1/14 (FGIC ) ......... 250,000 277,647
Umatilla School District #016R (Pendleton)
6.00% 7/1/14 (AMBAC) ......................... 500,000 541,130
Washington County School District (Sherwood)
#88J 6.10% 6/1/12 (FSA) ...................... 300,000 330,912
----------
8,612,709
----------
Higher Education Revenue Bonds - 10.26%
Central Oregon Community College 5.90%
6/1/09 (FGIC) ................................ 750,000 809,543
Oregon Health and Education Authority for
Lewis & Clark College 6.125%
10/1/24 (MBIA) ............................... 1,055,000 1,146,056
Oregon Health and Education Authority for
Reed College 5.375% 7/1/25 (MBIA) ............. 1,000,000 1,027,010
----------
2,982,609
----------
Hospital Revenue Bonds - 7.36%
Western Lane Hospital District for Sisters of
St. Joseph Peace Hospital 5.75%
8/1/19 (MBIA) ................................ 1,000,000 1,056,710
Western Lane Hospital District for Sisters of
St. Joseph Peace Hospital 5.875%
8/1/12 (MBIA) ................................ 1,000,000 1,081,630
----------
2,138,340
----------
Housing Revenue Bonds - 3.92%
Oregon Heatlh, Housing, Educational, and
Cultural Facilities Authority for Pier Park
Project 6.05% 4/1/18 (GNMA) ................... 1,095,000 1,138,756
----------
1,138,756
----------
Lease/Certificates of Participation - 3.69%
Oregon State Department Administrative Services
Certificate of Participation - Series A 5.80%
5/1/24 (AMBAC) ............................... 1,000,000 1,072,970
----------
1,072,970
----------
<PAGE>

for tax-exempt income 17
Tax-Free Oregon Insured Fund
Statement of Net Assets (Continued)
Principal Market
Amount Value
----------------------
Municipal Bonds (Continued)
Power Authority Revenue Bonds - 6.33%
Central Lincoln Peoples Utility District
5.75% 1/1/15 (AMBAC) ............................ $ 500,000 $ 522,745
Eugene Electric Revenue Series C 5.80%
8/1/22 (MBIA) ................................... 1,250,000 1,317,263
----------
1,840,008
----------
*Pre-Refunded Bonds - 4.76%
Lane County School District #19 6.00%
10/15/14-04 (MBIA) .............................. 500,000 561,940
Washington County Education Service 7.10%
6/1/25-05 (MBIA) ................................ 700,000 820,680
----------
1,382,620
----------

Transportation Revenue Bonds - 7.13%
Portland, OR Airport Revenue for Portland
International Airport 5.625% 7/1/26 (FGIC) 2,000,000 2,072,920
----------
2,072,920
----------
Water and Sewer Revenue Bonds - 14.81%
Beaverton Water Revenue 6.125%
6/1/14 (FSA) .................................... 500,000 547,040
Klamath Falls Water Revenue 6.10%
6/1/14(FSA) ..................................... 500,000 546,350
Portland Sewer System Revenue 6.25%
6/1/15 (FSA) .................................... 1,000,000 1,115,690
Salem Water & Sewer Revenue 5.50%
6/1/14 (MBIA) ................................... 1,000,000 1,046,470
Salem Water & Sewer Revenue 5.625%
6/1/16 (MBIA) ................................... 1,000,000 1,047,990
----------
4,303,540
----------
Other Revenue Bonds - 10.31%
Northern Wasco County 5.625%
12/1/22 (FGIC) .................................... 1,000,000 1,044,410
Oregon Health Science University zero coupon
7/1/21 (MBIA) 6,500,000 1,951,105
----------
2,995,515
----------
Total Municipal Bonds (cost $26,331,852) .......... 28,539,987
----------

TOTAL MARMET VALUE OF SAECURITIES OWNED
(cost $26,331,852) - 98.20% .................................. $28,539,987
Receivables and other assets net of liabilities - 1.80% ........ 524,450
-----------
Net assets applicable to 2,818,547 shares ($0.01 par
value) outstanding - 100.00% ................................... $29,064,437
===========

NET ASSET VALUE - TAX-FREE OREGON INSURED FUND A CLASS
($22,071,190 / 2,140,590 shares) ............................. $10.31
===========
NET ASSET VALUE - TAX-FREE OREGON INSURED FUND B CLASS
($6,460,832 / 626,359 shares) ................................ $10.31
===========

NET ASSET VALUE - TAX-FREE OREGON INSURED FUND C CLASS
($532,415 / 51,598 shares) ................................... $10.32
===========

- ----------------------
* For Pre-Refunded Bonds, the stated maturity is followed by the
year in which each bond is pre-refunded.

<PAGE>

- ----------------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by the Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association

COMPONENTS OF NET ASSETS AT DECEMBER 31, 1997:
Common Stock, $0.01 par value, unlimited shares authorized to the
Tax-Free Oregon Insured Fund ................................... $27,456,913
Accumulated net realized loss on investments ..................... (600,611)
Net unrealized appreciation of investments ....................... 2,208,135
-----------
Total net assets ................................................. $29,064,437
===========
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
TAX-FREE OREGON INSURED FUND A CLASS
Net asset value A Class (A) ...................................... $10.31
Sales charge (3.75% of offering price, or 3.88% of
amount invested per share) (B) ................................. 0.40
-----------
Offering price ................................................... $10.71
===========

- ----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See Buying Shares in the current Prospectus for purchases of 100,000 or
more.

See accompanying notes

Delaware-Voyageur
Tax-Free Washington Insured Fund
Statement of net assets
December 31, 1997
Principal Market
Amount Value
-------------------------
Municipal Bonds - 95.48%
General Obligation Bonds - 20.35%
Benton County Independent School District #116
5.80% 12/1/10 (FGIC) ............................ $100,000 $107,186
Bothell 5.70% 12/1/10 (AMBAC) ..................... 75,000 80,103
Clark County School District #114 6.00%
12/1/11 (FGIC) ................................... 75,000 81,680
Kent Washington Series A 6.00% 12/1/16
(MBIA) ........................................... 100,000 109,080
King County Kent School District #415 5.55%
12/1/11 (MBIA) ................................... 75,000 81,370
Port Tacoma Washington 5.30% 12/1/17
(AMBAC) .......................................... 50,000 50,227
Snohomish County 5.90% 12/1/15 (MBIA) 75,000 79,208
Washington State Series 93A UTGO Utility
General Obligation 5.75% 10/1/17 (FGIC) .......... 100,000 103,946
--------
692,800
---------
Housing Revenue Bonds - 27.60%
King County,Washington Housing Authority -
Fred Lind Manor Project - A 6.672% 6/20/32
( GNMA) ........................................... 200,000 221,238

<PAGE>

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

18 for tax-exempt income

Tax-Free Washington Insured Fund
Statement of Net Assets (Continued)
Principal Market
Amount Value
--------------------------

