SECURITIES & EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                      Securities Act of 1933 File #33-11010
                 Investment Company Act of 1940 File #811-4962
                                   FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933  /X/

       PRE-EFFECTIVE AMENDMENT NO. ___       / /
       POST-EFFECTIVE AMENDMENT NO. 13       /X/

                  and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940  /X/

       AMENDMENT NO.  13                    /X/

                       COMPOSITE DEFERRED SERIES, INC.
--------------------------------------------------------------------------
               (Exact name of Registrant as specified in Charter)

               601 W. Main Avenue, Suite 801, Spokane, WA  99201
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                    (Address of principal executive offices)

                                 1-509-353-3486
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               (Registrant's telephone number, including area code)

JOHN T. WEST, CORPORATE SECRETARY
Composite Group of Funds
601 West Main Avenue, Suite 801, Spokane, WA  99201
---------------------------------------------------
       (Name and address of agent for service)

Approximate Date of Proposed Public Offering  January 15, 1996

It is proposed that this filing will become effective:

[  ] immediately upon filing pursuant to paragraph (b) of Rule 485
[  ] on (date) pursuant to paragraph (b) of Rule 485
[  ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[XX] on April 30, 1996, pursuant to paragraph (a)(i) of Rule 485
[  ] 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
[  ] on (date) pursuant to paragraph (a)(ii) of Rule 485
[  ] this post-effective amendment designates a new effective date for a
     previously filed post-effective amendment.
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       CALCULATION OF REGISTRATIAON FEE UNDER THE SECURITIES ACT OF 1933

Indefinite  amount has been  registered  pursuant to Rule 24f-2.  The Rule 24f-2
Notice for the most recent fiscal year was filed on December 14, 1995.

<PAGE>


                                     PART A
                               TABLE OF CONTENTS

N-1A Item No.                                                     Location

Item 1.     Cover Page .........................................  Cover Page
Item 2.     Synopsis ...........................................  *
Item 3.     Condensed Financial Information ....................  Financial
                                                                    Highlights
Item 4.     General Description of the Registrant ..............  A Mutual Fund
                                                                    Formed to
                                                                    Meet a Broad
                                                                    Range of
                                                                    Investment
                                                                    Objectives
                                                                  The Fund's
                                                                    Objectives
                                                                  How We Plan to
                                                                    Reach These
                                                                    Objectives
                                                                  Investment
                                                                    Restrictions
Item 5.     Management of the Fund .............................  Who We Are
                                                                  The Cost of
                                                                    Good
                                                                    Management
Item 6.     Capital Stock and Other Securities .................  Who We Are
                                                                  Distribution
                                                                    of Income
                                                                    and Capital
                                                                    Gains
                                                                  Income Taxes 
                                                                    on Dividends
                                                                    and Capital
                                                                    Gains
                                                                  We're Here
                                                                    to Help
                                                                    You
Item 7.     Purchase of Securities Being Offered ...............  The Cost of
                                                                    Good
                                                                    Management
                                                                  The Value of a
                                                                    Single Share
                                                                  How to Buy
                                                                    Shares
Item 8.     Redemption or Repurchase ...........................  How to Sell
                                                                    Shares
Item 9.     Pending Legal Proceedings ..........................  *



*Not applicable or negative answer

<PAGE>

                                     PART B
                               TABLE OF CONTENTS
Item 10.    Cover Page .........................................  Cover Page
Item 11.    Table of Contents ..................................  Table of
                                                                    Contents
Item 12.    General Information and History ....................  Organization
                                                                    and
                                                                    Authorized
                                                                    Capital
Item 13.    Investment Objectives & Policies ...................  Investment
                                                                    Practices
                                                                  Investment
                                                                    Restrictions
                                                                  Brokerage
                                                                    Allocations
                                                                    and
                                                                    Portfolio
                                                                    Transactions
Item 14.    Management of the Fund .............................  The Fund and
                                                                    Its
                                                                    Management
Item 15.    Control Persons and Principal Holders of Securities.  Directors &
                                                                    Officers of
                                                                    the Fund
Item 16.    Investment Advisory and Other Services .............  The Investment
                                                                    Adviser
                                                                  Investment
                                                                    Management
                                                                    Services
                                                                  Distribution
                                                                    Services
                                                                  Custodian
Item 17.    Brokerage Allocation & Other Practices .............  Brokerage
                                                                   Allocations
                                                                   and Portfolio
                                                                   Transactions
Item 18.    Capital Stock and Other Securities .................  Organization
                                                                    and
                                                                    Authorized
                                                                    Capital
Item 19.    Purchase, Redemption and Pricing of Securities
               Being Offered ................................... How Shares are
                                                                   Valued
                                                                 How Shares Can
                                                                   Be Purchased
                                                                 How to Sell
                                                                   Shares - See
                                                                   Prospectus
                                                                   page 20
                                                                 Specimen Price
                                                                   Make-up
                                                                   Sheet
Item 20.    Tax Status ......................................... Dividends,
                                                                   Capital
                                                                   Gain
                                                                   Distributions
                                                                   and Taxes
Item 21.    Underwriters ....................................... Distribution
                                                                   Services
Item 22.    Financial Statements ............................... Financial
                                                                   Statements
                                                                   and Reports
<PAGE>

                        COMPOSITE DEFERRED SERIES, INC.
                                   SUITE 801
                               601 W. MAIN AVENUE
                         SPOKANE, WASHINGTON 99201-0613
                            TELEPHONE (509) 353-3550
                            TOLL-FREE (800) 543-8072

      A MUTUAL FUND FORMED TO MEET A BROAD RANGE OF INVESTMENT OBJECTIVES

     Composite  Deferred Series,  Inc, (the "Fund") is a mutual fund designed to
provide  a broad  range  of  investment  alternatives  with its  series  of four
separate portfolios.  Each of the portfolios has distinct investment  objectives
and policies.  Currently investments in shares of the Fund's portfolios may only
be  made  by  the  Composite  Deferred  Variable  Accounts,   separate  accounts
established  and  maintained  by WM  Life  Insurance  Company  and  Empire  Life
Insurance  Company  individually  for the purpose of funding  annuity  contracts
issued  by the  Company.  As long as  shares  of the Fund  are sold  only to the
Accounts,  the terms  "shareholder" or  "shareholders"  in this Prospectus shall
refer to the Accounts. The four portfolios are:
   
- GROWTH & INCOME PORTFOLIO.  Common stocks for long-term capital growth with
  current income a secondary consideration.
- NORTHWEST PORTFOLIO.  Common stocks of companies located or doing business in
  the Northwest for long-term capital growth.
- INCOME PORTFOLIO.  Debt securities for high current income.
- MONEY MARKET PORTFOLIO.  Money market instruments for maximum current income
  with liquidity.  PORTFOLIO SHARES ARE NEITHER GUARANTEED NOR INSURED BY THE
  U.S. GOVERNMENT, AND THERE IS NO ASSURANCE THAT THE $1.00 PER SHARE NET ASSET
  VALUE (NAV) WILL BE MAINTAINED.
(See  "How We Plan to  Reach  These  Objectives"  for more  detailed  investment
criteria.) There is, of course, no guarantee that these objectives can be met.

    
     FUND SHARES ARE NOT DEPOSITS OR  OBLIGATIONS  OF, OR ENDORSED OR GUARANTEED
BY, ANY BANK, NOR ARE THEY FEDERALLY  INSURED BY THE FEDERAL  DEPOSIT  INSURANCE
CORPORATION,  THE FEDERAL  RESERVE  BOARD,  OR ANY OTHER  AGENCY.  THESE  SHARES
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
     This Prospectus  describes the investment  practices of the Fund's separate
portfolios  and  provides  a  basic   description  of  how  the  Fund  operates,
management,  fees and other itmes that potential  investors should know.  PLEASE
RETAIN  THE  PROSPECTUS  FOR  FUTURE   REFERENCE.   A  Statement  of  Additional
Information  about  this  Fund is on  file  with  the  Securities  and  Exchange
Commission and is incorporated by reference into this Prospectus.  The Statement
of Additional  Information  should be read in conjunction  with this Prospectus.
You may obtain a free copy by calling or writing the Fund at the above location.
   
THE DATE OF THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION IS APRIL
30, 1996.

CONTENTS                           PAGE                                   PAGE
Financial Highlights ............   14    The Value of a Single Share ...  19
The Fund's Objectives ...........   16    How to Buy Shares .............  20
How We Plan to Reach                      Distribution of Income and
  These Objectives ..............   16      Capital Gains ...............  20
Investment Restrictions .........   18    Income Taxes on Dividends and
Who We Are ......................   18      Capital Gains ...............  20
The Cost of Good Management .....   19    How to Sell Shares ............  20
                                          We're Here to Help You ........  20

    
THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED  BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES  COMMISSION,  NOR HAS THE SECURITIES
AND  EXCHANGE  COMMISSION  OR ANY STATE  SECURITIES  COMMISSION  PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
                         ---------------------------
THIS  PROSPECTUS  MUST BE ACCOMPANIED  BY A CURRENT  PROSPECTUS FOR THE FLEXIBLE
PREMIUM DEFERRED  VARIABLE ANNUITY CONTRACTS ISSUED BY WM LIFE INSURANCE COMPANY
AND EMPIRE LIFE INSURANCE COMPANY.
<PAGE>
FINANCIAL  HIGHLIGHTS  (FOR  A  SHARE  OUTSTANDING  THROUGHOUT  EACH  YEAR)  The
supplemental  financial information on this page has been audited by independent
auditors  whose  reports  thereon  appear in the Fund's  Annual  Report which is
incorporated by reference into the Statement of Additional Information.

<TABLE>
<CAPTION>
   
                                                          YEARS ENDED DECEMBER 31,
GROWTH & INCOME              ----------------------------------------------------------------------------------------
PORTFOLIO                     1995      1994      1993      1992      1991      1990      1989      1988      1987(4)
                             -------   -------   -------   -------   -------   -------   -------   -------   --------
<S>                          <C>       <C>       <C>        <C>       <C>       <C>       <C>       <C>       <C>
NET ASSET VALUE,
 BEGINNING OF YEAR .........  $15.70    $15.71    $15.26    $14.28    $11.82    $12.89    $12.07    $10.53    $12.00
  INCOME FROM                 -------   -------   -------   -------   -------   -------   -------   -------   --------
    INVESTMENT OPERATIONS
  Net investment income ....    0.35      0.31      0.29      0.36      0.36      0.40      0.51      0.40      0.22
  Net gains or losses on
    securities (both real-
    ized and unrealized) ...    4.90      0.12      0.84      1.13      2.66     (1.04)     0.81      1.54     (1.49)
                              -------   -------   -------   -------   -------   -------   --------  -------   --------
     Total from investment
      operations ...........    5.25      0.43      1.13      1.49      3.02     (0.64)     1.32      1.94     (1.27)
                              -------   -------   -------   -------   -------   -------   --------  -------   --------
  LESS DISTRIBUTIONS
  Dividends (from net
    investment income) .....   (0.35)    (0.31)    (0.28)    (0.36)    (0.35)    (0.43)    (0.50)    (0.40)    (0.20)
  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)    (0.43)    (0.50)    (0.40)    (0.20)
                              -------   -------   -------   -------   --------  -------   --------  -------   --------
NET ASSET VALUE,
 END OF YEAR ...............  $20.22    $15.70    $15.71    $15.26    $14.28    $11.82    $12.89    $12.07    $10.53
                              =======   =======   =======   =======   ========  =======   ========  =======   ========
TOTAL RETURN(1) ............  33.70%     2.72%     7.58%    10.56%    25.91%    -4.96%    11.00%    18.55%    10.57%
RATIOS/SUPPLEMENTAL DATA
  Net assets,
    end of year (thousands). $24,448   $14,195   $11,239    $7,455    $4,116    $2,140    $1,986    $1,394    $771
Ratio of expenses to
  average net assets(3) ....   0.70%     0.68%     0.76%     0.87%     1.16%     1.38%     1.10%     0.69%        -%
Ratio of net income to
  average net assets .......   2.01%     1.97%     1.96%     2.51%     2.77%     3.41%     4.12%     3.61%     3.29%
Portfolio turnover rate(2) .     36%       25%       38%       13%       23%       23%       28%       35%       12%
<FN>
(1)  Total return does not reflect sales charge or separate account expenses; returns of less than one year are not annualized.
(2)  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.
(3)  All expenses incurred from incorporation were absorbed by WM Life Insurance Company, the sole shareholder, through April 30,
     1988.  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 upon net expenses and have not 
     been restated.
(4)  Information for 1987 is presented from April 30, 1987, the date registration became effective under the Investment Company Act
     of 1940, as amended.
    
</FN>
</TABLE>
<TABLE>
<CAPTION>
   

                                        YEARS ENDED                    JANUARY 4,
                                        DECEMBER 31,                    1993 TO
                                 --------------------------            DECEMBER 31,
NORTHWEST PORTFOLIO                1995              1994                1993(3)
                                 ----------       ---------           -------------
<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 real-
   ized and unrealized) ........     3.02           (0.21)                0.19
                                 ----------       ---------           -------------
    Total from invest-
     ment operations ...........     3.11           12.06                 0.35
                                 ----------       ---------           -------------
  LESS DISTRIBUTIONS
  Dividends (from net
   investment income) ..........    (0.09)          (0.08)               (0.16)
  Distributions (from
   capital gains) ..............        -           (0.01)                   -
                                 ----------       ----------          -------------
    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 (thousands) ....   $7,495          $4,647               $2,686
 Ratio of expenses to
  average net assets (4) .......    0.90%           0.87%                   -%
 Ratio of net income to
  average net assets ...........    0.67%           0.76%                1.61%(5)
 Portfolio turnover rate(2) ....      11%             17%                   -%
<FN>
(1)  Total return does not reflect sales charge or separate account expenses; returns of less than one year are not annualized.
(2)  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.
(3)  Operations commenced January 4, 1993.
(4)  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 upon net expenses
     and have not been restated.
(5)  Annualized.
    
