COMPOSITE EQUITY SERIES INC, 485BPOS, 1997-02-25

COMPOSITE EQUITY SERIES INC
485BPOS, 1997-02-25

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SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Securities Act of 1933 File #2-11380
Investment Company Act of 1940 File #811-565
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/

PRE-EFFECTIVE AMENDMENT NO. ___ / /
POST-EFFECTIVE AMENDMENT NO. 59 /X/

and/or

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

AMENDMENT NO. 59 /X/

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

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

1-509-353-3486
- --------------------------------------------------------------------------
(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 February 28, 1997

It is proposed that this filing will become effective:

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[XX] on February 28, 1997, pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on (date) 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.
- -------------------------------------------------------------------------------
CALCULATION OF REGISTRATION 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 19, 1996.

<PAGE>

PART A
TABLE OF CONTENTS

N-1A Item No. Location

Item 1. Cover Page ......................................... Cover Page
Item 2. Synopsis ........................................... Fee Table
About this
Prospectus
Item 3. Condensed Financial Information .................... Financial
Highlights
Performance
Information
Item 4. General Description of the Registrant .............. Cover Page
The Funds'
Objectives
Investment
Practices and
Risk Factors
Investment
Restrictions
Item 5. Management of the Fund ............................. Who We Are
The Cost of
Good
Management
How to Buy
Shares
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 ................... See Prospectus
page 11
Investment
Practices
Brokerage
Allocations
and
Portfolio
Transactions
Item 14. Management of the Fund ............................. The Funds and
Their
Management
Item 15. Control Persons and Principal Holders of Securities. Directors &
Officers of
the Funds
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
Voting
Privileges
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 21
Exchange
Privilege
Services
Provided
by the Funds
Specimen Price
Make-up
Sheet
Item 20. Tax Status ......................................... Dividends,
Capital
Gain
Distributions
and Taxes
Item 21. Underwriters ....................................... Distribution
Services
Item 22. Performance Information ............................ Performance
Information
Item 23. Financial Statements ............................... Financial
Statements
and Reports

<PAGE>
COMPOSITE EQUITY FUNDS
SUITE 801
601 W. MAIN AVENUE
SPOKANE, WASHINGTON 99201-0613
TELEPHONE (509) 353-3550 TOLL FREE (800) 543-8072

A SELECTION OF THREE FUNDS WITH DIFFERENT INVESTMENT OBJECTIVES:
The Composite Equity Funds provide a diversified selection of investments
in stocks, bonds, and other securities:

COMPOSITE BOND & STOCK FUND, INC. - This Fund, which was established in
1939, is designed to provide continuity of income, conservation of principal,
and long-term growth of income and principal. Investments are made in bonds,
preferred stocks, common stocks, and convertible bonds.

COMPOSITE GROWTH & INCOME FUND - The primary objective of this Fund is
long-term capital growth. Current income is a secondary consideration.
Investments are made in a diversified pool of common stocks and other
securities. Established in 1949, this is the second oldest mutual fund in the
Composite Group.

COMPOSITE NORTHWEST FUND, INC. - This Fund seeks long-term growth of
capital by investing in common stocks of companies doing business or located in
Alaska, Idaho, Montana, Oregon and Washington.

Please read this Prospectus dated February 28, 1997, and retain it for
future reference. It sets forth information about these Funds that a prospective
investor should know before investing.

OTHER IMPORTANT INFORMATION
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT 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.

A STATEMENT OF ADDITIONAL INFORMATION ABOUT THE FUNDS, DATED FEBRUARY 28,
1997, IS ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION. IT IS INCORPORATED
BY REFERENCE INTO THIS PROSPECTUS. YOU MAY OBTAIN A FREE COPY BY CALLING OR
WRITING THE FUNDS AT THE LOCATION LISTED IN THE HEADING OF THIS INTRODUCTION.

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 COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

CONTENTS Page
About this Prospectus......................... 2
Expense information........................... 3
Financial highlights.......................... 5
The Funds' objectives......................... 11
Investment practices and risk factors......... 11
Investment restrictions....................... 13
Who we are.................................... 13
The cost of good management................... 14
The value of a single share................... 15
How to buy shares............................. 16
Distribution of income and capital gains...... 19
Income taxes on dividends and
capital gains............................... 20
Exchanges for other Composite funds........... 20
How to sell shares............................ 21
IRAs & other tax-sheltered
retirement plans............................ 22
Performance information....................... 22
Reports to shareholders....................... 23
We're here to help you........................ 23

ABOUT THIS PROSPECTUS
In this publication, you will find basic information about the Composite
Equity Funds. Included are such subjects as how to buy and sell shares, as well
as details about the Funds' objectives, investment practices and restrictions,
and other matters.
If you are not familiar with mutual funds, investment terminology, or the
Composite Group of Funds, you may find it useful to understand the following key
words and terms that appear frequently on these pages:

GLOSSARY OF KEY WORDS AND TERMS
ADVISER. Composite Research & Management Co., which is called the "Adviser"
in this Prospectus, is the manager of the Equity Funds and several other
Composite mutual funds.
CLASS A SHARES. All Composite Equity Funds are available in two classes.
Class A shares include a sales charge at the time of purchase and annual
operating expenses.
CLASS B SHARES. Class B shares do not have an initial sales charge, but
they do have higher operating expenses for six years than Class A shares, and
they have a contingent deferred sales charge (see below).
CONTINGENT DEFERRED SALES CHARGE. If an investor redeems Class B shares
within four years of purchase, he or she normally must pay this charge.
DISTRIBUTOR. Murphey Favre, Inc. distributes the Composite Equity Funds and
other Composite mutual funds and is referred to as the "Distributor" in this
Prospectus.
EXCHANGE. This privilege allows shareholders to exchange shares of any
Composite fund for the same class of shares of any other Composite fund. There
is no fee or additional sales charge for such an exchange.
FUND. The term "Fund" identifies any one of the three mutual funds offered
through this Prospectus. These "Funds" are identified as follows in this
document:
BOND & STOCK. This Fund's objectives are to provide continuity of income,
conservation of principal, and long-term growth of both income and principal.
GROWTH & INCOME. This Fund's primary objective is to provide long-term
capital growth by investing in common stocks and other securities. Current
income is a secondary consideration.
NORTHWEST. This Fund invests in common stocks of companies located or doing
business in the Northwest states of Alaska, Idaho, Montana, Oregon, and
Washington. The primary objective is long-term growth of capital.
NET ASSET VALUE (NAV). This is the term used in this publication and in
daily newspaper financial tables to refer to the value of a single share of a
mutual fund.
REDEMPTION. This refers to the sale of mutual fund shares by an investor.
He or she is said to have "redeemed" the shares.
REPRESENTATIVE. This is the person who is authorized to purchase or sell
mutual fund shares on your behalf. Your representative may be an investment
representative of Washington Mutual Bank or a registered representative of
Murphey Favre, Inc. or a registered representative of another securities dealer.
STATEMENT OF ADDITIONAL INFORMATION. This is a document that has more
detailed information about the Funds than what is in this Prospectus. It is on
file with the Securities and Exchange Commission and also is available through
the Funds.

EXPENSE INFORMATION
The table below shows the Funds' costs and expenses that an investor will
bear both directly or indirectly and how they affect share ownership. Operating
expenses are based on the Funds' expenses during the fiscal year ended October
31, 1996.
For further information on costs and expenses, please see "The cost of good
management" on Page 14.

CLASS A CLASS B
SHAREHOLDER TRANSACTION EXPENSES FOR EACH FUND: SHARES SHARES
---------- ---------
Maximum sales charge imposed on purchases
(as a percentage of offering price) 4.50% None

Maximum contingent deferred sales charge (as a percentage of
purchase price or redemption proceeds, whichever is lower) None 4.00%

Redemption fee None None
Exchange fee None None

BOND & STOCK GROWTH & INCOME NORTHWEST
------------------- -------------------- ---------------------
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
SHARES SHARES SHARES SHARES SHARES SHARES
------------------- -------------------- ---------------------
Advisory fees .63% .63% .63% .63% .63% .63%
12b-1 fees .25% 1.00% .25% 1.00% .25% 1.00%
Other expenses .18% .23% .23% .31% .20% .35%
-------- -------- ---------- --------- --------- -----------
Total Fund operating
expenses 1.06% 1.86% 1.11% 1.94% 1.08% 1.98%
======== ======== ========== ========= ========= ===========

Sales charge waivers are available for Class A and Class B shares, and
reduced sales charge purchase plans are available for Class A shares. The 4%
contingent deferred sales charge on Class B shares declines 1% annually to 0%
after four years. 12b-1 fees include service fees not to exceed .25% of average
net assets with the remainder being reimbursed distribution expenses for Class A
shares and distribution fees for Class B shares. Please see "The cost of good
management" for further information. There is a $10 charge for redemptions paid
by Fed Funds wire, but not for redemptions deposited to your pre-authorized bank
account or paid by check.

EXAMPLE
YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT IN ONE OF THE FUNDS,
ASSUMING YOU RECEIVE A 5% ANNUAL RETURN AND THAT THE FUND'S EXPENSES ARE THE
SAME AS THOSE SHOWN IN THE ANNUAL FUND OPERATING EXPENSES TABLE ON THE PREVIOUS
PAGE. THE 5% FIGURE IS A CONSTANT RATE REQUIRED FOR COMPARATIVE PURPOSES BY THE
SECURITIES AND EXCHANGE COMMISSION. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL RESULTS WILL BE
GREATER OR LESS THAN THE ILLUSTRATION.

<TABLE>
<CAPTION>
BOND & STOCK GROWTH & INCOME NORTHWEST
------------------- ------------------ -------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
EXPENSES ASSUMING REDEMPTION SHARES SHARES SHARES SHARES SHARES SHARES
AT THE END OF EACH PERIOD: --------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 55 $ 49 $ 56 $ 50 $ 56 $ 50
3 Years $ 77 $ 68 $ 79 $ 71 $ 78 $ 72
5 Years $101 $101 $104 $105 $102 $107
10 Years $169 $177 $174 $184 $171 $186
EXPENSES ASSUMING YOU KEEP YOUR
SHARES AND NO REDEMPTIONS ARE MADE:
1 Year $ 55 $ 19 $ 56 $ 20 $ 56 $ 20
3 Years $ 77 $ 58 $ 79 $ 61 $ 78 $ 62
5 Years $101 $101 $104 $105 $102 $107
10 Years $169 $177 $174 $184 $171 $186

</TABLE>
Class B shares automatically convert to Class A shares after six years
without charge or tax impact. Because of that, years seven through ten reflect
Class A operating expenses. Redemption at the end of a full year results in the
imposition of the following year's contingent deferred sales charge. Class B
expenses assume contingent deferred sales charges as follows: one year, 3%;
three years, 1%; five and ten years, 0%. Long-term Class B shareholders could
pay more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers. The Class B
conversion feature is intended to reduce the likelihood this will occur.