MUNICIPAL BONDS (Continued)
Housing Revenue Bonds (Continued)
Kitsap County Housing 7.10% 2/20/36
(GNMA) ......................................... $200,000 $ 229,266
Washington State Housing Single Family
Mortgage Revenue 6.20% 12/1/22 (GNMA) 200,000 211,520
Washington State Housing Finance -
Single Family - Series 2A 6.30%
12/1/27 (GNMA) (AMT) .......................... 200,000 214,458
Washington State Housing Finance
Commonwealth Multifamily Mortgage
Revenue A 6.00% 7/1/30 (GNMA) ................. 60,000 62,962
----------
939,444
----------
Higher Education Revenue Bonds - 12.60%
Washington Higher Education Pacific Lutheran
College 5.70% 11/1/26 (Connie Lee) ............ 200,000 208,010
Washington State University: Housing & Dining
System 6.375% 10/1/18 (MBIA) .................. 200,000 220,962
----------
428,972
----------
Hospital Revenue Bonds - 12.48%
University Of Washington Medical Center 6.30%
8/15/14 (FSA) ................................. 200,000 221,016
Washington State Health Care Facility Yakima
Valley Memorial Hospital
5.25% 12/1/20 (Connie Lee) .................... 100,000 99,467
Washington State Health Care Peace Health
5.625% 11/15/15 (MBIA) ........................ 100,000 104,415
----------
424,898
----------
Industrial Development Revenue Bonds - 2.41%
University Of Washington Parking Revenue
6.125% 11/1/14 (AMBAC) ........................ 75,000 81,926
----------
81,926
----------
MUNICIPAL BONDS (Continued)
Power Authority Revenue Bonds - 9.30%
Grant County Public #2 Wanapum 5.875%
1/1/26 (MBIA) 100,000 104,729
Kittitas County Public #1 5.80% 12/1/20 (MBIA) ... 100,000 105,318
Washington State Public Power #1 5.75%
7/1/12 (MBIA) .................................. 100,000 106,566
----------
316,613
----------
Water and Sewer Revenue Bonds - 10.74%
Covington Water & Sewer Revenue 6.00%
3/1/15 (AMBAC) ................................. 75,000 80,155
Olympia Washington Water and Sewer 5.125%
11/1/17 (FGIC) ................................. 100,000 100,107
Seattle Metropolitan Sewer Revenue 5.70%
1/1/14 (FGIC) .................................. 75,000 78,603
Vancouver Water And Sewer Revenue 6.00%
6/1/16 (FGIC) ................................... 100,000 106,755
----------
365,620
----------
Total Municipal Bonds (cost $3,017,582)........... 3,250,273
----------
<PAGE>

Principal Market
Amount Value
--------------------------
MUNICIPAL BONDS (Continued)
Short Term Investments - 4.50%
Norwest Advantage Municipal Money Market Fund .... $153,000 $ 153,000
----------

Total Short Term Investments (cost $153,000) ..... 153,000
----------

TOTAL MARKET VALUE OF SECURITIES OWNED
(cost $3,170,582) - 99.98% ..................... $3,403,273
Receivables and other assets net of liabilities - 0.02% 699
-----------
Net assets applicable to 315,957 shares ($0.01 par value)
outstanding - 100.00%.............................. $3,403,972
==========

Net asset value - tax-free washington insured fund a class
($2,371,816 / 220,224 shares)...................... $10.77
======
Net asset value - tax-free washington insured fund b class
($962,975 / 89,310 shares)......................... $10.78
======
Net asset value - tax-free washington insured fund c class
($69,181 / 6,423 shares)........................... $10.77
======
- ----------------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Alternative Minimum Tax
Connie Lee - Insured by the College Construction Insurance
Association
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by the Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association

Components of net assets at December 31, 1997:
Common Stock, $0.01 par value, unlimited
shares authorized to the Tax-Free Washington
Insured Fund..................................... $3,252,021
Accumulated net realized loss on investments ..... (80,740)
Net unrealized appreciation of investments ....... 232,691
----------
Total net assets ................................. $3,403,972
==========
Net asset value and offering price per share -
tax-free washington insured fund a class
Net asset value A Class (A) ...................... $10.77
Sales charge (3.75% of offering price, or 3.90%
of amount invested per share) (B) ............... 0.42
----------
Offering price ................................... $11.19
==========

- ----------------------
(A) Net asset value per share, as illustrated, is the estimated amount
which would be paid upon redemption or repurchase of shares.
(B) See Buying Shares in the current Prospectus for purchases of $100,000 or
more.

See accompanying notes
<PAGE>

for tax-exempt income 19

Delaware-Voyageur Funds
Statements of Operations
Year Ended December 31, 1997

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Tax-Free Tax-Free Tax-Free
Tax-Free Idaho North Dakota Oregon Washington
Fund Fund Insured Fund Insured Fund
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest ................................................ $2,212,600 $1,929,936 $1,503,451 $177,083
---------- ---------- ---------- --------

Expenses:
Management fees ......................................... 188,904 161,371 135,068 15,461
Distribution expense .................................... 137,525 46,069 91,688 11,022
Dividend disbursing and transfer agent fees and expenses. 38,638 46,799 31,843 7,581
Registration fees ....................................... 7,714 4,211 1,146 1,478
Reports and statements to shareholders .................. 13,771 18,649 11,186 7,236
Accounting and administration ........................... 14,686 13,648 10,428 1,311
Professional fees ....................................... 13,461 17,173 9,662 1,437
Custodian fees .......................................... 8,180 11,145 2,087 2,178
Taxes (other than taxes on income) ...................... 2,914 3,190 0 0
Directors' fees ......................................... 1,423 2,573 916 522
Amortization of organization expenses ................... 917 0 0 0
Other ................................................... 985 16,370 0 0
---------- ---------- ---------- --------
429,118 341,198 294,024 48,226
Less expenses absorbed or waived ........................ (56,965) (13,055) (61,673) (27,554)
---------- ---------- ---------- --------
Total net expenses ...................................... 372,153 328,143 232,351 20,672
---------- ---------- ---------- --------

Net Investment Income ................................... 1,840,447 1,601,793 1,271,100 156,411
---------- ---------- ---------- --------

Net Realized And Unrealized Gain On Investments:
Net realized gain on investment transactions .......... 52,973 416,818 17,126 38
Net change in unrealized appreciation on investments .. 1,890,831 880,044 1,188,556 141,117
---------- ---------- ---------- --------
Net Realized And Unrealized Gain On Investments ......... 1,943,804 1,296,862 1,205,682 141,155
---------- ---------- ---------- --------
Net Increase In Net Assets Resulting
From Operations ........................................ $3,784,251 $2,898,655 $2,476,782 $297,566
========== ========== ========== ========
</TABLE>