</FN>
</TABLE>
<TABLE>
<CAPTION>
   
                                                          YEARS ENDED DECEMBER 31,
INCOME PORTFOLIO             ----------------------------------------------------------------------------------------
                              1995      1994      1993      1992      1991      1990      1989      1988      1987(4)
                             -------   -------   -------   -------   -------   -------   -------   -------   --------
<S>                          <C>       <C>        <C>       <C>       <C>       <C>       <C>       <C>       <C>
NET ASSET VALUE,
 BEGINNING OF YEAR .........  $11.22    $12.57    $12.22    $12.27    $11.44    $11.46    $11.55    $11.72    $12.00
  INCOME FROM                 -------   -------   -------   -------   -------   -------   -------   -------   --------
    INVESTMENT OPERATIONS
  Net investment income ....    0.79      0.79      0.85      0.86      0.91      0.95      1.18      1.26      0.69
  Net gains or losses on
    securities (both real-
    ized and unrealized) ...    1.37     (1.35)     0.35     (0.05)     0.83     (0.02)    (0.09)    (0.17)    (0.28)
                              -------   -------   -------   -------   -------   -------   --------  -------   --------
     Total from investment
      operations ...........    2.16     (0.56)     1.20      0.81      1.74      0.93      1.09      1.09      0.41
                              -------   -------   -------   -------   -------   -------   --------  -------   --------
  LESS DISTRIBUTIONS
  Dividends (from net
    investment income) .....   (0.79)    (0.79)    (0.85)    (0.86)    (0.91)    (0.95)    (1.18)    (1.26)    (0.69)
                              -------   -------   -------   -------   --------  -------   --------  -------   --------
NET ASSET VALUE,
 END OF YEAR ...............  $12.59    $11.22    $12.57    $12.22    $12.27    $11.44    $11.46    $11.55    $11.72
                              =======   =======   =======   =======   ========  =======   ========  =======   ========
TOTAL RETURN(1) ............  19.86%    -4.48%    10.02%     6.91%    15.90%     8.59%     9.93%     9.69%     3.45%
RATIOS/SUPPLEMENTAL DATA
  Net assets,
    end of year (thousands). $15,206   $10,842    $9,113    $6,165    $4,407    $3,738    $3,628    $3,414    $1,394 
Ratio of expenses to
  average net assets(3) ....   0.76%     0.74%     0.86%     0.88%     0.98%     1.06%     0.81%     0.69%        -%
Ratio of net income to
  average net assets .......   6.62%     6.79%     6.75%     7.12%     7.78%     8.43%    10.23%    10.65%     7.30%
Portfolio turnover rate(2) .     14%       15%       29%       37%       66%       85%       48%       30%       13%
<FN>
(1)  Total return does not reflect sales charge or separate account expenses; returns of less than one year are not annualized.
(2)  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.
(3)  All expenses incurred from incorporation were absorbed by WM Life Insurance Company, the sole shareholder, through April 30,
     1988.  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 upon net expenses and have not 
     been restated.
(4)  Information for 1987 is presented from April 30, 1987, the date registration became effective under the Investment Company Act
     of 1940, as amended.
  
    
</FN>
</TABLE>
<TABLE>
<CAPTION>
   
                                                          YEARS ENDED DECEMBER 31,
MONEY MARKET                 ----------------------------------------------------------------------------------------
PORTFOLIO                     1995      1994      1993      1992      1991      1990      1989      1988      1987(1)
                             ------    ------    -------   -------   -------   -------   -------   -------   --------
<S>                          <C>       <C>       <C>       <C>        <C>       <C>       <C>       <C>       <C>
NET ASSET VALUE,
 BEGINNING OF YEAR ......... $1.00     $1.00     $1.00     $1.00      $1.00     $1.00     $1.00     $1.00     $1.00
  INCOME FROM                ------    ------    -------   -------   -------   -------   -------   -------   --------
    INVESTMENT OPERATIONS
  Net investment income ....  0.01         -         -         -       0.06      0.08      0.09      0.07      0.04
  LESS DISTRIBUTIONS
  Dividends (from net
    investment income) ..... (0.01)        -         -         -      (0.06)    (0.08)    (0.09)    (0.07)    (0.04)
NET ASSET VALUE,             ------    ------    -------   -------   -------   -------   -------   -------   --------   
 END OF YEAR ............... $1.00     $1.00     $1.00     $1.00      $1.00     $1.00     $1.00     $1.00     $1.00
                             ======    ======    =======   =======   =======   =======   =======   =======   ========
TOTAL RETURN ............... 1.16%         -%        -%     -0.25%     5.92%     8.01%     8.95%     7.60%     3.55%
RATIOS/SUPPLEMENTAL DATA
  Net assets,
    end of year (thousands).  $221      $219      $218      $218      $586      $565      $409       $301     $128
Ratio of expenses to
  average net assets(3) .... 4.54%     3.65%      2.87%     2.82%       -%        -%        -%         -%        -%
Ratio of net income to
  average net assets ....... 1.16%     0.39%         -%     0.82%     5.77%     7.70%     8.56%     7.22%     4.32%

<FN>
(1)  Information for 1987 is presented from April 30, 1987, the date registration became effective under the Investment Company Act
     of 1940, as amended.
(2)  Total return does not reflect sales charge or separate account expenses; returns of less than one year are not annualized.
(3)  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 management 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 upon net expenses and have not been restated.
</FN>
    
</TABLE>
<PAGE>
THE FUND'S OBJECTIVES
   
     Composite Deferred Series,  Inc. (a Washington  corporation formed December
8,  1986) is a  "series"  fund  consisting  of four  separate  portfolios.  Each
portfolio  is a  segregated  pool  of  assets  and  has a  different  investment
objective  which cannot be changed  without a majority  vote of its  outstanding
shares.  The  investment   practices  of  each  portfolio  involve  a  carefully
calculated  degree of risk.  There is no guarantee  that the  objectives  of the
portfolios can be achieved.
     GROWTH & INCOME  PORTFOLIO  is designed  and  managed to provide  long-term
growth of  capital,  with  current  income a  secondary  consideration,  through
investment in common stocks and other securities.
     NORTHWEST  PORTFOLIO  is designed to provide  long-term  capital  growth by
investing  in the common  stocks of companies  located or doing  business in the
Northwest states of Alaska, Idaho, Montana, Oregon and Washington.  Under normal
circumstances,  at least 65% of its total  assets will be invested in  companies
whose principal executive offices are located in the Northwest.
     INCOME  PORTFOLIO is designed  and managed to provide the highest  level of
current income,  with protection of capital a secondary  consideration,  through
investment in higher grades of debt and other securities.
     MONEY MARKET  PORTFOLIO is designed and maanged to provide  maximum current
income  while at the same time  maintaining  liquidity  and  preserving  capital
through investment in short-term, high-grade money market instruments.
    
     Investors  ("Contract Owners") should be aware that the market value of the
portfolio  selected  will  affect  the value of the  Flexible  Premium  Variable
Annuity Contract (the  "Contract") and the amount of annuity  payments  received
under the Contract. See the attached Prospectus for the Contract which describes
the  relationship  between  increases  or  decreases  in the net asset  value of
portfolio  shares  (and  any  distributions  on such  shares)  and the  benefits
provided under the Contract.

HOW WE PLAN TO REACH THESE OBJECTIVES

     We intend to achieve the above  objectives by investing in  securities  and
other instruments specifically chosen to fulfill such objectives, as follows:

GENERAL PORTFOLIO TECHNIQUES
ALL PORTFOLIOS
   
     MONEY MARKET  INSTRUMENTS.  The Portfolios are permitted to invest in money
market  instruments  for  temporary  or  defensive  purposes.  The money  market
investments  permitted  include  obligations of the United States government and
its agencies and instrumentalities; commercial paper including bank obligations;
other  short-term  corporate  debt  securities;  certificates  of  deposit;  and
repurchase agreements.
     REPURCHASE AGREEMENTS.  The Portfolios may temporarily invest cash reserves
in repurchase agreements.  Repurchase agreements are debt instruments subject to
an obligation  of the seller to  repurchase  and of the Portfolio to resell at a
fixed price. In the event the seller defaults on its agreement to repurchase the
instrument, the Portfolio may suffer a loss because of a decline in the value of
the underlying debt instrument.  Repurchase agreements will only be entered into
with brokers, dealers or banks that meet credit guidelines adopted by the Fund's
Board of Directors.  To limit risk,  repurchase agreements maturing in more than
seven days will not exceed 10% of the Portfolio's total assets.

GROWTH & INCOME PORTFOLIO
     A broadly  diversified  portfolio of common  stocks is  carefully  selected
which, in the opinion of the Adviser,  has an underlying value and which will be
held for as long as those stocks reflect that value.  Frequently,  this involves
investment  in stocks that the Adviser  considers to be  undervalued.  These are
stocks that may be currently "out of favor" with some  investors,  and hence, in
management's  judgment,  are  selling at less than they are worth.  Some  stocks
chosen may pay significant  dividends and provide income to the Portfolio and to
its  shareholders.  Others may pay little or no dividends,  but in  management's
judgment  are  valuable for their  growth  potential  alone.  During some market
conditions  (for  example,   in  general  stock  market  declines)  a  defensive
investment  practice  may be used;  the Adviser  may choose to sell  substantial
amounts of common  stock,  and invest the proceeds in more stable,  fixed-income
securities  (not to exceed 65% of the  Portfolio's  total net assets)  until the
market for common stocks appears ready to resume its growth. This flexibility --
this  capacity to ride the currents of market  conditions to its advantage -- is
one of the strengths of the Growth & Income portfolio.
    
     Although the Portfolio is diversified and management believes the Portfolio
to be invested  prudently,  some securities  within the Portfolio,  from time to
time,   may  be  subject  to   moderate-to-high   levels  of  market   risk  and
low-to-moderate levels of financial risk.
   
NORTHWEST PORTFOLIO
     Common stocks are selected from high-quality  companies with solid business
fundamentals that the Adviser believes have a competitive  advantage.  Since the
Portfolio  concentrates on companies located or doing business in the Northwest,
a portion of its performance is dependent on the region's  economic  conditions.
Because of this,  it could be  adversely  impacted by  industrial  and  business
trends within the five-state  area. Some of the companies  whose  securities are
held by the Portfolio may have significant national or international markets for
their products and services.  Therefore,  its performance could also be affected
by national or international economic conditions.

GROWTH & INCOME AND NORTHWEST PORTFOLIO
    
     Up to 25% of  each  Portfolio's  assets  may be  invested  in  real  estate
investment  trusts  ("REITs").  Among the  factors  influencing  the  investment
performance  of REITs are the  profitable  operation of  properties  owned,  the
financial condition of lessees and mortgageors, the underlying value of the real
property and  mortgages  owned,  the amount of leverage,  and the amount of cash
flow generated and paid out.
     Each Portfolio may, if the Adviser  considers it  appropriate,  use covered
call options to obtain  additional  income.  The total of a  Portfolio's  assets
subject to options will not exceed 20%.
     The  principal  reason for writing  covered  call  options is to attempt to
realize, through the receipt of premium, a greater return than would be realized
on the underlying securities alone. In return for the premium, the Portfolio has
given up the  opportunity  for profit from a price  increase  in the  underlying
security  above the exercise  price,  so long as the option  remains  open,  but
retains the risk of loss should the price of the security decline.  If an option
expires,  the writer  realizes a gain in the amount of the premium.  Such a gain
may be offset by a decline in the market value of the underlying security during
the option period. If a covered call option is exercised,  the writer realizes a
gain or loss from the sale of the underlying security.

INCOME PORTFOLIO
     A diversified  portfolio of debt issues and other  obligations is carefully
selected by the Adviser to provide high current yields  consistent with moderate
risk. Accordingly, the Portfolio invests most of its assets in the following:
   
1)   Debt and convertible  debt securities  which enjoy the four highest ratings
     of  Standard & Poor's  Corporation  or  Moody's  Investor's  Service,  Inc.
     (Securities  rated  BBB by  Standard  & Poor's or Baa by  Moody's  may have
     speculative  characteristics.  See the Statement of Additional Information,
     Appendix B, for a detailed description of these ratings.)
    
2)   Debts  of  the  United  States  government  and  its  agencies,   including
     mortgage-backed securities.
3)   Obligations of U.S. banks that belong to the Federal Reserve  System.  (The
     Portfolio may invest no more than 25% of its total assets in these issues.)
4)   Preferred  stocks and  convertible  preferred  stocks  which enjoy the four
     highest ratings of Standard & Poor's or Moody's.
5)   The  highest  grade  commercial  paper  as rated by  Standard  & Poor's  or
     Moody's.
6)   Short-term repurchase agreements (usually not more than seven days).
7)   Deposits in U.S. banks.  (Unless these are liquid,  they may not exceed 10%
     of the Portfolio's total assets.)
   