FOR FURTHER INFORMATION
* Advisory fees - See "The cost of good management" Page 14
* 12b-1 fees - See "The cost of good management" Page 14
* Sales charge on purchases - See "Buying Class A shares" Page 16
* Contingent deferred sales charge - See "Buying Class B shares" Page 17
* Conversion of Class B shares to Class A - See "Class B conversion feature"
Page 19

FINANCIAL HIGHLIGHTS
The tables on the following pages present selected financial information
about the Funds, including per share data, expense ratios and other data based
on average net assets. This information has been audited by LeMaster & Daniels
PLLC, the Funds' independent auditors, whose reports appear in the Funds' annual
report. The annual report is incorporated by reference into the Statement of
Additional Information.

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
BOND & STOCK - CLASS A SHARES

ELEVEN
MONTHS
YEARS ENDED OCTOBER 31, ENDED YEARS ENDED NOVEMBER 30,
------------------------------- OCT. 31,----------------------------------------
1996 1995 1994 1993 1992(4) 1991 1990 1989 1988 1987
-------- ------- ------- ------ -------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $13.48 $11.53 $12.23 $11.27 $11.01 $ 9.90 $10.86 $10.08 $ 8.85 $10.26
INCOME FROM -------- ------- ------- ------ -------- ------- ------- ------- ------- --------
INVESTMENT OPERATIONS
Net Investment Income. 0.52 0.50 0.46 0.48 0.44 0.55 0.53 0.58 0.53 0.52
Net Gains (Losses) on
Securities (both realized
and unrealized)...... 1.53 2.02 (0.57) 1.06 0.80 1.10 (0.78) 0.72 1.19 (1.23)
Total From Investment -------- ------- ------- ------ -------- ------- ------- ------- ------- --------
Operations.......... 2.05 2.52 (0.11) 1.54 1.24 1.65 (0.25) 1.30 1.72 (0.71)
Less Distributions -------- ------- ------- ------ -------- ------- ------- ------- ------- --------
Dividends (from net
investment income)... (0.50) (0.49) (0.44) (0.46) (0.53) (0.54) (0.61) (0.52) (0.44) (0.53)
Distributions (from
capital gains)....... (0.32) (0.08) (0.15) (0.12) (0.45) 0.00 (0.10) 0.00 (0.05) (0.17)
-------- ------- ------- ------ -------- ------- ------- ------- ------- --------
Total Distributions. (0.82) (0.57) (0.59) (0.58) (0.98) (0.54) (0.71) (0.52) (0.49) (0.70)
NET ASSET VALUE, -------- ------- ------- ------ -------- ------- ------- ------- ------- --------
END OF PERIOD ......... $14.71 $13.48 $11.53 $12.23 $11.27 $11.01 $ 9.90 $10.86 $10.08 $ 8.85
======== ======= ======= ====== ======== ======= ======= ======= ======= ========
TOTAL RETURN (1) ...... 15.66% 22.55% -0.90% 13.99% 11.92% 16.96% -2.29% 13.21% 19.67% -7.53%
RATIOS/SUPPLEMENTAL
DATA
Net Assets,
End of Period ($1,000's) $255,414 $208,592 $191,615 $180,281 $102,523 $66,090 $63,669 $71,771 $69,230 $74,407
Ratio of Expenses to
Average Net Assets(2) 0.98% 1.02% 1.06% 1.13% 1.13%(5) 1.14% 1.17% 0.96% 0.87% 1.69%
Ratio of Net Income to
Average Net Assets... 3.68% 3.98% 3.97% 4.01% 4.30%(5) 4.90% 5.25% 5.42% 5.35% 4.99%
Portfolio Turnover Rate 46% 32% 25% 19% 15%(5) 35% 38% 36% 81% 83%
Average Commission Paid(3) $0.0632 - - - - - - - - -

(1) Total returns do not reflect a sales charge and are not annualized.
(2) Ratio of expenses to average net assets include expenses paid indirectly
beginning in fiscal 1995.
(3) Average commission paid disclosure beginning in fiscal 1996.
(4) Change in Fund's fiscal year-end.
(5) Annualized.

</TABLE>
<PAGE>

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)

BOND & STOCK - CLASS B SHARES

YEARS ENDED MARCH 30,
OCTOBER 31, TO
----------------- OCT. 31,
1996 1995 1994(4)
--------- ------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD........... $13.47 $11.51 $11.49
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income ......................... 0.41 0.39 0.18
Net Gains on Securities
(both realized and unrealized)............... 1.53 2.03 0.04
--------- ------- ----------
Total From Investment Operations............ 1.94 2.42 0.22
--------- ------- ----------
LESS DISTRIBUTIONS
Dividends (from net investment income)........ (0.40) (0.38) (0.20)
Distributions (from capital gains)............ (0.32) (0.08) 0.00
--------- ------- ----------
Total Distributions......................... (0.72) (0.46) (0.20)
--------- ------- ----------
NET ASSET VALUE, END OF PERIOD ................ $14.69 $13.47 $11.51
========= ======= ==========
TOTAL RETURN (1) .............................. 14.73% 21.60% 1.94%
Ratios/Supplemental Data
Net Assets, End of Period ($1,000's).......... $22,243 $7,372 $3,362
Ratio of Expenses to Average Net Assets(2) ... 1.86% 1.84% 1.77%(5)
Ratio of Net Income to Average Net Assets..... 2.80% 3.10% 3.22%(5)
Portfolio Turnover Rate....................... 46% 32% 25%
Average Commission Paid(3) ................... $0.0632 - -

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
GROWTH & INCOME - CLASS A SHARES
YEARS ENDED OCTOBER 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- ------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $14.65 $12.71 $12.81 $12.02 $11.86 $ 9.18 $12.17 $11.10 $ 9.77 $11.57
INCOME FROM ------- ------- ------- ------- ------- ------- ------- ------ -------- -------
INVESTMENT OPERATIONS
Net Investment Income. 0.20 0.22 0.18 0.21 0.29 0.29 0.35 0.46 0.35 0.44
Net Gains (Losses) on
Securities (both realized
and unrealized)...... 3.16 2.31 0.85 1.10 0.80 2.69 (2.19) 0.96 1.32 (0.45)
Total From Investment ------- ------- ------- ------- ------- ------- ------- ------ -------- -------
Operations.......... 3.36 2.53 1.03 1.31 1.09 2.98 (1.84) 1.42 1.67 (0.01)
LESS DISTRIBUTIONS ------- ------- ------- ------- ------- ------- ------- ------ -------- -------
Dividends (from net
investment income)... (0.21) (0.19) (0.18) (0.21) (0.34) (0.30) (0.50) (0.35) (0.29) (0.55)
Distributions (from
capital gains)....... (0.54) (0.40) (0.95) (0.31) (0.59) 0.00 (0.65) 0.00 (0.05) (1.24)
------- ------- ------- ------- ------- ------- ------- ------ -------- -------
Total Distributions. (0.75) (0.59) (1.13) (0.52) (0.93) (0.30) (1.15) (0.35) (0.34) (1.79)
NET ASSET VALUE, ------- ------- ------- ------- ------- ------- ------- ------ -------- -------
END OF YEAR ........... $17.26 $14.65 $12.71 $12.81 $12.02 $11.86 $ 9.18 $12.17 $11.10 $ 9.77
======= ======= ======= ======= ======= ======= ======= ====== ======== =======
TOTAL RETURN (1) ...... 23.61% 20.87% 8.55% 11.06% 9.94% 32.69% -16.25% 13.00% 17.36% 0.20%
RATIOS/SUPPLEMENTAL
DATA
Net Assets,
End of Year ($1,000's) $178,331 $130,630 $102,837 $95,229 $81,102 $69,365 $68,297 $72,642 $69,117 $67,933
Ratio of Expenses to
Average Net Assets(2) 1.03% 1.07% 1.10% 1.17% 1.10% 1.12% 1.17% 1.06% 0.89% 0.90%
Ratio of Net Income to
Average Net Assets... 1.26% 1.62% 1.45% 1.67% 2.37% 2.73% 3.33% 3.88% 3.33% 3.70%
Portfolio Turnover Rate 52% 39% 34% 54% 18% 26% 37% 37% 45% 71%
Average Commission Paid(3) $0.0654 - - - - - - - - -

(1) Total returns do not reflect a sales charge.
(2) Ratio of expenses to average net assets include expenses paid indirectly
beginning in fiscal 1995.
(3) Average commission paid disclosure beginning in fiscal 1996.

</TABLE>
<PAGE>

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
GROWTH & INCOME - CLASS B SHARES

YEARS ENDED MARCH 30,
OCTOBER 31, TO
----------------- OCT. 31,
1996 1995 1994(4)
------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD........... $14.59 $12.68 $12.00
INCOME FROM INVESTMENT OPERATIONS ------- -------- --------
Net Investment Income ......................... 0.06 0.11 0.05
Net Gains on Securities
(both realized and unrealized)............... 3.14 2.31 0.69
------- -------- --------
Total From Investment Operations............ 3.20 2.42 0.74
LESS DISTRIBUTIONS ------- -------- --------
Dividends (from net investment income)........ (0.08) (0.11) (0.06)
Distributions (from capital gains)............ (0.54) (0.40) 0.00
------- -------- --------
Total Distributions......................... (0.62) (0.51) (0.06)
------- -------- --------
NET ASSET VALUE, END OF PERIOD ................ $17.17 $14.59 $12.68
======= ======== ========
TOTAL RETURN (1) .............................. 22.55% 19.95% 6.14%
Ratios/Supplemental Data
Net Assets, End of Period ($1,000's).......... $22,851 $8,871 $2,082
Ratio of Expenses to Average Net Assets(2) ... 1.94% 1.91% 1.85%(5)
Ratio of Net Income to Average Net Assets..... 0.34% 0.69% 0.65%(5)
Portfolio Turnover Rate....................... 52% 39% 34%
Average Commission Paid(3) ................... $0.0654 - -

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)
NORTHWEST - CLASS A SHARES