See accompanying notes
<PAGE>

20 for tax-exempt income

Delaware-Voyageur Funds
Statements of Changes in Net Assets

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Tax-Free Tax-Free
Idaho Fund North Dakota Fund
---------------------------------------------------------
Year ended Year ended
12/31/97 12/31/96 12/31/97 12/31/96
<S> <C> <C> <C> <C>
Increase (Decrease) In Net Assets
From Operations:
Net investment income ............... $ 1,840,447 $ 1,366,067 $ 1,601,793 $ 1,753,300
Net realized gain (loss) ............
from investments ................... 52,973 (40,482) 416,818 (385,738)
Net change in unrealized
appreciation (depreciation)
on investments ..................... 1,890,831 66,395 880,044 (90,482)
----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations .................... 3,784,251 1,391,980 2,898,655 1,277,080
----------- ----------- ----------- -----------
Distribution To Shareholders From:
Net investment income:
A Class ....................... (1,561,674) (1,118,768) (1,597,868) (1,698,579)
B Class ....................... (273,521) (176,734) (37,856) (24,585)
C Class ....................... (40,080) (37,976) (1,691) (722)
----------- ----------- ----------- -----------
(1,875,275) (1,333,478) (1,637,415) (1,723,886)
----------- ----------- ----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
A Class ....................... 8,087,405 14,993,646 751,084 1,894,680
B Class ....................... 2,019,434 3,034,644 192,597 360,271
C Class ....................... 702,551 369,077 0 28,000
Net asset value of shares issued upon
reinvestment of dividends from net
investment income:
A Class ....................... 967,219 593,826 1,047,157 1,092,516
B Class ....................... 155,808 63,171 22,504 18,141
C Class ....................... 34,029 42,079 1,714 731
----------- ----------- ----------- -----------
11,966,446 19,096,443 2,015,056 3,394,339
----------- ----------- ----------- -----------
Cost of shares repurchased:
A Class ....................... (4,493,235) (1,473,902) (5,770,655) (4,927,263)
B Class ....................... (611,419) (162,225) (61,932) (49,185)
C Class ....................... (480,962) (374,650) (3,000) (8,304)
----------- ----------- ----------- -----------
(5,585,616) (2,010,777) (5,835,587) (4,984,752)
----------- ----------- ----------- -----------
Increase (decrease) in net assets
derived from capital share
transactions ....................... 6,380,830 17,085,666 (3,820,531) (1,590,413)
----------- ----------- ----------- -----------
Net INCREASE (DECREASE) in net
assets ............................. 8,289,806 17,144,168 (2,559,291) (2,037,219)

Net assets:
Beginning of year ................... 33,451,212 16,307,044 34,454,124 36,491,343
----------- ----------- ----------- -----------
End of year ......................... $41,741,018 $33,451,212 $31,894,833 $34,454,124
=========== =========== =========== ===========
</TABLE>
<PAGE>

(RESTUBBED TABLE)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Tax-Free Tax-Free Washington
Oregon Insured Fund Insured Fund
---------------------------------------------------
Year ended Year ended
12/31/97 12/31/96 12/31/97 12/31/96
<S> <C> <C> <C> <C>
Increase (Decrease) In Net Assets
From Operations:
Net investment income ............... $ 1,271,100 $ 1,206,292 $ 156,411 $ 131,570
Net realized gain (loss) ............
from investments ................... 17,126 (196,640) 38 (2,791)
Net change in unrealized
appreciation (depreciation)
on investments ..................... 1,188,556 (232,512) 141,117 (13,997)
----------- ----------- --------- ---------
Net increase in net assets resulting
from operations .................... 2,476,782 777,140 297,566 114,782
----------- ----------- --------- ---------
Distribution To Shareholders From:
Net investment income:
A Class ....................... (1,033,966) (1,030,533) (125,449) (117,335)
B Class ....................... (224,133) (161,757) (30,887) (11,708)
C Class ....................... (17,078) (9,989) (1,855) (812)
----------- ----------- --------- ---------
(1,275,177) (1,202,279) (158,191) (129,855)
----------- ----------- --------- ---------
Capital Share Transactions:
Proceeds from shares sold:
A Class ....................... 3,728,179 4,388,724 404,281 512,363
B Class ....................... 1,626,102 2,486,473 522,233 512,470
C Class ....................... 164,876 278,889 46,196 947
Net asset value of shares issued upon
reinvestment of dividends from net
investment income:
A Class ....................... 616,492 591,621 63,054 54,645
B Class ....................... 152,794 87,855 19,999 5,371
C Class ....................... 11,587 6,822 913 0
----------- ----------- --------- ---------
6,300,030 7,840,384 1,056,676 1,085,796
----------- ----------- --------- ---------
Cost of shares repurchased:
A Class ....................... (4,116,579) (5,261,339) (577,974) (260,676)
B Class ....................... (326,601) (575,002) (131,521) (26,026)
C Class ....................... (25,157) (173,467) 0 0
----------- ----------- --------- ---------
(4,468,337) (6,009,808) (709,495) (286,702)
----------- ----------- --------- ---------
Increase (decrease) in net assets
derived from capital share
transactions ....................... 1,831,693 1,830,576 347,181 799,094
----------- ----------- --------- ---------
Net INCREASE (DECREASE) in net
assets ............................. 3,033,298 1,405,437 486,556 784,021

Net assets:
Beginning of year ................... 26,031,139 24,625,702 2,917,416 2,133,395
----------- ----------- --------- ---------
End of year ......................... $29,064,437 $26,031,139 $3,403,972 $2,917,416
=========== =========== ========== ==========
</TABLE>

See accompanying notes
<PAGE>

for tax-exempt income 21
Delaware-Voyageur Funds
Financial Highlights
December 31, 1997

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:

Tax-Free Idaho Fund - Class A
------------------------------------------
Year ended Year ended Period 1/4/95(1)
12/31/97(4) 12/31/96 to 12/31/95
<S> <C> <C> <C>
Net asset value, beginning of period ................................ $10.910 $11.020 $10.000

Income from investment operations:
Net investment income ............................................ 0.551 0.580 0.600
Net realized and unrealized gain (loss) on investments ........... 0.552 (0.120) 1.100
------- ------- -------
Total from investment operations ................................. 1.103 0.460 1.700
------- ------- -------
Less dividends and distributions:
Dividends from net investment income ............................. (0.563) (0.570) (0.600)
Distributions from net realized gain on security transactions .... -- -- (0.080)
------- ------- -------
Total dividends and distributions ................................ (0.563) (0.570) (0.680)
------- ------- -------
Net asset value, end of period ...................................... $11.450 $10.910 $11.020
======= ======= =======
Total return(2) ..................................................... 10.41% 4.36% 17.48%

Ratios and supplemental data:
Net assets, end of period (000 omitted) .......................... $33,788 $27,684 $13,540
Ratio of expenses to average net assets .......................... 0.87% 0.60% 0.26%(3)
Ratio of expenses to average net assets prior to expense
limitation ...................................................... 1.02% 1.10% 1.25%(3)
Ratio of net investment income to average net assets ............. 4.98% 5.29% 5.24%(3)
Ratio of net investment income to average net assets prior to
expense limitation .............................................. 4.83% 4.79% 4.25%(3)
Portfolio turnover ............................................... 19% 35% 42%
</TABLE>

- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.