     To increase the Portfolio's yield, the Adviser may also invest up to 20% of
the Portfolio's  assets in lower-rated  securities (but no lower than Standard &
Poor's B or  Moody's B) or  non-rated  securities  the  Adviser  believes  to be
comparable.  Lower-rated and unrated securities are generally subject to greater
financial risk than higher-rated  securities,  as there is a greater probability
that issuers of lower-rated securities will not be able to pay the principal and
interest due on such securities,  especially  during periods of adverse economic
conditions. The market price of lower-rated securities generally fluctuates more
than  those of  higher-  rated  securities,  which may  affect  the value of the
Portfolio.  Securities which are rated lower than BBB or Baa (commonly  referred
to as "junk bonds") should be considered  speculative as such ratings indicate a
quality of less than investment  grade.  Securities  rated BBB or Baa,  although
investment grade,  also reflect  speculative  characteristics.  The Adviser will
only invest in these lower-rated  securities if it believes the income and yield
are sufficient to justify the incremental  risk. In addition,  the Portfolio may
purchase or sell U.S. government securities on a when-issued or delayed delivery
basis (known generally as forward commitments).
    
     The  Income  portfolio  invests  most  of its  assets  in  investment-grade
corporate  bonds,  and these  should be subject  to little  financial  risk,  to
moderately  high levels of market risk,  and to  moderately  low current  income
volatility.
     The market value of fixed-income  debt securities is affected by changes in
general  market  interest  rates.  If interest  rates fall,  the market value of
fixed- income securities tends to rise; but if interest rates rise, the value of
fixed-  income   securities   tends  to  fall.  This  market  risk  affects  all
fixed-income  securities,  but lower-rated and unrated securities may be subject
to greater market risk than higher-rated  (lower-yield) securities.  For further
details on risk, see the Statement of Additional Information.

MONEY MARKET PORTFOLIO
     At the date of this Prospectus this Portfolio was closed to investors,  but
may be offered  in the  future.  A  portfolio  of  fixed-income  obligations  is
carefully  selected  by the  Adviser  to  provide  the  return  of money  market
instruments along with liquidity. No common stock or other equity securities are
allowed.  Such  obligations,  unless  restricted  by law, fall into five general
categories:

1)   Obligations  issued or  guaranteed  by the United  States  government,  its
     agencies or its instrumentalities.
2)   Obligations  of U.S.  and  foreign  banks  with  assets  of more  than $500
     million.
3)   Short-term  commercial  notes,  issued  directly by businesses and banks to
     finance  short- term cash needs.  The Portfolio  will only  purchase  notes
     which have the highest rating by Moody's  Investor's  Service,  Inc., or by
     Standard  &  Poor's   Corporation.   (See  the   Statement  of   Additional
     Information, Appendix B, for a detailed description of these ratings.)
4)   Short-term repurchase agreements (usually not more than one business day.)

     At least 80% of the Portfolio's assets will be invested in the higher-rated
money market instruments which mature in less than one year.
   
     The Statement of Additional  Information  contains  details  concerning the
types, ratings and nature of the Portfolio's investments,  and the criteria used
for evaluation and selection.
    
     The Money Market portfolio invests in short-term,  high-quality investments
that should  reflect  current  market  interest  rates,  and therefore the Money
Market  portfolio  should  be  subject  to  relatively  little  market  risk and
financial  risk but a high  level of  current  income  volatility.  Nonetheless,
investors should be aware that the market value of fixed-income  debt securities
is affected by changes in general market interest rates. If interest rates fall,
the market value of fixed-income securities tends to rise; but if interest rates
rise,  the value of  fixed-income  securities  tends to fall.  This  market risk
affects all fixed-income securities.
   
     The  Portfolio  invests  less than 25% of its total  assets in domestic and
foreign bank obligations  (including  foreign branches of U.S.  domestic banks).
This  investment  involves  risks that are  different in some  respects  from an
investment in an investment  company which invests only in debt  obligations  of
U.S. domestic issuers.
     
INVESTMENT RESTRICTIONS
     While many of the decisions of the Adviser depend on flexibility, there are
certain  principles so fundamental  that they are required as matters of policy.
These may not be  changed  without  a vote of the  majority  of the  outstanding
shares of the respective Portfolio.

     IN ADDITION TO OTHER  RESTRICTIONS  LISTED IN THE  STATEMENT OF  ADDITIONAL
INFORMATION, EACH PORTFOLIO MAY NOT:
 
- invest more than 5%* of its total assets in the securities of any single
  issuer (other than U.S. government securities), except that up to 25% of
  Growth & Income, Northwest, and Income Portfolios' assets may be invested
  without regard to this 5% limitation;
- acquire more than 10%* of the voting securities of any company;
- invest more than 25%* of its assets in any single industry;
- borrow money (except it may borrow up to 5% of its total assets for emergency,
  non-investment purposes, or up to 33 1/3% to meet redemption requests that
  would otherwise result in the untimely liquidation of vital parts of its
  portfolios).
 
* Percentage at the time the investment is made.
 
    

WHO WE ARE
   
     Composite  Deferred Series was incorporated under the laws of Washington on
December 8, 1986, as an open-end management  investment company,  often called a
"mutual  fund."  Each  Portfolio  is  classified  as  "diversified,"  under  the
Investment Company Act of 1940.
     Shares of the Fund's  portfolios  are sold only to, and are owned  entirely
by, the  Composite  Deferred  Variable  Accounts  (the  "Accounts")  to fund the
benefits  under  certain  flexible  premium  variable  annuity   contracts  (the
"Contracts")  issued by WM Life  Insurance  Company  and Empire  Life  Insurance
Company,  individually  the  "Company."  (In the  future,  shares may be sold to
certain other separate  accounts.)  The Accounts for which Murphey Favre,  Inc.,
serves as  distributor,  will invest in shares of the various  portfolios of the
Fund as directed by the  Contract  Owner,  whose  allocation  rights are further
described in the attached  Prospectus for the  Contracts.  The Company may cause
the account to sell shares to the extent necessary to provide benefits under the
Contracts.
     The Fund is managed by Composite Research & Management Co. (the "Adviser").
The Adviser and Murphey Favre are  subsidiaries of Washington  Mutual Bank. They
are also  affiliated  with Washington  Mutual,  fsb; WM Life Insurance  Company,
Empire Life Insurance Company,  and Murphey Favre Securities  Services,  and are
indirect subsidiaries of Washington Mutual, Inc. The Adviser manages seven other
mutual  funds  with  differing  objectives,  as well as  institutional  advisory
accounts,  and has been in the business of investment management since 1944. The
Adviser's  address  is  1201  Third  Avenue,  Suite  1220,  Seattle,  Washington
98101-3015.
     The  Adviser   advises  the  Fund  on  investment   policies  and  specific
investments.  Subject to  supervision  by the  Fund's  Board of  Directors,  the
Adviser  determines  which  securities are to be bought or sold. These decisions
are based on analyses of the nation's economy,  sectors of industry and specific
corporations.  They are compiled  from  extensive  data  provided by some of the
country's   largest   investment   firms,  in  addition  to  the  Adviser's  own
investigation.
     William G. Papesh is president  of the Fund and of the  Adviser.  A team of
the Adviser's investment professionals manage each Portfolio. There is an Equity
investment  team and a  Fixed-Income  investment  team,  each  reporting  to the
Adviser's investment committee.  The Equity team consists of Jeffrey D. Huffman,
Chartered Financial Analyst (CFA); Philip M. Foreman, CFA; and David W. Simpson,
CFA.  The  Fixed-Income  team  consists  of  Brian  L.  Placzek,  CFA;  Gary  J.
Pokrzywinski,  CFA; and Audrey S. Quaye.  Mr.  Huffman has been  employed by the
Adviser  since  January  1995,  and  has  11  years  of  continuous   investment
experience. Mr. Foreman has been employed by the Adviser since November 1991 and
has 11 years of continuous investment experience.  Mr. Simpson has been employed
by the  Adviser  since  March  1993 and has 10 years  of  continuous  investment
experience. Mr. Placzek has been employed by the Adviser since July 1990 and has
11 years of  continuous  experience in investment  and financial  analysis.  Mr.
Pokrzywinski  has been  employed by the Adviser since July 1992 and has 11 years
of continuous  experience in fixed-income  and financial  market  analysis.  Ms.
Quaye has been employed by the Adviser since  February 1996 and has six years of
continuous experience in fixed-income investment and financial analysis.
     Management  has included a discussion of  performance  in the Fund's annual
report  which is available  upon request and without  charge by calling the Fund
offices.
     The Fund has an authorized  capitalization  of 10 billion shares of capital
stock.  Shares are  designated by  Portfolio.  All shares of the Fund are freely
transferable.  The shares do not have preemptive  rights, and none of the shares
have  any   preference  to   conversion,   exchange,   dividends,   retirements,
liquidation,  redemption or any other feature.  Normally, the Fund does not hold
annual  meetings.  When meetings are held,  shareholders  have the right to vote
their shares cumulatively in any election of directors. With certain exceptions,
such as changes of investment objective and approval of the management contract,
all  shares  have  equal  voting  rights  on  any  corporate   matter  requiring
shareholder  approval.  Investors  (contract owners) may instruct the Company on
voting shares at  shareholders'  meetings.  (See the Prospectus for the Account,
"Voting Rights," for a discussion of pass-through voting.)

THE COST OF GOOD MANAGEMENT

     A management  contract  has been  executed  between the Fund and  Composite
Research & Management  Co. It is renewable  annually  subject to the approval of
the Fund's Board of Directors.
    
     Under the  contract,  a fee based on a percentage  of net assets is paid to
the Adviser for its investment advisory and administrative services and as agent
for the Fund in paying that portion of the fee owed to the Distributor. The Fund
is  responsible  for paying  expenses of  operation  that are not assumed by the
Adviser.
   
     Each Portfolio's  advisory fee is calculated and paid monthly.  It is equal
to an annual rate of .50% of the average daily net asset value of the Portfolio.
     Total expenses,  including advisory fees and other operating expenses,  can
be found under  "Ratio of  expenses  to average  net  assets" in the  "Financial
highlights" section on pages 14 and 15 of this Prospectus.
 
THE VALUE OF A SINGLE SHARE
     Each  Portfolio  calculates  its net asset  value at the  close of  regular
trading on each day the New York Stock  Exchange  is open  (generally  1:00 p.m.
Pacific  time).  Net Asset  Value per share  (NAV) is  determined  by adding the
market value of the  securities in the Portfolio,  plus all other assets,  minus
any liabilities.  That amount,  divided by the number of shares outstanding,  is
the  NAV of the  individual  Portfolio.  Security  valuations  are  provided  by
independent pricing sources approved by the Fund's Board of Directors. When such
valuations  are not  available,  the Board of Directors  will  determine how the
securities are to be priced at fair value.
     Investment  securities in the Money Market  portfolio are valued at cost as
adjusted for amortization of premiums and discounts where applicable.  The Board
of Directors  regularly and routinely  monitors amortized cost value assigned to
these securities to insure that carrying value approximates market valuation.
     The NAV per share of most  mutual  funds  fluctuates  with the value of the
securities held.  However,  the Money Market  portfolio,  like most money market
funds,  attempts to maintain the NAV per share at a constant $1.00.  When income
to the Portfolio is realized,  proportionate numbers of shares are added to each
shareholder's  account, in order to maintain the per share value of $1.00. If on
any  business  day net  income  should  happen  to be  less  than  realized  and
unrealized  losses,  rather  than  reduce  the NAV below  $1.00 per  share,  the
Portfolio will reduce the number of shares  outstanding.  Each  shareholder will
automatically  contribute shares  proportionately to the Portfolio  representing
the account's negative net income thereby reducing the number of shares in their
account.
    
     Money Market  portfolio  shares are neither  guaranteed  nor insured by the
U.S. government,  and there is no assurance that the $1.00 per share NAV will be
maintained.

HOW TO BUY SHARES
     Investments  in shares  of the  Fund's  portfolios  may only be made by the
Composite  Deferred  Variable  Accounts,   separate  accounts   established  and
maintained  by WM Life  Insurance  Company  and Empire  Life  Insurance  Company
individually for the purpose of funding annuity contracts issued by the Company.
Investors  desiring  to  purchase  annuity  contracts  supported  by  any of the
portfolios  of  Composite   Deferred  Series  should  read  this  prospectus  in
conjunction with the Account Prospectus.
     Portfolio  shares are offered to the Accounts  without  sales charge at the
respective net asset value of the portfolios  next  determined  after receipt by
the Fund of the purchase order.

DISTRIBUTION OF INCOME AND CAPITAL GAINS
   
     The Fund  intends to  distribute  substantially  all of the net  investment
income,  if any, of each Portfolio.  (Net investment income is the return on the
securities  in  each  Portfolio,  minus  expenses  and  excluding  realized  and
unrealized  capital  gains.)  Dividends  from  net  investment  income  and  any
distributions of realized  capital gains are reinvested in additional  shares of
the respective Portfolio at net asset value.
     For the Money Market  portfolio,  net  investment  income is calculated and
paid  daily  (dividends  will not be earned on the day of  purchase  but will be
earned on the day of  withdrawal);  for the  Income  portfolio,  net  investment
income is accrued daily and paid monthly;  for the Growth & Income and Northwest
portfolios,  net  investment  income is calculated and paid  quarterly.  Any net
realized capital gains will be paid annually.

INCOME TAXES ON DIVIDENDS AND CAPITAL GAINS
     The Portfolios qualify as regulated investment companies under the Internal
Revenue  Code.  As long as they  remain  qualified,  they will not be subject to
federal income tax on income and capital gains distributed to its shareholders.
     Portfolios  within a series fund are treated  separately for federal income
tax purposes.
    
