INVESTMENT HIGHLIGHTS

PORTFOLIOS

FINANCIAL INFORMATION
     INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
     FINANCIAL STATEMENTS
     FINANCIAL HIGHLIGHTS
     NOTES TO FINANCIAL STATEMENTS

                            MESSAGE TO ANNUITY OWNERS


     On the whole, 1995 was a magnificent year for investors.  The first half of
the year saw the stock market soar to unprecedented  levels, and that prosperity
continued  through  year-end.   Across  the  board,  the  bond  market  improved
dramatically,  and a long-term approach to investing coupled with patience, paid
off for Composite Variable Annuity owners.
     The Growth  portfolio was  deliberately  overweighted in finance and health
care,  and had good exposure to technology  throughout  the year. It had several
stocks  with  particularly  large gains in 1995 and,  as  expected,  most of the
Portfolio's  holdings  raised their dividends at rates in excess of inflation in
1995.  In the coming year, we plan to sustain a slight  overweighting  in health
care, finance, and defense-aerospace  industries.  We believe our investors will
be best  served by our  long-term  philosophy  of  balancing  risk and return to
achieve the Portfolio's primary objective of long-term capital growth.
     The  Northwest  Portfolio  also  saw a  change  in  1995.  While  it rose a
respectable 26.03% for the year, shareholders approved a proposal in December to
change  the  manner  in which  the  Portfolio  intends  to meet  its  investment
objective.  Still  exclusively  dedicated to  investing in companies  located or
doing business in the Northwest, the Portfolio will no longer be limited only to
those companies  comprising the Northwest 50(R) Index. All told, we see a number
of  significant  positive  elements  in  the  Northwest  economy,   including  a
turnaround in the aerospace  cycle, a strong base of technology  companies,  and
our proximity to the growing  Pacific Rim economies.  The new  flexibility  will
allow us to capitalize on these circumstances.
     Led by the bond market as a whole,  the Income  Portfolio  produced overall
fixed income  returns which were the best in almost a decade.  The  intermediate
maturity  profile of the Portfolio was  especially  beneficial  this year, as it
aided in  generating  both  substantially  greater  returns and an increased net
asset  value per share.  During the year,  the  Portfolio  upgraded  the average
credit-quality of its  securities  to Aa2/AA as rated by Moody's and Standard &
Poor's, respectively. It is anticipated,  however, that the market over the next
year will provide an opportunity to capture  potential  increases in yields from
bonds with slightly lower credit-quality.
     Although the volatility of the market precludes our making any claims about
seeing  this kind of  performance  repeat  itself in the  coming  year,  certain
factors  give us  confidence  that the  years  ahead  should  be  rewarding  for
investors.  One of them is a trend toward controlled  inflation.  Another is the
increased  awareness among the aging baby boom generation of the need to prepare
for retirement. As the baby boomers commit larger proportions of their resources
to financial  markets,  not only should they achieve their retirement goals, but
they can be expected, in so doing, to stimulate the markets in general.
     The Composite  Variable  Annuity has many advantages  which we believe will
serve you well in the years to come.  Should you have any questions,  I urge you
to contact your investment representative for helpful information. 
     We appreciate your business and the confidence you have placed in us.
--------------------------------------------------------------------------------
FOOTNOTES TO INVESTMENT PERFORMANCE CHARTS ON PAGES 3, 4, AND 5.

     INVESTMENT  RETURNS AND PRINCIPAL VALUES OF PORTFOLIO SHARES WILL FLUCTUATE
SO THAT AN  INVESTOR'S  SHARES,  WHEN  REDEEMED,  MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST.
     COMPARISONS  TO PORTFOLIO  PERFORMANCE  ON THE FOLLOWING  PAGES INCLUDE THE
CONSUMER  PRICE  INDEX  (CPI) AS A  MEASURE  OF  CHANGE  IN  CONSUMER  PRICES AS
DETERMINED  BY THE U.S.  BUREAU OF LABOR  STATISTICS,  THE STANDARD & POOR'S 500
STOCK INDEX (S&P 500),  WHICH IS  CONSIDERED  REPRESENTATIVE  OF THE U.S.  STOCK
MARKET,  AND  THE  LEHMAN  GOVERNMENT/CORPORATE  BOND  INDEX  (LGCB),  WHICH  IS
CONSIDERED  REPRESENTATIVE  OF THE U.S.  GOVERNMENT  AND CORPORATE BOND MARKETS.
THESE  INDICES  ARE  UNMANAGED  AND DO  NOT  REFLECT  ACTUAL  INVESTMENT-RELATED
EXPENSES INCURRED BY THE PORTFOLIOS WITH WHICH THEY ARE COMPARED. AVERAGE ANNUAL
TOTAL RETURNS AND GRAPH VALUES INCLUDE CHANGES IN SHARE PRICE,  AND REINVESTMENT
OF DIVIDENDS AND CAPITAL GAINS.
     PERFORMANCE  INFORMATION IS PRESENTED SINCE THE  COMMENCEMENT OF OPERATIONS
OF EACH  PORTFOLIO  WHICH IS JUNE 1987 FOR THE INCOME AND GROWTH  PORTFOLIOS AND
JANUARY 1993 FOR THE NORTHWEST PORTFOLIO.
<PAGE>
                             
                              INVESTMENT HIGHLIGHTS
                   COMPOSITE DEFERRED SERIES GROWTH PORTFOLIO
                                  
     The equity market, to use the vernacular of the street,  was "red hot" this
past year and the  Composite  Deferred  Series Growth  Portfolio  shared in that
performance.  Total  return for the year ended  December  31,  1995,  was 33.70%
before sales charges.  The best  performing  industry  sectors were  technology,
finance and portions of health care. The Portfolio was purposely overweighted in
finance and health care and had selective exposure to technology  throughout the
year.
     The Portfolio had several stocks with  particularly  large gains throughout
the year,  including  Barra,  Merck,  Hewlett  Packard,  Johnson & Johnson,  and
Federal Home Loan Mortgage  Corporation.  The largest  position  throughout  the
year,  West One Bancorp,  performed  particularly  well. Its  operations  proved
irresistible  to U.S.  Bancorp who acquired it to form a more powerful  bank. In
contrast, in the health care industry,  for example, a number of the Portfolio's
holdings including FHP, Caremark, and Manor Care underperformed the market, very
likely  because of fears of cuts in Medicaid  reimbursements  to the  companies.
Notwithstanding  the recent  performance of these  companies,  we believe in the
long-term viability of the sector. As expected, most of the Portfolio's holdings
raised their dividends at rates in excess of inflation in 1995.
     Looking ahead, we expect to maintain a slight overweighting in health care,
finance and defense-aerospace  industries, and to maintain our underweighting in
the consumer  durable sector.  Although we continue to anticipate an environment
of slowing corporate  earnings,  we expect merger and consolidation  activity to
remain  high as  companies  continue to  structure  their  businesses  to remain
competitive  globally.  Cyclical  stocks  may  become  good buys if the  Federal
Reserve lowers interest rates materially in 1996.
     We are  long-term  investors  and avoid the risks  associated  with trading
stocks  for a quick  profit.  Rather,  we seek  rewards  from the  growth of the
businesses in our portfolio.  The Portfolio's  investment strategy will continue
to focus on buying sound  businesses  when they represent  good value.  Over the
long term,  we believe you will be well served by our  philosophy of buying good
businesses at attractive  valuation levels. This approach is at the heart of our
investment  philosophy,  balancing  risk and return to achieve  the  Portfolio's
primary objective of long-term capital growth.
<TABLE>
<CAPTION>
   Investment Performance - Growth Portfolio - Periods Ended December 31, 1995
           Ending Value of $10,000 invested since inception on 6/30/87

               COMPOSITE DEFERRED      STANDARD & POOR'S       CONSUMER
                     GROWTH                 500 INDEX         PRICE INDEX
               ------------------      -----------------     ------------
<S>            <C>                     <C>                   <C>
 6/30/87       $10,000                 $10,000               $10,000                     
12/31/87       $ 8,951                 $ 8,263               $10,167
12/31/88       $10,611                 $ 9,631               $10,617
12/31/89       $11,778                 $12,675               $11,110
12/31/90       $11,194                 $12,288               $11,789
12/31/91       $14,095                 $16,032               $12,150
12/31/92       $15,582                 $17,253               $12,502
12/31/93       $16,761                 $18,992               $12,846
12/31/94       $17,217                 $19,243               $13,189
12/31/95       $23,019                 $26,474               $13,524

</TABLE>
<TABLE>
<CAPTION>

                                                                   FUND LIFE
                                   ONE YEAR        FIVE YEARS     (SINCE 6/87)       
                                 -------------    -------------  ---------------
<S>                              <C>              <C>            <C>
Average Annual Total Returns     33.70%           15.51%         10.23%

Past performance cannot predict future results.

</TABLE>
AN INVESTMENT IN THIS PORTFOLIO THROUGH A COMPOSITE VARIABLE ANNUITY CONTRACT
WOULD HAVE RESULTED IN AVERAGE ANNUAL TOTAL RETURNS OF 23.76%, 13.46% AND 8.85% 
OVER ONE YEAR, FIVE YEARS AND SINCE INCEPTION, RESPECTIVELY.  THESE RETURNS ARE
AFTER ALL FEES AND CHARGES AND ASSUME PAYMENT OF THE APPLICABLE CONTINGENT 
DEFERRED SALES CHARGE WHICH RANGES FROM 7% TO 0%. PLEASE SEE FOOTNOTE ON PAGE 2.