See accompanying notes
<PAGE>

22 for tax-exempt income

Financial Highlights (Continued)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:

Tax-Free Idaho Fund - Class B Tax-Free Idaho Fund - Class C
--------------------------------------- -------------------------------------
Period Period
Year ended Year ended 3/16/95(1) Year ended Year ended 1/11/95(1)
12/31/97(4) 12/31/96 to 12/31/95 2/31/97(4) 12/31/96 to 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $10.890 $11.010 $10.500 $10.900 $11.020 $10.040

Income from investment operations:
Net investment income ...................... 0.487 0.520 0.420 0.459 0.500 0.500
Net realized and unrealized gain (loss)
on investments ............................ 0.560 (0.130) 0.590 0.549 (0.130) 1.060
------- ------- ------- ------- ------- -------
Total from investment operations ........... 1.047 0.390 1.010 1.008 0.370 1.560
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ....... (0.497) (0.510) (0.420) (0.478) (0.490) (0.500)
Distributions from net realized gain on
security transactions ..................... -- -- (0.080) -- (0.080)
------- ------- ------- ------- ------- -------
Total dividends and distributions .......... (0.497) (0.510) (0.500) (0.478) (0.490) (0.580)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............... $11.440 $10.890 $11.010 $11.430 $10.900 $11.020
======= ======= ======= ======= ======= =======
Total return(2) .............................. 9.87% 3.75% 9.86% 9.49% 3.48% 15.81%

Ratios and supplemental data:
Net assets, end of period (000 omitted) .... $ 6,827 $ 4,945 $ 1,977 $ 1,125 $ 822 $ 789
Ratio of expenses to average net assets .... 1.46% 1.11% 0.79%(3) 1.62% 1.33% 1.05%(3)
Ratio of expenses to average net assets
prior to expense limitation ............... 1.61% 1.85% 1.90%(3) 1.77% 1.82% 2.00%(3)
Ratio of net investment income to average
net assets ................................ 4.39% 4.78% 4.68%(3) 4.23% 4.57% 4.48%(3)
Ratio of net investment income to average
net assets prior to expense limitation .... 4.24% 4.04% 3.57%(3) 4.08% 4.08% 3.53%(3)
Portfolio turnover ......................... 19% 35% 42% 19% 35% 42%
</TABLE>

See accompanying notes
<PAGE>

for tax-exempt income 23
Financial Highlights (Continued)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:

Tax-Free North Dakota Fund - Class A
------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended
12/31/97(2) 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $10.880 $11.000 $ 9.850 $11.070 $10.590

Income from investment operations:
Net investment income ...................... 0.546 0.540 0.540 0.560 0.580
Net realized and unrealized gain (loss)
on investments ............................ 0.451 (0.130) 1.180 (1.150) 0.580
------- ------- ------- ------- -------
Total from investment operations ........... 0.997 0.410 1.720 (0.590) 1.160
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ....... (0.557) (0.530) (0.570) (0.530) (0.580)
Distributions from net realized gain on
security transactions ..................... -- -- -- (0.080) (0.100)
In excess of net realized gains -- -- -- (0.020)
------- ------- ------- ------- -------
Total dividends and distributions .......... (0.557) (0.530) (0.570) (0.630) (0.680)
------- ------- ------- ------- -------
Net asset value, end of period ............... $11.320 $10.880 $11.000 $ 9.850 $11.070
======= ======= ======= ======= =======
Total return(1) .............................. 9.43% 3.89% 17.81% (5.47)% 11.20%

Ratios and supplemental data:
Net assets, end of period (000 omitted) .... $30,965 $33,713 $36,096 $33,829 $34,880
Ratio of expenses to average net assets .... 1.00% 0.88% 0.81% 0.46% 0.59%
Ratio of expenses to average net assets
prior to expense limitation ............... 1.04% 1.08% 1.05% 1.14% 1.25%
Ratio of net investment income to average
net assets ................................ 4.97% 5.01% 5.07% 5.36% 5.11%
Ratio of net investment income to average
net assets prior to expense limitation .... 4.93% 4.81% 4.83% 4.68% 4.45%
Portfolio turnover ......................... 41% 58% 45% 33% 27%
</TABLE>

- ----------------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.

See accompanying notes
<PAGE>

24 for tax-exempt income

Financial Highlights (Continued)

Tax-Free North Dakota Fund - Class B Tax-Free North Dakota - Class C
---------------------------------------------- -----------------------------------
Period from Period from
Year ended Year ended Year ended 5/10/94(1) Year ended Year ended 7/29/95(1)
12/31/97(4) 12/31/96 12/31/95 to 12/31/94 12/31/97(4) 12/31/96 to 12/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $10.880 $11.000 $ 9.850 $10.310 $10.870 $11.000 $10.510

Income from investment operations:
Net investment income ...................... 0.484 0.490 0.480 0.300 0.441 0.440 0.170
Net realized and unrealized gain (loss)
on investments ............................ 0.451 (0.130) 1.180 (0.390) 0.468 (0.140) 0.500
------- ------- ------- ------- ------- ------- -------
Total from investment operations ........... 0.935 0.360 1.660 (0.090) 0.909 0.300 0.670
------- ------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ....... (0.495) (0.480) (0.510) (0.270) (0.459) (0.430) (0.180)
Distributions from net realized gain on
security transactions ..................... -- -- -- (0.080) -- -- --
In excess of net realized gains ............ -- -- -- (0.020) -- -- --
------- ------- ------- ------- ------- ------- -------
Total dividends and distributions .......... (0.495) (0.480) (0.510) (0.370) (0.459) (0.430) (0.180)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ............... $11.320 $10.880 $11.000 $ 9.850 $11.320 $10.870 $11.000
======= ======= ======= ======= ======= ======= =======
Total return(2) .............................. 8.82% 3.39% 17.24% (0.77%) 8.57% 2.81% 6.47%

Ratios and supplemental data:
Net assets, end of period (000 omitted) .... $ 889 $ 700 $ 375 $ 144 $ 41 $ 40 $ 20
Ratio of expenses to average net assets .... 1.55% 1.36% 1.29% 0.99%(3) 1.87% 1.75% 1.73%(3)
Ratio of expenses to average net assets
prior to expense limitation ............... 1.59% 1.83% 1.79% 1.89%(3) 1.91% 1.75% 1.73%(3)
Ratio of net investment income to average
net assets ................................ 4.42% 4.52% 4.56% 4.97%(3) 4.10% 4.06% 4.00%(3)
Ratio of net investment income to average
net assets prior to expense limitation .... 4.38% 4.05% 4.06% 4.07%(3) 4.06% 4.06% 4.00%(3)
Portfolio turnover ......................... 41% 58% 45% 33% 41% 58% 45%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact
of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.