     Since the Accounts will be the only shareholders of the Fund, no discussion
is included  about the federal  income tax  consequences  to  shareholders.  For
information  concerning  the  federal  income  tax  consequences  to  holders of
variable annuity contracts, see the attached Prospectus for the Flexible Premium
Deferred Variable Annuity Contracts.

HOW TO SELL SHARES
   
     Shares of the Fund's portfolios may be redeemed for cash at any time by the
Accounts.  There is no charge  levied by the Fund for  redemption  of  Portfolio
shares,  nor is any fee imposed on the exchange of shares of one  Portfolio  for
those of  another.  The share price paid on sales or  exchanges  will be the net
asset value as of the next close of the New York Stock Exchange after receipt of
the request.
    
     Contract  Owners should see the Prospectus for the Accounts for information
on  surrenders  and  withdrawals  under the  annuity  contracts  and any charges
associated with the annuity contracts.  (See the Prospectus for the Accounts for
a discussion of contingent deferred sales charge.)

WE'RE HERE TO HELP YOU
     Any  inquiries  you may have  regarding  this Fund or your  account  may be
directed  to your  investment  representative  or to the Fund at the  address or
telephone number on page 13 of this  Prospectus.  We will be glad to answer your
questions.
<PAGE>

                                                               
                                                                 STATEMENT OF
                                                                 ADDITIONAL
                                                                 INFORMATION
                                                                    
                                                                 APRIL 30, 1996
                                                                     

                         COMPOSITE DEFERRED SERIES, INC.
       A Mutual Fund Formed to Meet a Broad Range of Investment Objectives

                          601 W Main Avenue, Suite 801
                             Spokane, WA 99201-0613
                             Telephone: 509-353-3550
                             Toll free: 800-543-8072

Composite Deferred Series,  Inc. (the "Fund") aims to enable investors to meet a
broad range of  investment  alternatives  by providing a series of four separate
portfolios,  each with a different investment  objective.  Additional portfolios
may be created by the Board of  Directors,  from time to time,  without  further
action on the part of existing  investors.  Investors choose whichever portfolio
best suits  their  needs and may  exchange  portfolios  within the Fund  without
charge  as their  investment  objectives  or  economic  conditions  change.  The
portfolios are:

     - MONEY MARKET  PORTFOLIO:  Money market  instruments  for maximum  current
       income with liquidity.
   
     - GROWTH & INCOME  PORTFOLIO:  Common stocks for long-term  capital  growth
       with current income a secondary consideration.
 
     - NORTHWEST  PORTFOLIO:  Common stocks of Northwest companies for long-term
       capital growth.
    
     - INCOME PORTFOLIO: Debt securities for high current income.

Individual  portfolio  investments,  carefully  chosen to  fulfill  the  diverse
objectives,  are adjusted in  accordance  with  Composite  Research & Management
Co.'s  (the  "Adviser")   evaluation  of  changing  market  risks  and  economic
conditions.  There can be no assurance that these investment  objectives will be
achieved.
   
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.  IT SHOULD BE READ
IN CONJUNCTION  WITH THE FUND'S  PROSPECTUS DATED APRIL 30, 1996, AS WELL AS THE
PROSPECTUS FOR THE FLEXIBLE PREMIUM DEFERRED  VARIABLE ANNUITY  CONTRACTS ISSUED
BY WM LIFE  INSURANCE  COMPANY AND EMPIRE LIFE  INSURANCE  COMPANY.  BOTH MAY BE
OBTAINED WITHOUT CHARGE BY CONTACTING MURPHEY FAVRE, INC., AT THE ABOVE ADDRESS.
THIS  STATEMENT  IS INTENDED TO PROVIDE  ADDITIONAL  INFORMATION  REGARDING  THE
ACTIVITIES  AND OPERATION OF THE FUND WHEN  ALLOCATING  AN INVESTMENT  UNDER THE
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT TO THE FUND.
 
                                TABLE OF CONTENTS

The Fund and Its Management          2-8    Brokerage Allocations and
Distribution Services                  8     Portfolio Transactions       17-18
How Shares Are Valued                8-9    General Information             18
How Shares Can Be Purchased            9    Financial Statements and
Redemption of Shares                   9     Reports                        19
Dividends, Capital Gain                     Appendix A                      20
    Distributions and Taxes         9-10    Appendix B                    21-24
Investment Practices               10-16
Investment Restrictions            16-17 
    
THE FUND AND ITS MANAGEMENT

COMPOSITE DEFERRED SERIES, INC.

Currently,  shares  of the  Fund's  portfolios  are sold  only to the  Composite
Deferred  Variable  Accounts (the "Accounts") to fund the benefits under certain
flexible premium deferred variable annuity contracts (the "Contracts") issued by
WM Life  Insurance  Company  and Empire  Life  Insurance  Company  (together  or
separately,  the "Company").  In the future, shares may be sold to certain other
separate  accounts and  affiliated  entities of the Company.  The Accounts  will
invest  in shares  of the  various  portfolios  of the Fund as  directed  by the
investor (the "Contract  Owner"),  whose allocation rights are further described
in the attached prospectus for the Contracts. The Company may sell shares to the
extent necessary to provide benefits under the Contracts.

THE INVESTMENT ADVISER
   
As discussed under "Who We Are" in the prospectus,  Composite  Deferred  Series,
Inc.  (the  "Fund")  is  managed  and  investment  decisions  are made under the
supervision of Composite Research & Management Co. (the "Adviser"). Decisions to
buy, sell, or hold a particular  security are made by an investment  team of the
Adviser,  approved by an investment committee of the Adviser, and subject to the
control and final direction of the Fund's Board of Directors.

Composite  Research  &  Management  Co.  is  Adviser  for the  eight  investment
companies  (currently 12 separate  portfolios) in the "Composite Group," namely:
Composite Bond & Stock Fund,  Inc.;  Composite  Equity Series,  Inc.;  Composite
Income  Fund,  Inc.;  Composite  Tax-Exempt  Bond  Fund,  Inc.;  Composite  Cash
Management  Company;  Composite  U.S.  Government  Securities,  Inc.;  Composite
Northwest  Fund,  Inc.;  and Composite  Deferred  Series,  Inc. The Adviser also
provides investment advice to institutional clients.
    
INVESTMENT MANAGEMENT SERVICES
   
Management  fees and services  performed by the Adviser are discussed under "The
Cost of Good Management" in the prospectus.  The Investment Management Agreement
(the  "Agreement")  requires  the  Adviser to  furnish  suitable  office  space,
research,  statistical and investment  management  services to the Fund. It will
continue from  year-to-year if  continuation  is specifically  approved at least
annually by the Fund's Board of Directors (including a majority of the directors
who are not  parties  to the  Agreement)  by votes  cast in  person at a meeting
called for the purpose of voting on such  approval,  or by vote of a majority of
the  outstanding  shares of the Fund.  The Agreement can be terminated by either
party on sixty (60) days' notice,  without  penalty,  and provides for automatic
termination upon its assignment.

Under the provisions of the Investment Company Act of 1940 and as used elsewhere
in the prospectus and this Statement of Additional Information, the phrase "vote
of the  majority  of the  outstanding  shares of the Fund" means the vote at any
meeting of  shareholders  of (a) 67% or more of the  shares  present by proxy at
such meeting, if the shareholders of more than 50% of the outstanding shares are
present or represented by proxy, or (b) more than 50% of the outstanding shares,
whichever is less. The Accounts will vote shares as directed by Contract Owners.

In payment for its services,  the Adviser receives a fee equal to .50% per annum
computed on the average daily net assets of each portfolio. For 1995, management
fees incurred by the Money Market portfolio,  Growth & Income portfolio,  Income
portfolio and Northwest portfolio,  before expense reimbursements,  were $1,097,
$90,132, $64,637, and $29,906,  respectively. For 1994, management fees incurred
by the Money Market portfolio,  Growth & Income portfolio, Income portfolio, and
Northwest  portfolio,  before  expense  reimbursements,  were  $1,088,  $67,108,
$51,869, and $18,740,  respectively.  For 1993,  management fees incurred by the
Money  Market  portfolio,  Growth  & Income  portfolio,  Income  portfolio,  and
Northwest  portfolio  before  expense  reimbursements,   were  $1,088,  $43,662,
$34,401, and $8,088, respectively.

From time to time, the Adviser may voluntarily  waive fees and WM Life Insurance
Company may voluntarily  reimburse  expenses.  For the 1995, 1994, and 1993, the
total  management  fee waiver and  expense  reimbursement  for the Money  Market
portfolio was $ 3,394, $1,779, and $5,225, respectively.  During 1993, the total
management fee waivers and expense  reimbursements  for the Northwest  portfolio
was $23,453.  There were no other fee waivers or expense  reimbursements  during
those periods. If, in any fiscal year, the sum of the Fund's expenses as defined
under the securities  regulations of any state having jurisdiction over the Fund
exceeds the expense  limitations of any such state,  the Adviser shall reimburse
the Fund for a portion of such excess  expenses equal to such excess  multiplied
by the ratio of the fees otherwise payable under this Agreement.  The obligation
of the Adviser to reimburse the Fund  hereunder is limited in any fiscal year to
the amount of its fee hereunder for such fiscal year.

Under the terms of the Investment Management Agreement,  the Fund is required to
pay fees of directors not employed by the Adviser or its  affiliates;  custodian
expenses;  brokerage;  taxes;  auditing and legal  expenses;  costs of issuance,
transfer,  registration  or redemption of shares for sale; and costs relating to
disbursement  of  dividends,  corporate  meetings,  corporate  reports,  and the
maintenance of its corporate existence.

Investment  decisions  for the Fund are made  independently  of those  for other
funds in the Composite Group.  However,  the Adviser may determine that the same
security  is  suitable  for more than one of the funds.  If more than one of the
funds is  simultaneously  engaged in the purchase or sale of the same  security,
the  transactions  are  allocated  as to price and amount in  accordance  with a
formula  considered to be equitable to each. It is recognized that in some cases
this  system  could  have a  detrimental  effect  on the  price or volume of the
security  as far as the funds are  concerned.  In other  cases,  however,  it is
believed  that the ability to  participate  in volume  transactions  may provide
better  executions  for each fund.  It is the  opinion of each  fund's  Board of
Directors that these advantages, when combined with the personnel and facilities
of the Adviser's  organization,  outweigh possible disadvantages which may exist
from exposure to simultaneous transactions.

The Fund has  adopted a code of  ethics  which is  intended  to  prevent  access
persons from conducting  personal  securities  transactions which interfere with
the Fund  portfolio  transactions  or otherwise  take unfair  advantage of their
relationship to the Fund. In general,  the personal  securities  transactions of
individuals  with access to information  regarding  Fund portfolio  transactions
must be pre-cleared by the Adviser's  Compliance Officer and must not occur when
similar transactions are contemplated by a Fund.
    
GLASS STEAGALL

The Glass-Steagall Act, among other things,  generally prohibits member banks of
the  Federal  Reserve  System  from  engaging  to any extent in the  business of
issuing,   underwriting,   selling  or  distributing  securities  and  generally
prohibits  management  inter-locks  and  affiliations  between  member banks and
companies  engaged  in  certain  activities.  In a  Statement  of  Policy  dated
September 1, 1982, the Federal Deposit Insurance  Corporation concluded that the
investment restrictions of the Glass-Steagall Act do not apply to banks or their
affiliates  if the  banks  are  not  members  of  the  Federal  Reserve  System.
Washington  Mutual Bank is not a member  bank.  The Adviser has advised the Fund
that, in its view,  the  Glass-Steagall  Act does not prohibit the activities of
the Adviser and that it may perform the  services for the Fund  contemplated  by
the Management  Agreement without violation of the  Glass-Steagall  Act or other
applicable banking laws or regulations.

DIRECTORS AND OFFICERS OF THE FUND

The Board of Directors of the Fund is elected by the  shareholder as directed by
Contract  Owners.  Interim  vacancies may be filled by the current  directors so
long as at least  two-thirds were  previously  elected by the  shareholder.  The
Board has  responsibility  for the  overall  management  of the Fund,  including
general supervision and review of its investment activities.  The directors,  in
turn, elect officers who are responsible for administering the Fund's day-to-day
operations. Directors and officers hold identical positions with each investment
company in the Composite  Group.  Their  business  experience  for the past five
years are set forth below.  Unless  otherwise noted, the address of each officer
is 601 W. Main Avenue, Suite 801, Spokane, Washington 99201-0613.

WAYNE L. ATTWOOD, MD
  Director
  3 E. 40th
  Spokane, Washington 99203

Dr. Attwood is a retired  doctor of internal  medicine and  gastroenterology  in
Spokane, Washington.

KRISTIANNE BLAKE
  Director
  705 W. 7th, Suite D
  Spokane, Washington 99204

Mrs. Blake is president of Kristianne  Gates Blake,  PS, an accounting  services
firm specializing in personal financial planning and tax planning.

*ANNE V. FARRELL
  Director
  425 Pike Street, Suite 510
  Seattle, Washington 98101

Mrs.  Farrell is  president  and CEO of The  Seattle  Foundation  (a  charitable
foundation). In addition, she serves as a director of Washington Mutual, Inc.
   
EDWIN J. McWILLIAMS
  Director
  1717 S. Upper Terrace Road
  Spokane, Washington 99203

Mr.  McWilliams is former  president of both  Fidelity  Service  Corporation  (a
mortgage  servicing  subsidiary of Sterling  Savings  Association)  and Fidelity
Mutual Savings Bank.

*MICHAEL K. MURPHY
  Director
  PO Box 3366
  Spokane, Washington 99203

Mr. Murphy is Chairman and CEO of CPM Development Corporation (a holding company
which includes Central Pre-Mix Concrete  Company).  In addition,  he serves as a
director of Washington Mutual, Inc.
    