<PAGE>

                              INVESTMENT HIGHLIGHTS
                  COMPOSITE DEFERRED SERIES NORTHWEST PORTFOLIO
                                 
     Composite  Deferred Series  Northwest  Portfolio rose a respectable  26.03%
before  sales  charges,  for the year ended  December  31,  1995 - less than the
unmanaged S&P 500 Stock Index which had a return of 37.58% for the year.
     The most robust  sectors in the  Portfolio  were  technology  and  finance.
Microsoft,  one of the portfolio's largest holdings, was a star performer with a
total return of 43.6% during the year. Other successful technology stocks in our
portfolio  include  Lattice  Semiconductor  (up 94.8%) and Tektronix (up 45.3%).
West One  Bancorp  saw its stock rise  95.6%  during the year as it agreed to be
acquired by U.S. Bancorp (another Portfolio  holding),  which rose 54.3%. Fickle
consumers  and  excessive  expansion  of stores  caused  retailing  to be a poor
performing  industry.  The  retail-wholesale  sector  underperformed  the market
averages.  Fred Meyer was the Portfolio's  lowest  performing  retailing  stock,
sinking 26.8% in 1995.
     We see a number of significant  positive elements in the Northwest economy,
including a  turnaround  in the  aerospace  cycle,  a strong base of  technology
companies,  and our  proximity  to the  growing  Pacific Rim  economies.  We are
somewhat cautious, however, about the stock market given its stellar performance
this past year.  While a short-term  correction  sometime in the next year would
not  startle  us, we  believe  the  attempts  of  short-term  market  timing are
generally fruitless.  Rather,  despite inevitable market  fluctuations,  we much
prefer investing for the long term in companies whose growth  potential  appears
attractive.
     On December  15,  1995,  annuity  owners  approved a proposal to change the
manner in which the portfolio intends to meet its investment objective. While we
will continue to invest exclusively in Northwest companies, we will no longer be
limited to those  companies  comprising  the  Northwest  50(R)  Index.  This new
flexibility  will enable us to  construct a  diversified  portfolio  that can be
fully  managed.  Consequently,  a few changes to the portfolio  were made in the
last two  weeks of the  year,  and more can be  anticipated  in 1996.  Among the
immediate  changes were the elimination of Univar and Wholesome and Hearty Foods
from the Portfolio. Modest positions were taken in several technology companies,
including Merix, a manufacturer of complex circuit boards based in Forest Grove,
Oregon,  and Adaptive  Solutions,  a  Beaverton,  Oregon  company with  exciting
technology in super-fast computer co-processors. We continue to believe that the
Northwest offers excellent investment opportunities, and we will be working hard
to participate in many of them.
<TABLE>
<CAPTION>
Performance Information - Northwest Portfolio - Periods Ended December 31, 1995
           Ending Value of $10,000 invested since inception on 1/4/93

             COMPOSITE DEFERRED NORTHWEST        S&P 500               CPI
             ----------------------------      ------------        ------------
<S>          <C>                               <C>                 <C>
12/31/92     $10,000                           $10,000             $10,000
12/31/93     $10,293                           $11,008             $10,275
12/31/94     $10,178                           $11,153             $10,550
12/31/95     $12,827                           $15,344             $10,817
</TABLE>
<TABLE>
<CAPTION>
                                                    FUND LIFE
                                   ONE YEAR        (THREE YEARS)       
                                 -------------     ------------- 
<S>                                 <C>                <C>
Average Annual Total Return         26.03%             8.69%

Past performance cannot predict future results.

</TABLE>
AN INVESTMENT IN THIS PORTFOLIO  THROUGH A COMPOSITE  VARIABLE  ANNUITY CONTRACT
WOULD HAVE  RESULTED IN AN AVERAGE  ANNUAL TOTAL RETURN OF 16.70% AND 5.76% OVER
ONE YEAR AND SINCE INCEPTION, RESPECTIVELY. THESE RETURNS ARE AFTER ALL FEES AND
CHARGES AND ASSUME  PAYMENT OF THE APPLICABLE  CONTINGENT  DEFERRED SALES CHARGE
WHICH RANGES FROM 7% TO 0%. PLEASE SEE FOOTNOTE ON PAGE 2.

<PAGE>

                              INVESTMENT HIGHLIGHTS
                   COMPOSITE DEFERRED SERIES INCOME PORTFOLIO
                                              
     Led by the  bond  market  as a  whole,  Composite  Deferred  Series  Income
Portfolio  produced  significant  returns in 1995. A host of factors,  including
reduced  government  spending,  large domestic  productivity  gains,  and slower
worldwide economic growth, were largely  responsible for low inflation,  falling
interest rates and stable to improving corporate credit-quality.  This, in turn,
produced overall fixed income returns that were the best in almost a decade.
     By combining an asset mix of principally  corporate bonds,  mortgage-backed
securities,  and Treasury notes with an intermediate-maturity profile (currently
10 years),  the Portfolio seeks to accomplish its objectives of providing a high
level of current income consistent with protection of shareholders' capital.
     The   intermediate-maturity   profile  of  the  Portfolio  was   especially
beneficial  this year as it aided us in generating  both  substantially  greater
returns and an increased net asset value per share. The higher  income-producing
positions in the Portfolio (corporate bonds and mortgage-backed  securities, for
example)  provided  extra yield while the  diversification  within those sectors
proved positive as the number of improving situations offset the laggards.
     During the year the Portfolio upgraded credit-quality to Aa2/AA as rated by
Moody's  and  Standard & Poor's,  respectively.  This is at the upper end of the
Portfolio's spectrum. It is anticipated,  however, that the market over the next
year will provide us an  opportunity  to capture  potential  increases in yields
from boonds with slightly lower  credit-quality.  In taking any such action,  we
will continue to carefully evaluate risk/reward characteristics of securities in
our search  for the best  relative  value.  
     Especially  in times like this, we believe our Income  Portfolio  offers an
important  advantage over callable bonds.  Should the issuer elect to redeem its
bonds before  maturity,  investors  find it  difficult - if not  impossible - to
reinvest for similar returns.  With approximately 85% of the Portfolio currently
invested  in  non-callable  bonds,  it  remains  well  structured  to avoid  the
substantial  risk  of  bonds  being  called  or  refinanced  in the  lower  rate
environment we see ahead.
     The  Portfolio's  adherence to its investment  practices  allows those with
longer-term time horizons to survive the inevitable  market  corrections such as
experienced in 1994 and to participate in gains such as those provided this past
year. This, we submit,  is the very essence of mutual fund investing.  And it is
why  Composite  Deferred  Series Income  Portfolio  continues to pursue a course
designed to provide long-term value.
<TABLE>
<CAPTION>
  Performance Information - Income Portfolio - Periods Ended December 31, 1995
          Ending Value of $10,000 invested since inception on 6/30/87


               COMPOSITE DEFERRED           LEHMAN GOVERNMENT/      CONSUMER
                     INCOME               CORPORATE BOND INDEX    PRICE INDEX
               ------------------         --------------------    -----------
<S>                 <C>                         <C>                 <C>
 6/30/87            $10,000                     $10,000             $10,000                     
12/31/87            $10,214                     $10,274             $10,167
12/31/88            $11,203                     $11,053             $10,617
12/31/89            $12,315                     $12,627             $11,110
12/31/90            $13,373                     $13,673             $11,789
12/31/91            $15,498                     $15,877             $12,150
12/31/92            $16,570                     $17,081             $12,502
12/31/93            $18,230                     $18,966             $12,846
12/31/94            $17,414                     $18,300             $13,189
12/31/95            $20,872                     $21,821             $13,524

</TABLE>
<TABLE>
<CAPTION>

                                                                      FUND LIFE
                                   ONE YEAR        FIVE YEARS       (SINCE 6/87)       
                                 -------------   ---------------    ------------- 
<S>                                 <C>               <C>                <C>
Average Annual Total Return         19.86%            9.31%              9.15%

Past performance cannot predict future results.

</TABLE>
AN INVESTMENT IN THIS PORTFOLIO  THROUGH A COMPOSITE  VARIABLE  ANNUITY CONTRACT
HAVE RESULTED IN AVERAGE  ANNUAL TOTAL  RETURNS OF 10.95%,  7.37% AND 7.83% OVER
ONE YEAR, FIVE YEARS, AND SINCE INCEPTION, RESPECTIVELY. THESE RETURNS ARE AFTER
ALL FEES AND CHARGES AND ASSUME  PAYMENT OF THE APPLICABLE  CONTINGENT  DEFERRED
SALES CHARGE WHICH RANGES FROM 7% TO 0%. PLEASE SEE FOOTNOTE ON PAGE 2.

<PAGE>
<TABLE>
<CAPTION>
                      COMPOSITE DEFERRED SERIES PORTFOLIOS
COMPOSITE
DEFERRED
SERIES, INC.

PORTFOLIOS OF
INVESTMENTS 
IN SECURITIES
DECEMBER 31, 
1995

GROWTH PORTFOLIO                               

                                 
        PRINCIPAL                                                                      MARKET
         AMOUNT                                                                        VALUE
     ----------------                                                            -----------------
      <C>               <C>                                                      <C>
                        CONVERTIBLE CORPORATE BONDS - 2.95%
                                 COMMUNICATIONS - 0.69%
      $  160,000        LDDS Communications, 5.00%, due 08/15/2003 ............. $   168,800
                                                                                 -----------------
                                      MEDIA - 0.63%
         450,000        Time Warner, Inc., Zero coupon, due 12/17/2012 .........     155,250
                                                                                 -----------------
                                     RETAIL - 0.80%
         245,000        Michael Stores, 4.75%, due 01/15/2003 ..................     196,000
                                                                                 -----------------
                        TRANSPORTATION & EQUIPMENT 0.83%
         200,000        Airborne Freight, 6.75%, due 08/15/2001 ................     201,750
                                                                                 -----------------
                        TOTAL CONVERTIBLE CORPORATE BONDS (cost $692,101) ......     721,800
                                                                                 -----------------