See accompanying notes
<PAGE>

for tax-exempt income 25
Financial Highlights (Continued)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were as follows:

Tax-Free Oregon Insured Fund - Class A
------------------------------------------------------------------------------------
Year ended Year ended Year ended Two months ended Year ended Period 8/1/93(1)
12/31/97(4) 12/31/96 12/31/95 12/31/94 10/31/94 to 10/31/93
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 9.870 $10.050 $ 8.920 $ 9.000 $10.240 $10.000

Income from investment operations:
Net investment income ...................... 0.481 0.480 0.490 0.090 0.500 0.130
Net realized and unrealized gain (loss)
on investments ............................ 0.444 (0.180) 1.140 (0.090) (1.240) 0.240
------- ------- ------- ------- ------- -------
Total from investment operations ........... 0.925 0.300 1.630 0.000 (0.740) 0.370
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ....... (0.485) (0.480) (0.500) (0.080) (0.500) (0.130)
------- ------- ------- ------- ------- -------
Total dividends and distributions .......... (0.485) (0.480) (0.500) (0.080) (0.500) (0.130)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............... $10.310 $ 9.870 $10.050 $ 8.920 $ 9.000 $10.240
======= ======= ======= ======= ======= =======
Total return(2) .............................. 9.66% 3.15% 18.71% 0.06% (7.35)% 3.64%

Ratios and supplemental data:
Net assets, end of period (000 omitted) .... $22,071 $20,913 $21,590 $14,650 $14,086 $ 4,609
Ratio of expenses to average net assets .... 0.71% 0.71% 0.54% 0.05%(3) 0.03% --

Ratio of expenses to average net assets
prior to expense limitation ............... 0.94% 1.07% 1.11% 1.25%(3) 1.25% 1.25%(3)

Ratio of net investment income to average
net assets ................................ 4.83% 4.92% 5.12% 5.79%(3) 5.17% 4.61%(3)
Ratio of net investment income to average
net assets prior to expense limitation .... 4.60% 4.56% 4.55% 4.59%(3) 3.95% 3.36%(3)
Portfolio turnover ......................... 5% 40% 41% 5% 49% 11%
</TABLE>

- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value
of a share during the period and assumes reinvestment of
distributions at net asset value and does not reflect the impact
of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced
Voyageur Fund Managers, Inc. as the Fund's investment manager.

See accompanying notes
<PAGE>

26 for tax-exempt income

Financial Highlights (Continued)

Selected data for each share of the Fund outstanding throughout each period were
as follows:

<TABLE>
<CAPTION>
Tax-Free Oregon Insured Fund - Class B
--------------------------------------
Year Year Year Two months Period
ended ended ended ended 3/12/94(1)
12/31/97(4) 12/31/96 12/31/95 12/31/94 to 10/31/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $ 9.870 $ 10.050 $ 8.920 $ 9.000 $ 9.850

Income from investment operations:
Net investment income ..................... 0.422 0.430 0.440 0.080 0.270
Net realized and unrealized gain (loss)
on investments .......................... 0.434 (0.180) 1.140 (0.090) (0.850)
------- -------- ------- ------- -------
Total from investment operations .......... 0.856 0.250 1.580 (0.010) (0.580)
------- -------- ------- ------- -------

Less dividends and distributions:
Dividends from net investment income ...... (0.416) (0.430) (0.450) (0.070) (0.270)
------- -------- ------- ------- -------
Total dividends and distributions ......... (0.416) (0.430) (0.450) (0.070) (0.270)
------- -------- ------- ------- -------
Net asset value, end of period .............. $10.310 $ 9.870 $10.050 $ 8.920 $ 9.000
======= ======== ======= ======= =======

Total return(2).............................. 8.90% 2.61% 18.10% 0.03% (5.95%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ... $6,461 $ 4,758 $ 2,786 $ 1,303 $ 1,146
Ratio of expenses to average net assets ... 1.39% 1.25% 1.04% 0.60%(3) 0.75%(3)
Ratio of expenses to average net assets
prior to expense limitation ............. 1.62% 1.83% 1.86% 2.00%(3) 2.00%(3)
Ratio of net investment income to average
net assets .............................. 4.15% 4.37% 4.57% 5.19%(3) 4.43%(3)
Ratio of net investment income to average
net assets prior to expense limitation 3.92% 3.79% 3.75% 3.79%(3) 3.18%(3)
Portfolio turnover ........................ 5% 40% 41% 5% 49%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Tax-Free Oregon Insured Fund - Class C
--------------------------------------
Year Year Period
ended ended 7/7/95(1)
12/31/97(4) 12/31/96 to 12/31/95
<S> <C> <C> <C>
Net asset value, beginning of period ........ $ 9.880 $10.050 $ 9.630

Income from investment operations:
Net investment income ..................... 0.411 0.400 0.190
Net realized and unrealized gain (loss)
on investments .......................... 0.431 (0.170) 0.410
------- ------- -------
Total from investment operations .......... 0.842 0.230 0.600
------- ------- -------

Less dividends and distributions:
Dividends from net investment income ...... (0.402) (0.400) (0.180)
------- ------- -------
Total dividends and distributions ......... (0.402) (0.400) (0.180)
------- ------- -------
Net asset value, end of period .............. $10.320 $ 9.880 $10.050
======= ======= =======

Total return(2).............................. 8.75% 2.38% 6.35%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ... $ 532 $ 360 $ 250
Ratio of expenses to average net assets ... 1.51% 1.55% 1.39%(3)
Ratio of expenses to average net assets
prior to expense limitation ............. 1.74% 1.82% 1.74%(3)
Ratio of net investment income to average
net assets .............................. 4.03% 4.03% 4.00%(3)
Ratio of net investment income to average
net assets prior to expense limitation 3.80% 3.76% 3.65%(3)
Portfolio turnover ........................ 5% 40% 41%
</TABLE>

(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.

See accompanying notes

<PAGE>

for tax-exempt income 27

Financial Highlights (Continued)

Selected data for each share of the Fund outstanding throughout each period were
as follows:

<TABLE>
<CAPTION>
Tax-Free Washington Insured Fund - Class A
------------------------------------------
Year ended Year ended Year ended Two months ended Year ended Period 8/1/93(1)
12/31/974 12/31/96 12/31/95 12/31/94 10/31/ 94 to 10/31/93
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $10.300 $10.440 $9.210 $9.370 $10.670 $10.000

Income from investment operations:
Net investment income ..................... 0.541 0.540 0.590 0.090 0.550 0.150
Net realized and unrealized gain (loss)
on investments .......................... 0.481 (0.140) 1.210 (0.160) (1.260) 0.670
------- ------- ------- ------ ------ -------
Total from investment operations ............ 1.022 0.400 1.800 (0.070) (0.710) 0.820
------- ------- ------- ------ ------ -------

Less dividends and distributions:
Dividends from net investment income ...... (0.552) (0.540) (0.570) (0.090) (0.570) (0.150)
Distributions from net realized gain on
security transactions ................... -- -- -- -- (0.020) --
------- ------- ------- ------ ------ -------
Total dividends and distributions ......... (0.552) (0.540) (0.570) (0.090) (0.590) (0.150)
------- ------- ------- ------ ------ -------
Net asset value, end of period .............. $10.770 $10.300 $10.440 $9.210 $9.370 $10.670
======= ======= ======= ====== ====== =======

Total return(2) ............................. 10.23% 3.98% 19.94% (0.69)% (6.85)% 8.05%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ... $2,372 $2,382 $2,099 $2,049 $2,118 $2,108
Ratio of expenses to average net assets ... 0.49% 0.44% 0.28% 0.10% 0.14% --
Ratio of expenses to average net assets
prior to expense limitation ............. 1.38% 1.25% 1.25% 1.25%(3) 1.25% 1.25%(3)
Ratio of net investment income to average
net assets .............................. 5.20% 5.29% 5.57% 6.18%(3) 5.44% 5.50(3)
Ratio of net investment income to average
net assets prior to expense limitation .... 4.31% 4.48% 4.60% 5.03%(3) 4.33% 4.25%(3)
Portfolio turnover ........................ 20% 33% 51% -- -- 45%
</TABLE>

- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.