*WILLIAM G. PAPESH
  President and Director

Mr. Papesh is president and a director of the Transfer Agent and is an executive
vice president and a director of the Adviser and Distributor.

JAY ROCKEY
  Director
  2121 Fifth Avenue
  Seattle, Washington 98121
   
Mr.  Rockey  is  Chairman  and CEO of The  Rockey  Company  (a  regional  public
relations firm).

* LELAND J. SAHLIN
   Chairman and Director

Mr. Sahlin is a senior vice  president of the Adviser and served as president of
the Fund from  inception to 1989; of the  Distributor  from 1972 to 1987; and of
the Adviser from 1972 to 1988.
    
RICHARD C. YANCEY
  Director
  535 Madison Avenue
  New York, New York 10022

Mr.  Yancey  is  senior  advisor  to  Dillon,  Read & Co.,  Inc.  (a  registered
broker-dealer and investment banking firm), New York, New York.

*These directors are "interested persons" of the Fund as that term is defined in
the Investment Company Act of 1940 because they are either affiliated persons of
the Fund, its Adviser, or Distributor.

GENE G. BRANSON
Vice President
Suite 780
1201 - Third Avenue
Seattle WA  98101
   
Mr.  Branson is a senior vice  president  and  director of the  Distributor  and
Transfer Agent and a vice president and director of the Adviser.

MONTE D. CALVIN, CPA
Vice President and Treasurer

Mr. Calvin is executive vice president of the Transfer Agent and serves as chief
financial officer of the Fund.
 
CASSIE L. FOWLER, CPA
Assistant Secretary

Ms. Fowler is an employee of the Transfer Agent.
    
KERRY K. KILLINGER
Executive Vice President
Suite 1501
1201 Third Avenue
Seattle WA 98101

Mr. Killinger is president,  chairman of the board, and chief executive  officer
of  Washington  Mutual,  Inc.  and a director of the Adviser,  Distributor,  and
Transfer Agent.

JEFFREY L. LUNZER, CPA
Assistant Treasurer
   
Mr. Lunzer is a vice president of the Transfer Agent.

CONNIE M. LYONS
Assistant Secretary

Ms. Lyons is an employee of the Transfer Agent.
    
DOUGLAS D. SPRINGER
Vice President
Suite 780
1201 Third Avenue
Seattle WA  98101

Mr.  Springer is president and a director of the  Distributor  and a director of
the Adviser and the Transfer Agent.

JOHN T. WEST, CPA
Secretary
   
Mr. West is a vice president of the Transfer Agent.
 
The Fund paid no remuneration  to any of its officers,  including Mr. Papesh and
Mr.  Sahlin  during the year ended  December 31, 1995.  The Fund and other Funds
within the Composite  Group paid  directors' fees during the year ended December
31, 1995, in the amounts indicated below.

<TABLE>
<CAPTION>                                                 
                                                 
                                 MONEY MARKET     GROWTH & INCOME     INCOME     NORTHWEST     TOTAL
  DIRECTOR                        PORTFOLIO          PORTFOLIO        PORTFOLIO   PORTFOLIO    COMPLEX(1)
  ---------                       ------------     ---------------    ----------  ---------   -----------
  <S>                                <C>             <C>              <C>          <C>        <C>
  Wayne L. Attwood, MD               $1,250          $1,250           $1,250       $1,250     $15,000
  Kristianne Blake                      775             775              775          775       9,300
  Edwin J. McWilliams                 1,208           1,208            1,208        1,208      14,500
  Jay Rockey (2)                      1,177           1,177            1,177        1,177      14,125
  Richard C. Yancey                   1,208           1,308            1,208        1,308      15,000

<FN>
    (1)  Each of the directors serve in the same capacity  with each Fund within the Composite Group (eight companies) comprising 12
         individual investment portfolios.

    (2)  Mr. Rockey is Chairman and CEO of The Rockey Company, a public relations firm which has received revenue from the Fund and
         Washington Mutual, Inc., a parent company of the Adviser and Distributor, during the 1995 fiscal year.
</FN>
</TABLE>
Officers,  directors and their immediate families as a group owned of record and
beneficially less than 1% of the shares outstanding of any portfolio of the Fund
as of February 15, 1996.  The  Composite  Deferred  Variable  Account of WM Life
Insurance Company is the sole shareholder of the Fund.
    
Wayne L. Attwood, MD, Kristianne Blake, *Anne V. Farrell, and *Michael K. Murphy
serve  as  members  of  the  Board's  audit   committee.   The  committee  meets
periodically  with the Fund's  independent  accountants  and  officers to review
accounting  principles  used by the Fund and the adequacy of the Fund's internal
controls.

The investment  committee  performs interim functions for the Board of Directors
of the Fund  including  dividend  declaration  and  portfolio  pricing  matters.
Members are *Anne V. Farrell, *Michael K. Murphy, and Richard C. Yancey.

Responsibilities  of the Board's nominating  committee include preparing for and
recommending replacements for any vacancies in directors' positions, and initial
review of policy issues regarding the size, composition, and compensation of the
Board.  Members of the  nominating  committee  are  Kristianne  Blake,  Edwin J.
McWilliams and Jay Rockey.

* These directors are  "interested  persons" of the Fund as that term is defined
in the  Investment  Company  Act of 1940,  because  they are  either  affiliated
persons of the Fund, its Adviser, or Distributor.

DISTRIBUTION SERVICES

DISTRIBUTOR
   
Murphey Favre, Inc. (the  "Distributor")  will purchase and resell shares of the
Fund's  capital stock to fill orders placed with it by the Accounts.  Currently,
shares  of the  Fund's  portfolios  may only be sold to the  Composite  Deferred
Variable  Accounts  or to any  future  separate  account  developed  by WM  Life
Insurance Company and Empire Life Insurance Company. Shares will also be sold by
the Fund through the Distributor.
    
The Distributor  will not receive any earnings or profits from the redemption of
Fund  shares.  No  brokerage  fees  will be paid by the Fund to the  Distributor
during the year. The  Distributor  may act as broker on portfolio  purchases and
sales should it become a member of a national securities exchange.

HOW SHARES ARE VALUED
   
As described in the prospectus,  the net asset value of shares in each portfolio
of the Fund is  determined  once  daily at 1:00  p.m.  PST each day the New York
Stock Exchange is open for trading.  It is computed by dividing the market value
of  securities in the  individual  portfolios,  plus all other assets,  less all
liabilities, by the number of portfolio shares outstanding.
    
MONEY MARKET PORTFOLIO

Investment  securities  are  valued  at cost as  adjusted  for  amortization  of
premiums and discounts where  applicable.  The Board of Directors  regularly and
routinely  monitors  amortized cost value assigned to these securities to insure
that carrying value approximates market valuation.
   
GROWTH & INCOME, NORTHWEST AND INCOME PORTFOLIOS
    
Investment  securities  are  stated  on the  basis  of  valuations  provided  by
independent  pricing sources,  approved by the Fund's Board of Directors,  which
use  information  with  respect  to  valuations  based  upon  transactions  of a
security, quotations from dealers, market transactions in comparable securities,
and various relationships between securities,  in determining value.  Investment
securities  with less than 60 days to  maturity  when  purchased  are  valued at
amortized  cost which  approximates  market  value.  Investment  Securities  not
currently  quoted as described  above will be priced at fair value as determined
in good faith in a manner prescribed by the Board of Directors.

HOW SHARES CAN BE PURCHASED

Information  concerning  the purchase of shares is  discussed  under "How to Buy
Shares" in the prospectus.  Shares of the Fund are sold in a continuous offering
and may be purchased only by the Composite Deferred Variable Accounts,  separate
accounts established and maintained by WM Life Insurance Company and Empire Life
Insurance  Company  individually  for the  purpose of funding  variable  annuity
contract  charge at the  respective  net asset  values  of the  portfolios  next
determined  after receipt by the Fund of the purchase  order and  payments.  The
Fund receives the entire net asset value of all shares sold. (See Appendix A for
a specimen price make-up sheet.)

REDEMPTION OF SHARES

Shares of any  portfolio of the Fund can be redeemed by the Accounts at any time
for cash,  without sales charge,  at the net asset value next  determined  after
receipt of the redemption  request.  Variable  Annuity Contract Owners should be
aware,  however,  that a  contingent  deferred  sales  charge  may be applied to
surrenders  and  withdrawals  under the  Contract as  described  in the Contract
prospectus.

The Fund  reserves the right to suspend the right of  redemption  or to postpone
the date of  payment  upon  redemption  of the shares of any  portfolio  for any
period  during which the New York Stock  Exchange is closed  (other than weekend
and holiday closings) or trading on that Exchange is restricted, or during which
an emergency exists (as determined by the Securities and Exchange Commission) as
a result of which disposal of portfolio securities is not reasonably practicable
or it is not reasonably  practicable for the portfolio to determine the value of
its net  assets,  or for  such  other  period  as the  Securities  and  Exchange
Commission may by order permit for the protection of shareholders.
   

DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES

The Fund intends to continue to conduct its business and maintain the  necessary
diversification  of assets  and  source of income  requirements  to qualify as a
diversified  management  investment company under the Internal Revenue Code (the
"Code").  The Fund so qualified during the 1995 fiscal year. As a result,  under
Subchapter  M of the  Code,  the Fund is  accorded  conduit  or  "pass  through"
treatment  for  federal  income  tax  purposes  during  each  year in  which  it
distributes to its  shareholders 90% or more of its gross income from dividends,
interest and gains from the sale or other  disposition of securities and derives
less than 30% of its gross income from gains (without deduction for losses) from
the sale or other disposition of securities held for less than three months. The
Fund intends to  distribute  such amounts as necessary to avoid  federal  income
taxes.

Dividends from net investment  income and any  distributions of realized capital
gains will be paid in additional  shares of the portfolio paying the dividend or
making the distribution and credited to the Account.  Any such reinvestment will
be without charge at the net asset value of the respective portfolio.
    
Since WM Life Insurance  Company and Empire Life  Insurance  Company will be the
only shareholder of the Fund, no discussion is included about the federal income
tax  consequences to  shareholders.  For information  concerning the federal tax
consequences  to  holders  of  variable  annuity  contracts,  see  the  attached
prospectus for the Flexible Premium Deferred Variable Annuity Contracts.

INVESTMENT PRACTICES

The investment  objectives  and policies of the Fund's four separate  portfolios
appear in the  prospectus  and are extended  below.  Portfolio  investments  are
adjusted in accordance with management's evaluation of changing market risks and
economic  conditions.  Such changes are made as management believes necessary to
meet the objectives of the portfolios and the best interests of investors.
   
In addition to these  policies,  the Fund is subject to investment  restrictions
which  cannot  be  changed  without   approval  of  a  majority  of  outstanding
shareholders.  These restrictions are discussed under "Investment Restrictions."
No significant investment policies can be changed without shareholder approval.
    
Because of the many factors which influence  fluctuations in the market value of
securities owned by the Fund, including economic trends,  government actions and
regulations and  international  monetary  conditions,  there can be no assurance
that the objectives of the Fund's portfolios will be achieved.  There are market
risks  inherent in all  investments.  The Fund believes,  however,  that through
professional management the prospects for investment success are enhanced.

MONEY MARKET PORTFOLIO

Investment  objectives and policies of the Money Market  portfolio are described
in the  prospectus.  The  investment  objective of the portfolio is to provide a
high level of  current  income  while at the same time  preserving  capital  and
maintaining liquidity.  This objective cannot be changed without first obtaining
approval  of  the  portfolio's  investors.  It is a  fundamental  policy  of the
portfolio to invest only in the following money market  instruments which at the
time of purchase mature within one year:

1.   Obligations  issued or guaranteed  by the United  States  government or any
     agency or instrumentality  thereof. U.S. government  obligations are issued
     by the Treasury and include bills, certificates of indebtedness, notes, and
     bonds.   Agencies  and   instrumentalities   of  the  U.S.  government  are
     established under the authority of an act of Congress and include,  but are
     not limited to: the Government National Mortgage Association, the Tennessee
     Valley   Authority,   the  Bank  for   Cooperatives,   the   Farmers   Home
     Administration, Federal Home Loan Banks, Federal Intermediate Credit Banks,
     Federal Land Banks and the Federal National Mortgage Association.

2.   Obligations  of domestic and foreign banks having total assets in excess of
     500 million U.S.  dollars as of the date of their most  recently  published
     financial statement:

     Certificates  of deposit are receipts  issued by a bank in exchange for the
     deposit  of  funds.  The bank  agrees  to pay the  amount  deposited,  plus
     interest,  to the  bearer  of the  receipt  on the  date  specified  on the
     certificate. Because the certificate is negotiable, it can be traded in the
     secondary market before maturity.  Certificates of Deposit purchased by the
     portfolio will not be fully insured.

     Bankers' acceptances are time drafts drawn on a U.S. bank by an exporter or
     importer to obtain a stated amount of funds to pay for specific merchandise
     or, less frequently,  foreign exchange. The draft is then "accepted" by the
     U.S.  bank (the drawee) which in effect  unconditionally  guarantees to pay
     the face value of the  instrument  on its  maturity  date.  The face of the
     instrument   specifies   the  terms  and  the  nature  of  the   underlying
     transaction.

     Letters of credit are issued by U.S. banks and authorize the beneficiary to
     draw drafts upon such U.S. banks for acceptance and payment under specified
     conditions.  All of the  securities in the portfolio and income thereon are
     payable in U.S. dollars.