YEARS ENDED OCTOBER 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987(4)
------- ------- ------- ------- ------- ------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $17.40 $14.30 $14.50 $14.04 $13.45 $ 8.43 $10.18 $ 7.55 $ 6.02 $ 6.15
INCOME FROM ------- ------- ------- ------- ------- ------- ------- ------- ------ --------
INVESTMENT OPERATIONS
Net Investment Income. 0.03 0.07 0.08 0.07 0.08 0.07 0.08 0.08 0.06 0.07
Net Gains (Losses) on
Securities (both realized
and unrealized)...... 2.47 3.10 0.35 0.46 0.69 5.03 (1.76) 2.63 1.52 (0.14)
Total From Investment ------- ------- ------- ------- ------- ------- ------- ------- ------ --------
Operations.......... 2.50 3.17 0.43 0.53 0.77 5.10 (1.68) 2.71 1.58 (0.07)
LESS DISTRIBUTIONS ------- ------- ------- ------- ------- ------- ------- ------- ------ --------
Dividends (from net
investment income)... (0.03) (0.07) (0.08) (0.07) (0.07) (0.08) (0.07) (0.08) (0.05) (0.06)
Distributions (from
capital gains)....... (0.18) 0.00 (0.55) 0.00 (0.11) 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------- ------- ------- ------- ------ --------
Total Distributions. (0.21) (0.07) (0.63) (0.07) (0.18) (0.08) (0.07) (0.08) (0.05) (0.06)
NET ASSET VALUE, ------- ------- ------- ------- ------- ------- ------- ------- ------ --------
END OF YEAR ........... $19.69 $17.40 $14.30 $14.50 $14.04 $13.45 $ 8.43 $10.18 $ 7.55 $ 6.02
======= ======= ======= ======= ======= ======= ======= ======= ====== ========
TOTAL RETURN (1) ...... 14.54% 22.24% 2.97% 3.82% 5.77% 60.49% -16.68% 36.14% 26.42% -1.72%
RATIOS/SUPPLEMENTAL
DATA
Net Assets,
End of Year ($1,000's) $176,706 $157,953 $152,622 $168,840 $167,115 $98,754 $42,647 $18,687 $6,994 $6,589
Ratio of Expenses to
Average Net Assets(2) 1.08% 1.10% 1.09% 1.09% 1.11% 1.21% 1.45% 1.50% 1.44% 1.36%
Ratio of Net Income to
Average Net Assets... 0.16% 0.44% 0.51% 0.48% 0.53% 0.63% 0.72% 0.81% 0.84% 0.48%
Portfolio Turnover Rate 42% 9% 11% 8% 4% 8% 7% 12% 17% 40%
Average Commission Paid(3) $0.0665 - - - - - - - - -

</TABLE>
<PAGE>

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)

NORTHWEST - CLASS B SHARES

YEARS ENDED MARCH 30,
OCTOBER 31, TO
--------------- OCT. 31,
1996 1995 1994(4)
------ ------ ----------
NET ASSET VALUE, BEGINNING OF PERIOD........... $17.31 $14.28 $14.42
INCOME FROM INVESTMENT OPERATIONS ------ ------ ----------
Net Investment Income ......................... (0.08) (0.05) (0.02)
Net Gains on Securities
(both realized and unrealized)............... 2.40 3.08 (0.12)
------ ------ ----------
Total From Investment Operations............ 2.32 3.03 (0.14)
------ ------ ----------
LESS DISTRIBUTIONS
Dividends (from net investment income)........ 0.00 0.00 0.00
Distributions (from capital gains)............ (0.18) 0.00 0.00
------ ------ ----------
Total Distributions......................... (0.18) 0.00 0.00
------ ------ ----------
NET ASSET VALUE, END OF PERIOD ................ $19.45 $17.31 $14.28
====== ====== ==========
TOTAL RETURN (1) .............................. 13.54% 21.25% -0.97%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($1,000's).......... $14,653 $7,083 $3,102
Ratio of Expenses to Average Net Assets(2) ... 1.98% 1.95% 1.96%(5)
Ratio of Net Income to Average Net Assets..... -0.76% -0.45% -0.39%(5)
Portfolio Turnover Rate....................... 42% 9% 11%
Average Commission Paid(3) ................... $0.0665 - -

(1) Total returns do not reflect a sales charge and are not annualized.
(2) Ratio of expenses to average net assets include expenses paid
indirectly beginning in fiscal 1995.
(3) Average commission paid disclosure beginning in fiscal 1996.
(4) From the commencement of offering of Class B shares.
(5) Annualized.

<PAGE>
THE FUNDS' OBJECTIVES
Composite Research & Management Co., referred to as the "Adviser" in this
Prospectus, manages the Funds. The Adviser attempts to maintain Funds that are
responsive to changes in economic trends and developments, government actions
and regulations, and international monetary conditions. Currently, equity
investments are selected from high-quality companies with solid business
fundamentals that the Adviser believes have a competitive advantage. Securities
may be purchased on a recognized exchange, over-the-counter, or through the
NASDAQ system.

The investment objectives of each Fund are described below. These
objectives are fundamental and, therefore, cannot be changed without a majority
vote of the Fund's outstanding shares. Other investment practices are not
fundamental unless this Prospectus or the Statement of Additional Information
state that a particular policy is fundamental. Because risks are involved, there
cannot be any assurance a Fund's objectives will be attained.
BOND & STOCK: This Fund has three objectives: continuity of income,
conservation of principal, and long-term growth of both the income and
principal. The Fund invests in bonds, preferred stocks, common stocks, and
convertible bonds. At least 25% of the Fund's assets are invested in fixed-
income securities.

GROWTH & INCOME: The primary objective of this Fund is to provide long-term
capital growth by investing in common stocks and other securities. Current
income is a secondary consideration.
NORTHWEST: This Fund invests with the objective of long-term growth of
capital. Common stocks are selected from companies located or doing business in
the Northwest states of Alaska, Idaho, Montana, Oregon, and Washington. Under
normal circumstances, at least 65% of the Fund's total assets will be invested
in companies whose principal executive offices are located in the Northwest.

INVESTMENT PRACTICES AND RISK FACTORS
The Funds' net asset values per share will fluctuate as the values of the
securities they own change. There are many factors that influence fluctuations
in the market value of securities owned by the Funds. These include economic
trends, government actions and regulations, and international monetary
conditions. The price of an individual security can be affected by such factors
as poor earnings reports by its issuer, litigation, loss of major customers, or
changes particular to its industry. The Funds attempt to limit risk by
diversifying investments and by carefully researching securities before they are
purchased. Market risks are inherent in investments.

GENERAL
The Funds may employ the following techniques in addition to the primary
investment strategies discussed earlier under "The Funds' objectives."
MONEY MARKET INSTRUMENTS. The Funds are permitted to invest in money market
instruments for temporary or defensive purposes. The money market investments
permitted include obligations of the U.S. government and its agencies and
instrumentalities; short-term corporate-debt securities; commercial paper,
including bank obligations; certificates of deposit; and repurchase agreements.
REPURCHASE AGREEMENTS. The Funds may temporarily invest cash reserves in
repurchase agreements. In a repurchase agreement, a fund buys a security at one
price and agrees to sell it back at a higher price. If the seller defaults on
its agreement to repurchase the security, the Fund may suffer a loss because of
a decline in the value of the underlying debt security.
Repurchase agreements will be entered into only with brokers, dealers or
banks that meet credit guidelines adopted by each Fund's Board of Directors. To
limit risk, repurchase agreements maturing in more than seven days will not
exceed 10% of a Fund's total assets.

REAL ESTATE INVESTMENT TRUSTS. The Funds may invest up to 25% of their
assets in real estate investment trusts, known as "REITs." Factors influencing
the investment performance of REITs include the profitable operation of
properties owned, financial condition of lessees and mortgagors, underlying
value of the real property and mortgages owned, amount of financial leverage,
and amount of cash flow generated and paid out.

FIXED-INCOME SECURITIES. The Bond & Stock and Growth & Income Funds may
invest in bonds of any maturity, including mortgage-backed securities. All
fixed-income securities are subject to credit risk, which is dependent on the
issuer's ability to maintain timely interest and principal payments. During
periods of low interest rates, mortgage-backed securities may be subject to
accelerated prepayment and possible reinvestment in securities bearing lower
rates of interest.
Both Funds may also invest in below-investment-grade bonds (sometimes
called junk bonds). Any investment of this type may be considered speculative
and involve greater risk of default or price change because of changes in the
issuer's creditworthiness. The market price of these securities may fluctuate
more than higher-rated securities. They also may decline significantly in
periods of general economic difficulty, which may follow periods of rising
interest rates.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. The Bond & Stock and Growth &
Income Funds may purchase or sell securities on what is called a "when-issued"
or "delayed-delivery" basis. This is done to obtain what is considered to be an
advantageous yield or price at the time of the transaction. The Funds may
purchase securities in these transactions if payment and delivery are scheduled
to take place no more than 120 days in the future.
The payment obligation and interest rates to be received are fixed at the
time the Fund enters into the commitment. Thus, it is possible that the market
value at the time of settlement could be higher or lower than the purchase
price, if the general level of interest rates has changed. No interest will
accrue to the Fund until settlement.
Each Fund is prohibited from entering into when-issued or delayed-delivery
commitments that, in total, exceed 20% of the market value of its total assets
minus total liabilities (except for the obligations created by these
commitments).
COVERED CALL OPTIONS. Each of the Funds may write (sell) covered call
options. A call option is "covered" if the Fund owns the security underlying the
option it has written or it maintains enough cash, cash equivalents or liquid
securities to purchase the underlying security. If a Fund sells a covered call
option, it becomes obligated to deliver the securities underlying the option if
the purchaser chooses to exercise the option before its termination date. In
return, the Fund receives a premium from the purchaser which it keeps,
regardless of whether the option is exercised. During the option period, the
Fund gives up any possible capital appreciation above the agreed-upon price if
the market price of the underlying security rises.

FOREIGN SECURITIES. The Bond & Stock and Growth & Income Funds may invest
up to 25% of their assets in U.S. dollar-denominated securities of foreign
issuers.
Investments in foreign securities may involve somewhat different risks,
including incomplete or inaccurate financial information, foreign taxes and
restrictions, illiquidity, and fluctuations in currency values.

UNIQUE TO THE NORTHWEST FUND. The Northwest Fund concentrates its
investments in companies located or doing business in the Northwest. Because of
this, the Fund could be adversely impacted by economic trends within the
five-state area. Some of the companies whose securities are held by the Fund may
have significant national or international markets for their products and
services. Therefore, the Fund's performance could also be affected by national
or international economic conditions.

FOR FURTHER INFORMATION. See the Statement of Additional Information for
further information regarding the investment practices summarized in this
section.

INVESTMENT RESTRICTIONS
Although many of the Adviser's decisions depend on flexibility, there are
certain principles so fundamental to a Fund that they may not be changed without
a vote of a majority of the outstanding shares of that Fund.
IN ADDITION TO OTHER RESTRICTIONS LISTED IN THE STATEMENT OF ADDITIONAL
INFORMATION, EACH FUND MAY NOT:
1) Invest more than 5%* of its total assets in securities of any single
issuer other than U.S. government securities, except that up to 25% of a Fund's
assets may be invested without regard to this 5% limitation.
2) Acquire more than 10%* of the voting securities of any one company.
3) Invest more than 25%* of its total assets in any single industry.
4) Borrow money for investment purposes, although it may borrow up to 5% of
its total net assets for emergency, non-investment purposes.

*Percentage at the time the investment is made.