                                                                                    
         SHARES                                                                      
      ------------                                                               
                             COMMON STOCKS - 93.59%
                           AEROSPACE/DEFENSE - 7.98%
         6,700          Boeing Company .........................................     525,113
         8,450          Lockheed Martin Corporation ............................     667,550
        11,900          Loral Corporation ......................................     420,962
         7,140          Raytheon  Company ......................................     337,365
                                                                                 -----------------
                                                                                    1,950,990
                                                                                 -----------------
                              BANK/FINANCE - 13.45%
         6,620          Federal Home Loan Mortgage Corporation .................     552,770
         6,400          First Security Corporation .............................     246,400
         5,000          Franklin Resources, Inc. ...............................     251,875
         5,900          J.P. Morgan & Company, Inc. ............................     473,475
         8,314          Legg Mason, Inc. .......................................     228,635
         7,907          Mellon Bank Corporation ................................     425,001
        13,180          Norwest Corporation ....................................     434,940
         5,500          State Street Boston Corporation ........................     247,500
        12,789          U.S. Bancorp Oregon ....................................     430,030
                                                                                 -----------------
                                                                                    3,290,626
                                                                                 -----------------
                                BEVERAGES - 3.10%
          8,200         Coca Cola Femsa, S.A., American Depository Receipt .....     151,700
          5,200         PepsiCo, Inc. ..........................................     290,550
          9,100         Seagram Company, Ltd. ..................................     315,087
                                                                                 -----------------
                                                                                      757,337
                                                                                 -----------------
                           BUILDING & FOREST PRODUCTS - 2.32%
          7,000         Rayonier, Inc. .........................................     233,625
          7,700         Weyerhaeuser Company ...................................     333,025
                                                                                 -----------------
                                                                                      566,650
                                                                                 -----------------
                              CAPITAL GOODS - 2.47%
          2,900         Emerson Electric Company ...............................     237,075
          5,100         General Electric Company ...............................     367,200
                                                                                 -----------------
                                                                                      604,275
                                                                                 -----------------
                                CHEMICALS - 1.32%
         10,700         Nalco Chemical Company .................................     322,337
                                                                                 -----------------
                       COMPUTER SYSTEMS & SOFTWARE - 4.03%
         19,400         Barra, Inc.* ...........................................     329,800
          5,050         Microsoft Corporation* .................................     443,138
         14,600         Sequent Computer Systems, Inc.* ........................     211,700
                                                                                 -----------------
                                                                                      984,638
                                                                                 -----------------
                            CONSUMER DURABLES - 1.37%
         10,000         Fleetwood Enterprises ..................................     257,500
          4,600         Castle & Cooke, Inc. ...................................      77,050
                                                                                 -----------------
                                                                                      334,550
                                                                                 -----------------
                     CONSUMER NON-DURABLES/SERVICES - 4.70%
          10,200        Alberto Culver Company, Class A ........................     311,100
           4,800        Colgate Palmolive Company ..............................     337,200
           3,600        Nike, Inc. .............................................     250,650
           3,000        Proctor and Gamble Company .............................     249,000
                                                                                 -----------------                           
                                                                                    1,147,950
                                                                                 -----------------
                           ELECTRONICS/GENERAL - 2.90% 
           5,500        Arrow Electronics, Inc.* ...............................     237,188
           6,800        DSC Communications Corporation* ........................     250,750
           2,640        Hewlett-Packard Company ................................     221,100
                                                                                 -----------------
                                                                                      709,038
                                                                                 -----------------
                       ELECTRONICS/SEMI-CONDUCTORS - 1.73% 
           7,400        Motorola, Inc. .........................................     421,800
                                                                                 -----------------
                                  FOODS - 3.26%
           5,250        Campbell Soup Company ..................................     315,000
          13,800        Dole Food Company ......................................     483,000
                                                                                 -----------------
                                                                                      798,000
                                                                                 -----------------
                            HEALTH & MEDICAL - 11.60%
           7,700        Abbott Laboratories ....................................     321,475
           6,300        Bausch & Lomb, Inc. ....................................     249,638
          19,737        Caremark International, Inc. ...........................     357,733
          12,100        FHP International Corporation* .........................     344,850
           5,600        Forest Laboratories, Inc*. .............................     253,400
           3,950        Johnson & Johnson ......................................     338,219
          14,600        Manor Care, Inc. .......................................     511,000
           7,000        Merck & Company, Inc. ..................................     460,250
                                                                                 -----------------
                                                                                    2,836,565
                                                                                 -----------------
                      INDUSTRIAL PRODUCTS/SERVICES - 1.45%
           9,600        Crane Company ..........................................     354,000
                                                                                 -----------------
                                INSURANCE - 3.56%
           3,600        American International Group, Inc. .....................     333,000
          12,250        Integon Corporation ....................................     252,656
           9,700        Penncorp Financial Group, Inc. .........................     284,938
                                                                                 -----------------
                                                                                      870,594
                                                                                 -----------------
                                MACHINERY - 0.16%
           1,000        Applied Materials, Inc. ................................      39,375
                                                                                 -----------------
                            NATURAL GAS/OILS - 7.80%
           9,000        Burlington Resources, Inc. .............................     353,250
           3,000        Exxon Corporation ......................................     240,375
           3,175        Mobil Corporation ......................................     355,600
          11,600        Occidental Petroleum Corporation .......................     247,950
           7,000        Phillips Petroleum Company .............................     238,875
           5,800        Shell Transport & Trading Company, American 
                        Depository Receipt .....................................     471,975
                                                                                 -----------------
                                                                                    1,908,025
                                                                                 -----------------
                            POLLUTION CONTROL - 1.38% 
          13,400        Donaldson Company, Inc. ................................     336,675
                                                                                 -----------------
                      REAL ESTATE INVESTMENT TRUSTS - 4.02%
           7,100        Health Care Property Investors, Inc. ...................     249,387
           4,500        Nationwide Health Properties, Inc. .....................     189,000
           1,900        Real Estate Investment Trust of California .............      37,763
          18,800        Shurgard Storage Centers, Inc. .........................     507,600
                                                                                 -----------------
                                                                                      983,750
                                                                                 -----------------
                              RETAIL SALES - 1.51%
           7,300        Lowe's Companies .......................................     244,550
           5,500        Fred Meyer, Inc. .......................................     123,750
                                                                                 -----------------
                                                                                      368,300
                                                                                 -----------------
                                RAILROADS - 2.51%
           9,300        Union Pacific Corporation ..............................     613,800
                                                                                 -----------------
                              STEEL & IRON - 1.03%
          12,100        Worthington Industries .................................     251,831
                                                                                 -----------------
                                 TOBACCO - 2.21%
           4,000        Phillip Morris Companies, Inc. .........................     362,000
           5,750        RJR Nabisco Holdings Corporation .......................     177,531
                                                                                 -----------------
                                                                                      539,531
                                                                                 -----------------
                       TRANSPORTATION & EQUIPMENT - 1.26%
          11,750        Expeditors International of  Washington, Inc. ..........     306,969
                                                                                 -----------------
                       UTILITIES-GAS AND ELECTRIC - 0.68%
           7,200        MCN Corporation ........................................     167,400
                                                                                 -----------------
                      UTILITIES-TELECOMMUNICATIONS - 5.79%
           9,250        A T & T Corporation ....................................     598,938
           6,800        GTE Corporation ........................................     299,200
          13,600        Lincoln Telecommunications Company .....................     287,300
           4,000        SBC Communications, Inc. ...............................     230,000
                                                                                 -----------------
                                                                                    1,415,438
                                                                                 -----------------
                        TOTAL COMMON STOCKS (cost $17,616,492) .................  22,880,444
                                                                                 -----------------
                       CONVERTIBLE PREFERRED STOCKS - 2.35%
                       COMPUTER SYSTEMS & SOFTWARE - 1.33%
           4,450        General Motors, Class E-Series C .......................      325,962
                                                                                 -----------------
                                INSURANCE - 1.02%
           4,150        Integon Corporation ....................................      249,000
                                                                                 -----------------
                        TOTAL CONVERTIBLE PREFERRED STOCKS (cost $495,737) .....      574,962
                                                                                 -----------------

         PRINCIPAL
          AMOUNT                                            
       -------------
                                 REPURCHASE AGREEMENT - 1.08%
          263,000      Repurchase agreement with Goldman Sachs, collateralized 
                       by a U.S. Treasury Note, in a joint trading account at 
                       5.70%, dated 12/29/1995, due 01/02/1996 with a maturity 
                       value of $263,167 (cost $263,000) ......................        263,000
                                                                                -----------------
                       TOTAL INVESTMENTS (cost $19,067,330)                         24,440,206
                       Other assets ($88,565) less liabilities ($80,611) ......          7,954
                                                                                -----------------
                        NET ASSETS ............................................    $24,448,160
                                                                                =================
<FN>                                                                                
* Non-income producing security.

FEDERAL INCOME TAX INFORMATION:
Net unrealized appreciation of investments at December 31, 1995, of $5,372,876, based on aggregate cost of $19,067,330, was 
composed of gross appreciation of $5,526,287 for investments having an excess of value over cost and gross depreciation of $153,411 
for investments having an excess of cost over value.