3.   Commercial paper  (unsecured,  short-term  notes of indebtedness  issued by
     business and banking firms to finance their short-term  needs) purchased by
     the portfolio will consist only of direct obligations which, at the time of
     their  purchase,  are (a) rated in the highest  rating  category by Moody's
     Investors Service, Inc., or by Standard & Poor's Corporation. (See Appendix
     B).

4.   Repurchase  agreements:  The  portfolio  requires  daily  valuation  of the
     underlying  debt instrument for any repurchase  agreement  maturing in more
     than  one (1)  business  day and  requires  that  the  market  value of the
     collateral  be  maintained  at a minimum of 102 percent of the  transaction
     value. The Fund maintains constructive possession of the securities through
     a  safekeeping  arrangement  with parties who qualify as  custodians  under
     Section 17(f) of the Investment Company Act of 1940.

     The  portfolio  will  invest  less  than 25% of its  total  assets  in bank
     obligations,  including foreign banks and foreign branches of U.S. domestic
     banks. Any foreign bank obligations purchased will be readily marketable at
     the  time  of  purchase;  however,  such  marketability  and  corresponding
     liquidity may change at any time.

     The portfolio may attempt to increase  yields by trading to take  advantage
     of short-term market variations.  This policy is expected to result in high
     portfolio  turnover.  This  turnover may (but in the opinion of  management
     should not)  adversely  affect the portfolio  since the portfolio  does not
     usually  pay  brokerage  commissions  when it  purchases  short-term,  debt
     obligations (see "Brokerage Allocations and Portfolio Transactions").
   
GROWTH & INCOME PORTFOLIO

The  investment  objectives  and policies of the Growth & Income  portfolio  are
described in the prospectus.  The portfolio aims to achieve  long-term growth of
principal  with current  income a secondary  consideration  through the use of a
flexible  investment  policy.  Portfolio  investments are adjusted in accordance
with  management's  evaluation  of  changing  market  risks.  Thus the  relative
proportion  of various  types of  securities  held may vary  significantly.  The
portfolio  attempts to anticipate  market  conditions and economic  changes.  It
pursues its objective by usually placing emphasis on the selection and ownership
of common stocks (although the portfolio may invest in bonds,  preferred stocks,
U.S.  Treasury  bills,  certificates  of deposit,  and repurchase  agreements as
well).  There may be times when it appears  prudent to reduce the  proportion of
common  stocks  held to not less than 35% of the  portfolio's  total net assets.
During such  periods,  the  investment  in fixed  income  securities,  bonds and
preferred stocks may exceed that of common stocks.

NORTHWEST PORTFOLIO

The  investment  objective  and policies of the  portfolio  are described in the
prospectus.  Portfolio  investments are adjusted in accordance with management's
evaluation of changing  market risks and economic  conditions.  Such changes are
made as management believes necessary to meet the objectives of the Fund and the
best interest of shareholders.

The portfolio's  investment  objective is to provide long-term growth of capital
by investing  in common  stocks of  companies  doing  business or located in the
Northwest region (Alaska, Idaho, Montana,  Oregon and Washington).  Under normal
circumstances,  at least 65% of its assets will be invested in  companies  whose
principal executive offices are located in these states.
    
INCOME PORTFOLIO

Investment  objectives and policies of the Income portfolio are described in the
prospectus.  The  investment  objective  of the  portfolio  is to provide a high
current yield  consistent  with moderate  risk. The portfolio will invest in the
following:

1.   Debt and convertible  debt securities  (payable in U.S. funds) which have a
     rating  within the four highest  grades as  determined by Standard & Poor's
     Corporation (AAA, AA, A, or BBB) or Moody's Investors  Service,  Inc. (Aaa,
     Aa, A or Baa). Under present  commercial bank  regulations,  bonds rated in
     these  categories  generally are regarded as eligible for bank  investment.
     Securities rated BBB or Baa may have speculative characteristics. Up to 20%
     of the portfolio's total assets may be invested in debt,  convertible debt,
     preferred  stocks,  and  convertible  preferred  stocks which are not rated
     within  the four  highest  grades by  Standard & Poor's or  Moody's.  These
     issues must be rated B (Standard & Poor's) or B (Moody's) or better, or may
     be non-rated  obligations  which the Adviser  believes to be of  comparable
     quality.  This practice may involve higher risks, but the Adviser will only
     use such  practices  if it believes the income and yield is  sufficient  to
     justify  such risks.  See  Appendix B for a detailed  description  of these
     ratings.

2.   Debt  instruments  issued or guaranteed by the United States  government or
     its agencies or instrumentalities.

3.   Obligations of U.S. banks that are members of the Federal  Reserve  System,
     not to exceed 25% of the portfolio's total assets.

4.   Preferred  stocks  and  convertible  preferred  stocks  which have a rating
     within the four highest grades of Standard & Poor's (AAA, AA, A and BBB) or
     Moody's (Aaa, Aa, A and Baa) ratings applicable to such securities.

5.   The  highest-grade  commercial paper as rated by Standard & Poor's (A-1) or
     by Moody's (Prime 1).

6.   Repurchase  agreements:  The  portfolio  may  acquire  an  underlying  debt
     instrument,  secured  by the full  faith and  credit of the  United  States
     government,  for a relatively short period (usually not more than one week)
     subject to an obligation  of the seller to repurchase  and the portfolio to
     resell the instrument at a fixed price.

7.   Time or  demand  deposits  in U.S.  banks,  but  not to  exceed  10% of the
     portfolio's total assets if they are of an illiquid nature.

The portfolio will not directly purchase common stocks;  however,  it may retain
up to 10% of the value of the portfolio's total assets in common stocks acquired
either by conversion of  fixed-income  securities or by the exercise of warrants
or rights attached thereto.

Although  no more than 20% of the Fund's  total  assets may be invested in "high
yield"  securities  (i.e.,  not rated among the four  highest  grades,  commonly
referred to as "junk" bonds), these securities, whether rated or unrated, may be
subject to greater market fluctuations and risks of loss of income and principal
than the lower yielding,  higher rated,  fixed-income  securities which comprise
most of the  Fund's  portfolio.  Risks of high  yield  securities  include:  (i)
limited  liquidity and secondary market support;  (ii) substantial  market price
volatility   resulting  from  changes  in  prevailing   interest  rates;   (iii)
subordination  to the prior claims of banks and other senior  lenders;  (iv) the
operation of mandatory sinking fund or call/redemption provisions during periods
of declining interest rates whereby the Fund may reinvest  premature  redemption
proceeds  in lower  yielding  portfolio  securities;  (v) the  possibility  that
earnings of the issuer may be  insufficient  to meet its debt service;  and (vi)
the issuer's low creditworthiness and potential for insolvency during periods of
rising interest rates and economic downturn.

As a result of the limited liquidity of high yield securities,  their prices may
decline rapidly in the event a significant number of holders decide to sell. The
high yield  bond  market has grown  primarily  during a period of long  economic
expansion, and it is uncertain how it would perform during an economic downturn.
An economic downturn or an increase in interest rates could severely disrupt the
market for high yield bonds and adversely affect the value of outstanding  bonds
and the ability of the issuers to repay  principal  and  interest.  In addition,
there have been several Congressional attempts to limit the use of and/or tax of
high yield bonds,  or otherwise  diminish their  advantages,  which, if enacted,
could  adversely  affect the value of these  securities and the Fund's net asset
value.

The portfolio has a policy not to concentrate  its  investments  and accordingly
will not  invest  more than 25% of its total  assets  in any one  industry.  The
portfolio  considers the Electric  Utilities,  Electric and Gas  Utilities,  Gas
Utilities,  and Telephone  Utilities to be separate  industries.  Foreign issues
will  also  be  considered  a  separate   industry.   This  policy  on  industry
classification may result in increased risk.

In view of such possible  investment in these  industries,  an investment in the
portfolio should be made with an understanding of their  characteristics and the
risks  which such an  investment  may  entail.  General  problems of the utility
industries  include the  difficulty in obtaining an adequate  return on invested
capital (even in spite of frequent increases in rates which have been granted by
the public service  commissions  having  jurisdiction),  difficulty in financing
large  construction  programs  during an  inflationary  period,  restrictions on
operations,  difficulty in obtaining fuel for electric  generation at reasonable
prices,  uncertainty  in  obtaining  natural gas for resale,  and the effects of
energy conservation.

Federal,  state and municipal  governmental  authorities may, from time to time,
review  existing (and impose  additional)  regulations  governing the licensing,
construction  and operating of nuclear power plants.  Any of these delays or the
suspension of operations of such plants which have been or are being financed by
proceeds of certain  obligations held in the portfolio may affect the payment of
interest on or the repayment of principal amount of such  obligations.  The Fund
is unable to predict  the  ultimate  form any such  regulations  may take or the
impact such regulations may have on the obligations of the portfolio.

The portfolio does not intend to engage in active portfolio trading; however, in
certain cases, the portfolio will seek to take advantage of market  developments
and yield  disparities.  This may  result in the sale of  securities  held for a
short time.

Such strategies may result in increases or decreases in the portfolio's  current
income  available  for  distribution  to  shareholders  and in the  sale of debt
securities which may be sold at a gain or loss depending upon their cost.

The net asset value of the shares of an open-end  investment  company  investing
primarily in  fixed-income  securities  changes as the general level of interest
rates  fluctuate.  When interest rates decline,  the market value of a portfolio
can be expected to rise; conversely,  when interest rates rise, the market value
of a portfolio can be expected to decline.

INVESTMENT PRACTICES COMMON TO ALL PORTFOLIOS
   

COMMON MANAGEMENT

Investment  decisions for Composite Deferred Series, Inc. are made independently
of those made for other investment  companies  managed by the Adviser.  However,
the Adviser may  determine  that the same  security is held in the  portfolio of
more  than one of the  funds in the  Composite  Group.  If more than one of such
funds is  simultaneously  engaged in the purchase or sale of the same  security,
the  transactions  are  allocated  as to price and amount in  accordance  with a
formula  considered  to be equitable to each.  It is  recognized  that,  in some
cases, this system could have a detrimental effect on the price or volume of the
security  as far as the  Fund is  concerned.  In  other  cases,  however,  it is
believed that the ability of the Fund to participate in volume transactions will
provide  better  executions  for the  Fund.  It is the  opinion  of the Board of
Directors of the Fund that these  advantages,  when  combined with the personnel
and facilities of the Adviser's  organization,  outweigh possible  disadvantages
which may exist from exposure of simultaneous transactions.

MORTGAGE-BACKED SECURITIES AND FORWARD COMMITMENTS 
(GROWTH & INCOME AND INCOME PORTFOLIOS ONLY)
    
The  portfolios  may  invest  in  mortgage-backed   securities  including  those
representing an undivided ownership interest in a pool of mortgages, e.g., GNMA,
FNMA and FHLMC  certificates.  The mortgages  backing these  securities  include
conventional   thirty-year  fixed  rate  mortgages,   fifteen-year   fixed  rate
mortgages,  graduated-payment  mortgages and adjustable rate mortgages. The U.S.
government  or the  issuing  agency  guarantees  the  payment  of  interest  and
principal for these securities.  The guarantees,  however,  do not extend to the
securities' yield or value, which are likely to vary inversely with fluctuations
in interest  rates,  nor do the  guarantees  extend to the yield or value of the
portfolios'  shares.  These  certificates  are,  in most  cases,  "pass-through"
instruments  through  which the  holder  receives  a share of all  interest  and
principal  payments from the mortgages  underlying the certificate,  net certain
fees. Because the prepayment  characteristics of the underlying  mortgages vary,
it is not possible to predict accurately the average life or realized yield of a
particular issue of pass-through  certificates.  Mortgage-backed  securities are
often  subject to more rapid  repayment  than their stated  maturity  date would
indicate as a result of the  pass-through  of  prepayments  of  principal on the
underlying  mortgage  obligations.  For example,  securities backed by mortgages
with  thirty-year  maturities are customarily  treated as prepaying fully in the
twelfth year, and securities  backed by mortgages with  fifteen-year  maturities
are customarily treated as prepaying fully in the seventh year. While the timing
of  prepayments of graduated  payment  mortgages  differs  somewhat from that of
conventional mortgages, the prepayment experience of graduated payment mortgages
is basically the same as that of the conventional mortgages of the same maturity
dates over the life of the pool.  During  periods of declining  interest  rates,
prepayment of mortgages underlying mortgage-backed securities can be expected to
accelerate.  When the mortgage  obligations are prepaid, the portfolios reinvest
the prepaid  amounts in securities,  the yields of which reflect  interest rates
prevailing  at  the  time.  Therefore,   the  portfolios'  ability  to  maintain
high-yielding,  mortgage-backed  securities  will be  adversely  affected to the
extent that prepayments of mortgages must be reinvested in securities which have
lower  yields than the prepaid  mortgages.  Moreover,  prepayments  of mortgages
which underlie securities purchased at a premium could result in capital losses.

The portfolios may also purchase or sell U.S. government  securities  (including
GNMA,  FNMA, and FHLMC  certificates) on a when-issued or delayed delivery basis
(known  generally  as forward  commitments).  When-issued  or  delayed  delivery
transactions  arise when securities are purchased or sold by the portfolios with
payment  and  delivery  taking  place in the  future in order to secure  what is
considered to be an  advantageous  price and yield to the portfolios at the time
of entering into the transaction.  However,  the yield on a comparable  security
available  when delivery  takes place may vary from the yield on the security at
the time that the when-issued or delayed delivery  transaction was entered into.
When the portfolios engage in when-issued and delayed delivery transactions, the
portfolios  rely on the seller or buyer,  as the case may be, to consummate  the
transaction.  Failure to consummate the  transaction may result in the portfolio
missing  the  opportunity  of  obtaining  a  price  or  yield  considered  to be
advantageous.  When-issued and delayed delivery  transactions may be expected to
settle within three months from the date the  transactions  are entered into. No
payment or  delivery,  however,  is made by the  portfolios  until they  receive
delivery or payment from the other party to the transaction.