WHO WE ARE

Composite Bond & Stock Fund, Inc., Composite Equity Series, Inc., and
Composite Northwest Fund, Inc. are open-end, diversified, management investment
companies. They were incorporated under the laws of the state of Washington on
June 22, 1939; August 10, 1949; and May 27, 1986, respectively.
Each is a "series" company with the ability to add portfolios, called
"funds," subject to approval by its Board of Directors. Each currently consists
of a single fund using the corporate name except that the Composite Equity
Series, Inc. portfolio is named Composite Growth & Income Fund.
ADVISER. The Funds are managed by Composite Research & Management Co.,
which is referred to as the "Adviser" in this Prospectus.
The Adviser has been in the business of investment management since 1944.
It currently manages more than $2.3 billion for mutual funds and institutional
advisory accounts, including more than $1.4 billion within the Composite Group
of Funds.
The Adviser advises the Funds on investment policies and specific
investments. Subject to supervision by each Fund's Board of Directors, the
Adviser determines which securities are to be bought and sold. These decisions
are based on analyses of the economy, sectors of industry and specific
institutions. They are compiled from extensive data provided by some of the
country's largest investment firms, in addition to the Adviser's own research.
William G. Papesh is the president of the Funds and of the Adviser. A team
of the Adviser's investment professionals manages the Funds, under supervision
of the Adviser's investment committee. The primary portfolio managers are Philip
M. Foreman, CFA, for Growth & Income; Jeffrey D. Huffman, CFA, for Bond & Stock;
and David W. Simpson, CFA, for Northwest.
Mr. Huffman has 12 years of continuous investment experience and has been
employed by the Adviser since January 1995. Mr. Foreman has been employed by the
Adviser since November 1991 and also has 12 years of continuous investment
experience. Mr. Simpson has been employed by the Adviser since March 1993 and
has 11 years of continuous investment experience.

DISTRIBUTOR. Murphey Favre, Inc. is the "Distributor" for these Funds. The
Distributor is not a bank. Securities and annuities offered by it are not
deposits nor bank obligations, and they are not guaranteed by a bank nor insured
by the FDIC. The value of investments may fluctuate, return on investments is
not guaranteed, and loss of principal is possible.
TRANSFER AGENT. Murphey Favre Securities Services, Inc., which serves as
the "Transfer Agent," acts as the Funds' shareholder servicing and dividend
disbursing agent.

THE ADVISER, DISTRIBUTOR, AND TRANSFER AGENT, WHOSE ADDRESSES ARE LISTED ON
THE BACK COVER, ARE AFFILIATES OF WASHINGTON MUTUAL BANK AND WASHINGTON MUTUAL
BANK FSB. THEY ARE ALSO SUBSIDIARIES OF WASHINGTON MUTUAL, INC.
OTHER IMPORTANT INFORMATION. Each Fund offers two classes of shares, as
described in "How to buy shares:"
Bond & Stock has 300 million authorized shares of capital stock: 200
million Class A and 100 million Class B.
Growth & Income has 40 million authorized shares: 25 million Class A and 15
million Class B.
Northwest has 10 billion authorized shares: six billion Class A and four
billion Class B.
The shares do not have preemptive rights, and none has preference as to
conversion, exchange, dividends, retirement, liquidation, redemption, or any
other feature, except as described in "How to buy shares." The Funds do not
normally hold annual shareholder meetings. They may hold shareholder meetings
from time to time on important matters. Shares have equal voting rights on
corporate matters submitted for shareholder approval, except that each class may
vote separately on its distribution plan.
This Prospectus is consolidated to efficiently present information about
the Funds. There is a remote possibility that one Fund might become liable for
any misstatement in the Prospectus pertaining to another Fund.

THE COST OF GOOD MANAGEMENT
Composite Research & Management Co. serves as Adviser under investment
management agreements with each Fund. The agreements are renewable every year,
subject to the approval of each Fund's Board of Directors or the shareholders
themselves.
BEFORE READING THIS SECTION, YOU MAY FIND IT USEFUL TO TURN BACK TO PAGE 3
TO REVIEW THE SUMMARY ON "ANNUAL FUND OPERATING EXPENSES." THAT PROVIDES AN
OVERVIEW OF MUCH OF WHAT IS COVERED IN DETAIL HERE.

ADVISORY FEES
A fee based on a percentage of average daily net assets is paid to the
Adviser for its services. This includes investment management and administrative
services and the Adviser's function as an agent for each Fund when paying a
portion of the fee to the Distributor and Transfer Agent for their services.
Advisory fees are calculated daily and paid monthly.
Each Fund pays advisory fees equal to an annual rate of .625% of its
average daily net assets. Fees are reduced to .50% of average daily net assets
in excess of $250 million for Bond & Stock and Growth & Income. For Northwest,
the rate is reduced to .50% of its net assets over $500 million and up to $1
billion, and to .375% of the excess of the net assets over $1 billion.

DISTRIBUTION PLANS
Each Fund's Board of Directors has approved and monitors a distribution
plan that meets the provisions of Rule 12b-1 under the Investment Company Act of
1940. Each plan is intended to benefit shareholders by stimulating interest in
purchasing shares of the Funds and, thus, providing a consistent flow of
investment capital. This allows larger and more diversified holdings, as well as
economies of scale.
CLASS A SHARES. The plans authorize each Fund to reimburse the Distributor
for direct costs of marketing, selling and distributing Class A shares of that
Fund, subject to directors' approval. These costs include service fees, sales
literature and prospectuses (other than those provided to current shareholders),
compensation to sales people, and other costs of sales and marketing, including
state business and occupation tax assessed on the reimbursements. The
Distributor pays authorized dealers service fees in consideration for account
maintenance and other shareholder services. The fees are equal to an annual rate
of .25% of the average daily value of shares in the accounts of the dealer or
its customers.
Reimbursements are not to exceed annual limits of .25% of the Fund's
average daily net assets attributable to Class A shares. Unreimbursed expenses
which have not been accrued in the current fiscal year may not be recovered in
future periods.
CLASS B SHARES. The plans authorize each Fund to pay the Distributor a
distribution fee at an annual rate of .75% of each Fund's average daily net
assets attributable to Class B shares and a service fee at an annual rate of
.25% of such assets. The distribution fee is designed to permit investors to
purchase Class B shares without a front-end sales charge. At the same time, this
allows compensation to the Distributor in connection with the sale of Class B
shares. The service fee covers account maintenance and other shareholder
services.
The Distributor pays authorized dealers service fees at an annual rate of
.25% of the average daily value of Class B shares in the accounts of the dealer
or its customers.

Because the Distributor's distribution fee for Class B shares is not tied
directly to its expenses, the amount of compensation may be more or less than
its actual expenses. For this reason, the Class B distribution plan may be
characterized by the staff of the Securities and Exchange Commission as being a
"compensation" plan - in contrast to the Class A "reimbursement" plan. The Funds
are not liable for any expenses incurred by the Distributor in excess of the
amount of compensation it receives.

TOTAL EXPENSES

Other operating expenses include fees of directors not employed by the
Adviser, transfer agent fees, custodial fees, auditing and legal fees, taxes,
costs of issuing and redeeming shares, publishing of reports to shareholders,
corporate meetings, and other normal costs of running a business.
The transfer agent fees are for shareholder servicing and dividend
disbursing services. You may be required to pay a separate fee if you need
special services such as producing and mailing of historical account
transcripts.
Under terms of Northwest's investment management agreement, the Adviser
will reimburse the Fund if expenses in any fiscal year are more than 1.50% of
average daily net assets up to $30 million, and 1% of net assets over $30
million. Expenses excluded from those calculations include taxes, interest,
portfolio brokerage, and the .75% Class B share distribution fee.

THE VALUE OF A SINGLE SHARE
The Funds calculate the value of their shares at the end of each business
day of the New York Stock Exchange or at 1:00 p.m. Pacific time, whichever is
earlier. That figure is determined separately for each class by adding the value
of its securities and other assets - and then subtracting its liabilities. Next,
the resulting figure is divided by the number of shares of the class
outstanding. That provides the net asset value per share, which is commonly
referred to as "NAV."
Security valuations are provided by independent pricing sources approved by
each Fund's Board of Directors. When such valuations are not available, the
Board of Directors will determine how they are to be priced at fair value.

HOW TO BUY SHARES
Shares are offered at the next NAV that is calculated, plus a sales charge
for Class A shares. This section discusses various options you have in
purchasing shares of the Funds.
You may buy shares of the Funds through Murphey Favre, Inc. (the
Distributor), Washington Mutual Bank, or through selected securities dealers.
The Funds' shares may not be available in all states. With certain exceptions,
the minimum initial purchase in a Composite fund is $1,000. IRA accounts may
make initial purchases of $500 in any Fund. Subsequent investments should be at
least $50.

SYSTEMATIC INVESTMENT PROGRAM
For your convenience, you may arrange to have monthly purchases
automatically deducted from your checking account as part of a systematic
investment program. The minimum initial and monthly investments in this program
are $50. You can arrange this at the time of application or you can do it later
by talking to your Representative or by calling the Funds.

OTHER INFORMATION
The Funds and the Distributor reserve the right to refuse an order to buy
shares.
In the interest of economy and convenience, physical certificates
representing Fund shares will be issued only upon written request to the Fund or
by request from your Representative.

A COMPARISON OF CLASS A AND CLASS B SHARES
Each Fund offers two classes of shares which represent interests in the
same portfolio of investments:

1) Class A shares are sold to investors who pay a sales charge at the time
of purchase and who pay ongoing distribution expenses.

2) Class B shares are sold to investors who do not pay a sales charge at
the time of purchase. Instead, they pay higher ongoing distribution expenses for
six years. They also may pay a "contingent deferred sales charge" if they redeem
their shares within four years of purchase.
The net income attributable to Class B shares and the dividends payable to
Class B shares will be lower because of the higher expenses. Likewise, NAVs of
the two classes may be different.
Class A shares and Class B shares may be exchanged only for shares of the
same class of other Composite funds. See "Exchanges for other Composite funds"
on Page 20 in this Prospectus.
Representatives may receive differing compensation for selling or servicing
Class A or Class B shares.

When purchasing shares, investors are encouraged to choose the class of
shares that will be best for them. Factors to consider include the purchase
amount, the length of time shares are expected to be held, and other individual
circumstances.

Then, this question should be asked: "If I buy Class A or Class B shares
for a given length of time, which will give me the lowest cost: Class A's
initial sales charge and distribution expenses, or Class B's contingent deferred
sales charges and its higher distribution expenses?"
To assist investors in making that choice, the table on Page 3 provides
examples of charges that apply to each class of shares. Normally, Class A shares
will be more beneficial to investors who qualify for reduced sales charges, as
described below.

BUYING CLASS A SHARES

The offering price for Class A shares is the next calculated NAV, plus an
initial sales charge shown in the table below. Investors also may be entitled to
reduced or waived sales charges as discussed following the table. The final
column in the table indicates what dealers receive for selling Class A shares.