OTHER INFORMATION:
Purchases and sales of investment securities, other than short-term investments, aggregated $12,004,179 and $6,323,746, 
respectively, during the year ended December 31, 1995, including purchases and sales of U.S. government securities of $355,507 and 
$251,920.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST PORTFOLIO
                                                     
                                                                        MARKET
           SHARES                                                        VALUE
        -------------                                                --------------
           <C>      <C>                                              <C> 
                           COMMON STOCKS - 93.46%
                          AEROSPACE/DEFENSE - 8.04% 
            5,950        Boeing Company ............................    $466,331
            3,425        Precision Castparts Corporation ...........     136,144
                                                                     --------------
                                                                         602,475
                                                                     --------------
                            BANK/FINANCE - 12.05%
              126        Horizon Financial Corporation .............       1,638
            1,100        Interwest Bancorp, Inc. ...................      22,412
            6,200        Safeco Corporation ........................     213,900
           16,618        US Bancorp ................................     558,780
            4,163        Washington Federal, Inc. ..................     106,677
                                                                     --------------
                                                                         903,407
                                                                     --------------
                              BEVERAGES - .83%
            2,400        Redhook Ale Brewery* ......................      62,400
                                                                     --------------
                    BUILDING AND FOREST PRODUCTS - 8.17%
              700        Boise Cascade Corporation .................      24,237
              500        Georgia- Pacific Corporation ..............      34,312
            1,900        Longview Fibre Company ....................      30,875
            4,900        Louisiana Pacific Corporation .............     118,825
              250        Pope and Talbot, Inc. .....................       3,312
            5,100        T.J. International, Inc. ..................      94,350
            3,700        Weyerhaeuser Company ......................     160,025
            2,600        Willamette Industries, Inc. ...............     146,250
                                                                     ---------------
                                                                         612,186
                                                                     ---------------
                                CHEMICALS - .20%
              600        Penwest Ltd. ..............................      14,850
                                                                     ---------------
                   COMPUTER SYSTEMS AND SOFTWARE - 11.43%
           12,200        Mentor Graphics Corporation* ..............     222,650
            5,750        Microsoft Corporation* ....................     504,563
            8,950        Sequent Computer Systems, Inc.* ...........     129,775
                                                                     ---------------
                                                                         856,988
                                                                     ---------------
                          CONSUMER NON-DURABLES - 5.67%
            6,100        Nike, Inc., Class B .......................     424,712
                                                                     ---------------

                           ELECTRONICS/GENERAL - 7.68%
            2,400        Fluke Corporation .........................      90,600
            3,600        Itron, Inc.* ..............................     121,500
            2,300        Merix Corporation* ........................      69,000
            6,000        Textronix, Inc. ...........................     294,750
                                                                     ---------------
                                                                         575,850
                                                                     ---------------
                       ELECTRONICS/SEMICONDUCTORS - 5.32%
           11,000        Adaptive Solutions, Inc.* .................      59,125
            3,400        Electro Scientific Industries* ............      99,450
            4,800        Lattice Semiconductor Corporation* ........     156,600
            2,100        Micron Technology, Inc. ...................      83,212
                                                                     ---------------
                                                                         398,387
                                                                     ---------------
                            HEALTH & MEDICAL - 4.30%
            4,100        Advanced Technology Laboratories, Inc.* ...     100,450
            3,700        ICOS Corporation* .........................      27,288
            5,700        Immunex Corporation* ......................      94,050
            3,500        Spacelabs Medical, Inc.* ..................     100,625
                                                                     ---------------
                                                                         322,413
                                                                     ---------------
                      INDUSTRIAL PRODUCTS/SERVICES - 1.16%
            5,700        Flow International Corporation* ...........      53,438
            2,400        Oregon Steel Mills, Inc. ..................      33,600
                                                                     ---------------
                                                                          87,038
                                                                     ---------------
                                  MINING - .97%
            2,700        Coeur D'Alene Mines Corporation ...........      46,238
            3,800        Hecla Mining Company* .....................      26,125
                                                                     ---------------
                                                                          72,363
                                                                     ---------------
                             RETAIL SALES - 17.12%
           14,600        Albertson's, Inc. .........................     479,975
            8,100        Fred Meyer, Inc.* .........................     182,250
            5,400        Nordstrom, Inc. ...........................     218,700
           12,400        Price/Costco, Inc.* .......................     189,100
            3,765        Quality Food Centers, Inc. ................      82,830
            6,200        Starbucks Corporation* ....................     130,200
                                                                     ---------------
                                                                       1,283,055
                                                                     ---------------
                       TRANSPORTATION & EQUIPMENT - 7.90%
            8,050        Airborne Freight Corporation ..............     214,331
            7,000        Alaska Air Group, Inc.* ...................     113,750
            8,200        Expeditors International of Washington, Inc.    214,225
            1,190        PACCAR, Inc. ..............................      50,129
                                                                     ---------------
                                                                         592,435
                                                                     ---------------
                       UTILITIES - GAS & ELECTRIC - 1.24% 
              750        Montana Power Company .....................      16,969
            1,000        Portland General Corporation ..............      29,125
            1,350        Puget Sound Power & Light Company .........      31,388
              900        Washington Water Power Company ............      15,750
                                                                     ---------------
                                                                          93,232
                                                                     ---------------
                     UTILITIES - TELECOMMUNICATIONS - 1.38%
            2,900        US West Communications Group ..............     103,675
                                                                     ---------------

                         TOTAL COMMON STOCKS (cost $5,612,009) .....   7,005,466
                                                                     ---------------   
                                                                   
         
            PRINCIPAL                                                             MARKET  
             AMOUNT                                                               VALUE
          -------------                                                         ---------------
                              REPURCHASE AGREEMENT - 7.06%
         
          529,000        Repurchase agreement with Goldman Sachs,
                         collateralized by a U.S. Treasury Note, in a joint 
                         trading account at 5.70%, dated  12/29/1995, due 
                         01/02/1996 with a maturity value of $529,335
                         (cost $529,000) ......................................    529,000
                                                                                ---------------
                         TOTAL INVESTMENTS (cost $6,141,009)                     7,534,466
                         Other Assets ($22,364) less liabilities ($61,517) ..      (39,153)
                                                                                ---------------
                         NET ASSETS .........................................   $7,495,313
                                                                                ===============
<FN>
*Non-income producing security.

FEDERAL INCOME TAX INFORMATION:
Net unrealized appreciation of investments at December 31, 1995 of $1,393,457 based on aggregate cost of $6,141,009 was composed of
gross appreciation of $1,669,782 for investments having an excess of value over cost and gross depreciation of $276,325 for 
investments having an excess of cost over value.  As of December 31, 1995, the Fund had unused capital loss carryovers of $136,750
for federal tax purposes which may be applied against gains realized in future years.  If not applied, the carryovers will expire
by 2003.

OTHER INFORMATION:
Purchases and sales of investment securities, other than short-term investments, aggregated $1,881,354 and $624,335
respectively, during the year ended December 31, 1995.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INCOME PORTFOLIO
                                           
            PRINCIPAL                                                                MARKET         
             AMOUNT                                                                  VALUE
          -------------                                                         ----------------              
          <S>   <C>                                                             <C>          
                       U.S. TREASURY OBLIGATIONS - 42.56%
          $  200,000      U.S. Treasury Note, 7.875%, due 08/15/2001 ..........  $  223,688
             500,000      U.S. Treasury Note, 7.25%, due 11/30/1996 ...........     508,907
             100,000      U.S. Treasury Note, 7.125%, due 02/29/2000 ..........     106,531
             250,000      U.S. Treasury Note, 6.375%, due 08/15/2002 ..........     262,734
           1,250,000      U.S. Treasury Note, 5.875%, due 02/15/2004 ..........   1,275,781
           1,000,000      U.S. Treasury Note, 5.75%, due 08/15/2003 ...........   1,012,500
             150,000      U.S. Treasury Note, 4.00%, due 01/31/1996 ...........     149,953
             200,000      U.S. Treasury Bond, 7.50%, due 11/15/2024 ...........     240,313
           1,000,000      U.S. Treasury Bond, 7.25%, due 05/15/2016 ...........   1,142,187
             450,000      U.S. Treasury Bond, 7.25%, due 08/15/2022 ...........     521,156
           1,000,000      U.S. Treasury Bond, 6.25%, due 08/15/2023 ...........   1,028,125    
                                                                                ---------------
   
                          TOTAL U.S. TREASURY OBLIGATIONS( cost $6,064,410) ...   6,471,875
                                                                                ---------------
                      MORTGAGE - BACKED SECURITIES - 12.10% 

                  FEDERAL NATIONAL MORTGAGE ASSOCIATION - .09% 
              13,601      9.00%, due 10/01/2004 ...............................      14,324
                                                                                ---------------

                GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 10.23%
             409,309      9.00%, due 05/15/2009 ...............................     433,996
              32,174      8.50%, due 03/15/2022 ...............................      33,803
             168,378      8.00%, due 06/15/2022 ...............................     175,535
             476,697      7.50%, due 06/01/2024 ...............................     490,701
             416,705      7.00%, due 07/15/2023 ...............................     422,045
                                                                                ---------------
                                                                                  1,556,080
                                                                                ---------------
                   COLLATERALIZED MORTGAGE OBLIGATIONS - 1.78%                          
             255,000      Federal Home Loan  Mortgage Corporation, 7.50%, due 
                          07/15/2020 ..........................................     261,704
               4,370      MDC Funding, 8.20%, due 11/20/2017 ..................       4,402
               3,980      Shearson Lehman, 8.75%, due 08/27/2017 ..............       4,014
                                                                                ---------------
                                                                                    270,120
                                                                                ---------------
                          TOTAL MORTGAGE-BACKED SECURITIES (cost $1,801,803) ..   1,840,524
                                                                                ---------------
                            CORPORATE BONDS - 34.16%
                    NON-CONVERTIBLE CORPORATE BONDS - 33.22%

                            AEROSPACE/DEFENSE - 1.67%
             200,000      Boeing Company, 8.75%, due 08/15/2021 ............... $   253,874
                                                                                ---------------
                                 BANKING - 2.81%
             195,000      Bank of New York, 7.875%, due 11/15/2002 ............     214,378
             200,000      Mercantile Bank, 7.625%, due 10/15/2002 .............     212,876
                                                                                ---------------
                                                                                    427,254
                                                                                ---------------
                             BROADCAST/MEDIA - 2.70% 
             200,000      Time Warner, Inc., 9.15%, due 02/01/2023 ............     228,062
             200,000      Westinghouse Corporation, 7.875%, due 09/01/2023 ....     182,416
                                                                                ---------------
                                                                                    410,478
                                                                                ---------------
                                 FINANCE - 7.39%
             200,000      Associates Corporation Senior Notes, 8.80%, 
                          due 08/01/1998 ......................................     215,315
             150,000      Avco Financial Services, 8.85%, due 02/01/1996 ......     150,373
             175,000      Beneficial Corporation, 9.125%, due 02/15/1998 ......     187,220
             100,000      General Motors Acceptance Corporation, 7.75%, 
                          due 01/15/1999 ......................................     105,618
             200,000      Kemper Corp., 6.875%, due, 09/15/2003 ...............     206,045
             250,000      Morgan Stanley, 6.75, due, 03/04/2003 ...............     258,396
                                                                                ---------------
                                                                                  1,122,967
                                                                                ---------------
                            HEALTH & MEDICAL - 2.53%
             150,000      American Home Products, 7.25%, due 03/01/2023 .......     161,528
             250,000      American Medical International, 0%, due 08/12/1997 ..     223,237  
                                                                                    384,765  
                                                                                ---------------