LENDING OF SECURITIES

Each portfolio may lend up to 30% of its securities to the National  Association
of Securities  Dealers,  Inc.,  registered  broker-dealers  and Federal  Reserve
member  banks.  Such loans will be made  pursuant to  agreements  requiring  the
broker/dealer or bank to fully and continuously secure the loan by cash or other
securities  in which the  portfolio  may invest equal to the market value of the
securities loaned.

The  portfolios  will continue to receive  interest and dividend  income and any
capital  gains  (losses)  from the loaned  securities.  The  portfolios  receive
compensation  for  lending  their  securities  in the form of fees.  The Adviser
believes  that each  portfolio  within the Fund can  benefit  from such  lending
because of added  incremental  income from lending  fees and expanded  portfolio
return.

The portfolios  will enter into securities  lending and repurchase  transactions
only with  parties who meet  creditworthiness  standards  approved by the Fund's
Board of Directors  and  monitored by the Adviser.  In the event of a default or
bankruptcy  by a seller or borrower,  the  portfolios  will  promptly  liquidate
collateral.  However,  the exercise of the  portfolios'  right to liquidate such
collateral  could  involve  certain  costs or delays  and,  to the  extent  that
proceeds from any sale of collateral on a default of the seller or borrower were
less than the seller's or borrower's obligations,  the portfolios could suffer a
loss.
   
INVESTMENT RESTRICTIONS

WHILE MANY OF THE  DECISIONS  OF THE ADVISER  DEPEND ON  FLEXIBILITY,  THERE ARE
CERTAIN  PRINCIPLES SO FUNDAMENTAL  THAT THEY ARE REQUIRED AS MATTERS OF POLICY.
THESE MAY NOT BE  CHANGED  WITHOUT  A VOTE OF THE  MAJORITY  OF THE  OUTSTANDING
SHARES OF THE RESPECTIVE PORTFOLIO.

-    WITH  RESPECT TO 75% OF TOTAL  ASSETS  (100% FOR MONEY  MARKET  PORTFOLIO),
     INVEST MORE THAN 5%* OF ITS TOTAL  ASSETS IN THE  SECURITIES  OF ANY SINGLE
     COMPANY OR ISSUER (OTHER THAN U.S. GOVERNMENT SECURITIES);

-    INVEST IN ANY COMPANY FOR THE PURPOSE OF  MANAGEMENT OR CONTROL NOR ACQUIRE
     MORE THAN 10%* OF THE VOTING SECURITIES OF ANY COMPANY;

-    INVEST IN OTHER INVESTMENT COMPANIES (EXCEPT AS PART OF A MERGER);

-    UNDERWRITE THE SECURITIES OF OTHER ISSUERS  (EXCEPT IN CONNECTION  WITH THE
     SALE OF GNMA CERTIFICATES);

-    BUY SECURITIES SUBJECT TO RESTRICTIONS UNDER FEDERAL SECURITIES LAWS, OR TO
     RESTRICTIONS ON DISPOSITION (EXCEPT REPURCHASE AGREEMENTS);

-    INVEST  MORE THAN 25%* OF ITS ASSETS IN ANY SINGLE  INDUSTRY  OR IN FOREIGN
     SECURITIES;

-    INVEST  MORE THAN 10%* OF ITS ASSETS IN FOREIGN  SECURITIES  NOT PAYABLE IN
     U.S. DOLLARS;

-    BUY SECURITIES ON MARGIN, OR ENGAGE IN "SHORT" SALES;

-    INVEST IN REAL ESTATE, OIL AND GAS INTERESTS, OR COMMODITIES (EXCEPT GROWTH
     & INCOME AND NORTHWEST PORTFOLIOS MAY INVEST IN PUBLICLY TRADED REAL ESTATE
     INVESTMENT TRUSTS);

-    BUY OR SELL OPTIONS (EXCEPT FOR COVERED CALL OPTIONS IN THE GROWTH & INCOME
     AND NORTHWEST PORTFOLIOS);

-    BORROW  MONEY  (EXCEPT  IT MAY  BORROW  UP TO 5% OF ITS  TOTAL  ASSETS  FOR
     EMERGENCY,  NON- INVESTMENT  PURPOSES,  OR UP TO 33 1/3% TO MEET REDEMPTION
     REQUESTS THAT WOULD OTHERWISE  RESULT IN THE UNTIMELY  LIQUIDATION OF VITAL
     PARTS OF ITS PORTFOLIOS);

-    LEND MONEY (EXCEPT FOR THE EXECUTION OF REPURCHASE AGREEMENTS);

-    BUY OR SELL FUTURES RELATED SECURITIES  (EXCEPT FOR FORWARD  COMMITMENTS OF
     GNMAS AND OTHER MORTGAGE-BACKED SECURITIES;

-    ISSUE SENIOR SECURITIES.

*  PERCENTAGE AT THE TIME THE INVESTMENT IS MADE.

BROKERAGE ALLOCATIONS AND PORTFOLIO TRANSACTIONS

Under  terms  of the  Investment  Management  Agreement,  Composite  Research  &
Management Co. acts as agent for the Fund in entering orders with broker-dealers
to execute  portfolio  transactions  and in negotiating  commission  rates where
applicable.  Decisions  as  to  eligible  broker-dealers  are  approved  by  the
president of the Fund.

In executing portfolio  transactions and selecting broker- dealers,  the Adviser
uses its best efforts to seek,  on behalf of the Fund,  the best  overall  terms
available.  In assessing the best overall terms  available for any  transaction,
the Adviser may consider all factors it deems relevant, including the breadth of
the  market  in the  security,  the  price  of the  security,  the  size  of the
transaction,  the  reputation,  financial  condition,  experience  and execution
capability of a broker-dealer, and the amount of the commission and the value of
any brokerage and research services (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934, as amended) provided by a broker-dealer.

The  Adviser  is  authorized  to pay to a broker or  dealer  who  provides  such
brokerage  and  research   services  a  commission  for  executing  a  portfolio
transaction  for the Fund.  This  commission  may be in excess of the  amount of
commission  or net price  another  broker  or  dealer  would  have  charged  for
effecting  the  transaction  if the Adviser  determines  in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services  provided by such broker or dealer,  viewed in terms of that particular
transaction  or in terms of the overall  responsibilities  of the Adviser to the
Fund  and/or  other  accounts  over  which  the  Adviser  exercises   investment
discretion.  The  Adviser  may  commit to pay  commission  dollars to brokers or
financial  institutions  for specific  research  materials  or products  that it
considers useful in advising the institutions for specific research materials or
products  that it  considers  useful  in  advising  the Funds  and/or  its other
clients.  Research  services  furnished  to the Adviser  include,  for  example,
written and electronic reports analyzing economic and financial  characteristics
of  industries  and  companies,  reports  concerning  portfolio  strategies  and
characteristics,  telephone  conversations between brokerage securities analysts
and  members of the  Adviser's  staff,  and  personal  visits by such  analysts,
brokerage strategists and economists to the Adviser's office.

Some of these services are of value to the Adviser in advising  various clients,
although  not all of  these  services  are  necessarily  useful  and of value in
managing the Fund.  The advisory fee paid to the Adviser is not reduced  because
it  receives  those  services,  even  though it might  otherwise  be required to
purchase these services for cash.

The staff of the Securities and Exchange  Commission has expressed the view that
the best price and  execution  of  over-the-counter  transactions  in  portfolio
securities  may be secured by dealing  directly with  principal  market  makers,
thereby  avoiding  the payment of  compensation  to another  broker.  In certain
situations,  the Adviser  believes  that the  facilities,  expert  personnel and
technological systems of a broker often enable the Fund to secure a net price by
dealing with a broker that is as good as or better than the price the Fund could
have  received  from  a  principal  market  maker,  even  after  payment  of the
compensation to the broker. The Adviser places its over-the-counter transactions
with  principal  market  makers,  but may also deal on a  brokerage  basis  when
utilizing electronic trading networks or as circumstances warrant.
    
None of the  broker-dealers  with whom the Fund  deals has any  interest  in the
Adviser,  Distributor or  Administrator.  The  Distributor  will not execute any
portfolio  orders for the Fund during the fiscal year, nor will the  Distributor
or the  Adviser  receive  any  direct or  indirect  compensation  as a result of
portfolio  transactions of the Fund. Although Fund shares may be sold by brokers
who execute portfolio  transactions for the Fund, no brokerage will be allocated
for such sales.
   
Portfolio  turnover  rate is  calculated  by dividing the lesser of purchases or
sales of securities,  excluding  securities having maturity dates at acquisition
of one year or less, by the average value of such  portfolio  securities  during
the fiscal year.  Although  turnover  rate cannot be accurately  predicted,  the
Adviser does not anticipate  that it will be greater than 100% in each portfolio
in any given  year.  The  Adviser  expects  that the  Growth & Income and Income
portfolios'  turnover rates will normally not exceed 50% annually.  The turnover
rates for the Growth & Income,  Income and  Northwest  portfolios  for 1995 were
36%,  14%, and 11%,  respectively.  The turnover  rates for the Growth & Income,
Income and Northwest portfolios for 1994 were 25%, 15% and 17%, respectively.
    
GENERAL INFORMATION

ORGANIZATION AND AUTHORIZED CAPITAL

As discussed under "Who We Are" in the prospectus,  Composite  Deferred  Series,
Inc. was  incorporated  under the laws of the state of Washington on December 8,
1986, under a Certificate of Incorporation  granting  perpetual  existence.  The
Fund has an authorized  capitalization  of 10 billion  shares of capital  stock,
without par value.  Shares are issued by class designated by specific portfolio.
All  shares  of the  Fund  are  freely  transferable.  The  shares  do not  have
preemptive  rights,  and none of the shares have any  preference to  conversion,
exchange, dividends, retirements,  liquidation, redemption or any other feature.
Shares have equal voting rights.

VOTING PRIVILEGES
   
The Accounts will vote their shares as instructed by Contract  Owners.  The Fund
does not anticipate holding annual meetings solely to elect directors,  however,
when directors are nominated for election by Contract  Owners,  a Contract Owner
may exercise  cumulative  voting  privileges for the election of directors under
Washington state law. Using this privilege,  Contract Owners are entitled to one
vote for each  contract  unit  owned by them.  The  total  number  of votes  for
directors to which a Contract Owner is entitled may be accumulated  and cast for
each candidate in such  proportion  that the Contract Owner may designate.  Only
the  Contract  Owners  of a  particular  portfolio  may  vote on any  change  of
investment objective for that portfolio.
    
CUSTODIAN

The  securities  and cash owned by each  Portfolio  are held in  safekeeping  by
Investors  Fiduciary Trust Company (IFTC), 127 West 10th, Kansas City, MO 64105.
IFTC  is a  wholly-owned  subsidiary  of  State  Street  Bank.  The  custodian's
responsibilities  include collecting dividends,  interest and principal payments
on each Fund's investments.

INDEPENDENT PUBLIC ACCOUNTANTS

The firm of LeMaster & Daniels, Certified Public Accountants,  has been selected
as the  independent  accountant of the Fund.  LeMaster & Daniels  performs audit
services for the Fund  including the  examinations  of the financial  statements
included in the annual report to shareholders which is incorporated by reference
into this Statement of Additional Information.

REGISTRATION STATEMENT

This Statement of Additional  Information  and the prospectus do not contain all
of the  information set forth in the  registration  statement the Fund has filed
with the Securities and Exchange Commission. The complete registration statement
may be obtained from the Securities and Exchange  Commission upon payment of the
fee prescribed by the rules and regulations of the Commission.

FINANCIAL STATEMENTS AND REPORTS
   
Semiannual  and annual  reports are issued to  shareholders.  The annual reports
include audited financial  statements.  The Fund's annual report to shareholders
dated December 31, 1995,  which is incorporated by reference into this Statement
of Additional  Information,  may be obtained  without  charge by contacting  the
Fund's offices.
<PAGE>
                                   APPENDIX A




                          SPECIMEN PRICE MAKE-UP SHEET
                              AT DECEMBER 31, 1995


 
                      MONEY MARKET   GROWTH & INCOME     INCOME       NORTHWEST
                       PORTFOLIO        PORTFOLIO       PORTFOLIO     PORTFOLIO
                     -------------- -----------------  -----------   -----------
Assets                  $224,091       $24,528,771     $15,277,300   $7,556,830


Liabilities                2,874            80,611          71,702       61,517
                        ---------      ------------    -----------   ----------
Net Assets              $221,217       $24,448,610     $15,205,598   $7,495,313
                        =========      ============    ===========   ==========

Shares
Outstanding              221,217         1,208,890       1,207,536      499,904
                        =========      ============    ===========   ==========

Net Assets Per Share
 (Net Assets/Shares 
  Outstanding)             $1.00            $20.22          $12.59      $14.99
                        =========      ============    ===========   ==========

    
<PAGE>
                                   APPENDIX B



                         DESCRIPTION OF SECURITY RATINGS


                                      BONDS

MOODY'S INVESTORS SERVICE, INC. (MOODY'S):

Aaa: Bonds which are rated Aaa are judged to be of the best quality.  They carry
the smallest  degree of investment  risk and are generally  referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally  stable
margin and  principal  is secure.  While the  various  protective  elements  are
subject to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all  standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds.  They are rated lower than the best bonds  because  margins of protection
may not be as large as in Aaa securities or  fluctuation of protective  elements
may be of greater  amplitude or there may be other  elements  present which make
the long-term risks appear somewhat larger than in Aaa securities.