REALLOWED
SALES CHARGE TO DEALERS
------------------ -----------
% OF % OF NET % OF
PURCHASE OF OFFERING AMOUNT OFFERING
CLASS A SHARES PRICE INVESTED PRICE
- ---------------------- -------- --------- -----------
Less than $50,000 4.50% 4.71% 4.00%
$50,000 to $100,000 4.00% 4.17% 3.50%
$100,000 to $250,000 3.00% 3.09% 2.50%
$250,000 to $500,000 2.00% 2.04% 1.75%
$500,000 to $1,000,000 1.00% 1.01% 0.75%
$1,000,000 to $2,500,000 0.50% 0.50% 0.40%
$2,500,000 and above None None None*

* See net asset value purchases.

Example: AN INVESTOR CONSIDERS PUTTING $1,000 INTO A FUND'S CLASS A SHARES.
BASED ON THE FIRST COLUMN IN THE ABOVE TABLE, THE INVESTOR WOULD SEE THAT 4.50%
OF THE $1,000 WOULD PAY FOR A SALES CHARGE. THE CHARGE WOULD BE $45, WHICH IS
4.71% OF THE NET INVESTMENT OF $955, AS THE NEXT COLUMN SHOWS. THE DEALER
SELLING THE SHARES WOULD BE PAID $40 OF THE $45, WHICH IS 4.00% OF $1,000, AS
THE LAST COLUMN SHOWS.
Here is a summary of information on reduced sales charges for which an
investor may be qualified. This summary refers to the data in the above table
that cover purchases of $50,000 or more.

CUMULATIVE DISCOUNT. This allows current purchases to qualify for the
foregoing discounts by including the value of existing Composite Group
investments that were purchased subject to an initial or contingent deferred
sales charge. The discount will be based on the amount of the new purchase plus
the current offering price of shares owned at the time of the purchase. Those
eligible for a cumulative discount include individuals, traditional family
units, or trustees purchasing for single fiduciary accounts.
LETTER OF INTENT. This discount is for purchases made over an extended
period. It provides for a cumulative discount on the same basis as explained in
the previous paragraph if the following conditions are met: Purchases of Class A
shares must be made within a 13-month period that begins no earlier than 90 days
before the submission of a letter of intent from the investor to the Funds. For
more information about this discount, please contact the Fund offices or a
Representative.

REINVESTMENT. Redemption proceeds of Class A shares that were subject to a
sales charge when first purchased may be reinvested in Class A shares within 120
days without incurring another initial sales charge.

NET ASSET VALUE PURCHASES. Class A shares may be purchased with no initial
sales charge, and in any amount, by officers, directors and employees of the
Adviser, its affiliates, or officers, directors and employees of companies which
have entered into selling agreements with the Distributor. The purchase must be
for investment purposes only and may not be resold other than through redemption
by the Funds.
The Funds may also offer their shares at NAV to investors who use the sales
proceeds from open-end mutual funds outside the Composite Group of Funds
(excluding money market funds); to certain retirement plans; and to brokers,
dealers or registered investment advisers who have entered into arrangements
with the Distributor providing specifically for the shares to be used in
particular investment products made available to their clients for which they
may charge a separate fee.
There is no initial sales charge on Class A purchases of $2.5 million or
more.
The Distributor will pay authorized dealers commissions on certain net
asset value purchases as described in the Statement of Additional Information.
CONSULT A REPRESENTATIVE OR SEE THE STATEMENT OF ADDITIONAL INFORMATION IF
YOU THINK YOU MAY QUALIFY FOR ANY OF THESE PURCHASE PLANS.
YOU MUST NOTIFY THE FUND WHENEVER A REDUCED SALES CHARGE OR NET ASSET VALUE
PURCHASE APPLIES TO ENSURE RECEIVING THE SALES CHARGE REDUCTION OR WAIVER.

BUYING CLASS B SHARES
Class B shares are offered at the next calculated NAV without an initial
sales charge. The entire amount of the purchase is invested in the Fund
selected. However, Class B shares have higher distribution expenses than Class A
shares for six years. Also, if Class B shares are redeemed within four years of
purchase, a contingent deferred sales charge generally must be paid.

Those charges and fees help make it possible for the Funds to sell Class B
shares without sales charges at the time of purchase.

The proceeds from any contingent deferred sales charges are paid to the
Distributor to defray expenses for providing distribution services for Class B
shares. Examples of such expenses include compensation to sales people and
selected dealers. The Distributor currently pays authorized dealers commissions
of 4.00% of the price of shares sold by them.
CONTINGENT DEFERRED SALES CHARGE. Class B shares redeemed within four years
of purchase are subject to a contingent deferred sales charge according to the
following schedule. The period of ownership for this purpose begins on the first
day of the month in which the order for the investment is received. For example,
an investment made in March 1997 will be eligible for the second year's charge
if redeemed on or after March 1, 1998.

YEAR OF CONTINGENT
REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
- ----------------- -------------
First.................................. 4%
Second................................. 3%
Third.................................. 2%
Fourth................................. 1%
Fifth.................................. 0%
Sixth.................................. 0%

Class B shares purchased prior to January 15, 1996, are subject to a
different contingent deferred sales charge schedule which is shown in the
Statement of Additional Information.
The contingent deferred sales charge is calculated by applying the above
percentages to whichever of the following is less:

1) The NAV of the redeemed shares at the time they were purchased; or
2) The NAV of the redeemed shares at the time of redemption.
This means that no contingent deferred sales charge will be charged on any
NAV increases above the initial purchase price. Shares are redeemed in the order
that results in the lowest possible rate being charged. In view of that, they
will be redeemed in this order:
1) Shares from reinvested dividends or capital gain distributions
2) Shares from the earliest purchase

Here is an example:
AN INVESTOR PURCHASES 100 CLASS B SHARES AT $10 PER SHARE - FOR A TOTAL
COST OF $1,000. IN THE SECOND YEAR AFTER THE PURCHASE, THE NAV HAS RISEN TO $12
PER SHARE, AND THE INVESTOR HAS ACQUIRED 10 MORE SHARES THROUGH DIVIDEND
REINVESTMENT.
AT THAT TIME, THE INVESTOR DECIDES TO MAKE THE FIRST REDEMPTION. THE
TRANSACTION INCLUDES 50 SHARES AT $12 PER SHARE - FOR A TOTAL OF $600.
THE FIRST 10 SHARES TO BE REDEEMED WILL NOT BE SUBJECT TO ANY CHARGE
BECAUSE OF THE 10 SHARES RECEIVED FROM DIVIDEND REINVESTMENT. SEE ITEM 1) JUST
ABOVE THIS EXAMPLE.
AS FOR THE OTHER 40 SHARES, THE CHARGE WILL BE APPLIED ONLY TO THE ORIGINAL
COST OF $10 PER SHARE. THE NAV INCREASE OF $2 PER SHARE WILL NOT BE CONSIDERED.
AS A RESULT, $400 OF THE REDEMPTION PROCEEDS (40 X $10) WILL BE CHARGED A RATE
OF 3%, WHICH IS THE SECOND-YEAR RATE SHOWN IN THE TABLE ABOVE. THE RESULTING
SALES CHARGE WILL BE 3% X $400, WHICH WILL BE $12.
The contingent deferred sales charge may be waived for redemptions of Class
B shares under these circumstances:
1) Following the death or disability of a shareholder, as defined in
Section 72(m)(7) of the Internal Revenue Code
2) In connection with certain distributions from an IRA or other retirement
plan, as described in the Statement of Additional Information
3) According to the Fund's systematic withdrawal plan - but limited to 12%
annually of the value of the Fund account at the time the plan is
established
4) As a result of the right of the Fund to liquidate a shareholder's
account as described under "How to sell shares"
REINVESTMENT. You may reinvest in Class B shares within 120 days of
redemption and receive reimbursement credited to your account for any contingent
deferred sales charge you previously paid. The reinvested shares will be subject
to the holding period of the shares which were originally purchased. This
holding period determines any contingent deferred sales charges on subsequent
redemptions of the reinvested shares or their conversion to Class A shares as
described in the following section. Shares purchased in accounts that have
systematic investment programs or systematic withdrawal plans are not eligible
for this privilege.

YOU ARE RESPONSIBLE FOR NOTIFYING THE FUND WHENEVER YOU ARE ENTITLED TO A
CONTINGENT DEFERRED SALES CHARGE WAIVER OR REIMBURSEMENT.

CLASS B CONVERSION FEATURE. Class B shares that remain outstanding for six
years will convert to Class A shares of the same Fund. The basis for this will
be the relative NAVs of the two classes at the time of conversion.
Some investors buy shares at several different times and reinvest dividends
and capital gains over an extended period. Each time a conversion takes place, a
pro-rata portion of Class B shares acquired through the reinvestment of
dividends and capital gain distributions also will convert to Class A shares.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of a favorable ruling from the Internal Revenue Service
or an opinion of legal counsel that such conversion will not be subject to
federal income taxes. There cannot be any assurance that a ruling or opinion
will be available. If they should not be available, the conversion of Class B
shares to Class A shares would not occur and those shares would continue to be
subject to higher expenses than Class A shares for an indefinite period.

DISTRIBUTION OF INCOME AND CAPITAL GAINS

The Funds distribute dividends from net investment income which is
essentially interest and dividends from securities held, minus expenses. They
also make capital gain distributions if realized gains from the sale of
securities exceed realized losses. Bond & Stock and Growth & Income normally
declare and pay dividends near the end of each calendar quarter, when available,
and Northwest normally declares and pays dividends annually, when available. The
Funds distribute any capital gains annually when available, normally in
December.
You have four choices regarding what you do with dividends and capital gain
distributions. You can make your choice at the time of your initial purchase or
by contacting the Funds' offices or your Representative. The options include:
AUTOMATIC REINVESTMENT. Most shareholders elect this procedure. It is
automatically effective unless you choose another option. All dividends and
capital gain distributions are reinvested into additional shares of the Fund.
Automatic reinvestments generally provide the most capital growth.
REINVEST DIVIDENDS IN ANOTHER COMPOSITE FUND. Income dividends may be
automatically invested in the same class of shares of another Composite fund
provided shares of that Fund are available in your state of residence.
CASH PAYMENT OF INCOME AND REINVESTMENT OF ANY CAPITAL GAINS. With this
option, dividends are deposited to your pre-authorized bank account or paid by
check. Any capital gain distributions are reinvested in additional shares of the
Fund.
CASH PAYMENT OF ALL DISTRIBUTIONS. Dividends and capital gain distributions
are deposited to your pre-authorized bank account or paid by check.
OTHER INFORMATION. Reinvestments of income dividends and capital gain
distributions are made at the closing NAV on the day dividends or distributions
are deducted from the Fund's assets. There are no initial or contingent deferred
sales charges imposed on shares purchased with reinvested dividends or capital
gain distributions.
If you've chosen to receive dividends or capital gain distributions in cash
and the U.S. Postal Service cannot deliver your check, the Funds reserve the
right to reinvest your check at the then-current NAV and to automatically
reinvest subsequent dividends and capital gain distributions in your account.
The Funds may also automatically reinvest dividends or distributions of $10 or
less.