                                INSURANCE - 1.36%
             200,000      Integon Corporation, 8.00%, due 08/15/1999 ..........     206,637
                                                                                ---------------
                                MACHINERY -1.53%
             200,000      Caterpillar Corporation, 9.375%, due 07/15/2001 .....     233,110
                                                                                ---------------
                                OIL & GAS - 4.52%
             165,000      British Petroleum, 9.875%, due 03/15/2004 ...........     206,646
             200,000      Burlington Resources, 7.15%, due 05/01/1999 .........     208,555
             200,000      Coastal Corporation, 10.75%, due 10/01/2010 .........     272,547
                                                                                ---------------
                                                                                    687,748
                                                                                ---------------
                             TRANSPORTATION - 1.20%                                     
             150,000      Burlington Northern, 8.75%, due 02/25/2022 ..........     181,916  
                                                                                ---------------
                      UTILITIES - GAS & ELECTRIC - 7.51%
             150,000      Commonwealth Edison, 9.375%, due 02/15/2000 ......... $   167,251
             150,000      Consumers Power,  8.75%, due 02/15/1998 .............     157,544
             150,000      Niagara Mohawk Power, 9.50%, due 06/01/2000 .........     154,111
             150,000      Portland General Electric, 8.88%, due 08/12/1999 ....     164,885
             150,000      Public Service Electric & Gas 8.875%, due 06/01/2003.     172,764
             150,000      Public Service Company of New Hampshire, 9.17%, 
                          due 05/15/1998 ................................... ..     159,366
             150,000      Texas Utilities Electric, 9.50%, due 08/01/1999 .....     166,602
                                                                                ---------------
                                                                                  1,142,523
                                                                                ---------------
                          TOTAL NON-CONVERTIBLE CORPORATE BONDS 
                          (cost $4,780,353) ...................................   5,051,272

           
           PRINCIPAL                                                                MARKET
            AMOUNT                                                                  VALUE
        ---------------                                                         ---------------
                                                                
                       CONVERTIBLE CORPORATE BOND - 0.94%

                              RETAIL SALES - 0.94% 
             150,000     Costco Wholesale Corporation, 5.75%, due 05/15/2002 
                         (cost $140,948) ......................................     143,437 
                                                                                ---------------
                          
                         TOTAL CORPORATE BONDS (cost $4,921,302) ..............   5,194,709
                                                                                ---------------

                     U.S. DOLLAR FOREIGN OBLIGATIONS - 1.86%
          $  150,000      Province of Alberta, 9.25%, due 04/01/2000 ..........     170,482
             100,000      Province of Manitoba, 9.625%, due 03/15/1999 ........     111,902
                                                                                ---------------
                          TOTAL U.S. DOLLAR FOREIGN OBLIGATIONS (cost $256,845)     282,384
                                                                                ---------------

                                                                                                              
           SHARES
       ---------------
                                      PREFERRED STOCK - 0.39%
               1,000      Integon Corp (cost $59,320)..........................      60,000
                                                                                ---------------
                      
           PRINCIPAL
            AMOUNT
       ---------------    
                          REPURCHASE AGREEMENT - 7.27%
          $1,105,000      Repurchase agreement with Goldman Sachs,collateralized 
                          by a U.S. Treasury Note in a joint trading account at 
                          5.70%, dated 12/29/1995, due 01/02/1996 with a maturity
                          value of $1,105,700 (cost $1,105,000)................   1,105,000
                                                                                ---------------
                          TOTAL INVESTMENTS (cost $14,208,679) ................  14,954,492
                          Other assets ($322,808) less liabilities ($71,702) ..     251,106
                                                                                ---------------
                          NET ASSETS .......................................... $15,205,598
                                                                                ---------------
                                                                                                         
<FN>
FEDERAL INCOME TAX INFORMATION:
Net unrealized appreciation of investments at December 31, 1995 of $745,813  based on aggregate cost of $14,208,679, was composed 
of gross appreciation of $785,331 for investments having an excess of value over cost and gross depreciation of $39,518 for 
investments having an excess of cost over value.  As of December 31, 1995, the Fund had unused capital loss carryovers of $133,428
for federal tax purposes which may be applied against gains realized in future years.  If not applied, the carryovers will expire
by 2003.

OTHER INFORMATION:
Purchases and sales of investment securities, other than short-term investments, aggregated $3,799,881 and $1,568,597, respectively,
during the year ended December 31, 1995, including purchases and sales of U.S. government securities of $3,226,883 and $206,624,
respectively.  Principal repayments of mortgage-backed securities aggregated $121,955.
</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                  MONEY MARKET
                                   PORTFOLIO
    

     PRINCIPAL                                                                          MARKET
      AMOUNT                                                                            VALUE
   ------------                                                                     --------------
     <C>         <C>                                                               <C>                     
                           U.S. TREASURY BILL - 8.89%

     $ 20,000    U.S. Treasury Bill, 4.96%, due 05/02/1996 (cost $19,664) ........      19,664
                                                                                    --------------
                    GOVERNMENTAL AGENCY OBLIGATIONS - 87.76%
       25,000    Federal Agricultural Mortgage Assoc. Discount Note, 5.60%, 
                 due 01/02/1996 ..................................................      24,996
      120,000    Federal Farm Credit Bank Discount Note, 5.55%, due 02/02/1996 ...     119,408
       30,000    Federal Home Loan Mortgage Corp. Discount Note, 5.50%, 
                 due 02/26/1996 ..................................................      29,743
       20,000    Federal National Mortgage Assoc. Discount Note, 5.55%, 
                 due 01/05/1996 ..................................................      19,988
                                                                                    --------------
                 TOTAL GOVERNMENTAL AGENCY OBLIGATIONS (cost $194,135) ...........     194,135
                                                                                    --------------
                 TOTAL INVESTMENTS (cost $213,799) ...............................     213,799
                 Other assets ($10,292) less liabilities ($2,874) ................       7,418
                                                                                    --------------
                 NET ASSETS ...................................................... $   221,217
                                                                                    ==============
<FN>
OTHER INFORMATION:
Purchases and maturities of investment securities, all of which were U.S. government securities, aggregated $1,826,089 and 
$1,837,464, respectively, during the year ending December 31, 1995.
</FN>
</TABLE>
<PAGE>

INDEPENDENT PUBLIC ACCOUNTANTS' REPORT

TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
COMPOSITE DEFERRED SERIES, INC.

     We have  audited the  accompanying  statements  of assets and  liabilities,
including the investment  portfolios,  of Composite Deferred Series (comprising,
respectively,  the Growth, Northwest, Income, and Money Market Portfolios) as of
December 31, 1995,  and the related  statements of operations  for the year then
ended and the  statements of changes in net assets for the years ended  December
31, 1995 and 1994. For the Growth , Income,  and Money Market Portfolios we have
audited the financial  highlights for each of the five years in the period ended
December 31, 1995.  For the Northwest  Portfolio,  we have audited the financial
highlights  for the  years  ended  December  31,  1995 , 1994  and  1993.  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.
     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.  Our procedures included confirming  securities owned as of December
31, 1995, by correspondence with the custodian. 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 our
audits provide a reasonable basis for our opinion.
     In our opinion,  the  financial  statements  and the  financial  highlights
referred to above  present  fairly,  in all  material  respects,  the  financial
position  of  each  of the  respective  portfolios  constituting  the  Composite
Deferred  Series,  Inc.  as of  December  31,  1995,  and the  results  of their
operations,  the changes in their net assets, and their financial highlights for
the above  stated  periods in  conformity  with  generally  accepted  accounting
principles.

LEMASTER & DANIELS, PLLC
CERTIFIED PUBLIC ACCOUNTANTS
SPOKANE, WASHINGTON
JANUARY 19, 1996

<PAGE>
<TABLE>
<CAPTION>
COMPOSITE DEFERRED SERIES, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995

 
                                                                                                                            MONEY
                                                                     GROWTH            NORTHWEST           INCOME          MARKET
                                                                    PORTFOLIO          PORTFOLIO          PORTFOLIO       PORTFOLIO
                                                                ------------------ ------------------ ------------------ -----------
<S>                                                                <C>                 <C>               <C>              <C>
ASSETS

Investments at market (identified cost $19,067,330,
  $6,141,009, $14,208,679 and $213,799, respectively) ..........   $24,440,206         $7,534,466        $14,954,492      $213,799

Cash ...........................................................        19,600             10,231             69,776        10,278
Prepaid Expenses................................................         1,009                333                773            14
Receivable for:
  Interest .....................................................        13,621                251            252,009             -
  Dividends ....................................................        54,085              9,594                  -             -
  Sale of Fund's shares ........................................           250              1,955                250             -
                                                                ------------------ ------------------ ------------------ -----------
Total assets ...................................................    24,528,771          7,556,830         15,277,300       224,091
                                                                ================== ================== ================== ===========
LIABILITIES
Payable for:
  Investment securities purchased ..............................        67,772             54,661             59,320             -
  Accrued expenses and other payables ..........................        10,482              6,169             10,893         2,874
  Repurchase of Fund's shares ..................................         2,357                687              1,489             -
                                                                ------------------ ------------------ ------------------ -----------

Total liabilities ..............................................        80,611             61,517             71,702         2,874
                                                                ------------------ ------------------ ------------------ -----------

NET ASSETS .....................................................   $24,448,160         $7,495,313        $15,205,598      $221,217
                                                                ================== ================== ================== ===========