See accompanying notes

<PAGE>

28 for tax-exempt income

Financial Highlights (Continued)

Selected data for each share of the Fund outstanding throughout each period were
as follows:

<TABLE>
<CAPTION>
Tax-Free Washington Insured Fund - Class B
----------------------------------------------------------
Year ended Year ended Period 10/24/95(1)
12/31/97(4) 12/31/96 to 12/31/95
<S> <C> <C> <C>
Net asset value, beginning of period ................... $10.310 $10.440 $10.180

Income from investment operations:
Net investment income .............................. 0.471 0.470 0.090
Net realized and unrealized gain (loss)
on investments .................................. 0.470 (0.140) 0.250
------- ------- -------
Total from investment operations ................... 0.941 0.330 0.340
------- ------- -------

Less dividends and distributions:
Dividends from net investment income ............... 0.471) (0.460) (0.080)
Distributions from net realized gain on
security transactions -- -- --
------- ------- -------
Total dividends and distributions .................. (0.471) (0.460) (0.080)
------- ------- -------
Net asset value, end of period ......................... $10.780 $10.310 $10.440
======= ======= =======

Total return(2)......................................... 9.38% 3.32% 3.30%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ............ $ 963 $ 516 $ 15
Ratio of expenses to average net assets ............ 1.24% 1.21% 1.04%(3)
Ratio of expenses to average net assets prior to
expense limitation ............................... 2.13% 2.00% 2.00%(3)
Ratio of net investment income to average net assets 4.45% 4.47% 4.44%(3)
Ratio of net investment income to average net assets
prior to expense limitation .................. 3.56% 3.68% 3.48%
Portfolio turnover ................................. 20% 33% 51%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Tax-Free Washington Insured Fund - Class C
------------------------------------------------------
Year ended Year ended Period 4/21/95(1)
12/31/97(4) 12/31/96 to 12/31/95
<S> <C> <C> <C>
Net asset value, beginning of period ................... $10.300 $10.430 $ 9.940

Income from investment operations:
Net investment income .............................. 0.465 0.450 0.310
Net realized and unrealized gain (loss)
on investments .................................. 0.469 0.140) 0.480
------- ------- -------
Total from investment operations ................... 0.934 0.310 0.790
------- ------- -------

Less dividends and distributions:
Dividends from net investment income ............... (0.464) (0.440) (0.300)
Distributions from net realized gain on
security transactions -- -- --
------- ------- -------
Total dividends and distributions .................. (0.464) (0.440) (0.300)
------- ------- -------
Net asset value, end of period ......................... $10.770 $10.300 $10.430
======= ======= =======

Total return(2)......................................... 9.31% 3.12% 8.13%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ............ $ 69 $ 19 $ 19
Ratio of expenses to average net assets ............ 1.29% 1.37% 1.30%(3)
Ratio of expenses to average net assets prior to
expense limitation ............................... 2.18% 2.00% 2.00%(3)
Ratio of net investment income to average net assets 4.40% 4.36% 4.45%(3)
Ratio of net investment income to average net assets
prior to expense limitation .................. 33.51% 3.73% 3.75%(3)
Portfolio turnover ................................. 20% 33% 51%
</TABLE>
- ----------------------
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.

See accompanying notes

<PAGE>

for tax-exempt income 29

Delaware-Voyageur Funds -
Notes to Financial Statements
December 31, 1997

Delaware-Voyageur Tax-Free Idaho Fund (formerly Voyageur Idaho Tax Free Fund)(
"Tax-Free Idaho Fund") is a fund within The Voyageur Mutual Funds, Inc., - and
Delaware-Voyageur Tax-Free North Dakota Fund (formerly Voyageur North Dakota Tax
Free Fund)("Tax-Free North Dakota Fund"), is a fund within The Voyageur Tax-Free
Funds, Inc.; Delaware-Voyageur Tax-Free Oregon Insured Fund (formerly Voyageur
Oregon Insured Fund)("Tax-Free Oregon Insured Fund") and Delaware-Voyageur
Tax-Free Washington Insured Fund (formerly Voyageur Washington Insured Tax Free
Fund)("Tax-Free Washington Insured Fund"), are funds within the Voyageur
Investment Trust, (each referred to as a "Fund" or collectively as the "Funds")
are registered under the Investment Company Act of 1940 (as amended) as open-end
management investment companies. The Tax-Free Idaho Fund, Tax-Free North Dakota
Fund, Tax-Free Oregon Insured Fund, and Tax-Free Washington Insured Fund are
registered as non-diversified funds. The Funds offer three classes of shares.
The A Class carries a front-end sales charge of 3.75%. The B Class carries a
back-end deferred sales charge and the C Class carries a level load deferred
sales charge.

The Tax-Free Idaho Fund and Tax-Free North Dakota Fund seek high current
income free from both federal and state income taxes by investing in
investment grade municipal bonds. The Tax-Free Oregon Insured Fund and
Tax-Free Washington Insured Fund seek high current income free from both
federal and state income taxes with the added safety of an insured
portfolio by investing in insured municipal bonds.

1. Fund Reorganization
On April 30, 1997, Lincoln National Corporation ("LNC") acquired Voyageur
Fund Manager Inc.'s ("Voyageur") parent, Dougherty Financial Group, Inc.
("DFG") pursuant to an agreement and plan of merger dated January 15, 1997,
in which LNC acquired DFG including the mutual fund investment advisory
business of DFG conducted by Voyageur. Upon completion of the acquisition,
Delaware Management Company, Inc. ("DMC") became the investment adviser to
the Funds, Delaware Distributors, L.P. ("DDLP") became the distributor for
the Funds, and Delaware Service Company, Inc. ("DSC") became the transfer,
dividend-disbursing, shareholder servicing agent and accounting service
agent for the Funds.

2. Significant Accounting Policies
The following accounting policies are in accordance with generally
accepted accounting principles and are consistently followed by the Funds.

Security Valuation - Long-term debt securities are valued by an
independent pricing service and such prices are believed to reflect the
fair value of such securities. Money market instruments having less than 60
days to maturity are valued at amortized cost which approximates market
value. Other securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith by
or under the direction of the Funds' Board of Directors.