INCOME TAXES ON DIVIDENDS AND CAPITAL GAINS
You are responsible for federal income tax (and state and local income
taxes, if applicable) on dividends and capital gain distributions. This is true
whether they are paid in cash or reinvested in additional shares. You will be
advised annually as to the tax status of these dividends and distributions.
Generally, dividends paid by the Funds from interest, dividends, or net
short-term capital gains will be taxed as ordinary income. Distributions of net
long-term capital gains are taxable as long-term capital gains, regardless of
how long you have held your shares. If your shares are in an IRA or another
qualified retirement plan, you will not have to pay tax on the reinvested amount
until funds are withdrawn.
Each Fund complies with provisions of the Internal Revenue Code applicable
to regulated investment companies and distributes its taxable income
accordingly. Because of this, the Funds do not anticipate being subject to
federal income or excise taxes on earnings they distribute to shareholders.
Because of tax law requirements, you must provide the Funds an accurate and
certified Social Security number or taxpayer identification number to avoid the
31 % "back-up" withholding tax.

EXCHANGES FOR OTHER COMPOSITE FUNDS
You may exchange shares of any Composite fund for the same class of shares
of any other Composite fund. In addition to the Funds described in this
Prospectus, there are Composite funds that invest in other types of securities,
including: income-generating securities, tax-exempt bonds, U.S. government
securities, and money market instruments.

Contact your Representative or the Fund offices to request a prospectus for
the Composite funds that interest you.
Exchanges are made at the prevailing NAV of the shares being exchanged. No
additional sales charge will be incurred when exchanging shares from a fund
which imposes an initial or contingent deferred sales charge. Any contingent
deferred sales charge on the subsequent sale of Class B shares acquired by
exchange will be based on the schedule applicable to the shares which were given
in exchange. Shares exchanged from Composite Cash Management Company will be
subject to the acquired fund's sales charge unless the shares given in exchange
were previously exchanged from a Composite fund that imposes an initial or
contingent deferred sales charge.
All exchanges are subject to the minimum investment requirements of the
Composite fund being acquired and to its availability for sale in your state of
residence. You may arrange for automatic monthly exchanges. The Funds reserve
the right to refuse any order for the purchase of shares, including those by
exchange. In particular, a pattern of exchanges that coincides with a "market
timing" strategy may be disruptive to a Fund and, consequently, may be
disallowed.

HOW TO SELL SHARES

You may redeem shares at any time. The price paid per share will be the
next NAV that is calculated. The NAVs are determined at the end of each business
day of the New York Stock Exchange or at 1:00 p.m. Pacific time, whichever is
earlier. Contingent deferred sales charges, if applicable, will be deducted upon
redemption of Class B shares.
TELEPHONE. You may authorize telephone transactions on your Fund account
application or by contacting the Fund offices or your Representative.
Provided you have pre-authorized these transactions, you may redeem or
exchange shares by telephoning 1-800-543-8072. You may also request these
transactions through your Representative. Proceeds may be directed to a
pre-authorized bank or brokerage account or to the address of record for the
account.

It may be difficult to reach the Fund offices by telephone during periods
of unusual economic or market activity. Please be persistent if this occurs. The
Transfer Agent is committed to extending its availability beyond regular 7 a.m.
to 6 p.m. (Pacific time) customer service hours during such periods. Calls
requesting telephone redemption or exchanges during periods of unusual market
activity that are received after business hours will be recorded and returned in
the order they were received.

For protection, telephone instructions are verified. This is done by
requesting personal shareholder information, providing written confirmations of
each telephone transaction, and recording telephone instructions. The Transfer
Agent may require a Letter of Authorization, other documents, or authorization
from your Representative to initiate telephone redemptions of $25,000 or more
that are not directed to your pre-authorized bank or brokerage account. If
reasonable procedures are used, neither the Transfer Agent nor the Funds will be
liable for following telephone instructions which they reasonably believe to be
genuine. Shareholders assume the risk of any losses in such cases. However, the
Transfer Agent or the Funds may be liable for any losses because of unauthorized
or fraudulent telephone instructions if reasonable procedures are not followed.

WRITTEN REQUEST. Redemptions also may be requested by writing the Fund
offices. Written requests may require a signature guarantee, as discussed below,
and the return of any outstanding stock certificates. Changes in pre-authorized
redemption instructions or your account registration also require signature
guarantees. For your protection, the signature(s) must be guaranteed by an
officer of a U.S. bank belonging to the Federal Reserve System, a member of the
Stock Transfer Association Medallion Program, or a member of the National
Association of Securities Dealers.

PROMPT PAYMENT. Payment normally will be made on the next business day
after the transaction, but no later than seven days after unless you recently
purchased Fund shares by check. In that case, redemption proceeds may be delayed
until the Transfer Agent is reasonably satisfied that the check has been
collected. Generally this occurs within 14 days. Redemption proceeds will be
sent by check or Automated Clearing House transfer to your bank account without
charge. Wire redemption proceeds may be subject to a $10 fee. The receiving bank
also may charge a fee.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders may choose to receive specific
cash withdrawals on a periodic basis. A $5,000 minimum balance is required to
establish a systematic withdrawal plan in a Fund account. Shares of the Fund
will be redeemed to provide the requested payment. Naturally, withdrawals that
continually exceed dividend income and capital gains will eventually exhaust the
account.
Class B shareholders may use a systematic withdrawal plan to redeem up to
12% annually of the value of the Fund account, measured at the time the plan is
established, without incurring a contingent deferred sales charge.
OTHER CONSIDERATIONS. It is costly to maintain small accounts. Because of
this, an account may be closed after 90 days advance, written notice if the
total account value falls below $700 ($500 in an IRA account) when any transfer
or redemption is made. Shares will be redeemed at the next calculated NAV on the
day the account is closed. To prevent an account closure, investors may increase
holdings to a minimum of $700 during the 90-day grace period.

IRAS AND OTHER TAX-SHELTERED RETIREMENT PLANS

Shares in the Funds are particularly appropriate for many retirement plans,
including IRAs. Retirement plan contributions are tax deductible in some cases,
and earnings compound on a tax-deferred basis until withdrawn.
From time to time, Murphey Favre or its affiliates may offer "IRA bonuses"
on IRA rollovers and transfers to IRA accounts maintained by them. The Funds do
not pay any portion of these bonuses. The products purchased through these
rollovers and transfers may include the Composite Group of Funds. This payment
may be considered a reduction in the Distributor's sales charge.
Information about IRAs and other qualified retirement plans is available
from the Fund offices or your Representative.

PERFORMANCE INFORMATION
While past results are not necessarily indicative of future performance,
history provides a basis for comparisons of mutual fund investment strategies
and their execution. Among the factors that influence the Equity Funds'
performance are the type and quality of investments, operating expenses, and the
net amount of new money coming into the Funds.
Pertinent information follows:
AVERAGE ANNUAL TOTAL RETURN. "Average annual total return" shows the change
in value of an investment in a Fund over a stated period as a steady compound
rate of return. The calculation assumes reinvestment of dividends and capital
gain distributions and payment of the maximum initial sales charge for Class A
shares or the applicable contingent deferred sales charge for Class B shares.

NON-STANDARDIZED TOTAL RETURNS. These "non-standardized total returns"
differ from average annual total returns for the following reasons: First, they
may relate to non-standard periods; second, they may represent cumulative
(rather than average) total return and third, sales charges may not be deducted.

OTHER INFORMATION. Each Fund will include performance data for both Class A
and B shares in any advertisement or promotional material presenting performance
data of that Fund.
Management has included a discussion of the Funds' performance in their
annual report, which is available upon request and without charge by calling the
Fund offices.
The Funds may quote performance results from recognized services and
publications that monitor the performance of mutual funds. Included, too, may be
comparisons of their performance with various published, historical indices.

THE FUNDS' PERFORMANCE IS NOT FIXED NOR IS THE PRINCIPAL GUARANTEED. ASSET
VALUES FLUCTUATE DAILY SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. ANNUALIZATION OF RATES SHOULD NOT BE
INTERPRETED AS AN INDICATION OF A FUND'S ACTUAL PERFORMANCE IN THE FUTURE.

REPORTS TO SHAREHOLDERS
Shareholders receive semiannual and annual reports. The financial
statements in the annual reports are audited by independent accountants.

Shareholders whose accounts are directly with the Funds receive statements
at least quarterly. These statements show account transactions, the total number
of shares owned, and any dividends or distributions paid. Shareholders also
receive written confirmation soon after each transaction which is not a dividend
reinvestment, systematic investment program purchase, or systematic withdrawal
plan redemption.

WE'RE HERE TO HELP YOU
Any inquiries you may have about these Funds or your account should be
directed to the Funds at the address or telephone number on the front page and
back cover of this Prospectus. We will be glad to answer your questions.

<PAGE>
For further information, please contact:

FUND OFFICES
601 W. Main Avenue, Suite 801
Spokane, WA 99201-0613
Phone: (509) 353-3550
Toll free: (800) 543-8072

ADVISER
Composite Research & Management Co.
1201 Third Avenue, Suite 1400
Seattle, WA 98101-3015

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

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

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

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

BOARD OF DIRECTORS

Wayne L. Attwood, M.D.
Kristianne Blake
Anne V. Farrell
Michael K. Murphy
William G. Papesh
Daniel L. Pavelich
Jay Rockey
Richard C. Yancey

COMPOSITE GROUP

EQUITY
FUNDS

COMPOSITE BOND &
STOCK FUND, INC.

COMPOSITE GROWTH & INCOME FUND

COMPOSITE
NORTHWEST
FUND, INC.

PROSPECTUS

FEBRUARY 28,
1997

LOGO
<PAGE>

STATEMENT OF
ADDITIONAL
INFORMATION
FEBRUARY 28, 1997

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

COMPOSITE BOND & STOCK FUND, INC. ("Bond & Stock") is designed to provide both
income and long-term growth. The Fund has three objectives: (1) continuity of
income; (2) conservation of principal; and (3) long-term growth of both income
and principal. On behalf of these objectives, the Fund invests in bonds,
preferred stocks, common stocks, and convertible bonds.

COMPOSITE GROWTH & INCOME FUND ("Growth & Income") is designed to provide growth
through careful investing in a diversified pool of common stocks and other
securities. The Fund's objective is long-term capital growth, with current
income a secondary consideration.

COMPOSITE NORTHWEST FUND, INC. ("Northwest") is designed to provide long-term
growth of capital by investing in common stocks selected from companies doing
business or located in the Northwest (Alaska, Idaho, Montana, Oregon, and
Washington).

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ
IN CONJUNCTION WITH THE FUNDS' PROSPECTUS DATED FEBRUARY 28, 1997, WHICH CAN BE
OBTAINED WITHOUT CHARGE BY CONTACTING THE FUNDS AT THE ABOVE ADDRESS.