COMPOSITION OF NET ASSETS
Additional paid-in capital .....................................   $19,079,550         $6,238,606        $14,593,213      $221,217
Undistributed net investment income ............................         2,577                  -                  -             -
Accumulated net realized loss ..................................        (6,843)         (136,750)           (133,428)            -
Net unrealized appreciation of investments .....................     5,372,876          1,393,457            745,813             -
                                                                ------------------ ------------------ ------------------ -----------
                                                                   $24,448,160         $7,495,313        $15,205,598      $221,217
                                                                ================== ================== ================== ===========
NET ASSET VALUE
  Net asset value per share for 1,208,890,  499,904,
  1,207,536,  and 221,217 shares outstanding,
  respectively .................................................        $20.22             $14.99             $12.59         $1.00
                                                                ================== ================== ================== ===========

<FN>
See accompanying notes to the financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COMPOSITE DEFERRED SERIES, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995

                
                                                                     GROWTH           NORTHWEST          INCOME        MONEY MARKET
                                                                    PORTFOLIO         PORTFOLIO         PORTFOLIO        PORTFOLIO
                                                                ------------------ ----------------- ----------------- -------------
<S>                                                               <C>               <C>               <C>                 <C>
INVESTMENT INCOME
Income:
Interest .......................................................     $63,786            $9,810          $953,376          $12,061
  Dividends ....................................................     423,199            81,827                 -                -
                                                                ------------------ ----------------- ----------------- -------------
Total income ...................................................     486,985            91,637           953,376           12,061
                                                                ------------------ ----------------- ----------------- -------------
Expenses:
   Management fees .............................................      90,132            29,906            64,637            1,097
   Directors' fees .............................................       8,486             8,486             8,386            8,386
   Postage, printing and office expense ........................       9,725             8,325            12,693            1,724
   Custodial fees ..............................................       9,171             4,295             5,418              802
   Auditing and legal fees .....................................       6,932             1,984             5,058            1,258
   Registration and filing fees ................................       2,121               769             1,192               92
   Insurance ...................................................         331                97               262                6
   Expense reimbursement .......................................           -                 -                 -           (3,394)
                                                                ------------------ ----------------- ----------------- -------------

Total expenses .................................................     126,898            53,862            97,646            9,971

Fees paid indirectly ...........................................      (2,649)           (2,477)             (605)            (454)
                                                                ------------------ ----------------- ----------------- -------------
Net expenses ...................................................     124,249            51,385            97,041            9,517
                                                                ------------------ ----------------- ----------------- -------------
Net investment income ..........................................     362,736            40,252           856,335            2,544
                                                                ------------------ ----------------- ----------------- -------------

NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Realized  gain (loss) from investment transactions .............     441,257            (8,707)          (49,342)              12
Unrealized appreciation of investments during the year .........   4,414,288         1,309,785         1,529,737                -
                                                                ------------------ ----------------- ----------------- -------------
Net realized and unrealized gain on investments ................   4,855,545         1,301,078         1,480,395               12
                                                                ------------------ ----------------- ----------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...........  $5,218,281        $1,341,330        $2,336,730           $2,556
                                                                ================== ================= ================= =============

<FN>
See accompanying notes to the financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPOSITE DEFERRED SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS

                    
                                                                                                                                    
                                                    GROWTH PORTFOLIO                          NORTHWEST PORTFOLIO                   
                                             -------------------------------------   ------------------------------------   
                                                                                                                                
                                                  Years ended December 31,                  Years ended December 31,                
                                             -------------------------------------   ------------------------------------   
                                                   1995                1994                1995               1994                  
                                             ------------------  -----------------   -----------------  -----------------     
<S>                                           <C>                <C>                  <C>                 <C>
OPERATIONS
Net investment income .......................    $362,736           $264,291             $40,252            $28,558                 

Realized gain (loss) from investment 
transactions ................................     441,257            113,710             (8,707)           (128,043)           

Unrealized appreciation (depreciation)
  of investments during the year ............   4,414,288            (83,368)           1,309,785             16,642                
                                              ------------------  -----------------   -----------------  -----------------  

Net increase (decrease) in net assets
  resulting from operations .................   5,218,281             294,633           1,341,330            (82,843)               


DIVIDENDS TO SHAREHOLDERS
  From net investment income ................    (360,327)           (267,604)            (41,043)           (28,056)               
  From net capital gains from
    investment transactions .................    (448,100)           (113,710)                  -             (1,543)               

NET CAPITAL SHARE
TRANSACTIONS ................................   5,843,803           3,041,942           1,547,792          2,073,984              
                                              ------------------  -----------------   -----------------  -----------------   
Total increase in net assets ................  10,253,657           2,955,261           2,848,079          1,961,542                

NET ASSETS
Beginning of the year .......................  14,194,503          11,239,242           4,647,234          2,685,692                
                                              ------------------  -----------------   -----------------  -----------------   

End of the year ............................  $24,448,160         $14,194,503          $7,495,313         $4,647,234                
                                              ==================  =================   =================  =================    
UNDISTRIBUTED NET INVESTMENT
INCOME AT END OF YEAR ......................       $2,577                $168          $        -               $791                
                                              ==================  =================   =================  =================      

<FN>
See accompanying notes to the financial statements.
</FN>
</TABLE>

<TABLE>
<CAPTION>
COMPOSITE DEFERRED SERIES, INC.
STATEMENT OF CHANGES IN NET ASSETS

                    
                                                                                                                                    
                                                       INCOME PORTFOLIO                     MONEY MARKET PORTFOLIO
                                             -------------------------------------  -------------------------------------
                                                                                                                                
                                                      Years Ended December 31,              Years ended December 31,
                                              -------------------------------------  -------------------------------------
                                                    1995               1994                1995                1994
                                              -----------------  ------------------  -----------------   -----------------
<S>                                            <C>                 <C>                  <C>                  <C>
OPERATIONS
Net investment income .......................     $856,335            $704,261            $2,544               $857

Realized gain (loss) from investment 
transactions ................................      (49,342)            (65,570)               12                  -

Unrealized appreciation (depreciation)
  of investments during the year ............    1,529,737          (1,121,284)                -                  -
                                              -----------------  ------------------  -----------------   -----------------

Net increase (decrease) in net assets
  resulting from operations .................    2,336,730            (482,593)            2,556                 857


DIVIDENDS TO SHAREHOLDERS
  From net investment income ................     (856,335)           (704,261)           (2,544)               (857)
  From net capital gains from
    investment transactions .................            -                   -               (12)                  -

NET CAPITAL SHARE
TRANSACTIONS ................................    2,883,031           2,915,753             2,544                 857
                                              -----------------  ------------------  -----------------   -----------------
Total increase in net assets ................    4,363,426           1,728,899             2,544                 857

NET ASSETS
Beginning of the year .......................   10,842,172           9,113,273           218,673             217,816
                                              -----------------  ------------------  -----------------   -----------------

End of the year ............................   $15,205,598         $10,842,172          $221,217            $218,673
                                              =================  ==================  =================   =================
UNDISTRIBUTED NET INVESTMENT
INCOME AT END OF YEAR ......................   $         -         $         -       $         -         $         -
                                              =================  ==================  =================   =================     

<FN>
See accompanying notes to the financial statements.
</FN>
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS

GROWTH PORTFOLIO:

                                                      
                                                                                           YEARS ENDED DECEMBER 31,
                                                 -----------------------------------------------------------------------------------
                                                       1995                1994              1993                1992          1991
                                                 ------------------  ----------------- ------------------ -----------------  -------

<S>                                                 <C>                <C>                 <C>                <C>           <C>  
NET  ASSET VALUE, BEGINNING OF YEAR .........       $15.70             $15.71             $15.26             $14.28        $11.82
                                                 ------------------  ----------------- ------------------ -----------------  -------

  INCOME FROM INVESTMENT OPERATIONS
  Net Investment Income .....................         0.35               0.31               0.29               0.36          0.36
  Net Gains on Securities (both realized and 
    unrealized) .............................         4.90               0.12               0.84               1.13          2.66
                                                 ------------------  ----------------- ------------------ -----------------  -------
    Total From Investment Operations ........         5.25               0.43               1.13               1.49          3.02
                                                 ------------------  ----------------- ------------------ -----------------  -------

  LESS DISTRIBUTIONS
  Dividends(from net investment income) .....        (0.35)             (0.31)             (0.28)             (0.36)        (0.35)
  Distributions (from capital gains) ........        (0.38)             (0.13)             (0.40)             (0.15)        (0.21)
                                                 ------------------  ----------------- ------------------ -----------------  -------
    Total Distributions .....................        (0.73)             (0.44)             (0.68)             (0.51)        (0.56)
                                                 ------------------  ----------------- ------------------ -----------------  -------

NET  ASSET VALUE, END OF YEAR ...............       $20.22             $15.70             $15.71             $15.26        $14.28
                                                 ==================  ================= ================== =================  =======
TOTAL RETURN (1) ............................        33.70%              2.72%              7.58%             10.56%        25.91%

RATIOS/SUPPLEMENTAL DATA
  Net Assets, End of Year ($1,000's) ........       $24,448            $14,195             $11,239            $7,455        $4,116
  Ratio of Expenses to Average Net Assets (2)         0.70%              0.68%              0.76%              0.87%         1.16%
  Ratio of Net Income to Average Net Assets .         2.01%              1.97%              1.96%              2.51%         2.77%
  Portfolio Turnover Rate (3) ...............           36%                25%                38%                13%           23%
<FN>
(1)  Total return does not reflect sales charge or separate account expenses.
(2)  The ratio of expenses for 1995 is based upon total expenses in accordance with Securities and Exchange Commission Release 
     No. FR 46 effective September 1, 1995.  Ratios for prior periods were calculated based on net expenses and have not been 
     restated.
(3)  A portfolio turnover rate is the percentage computed by taking the lesser of purchases or sales of portfolio securities
     (excluding securities with a maturity date of one year or less at the time of acquisition) for a period and dividing it by 
     the monthly average of the market value of such securities during the period.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS

NORTHWEST PORTFOLIO:
         
                                                                                                    JANUARY 4, 1993
                                                                                                         TO
                                                                                                    DECEMBER 31,
                                                                  YEARS ENDED DECEMBER 31,
                                                      ----------------------------------------
                                                            1995                   1994               1993 (4)
                                                      ------------------     -----------------    ------------------

<S>                                                        <C>                   <C>                   <C>                          
NET  ASSET VALUE, BEGINNING OF PERIOD ...............      $11.97                $12.19                $12.00
                                                      ------------------     -----------------    ------------------
  INCOME FROM INVESTMENT OPERATIONS
  Net Investment Income .............................        0.09                  0.08                  0.16
  Net Gains or Losses on Securities (both
    realized and unrealized .........................        3.02                 (0.21)                 0.19
                                                      ------------------     -----------------    ------------------
    Total From Investment Operations ................        3.11                 (0.13)                 0.35
                                                      ------------------     -----------------    ------------------
  LESS DISTRIBUTIONS
  Dividends(from net investment income) .............       (0.09)                (0.08)                (0.16)
  Distributions (from capital gains) ................        0.00                 (0.01)                 0.00
                                                      ------------------     -----------------    ------------------
    Total Distributions .............................       (0.09)                (0.09)                (0.16)
                                                      ------------------     -----------------    ------------------
NET  ASSET VALUE, END OF PERIOD .....................      $14.99                $11.97                $12.19
                                                      ==================     =================    ==================
TOTAL RETURN (1) ....................................       26.03%                -1.12%                 2.95%

RATIOS/SUPPLEMENTAL DATA
  Net Assets, End of Period ($1,000's) ..............      $7,495                $4,647                $2,686
  Ratio of Expenses to Average Net Assets (2) .......        0.90%                 0.87%                 0.00% (5)
  Ratio of Net Income to Average Net Assets .........        0.67%                 0.76%                 1.61% (5)
  Portfolio Turnover Rate (3) .......................          11%                   17%                    0% (5)
<FN>
(1)  Total return does not reflect sales charge or separate account expenses.  Returns of less than one year are not annualized.
(2)  Management fees were waived and all expenses were absorbed by WM Life Insurance Company, the sole shareholder, through 
     December 31, 1993.  The ratio of expenses for 1995 is based upon total expenses in accordance with Securities and Exchange 
     Commission Release No. FR 46 effective September 1, 1995.  Ratios for prior periods were calculated based on net expenses and
     have not been restated.
(3)  A portfolio turnover rate is the percentage computed by taking the lesser of purchases or sales of portfolio securities
     (excluding securities with a maturity date of one year or less at the time of acquisition) for a period and dividing it by
     the monthly average of the market value of such securities during the period.
(4)  From commencement of operations.  See Note 1.
(5)  Annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS

INCOME PORTFOLIO:
                                                         
                      
                                                                         YEARS ENDED DECEMBER 31,  
                                                      ------------------------------------------------------------
                                                         1995       1994        1993        1992         1991
                                                      ----------  ---------  ----------  -----------  ------------

<S>                                                    <C>        <C>          <C>         <C>          <C>
NET  ASSET VALUE, BEGINNING OF YEAR .................   $11.22     $12.57      $12.22      $12.27       $11.44
                                                      ----------  ---------  ----------  -----------  ------------
  INCOME FROM INVESTMENT OPERATIONS
  Net Investment Income .............................     0.79       0.79        0.85        0.86         0.91
  Net Gains or Losses on Securities (both
    realized and unrealized) ........................     1.37      (1.35)       0.35       (0.05)        0.83
                                                      ----------  ---------  ----------  -----------  ------------
  Total From Investment Operations ..................     2.16      (0.56)       1.20        0.81         1.74
                                                      ----------  ---------  ----------  -----------  ------------
  LESS DISTRIBUTIONS
  Dividends(from net investment income) .............    (0.79)     (0.79)      (0.85)      (0.86)       (0.91)
                                                      ----------  ---------  ----------  -----------  ------------
NET  ASSET VALUE, END OF YEAR .......................   $12.59     $11.22      $12.57      $12.22       $12.27
                                                      ==========  =========  ==========  ===========  ============
TOTAL RETURN (1) ....................................    19.86%     -4.48%      10.02%       6.91%       15.90%

RATIOS/SUPPLEMENTAL DATA
  Net Assets, End of Year ($1,000's) ................  $15,206    $10,842      $9,113      $6,165       $4,407
  Ratio of Expenses to Average Net Assets (2) .......     0.76%      0.74%       0.86%       0.88%        0.98%
  Ratio of Net Income to Average Net Assets .........     6.62%      6.79%       6.75%       7.12%        7.78%
  Portfolio Turnover Rate (3) .......................       14%        15%         29%         37%          66%
<FN>
(1)  Total return does not reflect sales charge or separate account expenses.
(2)  The ratio of expenses for 1995 is based upon total expenses in accordance with Securities and Exchange Commission 
     Release No. FR 46 effective September 1, 1995.  Ratios for prior periods were calculated based on net expenses and have not
     been restated.
(3)  A portfolio turnover rate is the percentage computed by taking the lesser of purchases or sales of portfolio securities 
     (excluding securities with a maturity date of one year or less at the time of acquisition) for a period and dividing
     it by the monthly average of the market value of such securities during the period.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS

MONEY MARKET PORTFOLIO:

                                                              
                                                                                        YEARS ENDED DECEMBER 31,
                                                      ------------------------------------------------------------------------------
                                                            1995               1994             1993              1992         1991
                                                      ------------------ ----------------- ----------------- ---------------- ------

<S>                                                         <C>               <C>               <C>              <C>          <C>
NET  ASSET VALUE, BEGINNING OF YEAR .................       $1.00             $1.00             $1.00            $1.00        $1.00
                                                      ------------------ ----------------- ----------------- ---------------- ------

  INCOME FROM INVESTMENT OPERATIONS
  Net Investment Income .............................        0.01              0.00              0.00            (0.00)        0.06
                                                      ------------------ ----------------- ----------------- ---------------- ------

  LESS DISTRIBUTIONS
  Dividends(from net investment income) .............       (0.01)             0.00              0.00             0.00        (0.06)
                                                      ------------------ ----------------- ----------------- ---------------- ------

NET  ASSET VALUE, END OF YEAR .......................       $1.00             $1.00             $1.00            $1.00        $1.00
                                                      ================== ================= ================= ================ ======

TOTAL RETURN (1) ....................................        1.16%             0.00%             0.00%           -0.25%        5.92%

RATIOS/SUPPLEMENTAL DATA
  Net Assets, End of Year ($1,000's) ................        $221              $219              $218             $218        $586
  Ratio of Expenses to Average Net Assets (2) .......        4.54%             3.65%             2.87%            2.82%        0.00%
  Ratio of Net Income to Average Net Assets .........        1.16%             0.39%             0.00%            0.82%        5.77%
<FN>
(1) Total return does not reflect sales charge or separate account expenses.
(2) The Investment Adviser waived its management fee from inception of the Portfolio through June 30, 1994; and other expenses were
    reimbursed to the Portfolio by WM Life Insurance Company (WMLIC) from inception of the Portfolio through February 29, 1992. 
    Expenses, including the waived managment fee, in excess of revenues were reimbursed to the Portfolio by WMLIC during the period
    January 1, 1993 through December 31, 1995. The ratio of expenses for 1995 is based upon total expenses in accordance with 
    Securities and Exchange Commission Release No. FR 46 effective September 1, 1995.  Ratios for prior periods were calculated 
    based on net expenses and have not been restated.
</FN>
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ACCOUNTING POLICIES

     Composite  Deferred  Series,  Inc.  (the "Fund"),  is registered  under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.  The Fund  consists of four separate  portfolios  which are designed to
meet a variety of investment  objectives.  The Growth and Income  Portfolios are
diversified and the Money Market and Northwest Portfolios are non diversified.
     WM  Life  Insurance  Company  ("WMLIC"),  an  affiliate  of the  investment
adviser,  is the sole shareholder of the Fund. Shares are sold only to Composite
Deferred  Series variable  accounts to fund the benefits under certain  flexible
premium  variable  annuity  contracts  (the  "contracts"),  also  known  as  the
Composite Variable Annuity,  issued by WMLIC.  Contract owners have the right to
instruct WMLIC how to vote Fund shares attributable to their contracts.
     Following is a summary of significant  accounting  policies,  in conformity
with generally accepted accounting  principles,  which are consistently followed
by the Fund in the preparation of its financial statements.
a.  Investment  securities are stated on the basis of valuations  provided by an
    independent pricing service, approved by the Board of Directors, which uses
    information with respect to last reported sales price for securities  traded
    on a national securities  exchange (or reported on the National  Association
    of Securities  Dealers Automated  Quotation [NASDAQ] National Market System)
    or  securities   traded   over-the-counter,   transactions  of  a  security,
    quotations from dealers,  market transactions in comparable securities,  and
    various relationships between securities,  in determining value.  Investment
    securities in the Money Market Portfolio and investment securities with less
    than 60 days to maturity when purchased in the Growth,  Income and Northwest
    Portfolios  are valued at amortized  cost which  approximates  market value.
    Investment securities not currently quoted as described above will be priced
    at fair market value as determined  in good faith in a manner  prescribed by
    the Board of Directors.
b.  Interest income is earned from the settlement  date on securities  purchased
    and is  recorded on the accrual  basis.  Dividend  income is recorded on the
    ex-dividend date.
c.  Dividends to the  shareholder  of the Growth and Northwest  Portfolios  are
    calculated and paid  quarterly.  The Income  Portfolio  accrues  shareholder
    dividends daily and pays such dividends monthly.  Any capital gains are paid
    annually.  The Money Market  Portfolio  calculates and pays dividends to its
    shareholder  daily  (dividends are not earned on the day of purchase but are
    earned on the day of withdrawal).
d.  Security transactions are accounted for on the trade date (execution date of
    the order to buy or sell).  Realized gain or loss from security transactions
    and the change in unrealized  appreciation or depreciation are determined on
    the basis of identified cost.
e.  The Fund complies with  requirements of the Internal Revenue Code applicable
    to regulated  investment companies and distributes taxable income so that no
    provision for federal income tax is required.  Income  dividends and capital
    gain  distributions  are determined  with income tax  regulations  which may
    differ from generally accepted accounting principles.  These differences are
    primarily due to differing treatment for deferral of wash sales.
f.  In accordance  with  Securities and Exchange  Commission  Release No. FR. 46
    effective  September 1, 1995,  custodian fees have been increased by $2,649,
    $2,477,  $605 and $454 for the Growth,  Northwest,  Income and Money  Market
    Portfolios,   respectively.   Such   amounts   relate  to  "expense   offset
    arrangements." The Fund could have otherwise employed the assets to produce
    income if it had not entered into such arrangements.  In accordance with the
    regulations,  such amounts are added to custodian fees actually  incurred to
    arrive at gross custodian fees and then reflected as a deduction, "fees paid
    indirectly"   to  derive  net   expenses.   There  were  no  "expense offset
    arrangements" other than custodian fees.