Federal Income Taxes - Each Fund intends to continue to qualify as a
regulated investment company and make the requisite distributions to
shareholders. Accordingly, no provision for federal income taxes has been
made in the financial statements. Income and capital gain distributions are
determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles.

Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes
of the Funds on the basis of daily net assets of each class. Distribution
expenses relating to a specific class are charged directly to that class.

Other - Expenses common to all Funds within the Delaware Group of Funds
are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased
or sold (trade date). Costs used in calculating realized gains and losses
on the sale of investment securities are those of the specific securities
sold. Interest income is recorded on the accrual basis. Original issue
discounts and market premium are amortized to interest income over the
lives of the respective securities. The Funds declare dividends from net
investment income daily and pay such dividends monthly. Capital gains, if
any, are distributed annually.

Certain Fund expenses are paid through "soft dollar" arrangements with
brokers. The amount of these expenses is less than 0.01% of the Fund's
average daily net assets.

Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

<PAGE>

for tax-exempt
income 30

Notes to Financial Statements (Continued)

3. Investment Management and Other Transactions with Affiliates
Commencing May 1, 1997, in accordance with the terms of the Investment
Management Agreements, the Funds pay DMC, the Investment Manager of each
Fund, an annual fee, which is calculated daily based on the net assets of
each Fund. The management fee rates are as follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free Tax-Free Tax-Free
Idaho North Dakota Oregon Washington
Fund Fund Insured Fund Insured Fund
<S> <C> <C> <C> <C>
Management fee as a percentage
of average daily net assets (per annum) ................... 0.50% 0.50% 0.50% 0.50%
</TABLE>

DMC has elected to waive its fees and reimburse each Fund to the extent
that annual operating expenses exclusive of taxes, interest, brokerage
commissions, distribution expenses and extraordinary expenses, exceed
0.62%, 0.75%, 0.46%, 0.25%, of average daily net assets for the Tax-Free
Idaho Fund, Tax-Free North Dakota Fund, Tax-Free Oregon Insured Fund, and
the Tax-Free Washington Insured Fund, respectively, through December 31,
1997. Total expenses absorbed by DMC for the eight month period ended
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free Tax-Free Tax-Free
Idaho North Dakota Oregon Washington
Fund Fund Insured Fund Insured Fund
<S> <C> <C> <C> <C>
$26,963 $13,055 $41,909 $14,700
</TABLE>

Prior to May 1, 1997, the Funds had an investment advisory and management
agreement with Voyageur. Voyageur received a fee for its investment advisory and
management services based on the average daily net assets of the Tax-Free Idaho
Fund, Tax-Free North Dakota Fund, Tax-Free Oregon Insured Fund and Tax-Free
Washington Insured Fund at an annual rate of .50%. During the period January 1,
1997 to April 30, 1997, Voyageur waived $30,002, $19,764, and $12,854 of the
Tax-Free Idaho Fund, Tax-Free Oregon Insured Fund, and Tax-Free Washington
Insured Fund.
<PAGE>

Commencing May 1, 1997, the Funds have engaged DSC, an affiliate of DMC,
to serve as dividend disbursing, transfer agent and accounting services
agent for the Fund. For the eight month period ended December 31, 1997, the
amounts expensed for each Fund were as follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free Tax-Free Tax-Free
Idaho North Dakota Oregon Washington
Fund Fund Insured Fund Insured Fund
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend disbursing, transfer agent fees
and other expenses ........................................ $38,638 $46,799 $31,843 $7,581
Accounting services ................................... $9,892 $8,467 $6,984 $911
</TABLE>

Prior to May 1, 1997, the Funds paid a fee to Voyageur for acting as the
Funds' dividend disbursing, administrative and accounting services agent.
Each Fund was also responsible for reimbursing Voyageur's out of pocket
expenses in connection with the performance of these services.

On December 31, 1997, the Funds had payables to affiliates as follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free Tax-Free Tax-Free
Idaho North Dakota Oregon Washington
Fund Fund Insured Fund Insured Fund
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Management fee payable to DMC .................. $9,564 $30,872 $22,523 $10,565
Dividend disbursing, transfer agent fees,
accounting fees and other expenses payable to DSC ......... $2,752 $3,425 $2,142 $900
Other expenses payable to DMC and affiliates .............. -- -- -- $909
</TABLE>

Commencing May 1, 1997, and pursuant to the Distribution Agreement, the
Funds pay DDLP, the Distributor and an affiliate of DMC, an annual fee not
to exceed 0.25% of the average daily net assets of the A Class and 1.00% of
the average daily net assets of the B and C Class for each Fund.

Prior to May 1, 1997 each class of shares had a Distribution Agreement
with Voyageur Fund Distributors, Inc. ("VFD"). Under the plan the Funds
paid VFD a fee at an annual rate of 0.25% of the average daily net assets
of the Class A Shares and 1.00% of the average daily net assets of the
Class B and C Shares.

For the eight month period ended December 31, 1997, DDLP earned
commissions on sales of the Fund A Class shares for each Fund as follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free Tax-Free Tax-Free
Idaho North Dakota Oregon Washington
Fund Fund Insured Fund Insured Fund
-------------------------------------------------------------
<S> <C> <C> <C> <C>
$23,159 $1,251 $9,496 $1,272
</TABLE>

Certain officers of DMC, DSC and DDLP are officers, directors and/or
employees of the Funds. These officers, directors and employees are paid no
compensation by the Funds.
<PAGE>

for tax-exempt income 31

Notes to Financial Statements (Continued)

4. Investments
During the year ended December 31, 1997, the Funds made purchases and
sales of investment securities other than U.S. government securities and
temporary cash investments for each Fund as follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free Tax-Free Tax-Free
Idaho North Dakota Oregon Washington
Fund Fund Insured Fund Insured Fund
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases ................................................. $11,915,178 $13,221,399 $3,346,955 $762,599
Sales ..................................................... $6,932,067 $17,003,232 $1,308,780 $592,172
</TABLE>

At December 31, 1997, the aggregate cost of investments and unrealized
appreciation (depreciation) for federal income tax purposes for each Fund
were as follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free Tax-Free Tax-Free
Idaho North Dakota Oregon Washington
Fund Fund Insured Fund Insured Fund
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Cost of Investments ....................................... $38,351,516 $29,767,783 $26,331,852 $3,170,582
Aggregate unrealized appreciation ......................... $2,499,133 $2,010,559 $2,208,135 $232,691
Aggregate unrealized depreciation ......................... $0 $58 $0 $0
Net unrealized appreciation ............................... $2,499,133 $2,010,501 $2,208,135 $232,691
</TABLE>

For federal income tax purposes, as of December 31, 1997, Tax-Free North
Dakota Fund had a capital loss carryover of $44,191 that will expire in
2004, Tax-Free Oregon Insured Fund had a capital loss carryover of $600,611
that will expire in 2002 through 2004, and Tax-Free Washington Insured Fund
had a capital loss carryover of $80,740 that will expire in 2003.