TABLE OF CONTENTS
Page Page
------- -------
The Funds and Their Management 2-8 Investment Practices 17-20
Distribution Services 8-10 Investment Restrictions 20-21
How Shares Are Valued 10-11 Performance Information 21-22
How Shares Can Be Purchased 11-13 Brokerage Allocations &
Redemption of Shares 13 Portfolio Transactions 22-24
Exchange Privilege 13-14 General Information 24-25
Services Provided by the Funds 15 Financial Statements and
Tax-Sheltered Retirement Plans 15-16 Reports 25
Dividends, Capital Gain Appendix A 26
Distributions and Taxes 16-17 Appendix B 27-29

THE FUNDS AND THEIR MANAGEMENT
THE INVESTMENT ADVISER

As discussed under "Who We Are" in the prospectus, the Funds are 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, subject to the control and final direction
of each Fund's Board of Directors.

Composite Research & Management Co. is Adviser for the eight investment
companies (currently 11 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 present management agreements
(the "Agreements") between each Fund and the Adviser to furnish suitable office
space, research, statistical and investment management services to each Fund
were approved by shareholders. These Agreements continue in effect from
year-to-year provided their continuation is specifically approved at least
annually by each Fund's Board of Directors (including a majority of the
directors who are not parties to the Agreements) 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 each Fund. The Agreements can be
terminated by either party on sixty (60) days' notice, without penalty, and each
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 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.

BOND & STOCK AND GROWTH & INCOME

In payment for its services, the Adviser receives a monthly fee equal to .625%
per annum computed on the average daily net assets of each Fund; should average
daily net assets exceed $250 million, the fee will decrease to .50% of such
assets. Bond & Stock paid fees of $1,555,733, $1,230,409, and $1,224,676 for the
fiscal years ended October 31, 1996, 1995, and 1994, respectively. Growth &
Income paid fees of $1,065,507, $738,064, and $ 611,877, respectively, to the
Adviser during the fiscal years ended October 31, 1996, 1995, and 1994.

NORTHWEST

In payment for its services, the Adviser receives a monthly fee equal to .625%
per annum computed on the average daily net assets to $500 million. If average
daily net assets exceed $500 million, the fee will be reduced to an annual rate
of .50% on such assets, and to .375% on average daily net assets in excess of $1
billion. Fees paid to the Adviser, before expense reimbursements, during the
fiscal years ended October 31, 1996, 1995, and 1994 amounted to $1,123,204,
$973,877, and $1,014,963, respectively. The Adviser has agreed that should the
expenses of the Fund (excluding taxes, interest, portfolio brokerage and the
.75% Class B share distribution fee) exceed in any fiscal year 1.50% of the
average net assets of the Fund up to $30 million and 1% of average net assets
over $30 million it will reimburse the Fund for such excess.

The Agreements provide that the advisory fees paid to the Adviser by each Fund
will be based solely on the individual assets of that Fund. Under the terms of
the Agreements, each Fund is required to pay fees of directors not employed by
the Adviser or its affiliates, custodial expenses; brokerage fees, taxes,
auditing and legal expenses, costs of issue, transfer, registration or
redemption of shares for sale, costs relating to disbursement of dividends,
corporate meetings, corporate reports, and the maintenance of its corporate
existence.

Investment decisions for each 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 Funds have adopted a code of ethics which is intended to prevent access
persons from conducting personal securities transactions which interfere with
Fund portfolio transactions or otherwise take unfair advantage of their
relationship to the Funds. 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 interlocks 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 Funds
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 Funds contemplated by
the Investment Management Agreements without violation of the Glass-Steagall Act
or other applicable banking laws or regulations.

DIRECTORS AND OFFICERS OF THE FUNDS

Each Fund's Board of Directors is elected by its shareholders. Interim vacancies
may be filled by the current directors so long as at least two-thirds were
previously elected by shareholders. The Boards have responsibility for the
overall management of the Funds, including general supervision and review of
their investment activities. The directors, in turn, elect the officers of the
Funds who are responsible for administering the day-to-day operations. Directors
and officers hold identical positions with each of the funds in the Composite
Group. Directors and officers of the Funds and 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
2931 S. Howard
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.

* MICHAEL K. MURPHY
Director
PO Box 3366
Spokane, Washington 99220-3366

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 Adviser and Transfer Agent, and an
executive vice president and a director of the Distributor.

DANIEL L. PAVELICH
Director
Two Prudential Plaza
180 North Stetson Avenue, Suite 4300
Chicago, Illinois 60601

Mr. Pavelich is Chairman and CEO of BDO Seidman, a leading national accounting
and consulting firm.

JAY ROCKEY
Director
2121 - Fifth Avenue
Seattle, Washington 98121

Mr. Rockey is Chairman and CEO of The Rockey Company (a regional public
relations firm).

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 Funds as that term is defined
in the Investment Company Act of 1940 because they are affiliated persons of the
Funds, their Adviser, or Distributor.

GENE G. BRANSON
Vice President
Suite 780
1201 Third Avenue
Seattle, Washington 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 Funds.

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, Washington 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, Washington 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 Funds paid no remuneration to any of its officers, including Mr. Papesh and
Mr. Sahlin, during the fiscal year ended October 31, 1996. The Funds and other
Funds within the Composite Group paid directors' fees during the fiscal year
ended October 31, 1996, in the amounts indicated below:

BOND & GROWTH & TOTAL
DIRECTOR STOCK INCOME NORTHWEST COMPLEX (1)
- -------- --------- --------- --------- ------------
Wayne L. Attwood, MD $1,208 $1,208 $1,208 $14,500

Kristianne Blake 1,167 1,167 1,167 12,200

Edwin J. McWilliams 1,208 1,208 1,208 14,500

Jay Rockey (2) 1,208 1,208 1,208 14,500

Richard C. Yancey 1,292 1,292 1,292 15,000

(1) Each director serves in the same capacity with each Fund within the
Composite Group (eight companies) comprising 11 individual investment
portfolios.

(2) Mr. Rockey is Chairman and CEO of the Rockey Company, a public relations
firm which has received revenue from the Funds and Washington Mutual,
Inc., parent company of the Adviser and Distributor, during the 1996
fiscal year.

As of January 31, 1997, officers, directors and their immediate families as a
group owned of record and beneficially less than 1% of the outstanding shares of
each Fund. The Retirement Savings and Investment Plan of Washington Mutual, Inc.
owned of record 717,312 shares of Bond & Stock, 812,336 shares of Growth &
Income, and 578,224 shares of Northwest for the benefit of plan participants.
These shares amounted to 3%, 7% and 5%, respectively, of each Fund's outstanding
shares. The Retirement Savings and Investment Plan retains voting rights to
these shares.

Kristianne Blake, *Anne V. Farrell, *Michael K. Murphy, and Daniel L. Pavelich
serve as members of the Boards' audit committee. The committee meets
periodically with each Fund's independent accountants and officers to review
accounting principles used by each Fund and the adequacy of the Fund's internal
controls.

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

The valuation committee is comprised of any two directors or officers of the
Funds and one or more portfolio managers, as designated by the Funds' chairman,
president or vice president/treasurer of the Funds. The committee is called upon
to value any security held by the Funds whenever the security cannot otherwise
be valued under the Fund's guidelines for valuation.

Responsibilities of the Boards' 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
Boards. Members of the nominating committee are Wayne L. Attwood, MD, Daniel L.
Pavelich, and Jay Rockey.

The Boards' distribution committee is responsible for reviewing distribution
activities and 12b-1 expenditures to determine that there is a reasonable
likelihood the 12b-1 plan will benefit each Fund and its shareholders. The
committee meets at least annually and is responsible for making recommendations
to the board regarding renewal or changes to the distribution plan. Committee
members are Wayne L. Attwood, MD, Kristianne Blake, Jay Rockey, and Richard C.
Yancey.

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

DISTRIBUTION SERVICES

12B-1 PLAN

As discussed in the prospectus under "The Cost of Good Management," the
directors of each Fund have approved a plan for both classes of shares (the
"Plans") pursuant to Rule 12b-1 under the Investment Company Act of 1940 which
provides that investment companies may pay distribution expenses, directly or
indirectly, according to a plan adopted by each Fund's Board of Directors.

Under each Fund's Plan, the Fund may reimburse Murphey Favre, Inc. (the
"Distributor") for Class A distribution expenses, including the cost of printing
and distributing prospectuses (to other than current shareholders), statements
of additional information and other promotional and sales literature,
compensation to sales personnel for their services, and reimbursement to the
Distributor for the direct and indirect cost of furnishing services of its
personnel to assist in the entire distribution process but excluding general and
administrative expenses.

The maximum annual reimbursement allowed by the Plans and authorized by
directors for such Class A distribution expenses may not exceed .25% of the
average daily net assets attributable to Class A shares. Funds in the Composite
Group may benefit from expenditures made for distribution activities for another
Composite fund. Bond & Stock, Growth & Income and Northwest reimbursed the
Distributor in the amounts of $394,279, $265,579, and $360,642, respectively,
for distribution expenses incurred on behalf of Class A shares during fiscal
1996. Of this amount, $242,082, $155,212, and $190,593 was paid on behalf of
Bond & Stock, Growth & Income and Northwest to sales personnel of the
Distributor and to selected dealers for their shareholder servicing activities;
$7,285, $4,715, and $6,889, respectively, was paid for printing; and $105,652,
$144,912, and $163,160, respectively, was paid for other advertising expenses.

During fiscal years 1995 and 1994, Bond & Stock reimbursed the Distributor
$356,379 and $424,414, respectively; Growth & Income reimbursed the Distributor
$203,566 and $210,854, respectively; and Northwest reimbursed the Distributor
$279,851 and $348,103, respectively for distribution expenses related to Class A
shares.

Under the Plans, each Fund compensates the Distributor with a distribution fee
at an annual rate of .75% of the Fund's average daily net assets attributable to
Class B shares and a service fee at an annual rate of .25% of such assets.
During fiscal years 1996 and 1995, and the period from March 30, 1994
(commencement of public offering) to October 31, 1994, Bond & Stock compensated
the Distributor in the amounts of $148,688, $46,435, and $12,266, respectively;
Growth & Income compensated the Distributor $151,222, $49,988, and $4,490,
respectively; and Northwest compensated the Distributor $106,606, $49,126, and
$8,536, respectively, for distribution expenses related to Class B shares.

The Distributor pays dealers an amount equal to an annual rate of .25% of total
net assets of all accounts, of either class, serviced by their representatives.

Under the Plans, each Fund will report at least quarterly to its Board of
Directors the amounts and purposes of all distribution expense payments. During
the continuance of the Plan, as required by Rule 12b-1, the selection and
nomination of the independent directors of each Fund will be at the discretion
of the independent directors then in office.