NOTE 2 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

     The  amounts  of fees  and  expenses  described  below  are  shown  on each
Portfolio's statement of operations.
     Management  fees  were  paid by each  Portfolio  to  Composite  Research  &
Management  Co., the investment  adviser.  Fees are based upon an annual rate of
0.50% on  average  daily net  assets as  computed  daily.  For the Money  Market
Portfolio,  the  investment  adviser waived its management fee of $1,097 for the
year ended December 31, 1995.
     Directors'  fees and expenses  were paid directly by each Fund to directors
having no  affiliation  with the Fund other than in their capacity as directors.
Other officers and directors received no compensation from the Funds.
     WMLIC,  the sole  shareholder,  reimbursed the Money Market Portfolio for a
portion of the other  expenses.  During the year ended December 31, 1995,  WMLIC
reimbursed the Money Market Portfolio $2,297.

NOTE 3 - CAPITAL STOCK
<TABLE>
<CAPTION>
At December 31, 1995, there were 10 billion shares of no par value capital stock authorized.  Transactions in capital stock were as
follows:


                                                                                                                                    
                                                          GROWTH PORTFOLIO                         NORTHWEST PORTFOLIO              
                                             ---------------------------------------------    ---------------------------------     
                                                       Years ended December 31,                   Years Ended December 31,          
                                                       ------------------------                   ------------------------
                                                   1995                         1994              1995               1994           
                                             -----------------             ---------------    --------------     --------------     
<S>                                            <C>                          <C>               <C>                <C>              
SHARES
Sold                                             400,628                       298,482           156,526            208,140         
Issued for reinvestment of
  dividends and capital gains .............       41,600                        24,096             2,896              2,331        
                                             -----------------             ---------------    --------------     --------------     
                                                 442,228                       322,578           159,422            210,471         
Reacquired ................................     (137,392)                     (134,063)          (47,873)           (42,389)        
                                             -----------------             ---------------    --------------     --------------     
                                                 304,836                       188,515           111,549            168,082         
                                             =================             ===============    ==============     ==============     
AMOUNT
Sold ......................................   $7,442,085                    $4,756,061        $2,152,588         $2,554,986         
Issued for reinvestment of
  dividends and capital gains .............      808,427                       381,314            41,043             29,600         
                                             -----------------             ---------------    --------------     --------------     
                                               8,250,512                     5,137,375         2,193,631          2,584,586         
Reacquired ................................   (2,406,709)                   (2,095,433)         (645,839)          (510,602)        
                                             -----------------             ---------------    --------------     --------------     
Net increase ..............................   $5,843,803                    $3,041,942        $1,547,792         $2,073,984         
                                             =================             ===============    ==============     ==============     
</TABLE>
<TABLE>
<CAPTION>

                                                                                                                                    
                                                        INCOME PORTFOLIO                    MONEY MARKET PORTFOLIO
                                               ---------------------------------     -----------------------------------
                                                   Years ended December 31,               Years ended December 31,
                                                   ------------------------               ------------------------
                                                   1995               1994                1995                1994
                                               --------------     --------------     ---------------     ---------------
<S>                                            <C>                <C>                     <C>                 <C>                 
SHARES
Sold                                             373,491            371,388                   0                   0
Issued for reinvestment of
  dividends and capital gains ...............     71,224             60,183               2,544                 857
                                               --------------     --------------     ---------------     ---------------
                                                 444,715            431,571               2,544                 857
Reacquired ..................................   (203,756)          (189,983)                  0                   0
                                               --------------     --------------     ---------------     ---------------
Net increase ................................    240,959            241,588               2,544                 857
                                               ==============     ==============     ===============     ===============
AMOUNT
Sold ........................................  $4,456,949         $4,435,898                  $0                  $0
Issued for reinvestment of
  dividends and capital gains ...............     856,335            704,261               2,544                 857
                                               --------------     --------------     ---------------     ---------------
                                                5,313,284          5,140,159               2,544                 857
Reacquired ..................................  (2,430,253)        (2,224,406)                  0                   0
                                               --------------     --------------     ---------------     ---------------
                                               $2,883,031         $2,915,753              $2,544                $857
                                               ==============     ==============     ===============     ===============
</TABLE>

NOTE 4 - SHAREHOLDER MEETING RESULTS

  A special meeting of the Fund's shareholder (WMLIC) was held March 21, 1995.
Each matter voted upon as instructed by Contract Owners, as well as the number
of votes cast for, against or withheld, and abstained, are set forth below:

1.  The Fund's shareholder elected the following nine directors:
<TABLE>
<CAPTION>
           
                              GROWTH PORTFOLIO                   NORTHWEST PORTFOLIO               INCOME PORTFOLIO
                        -------------------------------     -----------------------------    -----------------------------
                                            SHARES                              SHARES                           SHARES
                           SHARES         WITHHOLDING          SHARES         WITHHOLDING      SHARES          WITHHOLDING
                           VOTED           AUTHORITY           VOTED           AUTHORITY       VOTED            AUTHORITY
                           "FOR"            TO VOTE            "FOR"            TO VOTE        "FOR"             TO VOTE
                        -------------   ---------------     --------------   ------------    --------------   ------------
 
<S>                       <C>                <C>              <C>              <C>             <C>                <C>             
Wayne L. Attwood, MD ...  498,433            6,619            206,969              0           510,651            7,305
Kristianne Blake .......  499,197            5,855            206,969              0           516,034            1,922       
Anne V. Farrell ........  499,197            5,855            205,102          1,867           516,034            1,922
Edwin J. McWilliams ....  497,225            7,827            206,969              0           516,034            1,922
Michael K. Murphy ......  499,197            5,855            205,102          1,867           516,034            1,922
William G. Papesh ......  499,197            5,855            206,969              0           516,034            1,922
Jay Rockey .............  499,197            5,855            206,969              0           515,701            2,255 
Leland J. Sahlin .......  497,225            7,827            206,969              0           516,034            1,922
Richard C. Yancey ......  499,197            5,855            206,969              0           516,034            1,922

</TABLE>
2.  The Fund's shareholder ratified the selection by a majority of the 
    independent members of the Fund's Board of Directors of LeMaster &
    Daniels, PLLC, as independent accountants for the Fund for the current
    year, subject to termination at any time without penalty.
     
<TABLE>
<CAPTION>
                                   SHARES         SHARES
                                   VOTED          VOTED
                                   "FOR"         "AGAINST"        ABSTAINED
                                 ----------     -----------      -----------
<S>                                <C>            <C>              <C>
Growth Portfolio ................  487,934          0              17,118
Northwest Portfolio .............  204,062          0               2,906
Income Portfolio ................  506,297        705              10,955

</TABLE>
<PAGE>

FOR FURTHER INFORMATION, PLEASE CONTACT:
FUND OFFICES
Composite Group of Funds
601 W. Main Avenue, Suite 801
Spokane, WA  99201-0613
Phone:  (509) 353-3550
Toll free:  (800) 543-8072

ADVISER
Composite Research & Management Co.
1201 Third Avenue, Suite 1220   Seattle, WA  98101-3015

DISTRIBUTOR
Murphey Favre, Inc.
1201 Third Avenue, Suite 780    Seattle, WA  98101-3015

CUSTODIAN
Investors Fiduciary Trust Company
127 W. 10th Street  Kansas City, MO  64105-1716

INDEPENDENT PUBLIC ACCOUNTANTS
LeMaster & Daniels, PLLC
601 W. Riverside, Suite 800    Spokane, WA  99201-0614

COUNSEL
Paine, Hamblen, Coffin, Brooke & Miller
717 W. Sprague Avenue, Suite 1200  Spokane, WA  99204-0464

OFFICERS

PRESIDENT
   William G. Papesh
EXECUTIVE VICE PRESIDENT
   Kerry K. Killinger
VICE PRESIDENTS
   Gene G. Branson
   Douglas D. Springer
VICE PRESIDENT & TREASURER
   Monte D. Calvin
SECRETARY
   John T. West

BOARD OF DIRECTORS

CHAIRMAN
   Leland J. Sahlin
MEMBERS
   Wayne L. Attwood, M.D.
   Kristianne Blake
   Anne V. Farrell
   Edwin J. McWilliams
   Michael K. Murphy
   William G. Papesh
   Jay Rockey
   Richard C. Yancey

This report is submitted for the general information of Composite Variable 
Annuity owners.  For more detailed information about the Fund, its officers and
directors, fees, expenses and other pertinent information, please see the
prospectus of the Fund.  This report is not authorized for distribution to
prospective investors in the Fund unless preceded or accompanied by an 
effective prospectus.

                                    
COMPOSITE 

DEFERRED
SERIES, 
INC.

ANNUAL REPORT

December 31, 1995


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