5. Capital Stock
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Tax-Free Tax-Free
Idaho North Dakota
Fund Fund
---------------------------------------------------------------
Year ended Year ended Year ended Year ended
12/31/97 12/31/96 12/31/97 12/31/96
<S> <C> <C> <C> <C>
Shares sold:
A Class ................................ 731,650 1,392,372 68,674 175,611
B Class ................................ 183,407 283,576 17,635 33,146
C Class ................................ 64,124 34,723 -- 2,582

Shares issued upon reinvestment of dividends
from net investment income:
A Class ................................ 87,352 55,095 95,230 101,442
B Class ................................ 14,064 5,873 2,047 1,687
C Class ................................ 3,083 3,898 156 68
--------- --------- ------- -------
1,083,680 1,775,537 183,742 314,536
--------- --------- ------- -------
Shares repurchased:
A Class ................................ (406,050) (137,976) (529,157) (458,594)
B Class ................................ (54,443 (15,168) (5,593) (4,529)
C Class ................................ (44,185) (34,878) (274) (770)
--------- --------- ------- -------
(504,678) (188,022) (535,024) (463,893)
--------- --------- ------- -------

Net Increase (Decrease) ............... 579,002 1,587,515 (351,282) (149,357)
========= ========= ======= =======
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Tax-Free Tax-Free
Oregon Washington
Insured Fund Insured Fund
-------------------------------------------------------------
Year ended Year ended Year ended Year ended
12/31/97 12/31/96 12/31/97 12/31/96
<S> <C> <C> <C> <C>
Shares sold:
A Class ................................ 372,928 448,613 38,633 50,130
B Class ................................ 162,406 254,637 50,130 50,610
C Class ................................ 16,538 28,308 4,447 93

Shares issued upon reinvestment of dividends
from net investment income:
A Class ................................ 61,920 60,566 6,061 5,366
B Class ................................ 15,305 9,000 1,911 530
C Class ................................ 1,157 696 86
------- ------- ------- -------
630,254 802,020 101,268 106,729
------- ------- ------- -------
Shares repurchased:
A Class ................................ (412,353) (539,553) (55,657) (25,440)
B Class ................................ (33,265) (58,924 (12,744) (2,606)
C Class ................................ (2,526) (17,624)
------- ------- ------- -------
(448,144) (616,101) (68,401) (28,046)
------- ------- ------- -------

Net Increase (Decrease) ............... 182,110 185,919 32,867 78,683
======= ======= ======= =======
</TABLE>

6. Credit And Market Risks
The Funds concentrate their investments in securities mainly issued by
each specific states' municipalities. The value of these investments may be
adversely affected by new legislation within the state, regional or local
economic conditions, and differing levels of supply and demand for
municipal bonds. Many municipalities insure repayment for their
obligations. Although bond insurance reduces the risk of loss due to
default by an issuer, such bonds remain subject to the risk that market
value may fluctuate for other reasons and there is no assurance that the
insurance company will meet its obligations. These securities have been
identified in the Statement of Net Assets.

<PAGE>

32 for tax-exempt income

Report of Independent Auditors

To the Shareholders and Board of Directors
Voyageur Mutual Funds, Inc. - Delaware-Voyageur Tax-Free Idaho Fund
Voyageur Tax-Free Funds, Inc. - Delaware-Voyageur Tax-Free North Dakota Fund
Voyageur Investment Trust - Delaware-Voyageur Tax-Free Oregon Insured Fund
Voyageur Investment Trust - Delaware-Voyageur Tax-Free Washington Insured Fund

We have audited the accompanying statements of net assets of Tax-Free
Idaho, Tax-Free North Dakota Fund, Tax-Free Oregon Insured Fund, and
Tax-Free Washington Insured Fund (the "Funds") as of December 31, 1997, and
the related statements of operations, the statements of changes in net
assets and the 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 December 31, 1996
and the financial highlights from the dates of commencement of operations
of the respective Funds through December 31, 1996 were audited by other
auditors whose report dated February 14, 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 December 31, 1997, by corres
pondence 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective Funds at December 31, 1997, 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

Philadelphia, Pennsylvania
February 16, 1998

<PAGE>

This annual report is for the information of Tax-Free Idaho Fund, Tax-Free
North Dakota Fund, Tax-Free Oregon Insured Fund, and Tax-Free Washington
Insured Fund shareholders, but it may be used with prospective investors when
preceded or accompanied by a current Prospectus for Tax-Free Idaho Fund,
Tax-Free North Dakota Fund, Tax-Free Oregon Insured Fund, and Tax-Free
Washington Insured Fund, which sets forth details about charges, expenses,
investment objectives and operating policies of each Fund. You should read the
prospectus carefully before you invest. Summary investment results are
documented in the Fund's current Statement of Additional Information. The
figures in this report represent past results which are not a guarantee of
future results. The return and principal value of an investment in the Fund
will fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.

Board of Directors
Wayne A. Stork
Chairman
Delaware Investments Family of Funds
Philadelphia, PA

Jeffrey J. Nick
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA

Walter P. Babich
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA

Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY

Ann R. Leven
Treasurer, National Gallery of Art
Washington, DC

W. Thacher Longstreth
City Councilman
Philadelphia, PA

Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN

Charles E. Peck
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA

<PAGE>

Affiliated Officers

David K. Downes
Executive Vice President, Chief Financial Officer
and Chief Operating Officer
Delaware Investments Family of Funds
Philadelphia, PA

George M. Chamberlain, Jr.
Senior Vice President, Secretary
and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA

Bruce D. Barton
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA

[Photos of globes]

directors
& officers

Investment Manager
Delaware Management Company, Inc.
Philadelphia, Pennsylvania

International Affiliate
Delaware International Advisers Ltd.
London, England

National Distributor
Delaware Distributors, L.P.
Philadelphia, Pennsylvania

Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
Philadelphia, Pennsylvania

1818 Market Street
Philadelphia, PA 19103-3682

Subadviser
Voyageur Asset Management Inc.
90 South Seventh Street
Minneapolis, MN 55402

<PAGE>

This report must be preceded or accompanied by a current Tax-Free Idaho Fund,
Tax-Free North Dakota Fund, Tax-Free Oregon Insured Fund, and Tax-Free
Washington Insured Fund Prospectus and the Delaware Investments Performance
Update for the most recently completed calendar quarter. For a prospectus of
any other mutual fund from Delaware Investments, contact your financial
adviser or Delaware.

[Photo of globes]

For Shareholders
1.800.523.1918

For Securities Dealers
1.800.362.7500

For Financial Institutions
Representatives Only

1.800.659.2265

[LOGO]

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, and involve investment risk, including the possible loss of the
principal amount invested. Shares of the Fund are not bank or credit union
deposits.

Copy Rights Delaware Distributors, L.P.

Printed in the USA
on recycled paper

(517)
AR-INOW[12/97]TKO2/98