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

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

Ba:  Bonds  which are rated Ba are judged to have  speculative  elements;  their
future cannot be considered  as well assured.  Often the  protection of interest
and  principal  payments  may be very  moderate and  characterize  bonds in this
class.

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

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

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

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

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

STANDARD & POOR'S CORPORATION (S & P)

AAA:  Debt  rated AAA has the  highest  rating  assigned  by  Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

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

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

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

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

BB:  Debt  rated BB has less  near-term  vulnerability  to  default  than  other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse  business,  financial,  or  economic  conditions  which  could  lead  to
inadequate  capacity to meet timely  interest  and  principal  payments.  The BB
rating  category  is also  used for debt  subordinated  to  senior  debt that is
assigned an actual or implied BBB rating.

B: Debt rated B has a greater  vulnerability  to default but  currently  has the
capacity to meet interest payments and principal  repayments.  Adverse business,
financial,  or economic conditions will likely impair capacity or willingness to
pay interest and repay  principal.  The B rating  category is also used for debt
subordinated  to senior  debt that is  assigned  an actual or  implied BB or BB-
rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default and is
dependent upon favorable  business,  financial,  or economic  conditions to meet
timely  payment of interest and repayment of principal.  In the event of adverse
business,  financial  or  economic  conditions,  it is not  likely  to have  the
capacity to pay interest and repay  principal.  The CCC rating  category is also
used for debt  subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC: The rating CC is typically  applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.

C: The rating C is typically  applied to debt  subordinated to senior debt which
is assigned an actual or implied CCC- debt  rating.  The C rating may be used to
cover a situation  where a bankruptcy  has been filed but debt service  payments
are continued.

CI: The rating CI is  reserved  for income  bonds on which no  interest is being
paid.

D:  Debt  rated D is in  payment  default.  The D rating  category  is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired,  unless S&P believes that such payments
will be made during such grace  period.  The D rating also will be used upon the
filing of a bankruptcy petition of debt service payments are jeopardized.

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

                                PREFERRED STOCKS

Moody's preferred stock rating symbols and their definitions are as follows:

aaa: An issue which is rated aaa is  considered  to be a  top-quality  preferred
stock.  This  rating  indicates  good  asset  protection  and the least  risk of
dividend impairment within the universe of preferred stocks.

aa: An issue which is rated aa is considered a high-grade  preferred stock. This
rating  indicates  that there is  reasonable  assurance  that earnings and asset
protection will remain relatively well maintained in the foreseeable future.

a: An issue which is rated a is considered to be an upper-medium grade preferred
stock.  While risks are judged to be somewhat greater than in the "aaa" and "aa"
classifications, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.

An issue which is rated baa is  considered to be medium  grade,  neither  highly
protected nor poorly secured.  Earnings and asset protection  appear adequate at
present but may be questionable over any great length of time.

S&P's  quality  ratings on preferred  stock are  expressed by symbols like those
used in rating  bonds.  They  represent a  considered  judgment of the  relative
security of dividends and -- what is thereby  implied -- the  prospective  yield
stability of the stock.

AAA:  This is the  highest  rating  that may be assigned by Standard & Poor to a
preferred  stock issue and  indicates  an extremely  strong  capacity to pay the
preferred stock obligations.

AA: A preferred  stock issue rated AA also  qualifies  as a  high-quality  fixed
income security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.

A: An issue  rated A is backed by a sound  capacity to pay the  preferred  stock
obligations  although it is somewhat more  susceptible to the adverse effects of
changes in circumstances and economic conditions.

BBB: An issue rated BBB is regarded as backed by an adequate capacity to pay the
preferred stock  obligations.  Whereas it normally exhibits adequate  protection
parameters,  adverse  economic  conditions  or changing  circumstances  are more
likely to lead to a weakened  capacity to make payments for a preferred stock in
this category than for issues in the A category.

BB, B, CCC:  Preferred stock in these  categories are regarded,  on balance,  as
predominately speculative with respect to the issuer's capacity to pay preferred
stock  obligations.  BB indicates the lowest degree of  speculation  and CCC the
highest degree of  speculation.  While such issues will likely have some quality
and protective  characteristics,  these are outweighed by large uncertainties or
major risk exposures to adverse conditions.

                                COMMERCIAL PAPER

A1 and Prime 1 commercial paper ratings issued by Standard & Poor's  Corporation
(S&P) and Moody's  Investors  Services,  Inc.  (Moody's) are the highest ratings
these corporations issue.

Commercial  paper rated A1 by S&P has the following  characteristics:  Liquidity
ratios are adequate to meet cash requirements.  Long-term senior debt is rated A
or  better.  The  issuer  has  access to at least  two  additional  channels  of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances.  Typically, the issuer's industry is well established
and the issuer has a strong  position  within the industry.  The reliability and
quality of management  are  unquestioned.  Relative  strength or weakness of the
above factors determine whether the issuer's commercial paper is rated A1, A2 or
A3.

Among factors considered by Moody's in assigning ratings are the following:  (1)
evaluation  of the  management  of the issuer;  (2) economic  evaluation  of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain  areas;  (3)  evaluation of the issuer's  products in
relation to competition and customer acceptance;  (4) liquidity;  (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial  strength of a parent company and the  relationships  which exist with
the issuer;  and (8)  recognition by the management of obligations  which may be
present or may arise as a result of public interest questions and preparation to
meet such obligations.
<PAGE>

                                     PART C

                               OTHER INFORMATION

ITEM 24.  FINANCIAL STATEMENTS AND EXHIBITS

(a)  Financial Statements.  The annual report to shareholders dated December 31,
     1995, was filed with the Securities and Exchange Commission via EDGAR on
     February 15, 1996.  The annual report is incorporated by reference in Part
     B.

                                               Filing
                                               Incorporated           Date
(b)  Exhibits                                  With                   Filed
     --------                                  ------------           ------

     (1)  Articles of Incorporation            Form N-1A              12-26-86
     (2)  Bylaws                               Form N-1A               2-29-96
     (3)  Voting Trust Agreement                                      INAP
     (4)  Specimen Capital Stock Certificate   Form N-1A              12-26-86
     (5)  Investment Management Agreement      Form N-1A               8-19-94
     (6)  Distribution Contract                Form N-1A               3-31-87
     (7)  Bonus, profit sharing, pension or
            other similar contracts for
            benefit of directors or officers
            of the Registrant                                         INAP
     (8)  Custody Agreement                    Form N-1A               2-28-94
     (9)  Shareholders Service Contract                               INAP
    (10)  Opinion and Consent of Counsel       Form N-1A               2-29-96
    (11)  Accountants' Consent                 Form N-1A               2-29-96
    (12)  All financial statements omitted
          from Item 23.                        Form N-1A              Annual
                                                                      Report
    (13)  Agreements or understandings made
          in consideration for providing
          initial capital                                             INAP
    (14)  Retirement Plan and Forms                                   INAP
    (15)  12b-1 Plan                                                  INAP

ITEM 25.  PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

The  Registrant  is  operated  under the  supervision  of  Composite  Research &
Management Co. which was established in 1944.  Composite  Research is affiliated
with Murphey Favre and Murphey Favre Securities  Services.  Murphey Favre serves
as principal  underwriter  and  distributor  of the  Registrant.  Murphey  Favre
Securities  Services  provides  administrative  and transfer services to WM Life
Insurance  Company.  All of the preceding are subsidiaries of Washington Mutual,
Inc. of Seattle, Washington.

Composite  Research,  Murphey Favre, and Murphey Favre Securities Services serve
in the same capacities for the seven other investment companies in the Composite
Group of Funds,  namely:  Composite Income Fund, Inc.;  Composite Equity Series,
Inc.;  Composite Cash Management Company;  Composite Tax-Exempt Bond Fund, Inc.;
Composite U.S. Government Securities,  Inc.; Composite Northwest Fund, Inc.; and
Composite Bond & Stock Fund, Inc.

ITEM 26.  NUMBER OF HOLDERS OF SECURITIES.

As of February 29, 1996,  there was one common stock  shareholder,  the separate
account of WM Life Insurance Company.

ITEM 27.  INDEMNIFICATION.

Registrant  shall have the power to indemnify  any  director,  officer or former
director or officer of the Corporation, or any person who may have served at the
Corporation's  request as a director or officer of another corporation,  against
expenses actually and reasonably  incurred by such person in connection with the
defense  of any  action,  suit or  proceeding,  civil or  criminal,  in which he
becomes a party by reason of being or having been such  director or officer,  to
the full extent  permitted by the laws of the state of Washington,  as such laws
at  anytime  may  be  in  force  and  effect,   provided,   however,  that  this
indemnification provision shall not protect, or purport to protect, any director
or officer of the corporation against any liability to the corporation or to the
shareholders  to which he  otherwise  would be  subject  by  reason  of  willful
misfeasance,  bad faith,  gross negligence,  or reckless disregard of the duties
involved in the conduct of this office.

ITEM 28.  BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Registrant's Investment Adviser is Composite Research & Management Co., a wholly
owned subsidiary of Washington Mutual, Inc., a Washington corporation organized
in 1889.  The Adviser serves in that capacity for the seven (7) other investment
companies with the Composite Group of Funds identified in Item 25.

Business and other  connections  of the  Investment  Adviser were most  recently
filed on Form ADV, Securities and Exchange  Commission File No. 801-4855,  which
was mailed on February 23, 1996, and is incorporated herein by reference.

ITEM 29.  PRINCIPAL UNDERWRITERS.

The principal  underwriter for the Registrant is Murphey Favre which also serves
in the same capacity for seven (7) other investment companies identified in Item
25.

Business and other  connections of the  underwriter  were most recently filed on
Form BD,  CRD 599,  with the  National  Association  of  Securities  Dealers  on
February 20, 1996, and are incorporated herein by reference.

ITEM 30.  LOCATION OF ACCOUNTS AND RECORDS.

All  accounts,  books and other  documents  required to be maintained by Section
31(a) of the  Investment  Company Act of 1940 and the rules  thereunder  will be
maintained at the offices of the  Registrant  at 601 W. Main Avenue,  Suite 801,
Spokane,  Washington 99201. The Registrant's  custodian activities are performed
at Investors Fiduciary Trust Company (IFTC), 127 W. 10th, Kansas City, MO 64105.

ITEM 31.  MANAGEMENT SERVICES.

Registrant is not a party to any management related service contract, other than
as set forth in the Prospectus.

ITEM 32.  UNDERTAKINGS.

Management  has included a discussion of Fund  performance  in the Fund's annual
report which is available upon request and without charge.

<PAGE>

                                   SIGNATURES
                                   FORM N-1A

Pursuant to the  requirements  of the  Securities Act of 1933 and the Investment
Company  Act  of  1940,  the  Registrant  certifies  that  it  meets  all of the
requirements for effectiveness of this Registration  Statement  pursuant to Rule
485(a) under the  Securities  Act of 1933 and has duly caused this  Registration
Statement  to  be  signed  on  its  behalf  by  the  undersigned,  thereto  duly
authorized,   in   the   City   of   Spokane,    and   State   of Washington
on the 28 day of November, 1995.

                                         COMPOSITE DEFERRED SERIES, INC.
                                        --------------------------------
                                                 Registrant
[SEAL]
                                          By:/s/ William G. Papesh
                                             ------------------------ 
ATTEST:                                         William G. Papesh
/s/ John T. West                                     President
----------------------------- 
John T. West, CPA                            /s/ Monte D. Calvin
Secretary                                    ------------------------
                                               Monte D. Calvin, CPA
                                           Principal Financial Officer

Pursuant to the  requirements of the Securities Act of 1933,  this  Registration
Statement  has been signed below by the following  persons in the  capacities on
the date indicated:

/s/ Wayne L. Attwood     November 28, 1995
-------------------------------------------                            
Wayne L. Attwood, Director     (Date)             

/s/ Anne V. Farrell      November 28, 1995
-------------------------------------------
Anne V. Farrell, Director      (Date)

/s/ Kristianne Blake     November 28, 1995
-------------------------------------------
Kristianne Blake, Director     (Date)

/s/ Edwin J. McWilliams  November 28, 1995
-------------------------------------------
Edwin J. McWilliams, Director  (Date)

/s/ Michael K. Murphy    November 28, 1995
-------------------------------------------
Michael K. Murphy, Director    (Date)

/s/ William G. Papesh    November 28, 1995
-------------------------------------------
William G. Papesh, Director    (Date)

/s/ Jay Rockey           November 28, 1995
-------------------------------------------
Jay Rockey, Director           (Date)

/s/ Leland J. Sahlin     November 28, 1995
-------------------------------------------
Leland J. Sahlin, Director     (Date)

/s/ Richard C. Yancey    November 28, 1995
-------------------------------------------
Richard C. Yancey, Director    (Date)

<PAGE>

                                   EXHIBIT 27



--------------------------------------------------------------------------------
                                 EXHIBIT INDEX
--------------------------------------------------------------------------------

EX-99.B2            BYLAWS
EX-99.B10           OPINION & CONSENT OF COUNSEL
EX-99.B11           ACOUNTANT'S CONSENT
EX-27.CLASS A       FINANCIAL DATA SCHEDULE - CLASS A

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