Each Plan has been approved unanimously by the directors of each Fund including
a majority of the independent directors who have no direct or indirect interest
in the Plan, and by the Distributor. Each Plan will remain in effect for one
year, may be terminated at any time by a vote of a majority of the independent
directors or by a vote of a majority of the outstanding voting securities of the
applicable Fund, and may be renewed from year to year thereafter, only if
approved by a vote of independent directors. In approving the Plan and
submitting it to shareholders, directors of each Fund determined, in the
exercise of their business judgment and in light of their fiduciary duties as
directors, that there is a reasonable likelihood that each Plan will benefit its
respective Fund and its shareholders. All material amendments to each Plan must
be approved by a vote of each Fund's Board of Directors including independent
directors, and by shareholders. The Plans will be renewed only if directors make
a similar determination for each subsequent year of the Plans.

DISTRIBUTOR

The Distributor purchases shares of each Fund's capital stock in a continuous
offering to fill orders placed with it by investors and investment dealers. It
purchases shares at net asset value and resells shares at the offering price in
accordance with terms of the Distribution Contracts with each Fund. The offering
price may include a sales charge as discussed in the Prospectus under "How to
buy shares." Each Fund receives the entire net asset value of all of its shares
sold. The Distributor or designated dealer retains their appropriate portion of
the initial sales charge. The Distributor pays sales commissions to dealers from
its own resources for Class B sales and retains contingent deferred sales charge
payments. The Distributor acts in a similar capacity for all other funds in the
Composite Group.

The Distributor may compensate its sales people or selected dealers for shares
sold without a sales charge according to various Class A "Net Asset Value
Purchase" provisions. The compensation is based on a percentage of the net asset
value of the shares sold.

During the 1996, 1995, and 1994 fiscal years, the Distributor received
$1,064,004, $471,479, and $1,143,940, respectively, for the sale of Bond & Stock
Class A shares. The Distributor retained $1,047,926, $471,445, and $1,140,938,
respectively, for the same time periods, with the balance paid to dealers for
their sales of Bond & Stock Class A shares.

During the 1996, 1995, and 1994 fiscal years, the Distributor received $586,437,
$384,766, and $214,750, respectively, for the sale of Growth & Income Class A
shares. The Distributor retained $563,398, $384,647, and $214,340, respectively,
for the same time periods, with the balance paid to dealers for their sales of
Growth & Income Class A shares.

During the fiscal years 1996, 1995, and 1994, the Distributor received $517,022,
$348,729, and $443,701, respectively, for the sale of Northwest Class A shares.
The Distributor retained $465,694, $337,189, and $386,198, respectively, for the
same time periods, with the balance paid to dealers for their sales of Northwest
Class A shares.

The Distributor has not received any earnings or profits from the redemption of
Class A shares. During the fiscal year ended October 31, 1996, the Distributor
received contingent deferred sales charge payments of $28,776, $24,626, and
$15,160 upon redemption of Class B shares of Bond & Stock, Growth & Income, and
Northwest, respectively. No brokerage fees were paid by the Funds to the
Distributor during the year, but the Distributor may act as a broker on
portfolio purchases and sales should it become a member of a securities
exchange.

The Funds bear the cost of registering their shares with federal and state
securities commissions and printing prospectuses and statements of additional
information used for its shareholders. The Distributor pays for information
intended for potential shareholders but may be reimbursed by the Funds under the
Distribution Plan for such expenses applicable to Class A shares.

TRANSFER AGENT

Murphey Favre Securities Services, Inc. (the "Transfer Agent") furnishes
necessary personnel and other transfer agent services required by each Fund. The
Shareholders Service Contract for each Fund was originally approved by
shareholders.

During the 1996, 1995, and 1994 fiscal years, Bond & Stock paid $222,913,
$194,112, and $187,827, respectively, for these services. During fiscal years
1996, 1995, and 1994, Growth & Income paid $193,784, $142,648, and $110,980,
respectively. Northwest paid $320,799, $292,144, and $284,597, respectively, for
these services.

At the date of this Statement of Additional Information, the monthly shareholder
servicing fee was $1.35 per Class A account and $1.45 per Class B account in
each Fund. All requests for transfer of shares should be directed to the Funds
or to the Transfer Agent.

HOW SHARES ARE VALUED

Investment securities are stated on the basis of valuations provided by an
independent pricing service, approved by each Fund's Board of Directors, which
uses 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 not currently quoted as described above will be priced at fair market
value as determined in good faith in a manner prescribed by the Boards 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 each class of each Fund are sold in a
continuous offering and may be purchased from the Distributor or a designated
dealer at the public offering price, which is the net asset value per share next
determined after receipt of a purchase order in Spokane, plus, in the case of
Class A shares, an initial sales charge which is a percentage of the public
offering price and varies as shown in the prospectus. The Distributor or
designated dealer retains their appropriate portion of the initial sales charge.

Class B shares are sold without an initial sales charge but are subject to
higher ongoing distribution expenses and may be subject to a contingent deferred
sales charge if redeemed within four years of purchase. The current contingent
deferred sales charge schedule is shown in the prospectus. Class B shares
purchased prior to January 15, 1996, are subject to a contingent deferred sales
charge of 3% if redeemed the first or second year after purchase, 2% in the
third or fourth year, 1% in the fifth year, and 0% in year six. (See Appendix A
for a specimen price-make-up sheet.)

The minimum initial investment for each Fund is $1,000 ($500 in IRA accounts),
and additional investments should be at least $50 (unless the transaction is via
a systematic investment program where the initial and additional monthly
investments must be at least $50). Investments made by an agent or fiduciary
(such as a bank trust department, investment adviser, broker, or employee
benefit or retirement plan), pursuant to a periodic investment plan, may have
the minimum purchase requirements on initial and subsequent investments waived.

Shareholders who have redeemed Class A shares initially subject to a sales
charge may reinvest their redemption proceeds in Class A shares of any Composite
Group fund at net asset value provided that reinvestment is effected within 120
days of the redemption. Contingent deferred sales charges assessed may be
reimbursed as they relate to the reinvestment of redemption proceeds in Class B
shares within 120 days. The shareholder is responsible for notifying the
Transfer Agent of such reinvestments. If a loss is realized on the redemption of
Fund shares, the reinvestment may be subject to the "wash sale" rule, resulting
in a disallowance of such loss for federal income tax purposes.

Class A shares may be sold at net asset value and in any amount to current and
retired directors, officers and employees of Washington Mutual, Inc., its
affiliates (including the Adviser, the Distributor, and the Transfer Agent, and
their children, step-children, grandchildren, step-grandchildren and parents),
as well as to any trust, pension, profit-sharing or other benefit plan for such
persons. The foregoing privilege is also extended to directors, officers and
employees of other companies which enter into selling arrangements with the
Distributor. Such shares are sold for investment purposes and on the condition
that they will not be resold except through redemption by the Fund.

Each Fund may also issue Class A shares at net asset value in connection with
the acquisition of assets, merger or consolidation with, another investment
company, or to shareholders in connection with reinvestment of income dividends
and capital gain distributions. Qualified employee benefit plans which have more
than 10 participants or which have more than $25,000 invested in those Composite
funds offered with an initial or contingent deferred sales charge are also
entitled to buy Class A shares without a sales charge. Individual retirement
accounts such as IRAs or SEP IRAs are not eligible for this privilege. In
addition, shareholders of mutual funds (other than money market funds), may
redeem those shares and use their sale proceeds to purchase Class A shares of a
Composite fund at net asset value provided the proceeds are reinvested within 90
days of such sale and proof of the sale is provided.

The Distributor may enter into arrangements with brokers, dealers or registered
investment advisers to sell Class A shares at net asset value for use in
particular investment products made available to their clients. The other
parties may charge their clients a fee for these products.

PURCHASE PLANS

CUMULATIVE DISCOUNTS: The initial sales charges on Class A shares are applicable
to purchases made at one time by a "purchaser" who may be one of the following:
an individual, and/or the individual's spouse, and/or children (including
step-children) under age 21; a trustee or other fiduciary of a single trust
estate or single fiduciary account; an organization exempt from federal income
tax under Section 501(c)(3) or (13) of the Internal Revenue Code; a pension,
profit-sharing or other employee benefit plan qualified or non-qualified under
Section 401 of the Internal Revenue Code; or any other organized group of
persons whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount. In
order to qualify for a lower sales charge, all orders from an organized group
will have to be identified as originating from a qualifying "purchaser." Upon
such notification, the investor will receive the lowest applicable sales charge.
Discounts may be modified or terminated at anytime.

Each Fund's Class A shares may also be purchased at the reduced sales charge
based on shares currently owned by the investor (excluding Composite Cash
Management Company Class A shares, unless exchanged from another fund). The
sales charge reduction is determined by adding the value of all Composite Group
Class A shares (at maximum offering price) and Class B shares (at net asset
value) to the amount of the Fund's shares being purchased.

LETTER OF INTENT: This Letter provides for a price adjustment depending upon the
actual amount purchased within a 13-month period. If total investments under the
Letter exceed the intended amount and thereby qualify for a lower initial sales
charge, a retroactive price adjustment is made and the difference is used to
purchase additional shares. A shareholder may include the value of all of their
Class A shares (at maximum offering price) and Class B shares (at net asset
value) held in the Composite Group (excluding Composite Cash Management Company,
unless exchanged from another fund) that were held on the effective date of the
Letter of Intent as an "accumulation credit" toward completion of the Letter.

The Letter of Intent, which imposes no obligation to purchase or sell additional
shares, provides that 5% of the amount of the intended purchase will be held in
escrow (in the form of shares) pending completion of the Letter.

CERTIFICATES

Ordinarily certificates for shares purchased will not be issued unless requested
by the investor. There is no charge for such issuance.

REDEMPTION OF SHARES

When the Fund or Transfer Agent receives: 1) a written request in proper form,
for redemption of shares, and 2) the return of any issued certificates for
shares being redeemed, a check for payment of shares will normally be sent the
next business day, and no later than seven business days, except as indicated
below. If the account is pre-authorized for telephone transfer, payment may be
made to a designated bank account or broker, providing such accounts are
identically registered. Telephone redemptions may also be directed to the
shareholder's address of record. No wire fee will be charged for transfers to
Washington Mutual Bank or Seafirst Bank. There is a $10.00 transmittal wire fee
(which is subject to change) to wire to all other banks. This fee will be
subtracted from the account balance prior to making the transfer. You should be
aware that certain banks also charge a receiving wire fee which is beyond the
control of the Transfer Agent.

If redemption is requested by a corporation, partnership, trust or fiduciary,
written evidence of authority must be submitted before the request will be
accepted.

Shares tendered for redemption will be redeemed at the net asset value next
determined less any applicable contingent deferred sales charge as described in
the prospectus under "How to Buy Shares." The amount received may be more or
less than the cost of the shares, depending on fluctuations in the market value
of securities owned by the Fund. If the shares have been purchased recently,
this redemption payment may be delayed until the Fund verifies that the
instrument used in the purchase (e.g., a check) has been collected and may take
up to 14 days.

As discussed in the prospectus, the Class B contingent deferred sales charge may
be waived under certain circumstances. In addition to the specific cases
outlined in the prospectus, the charge may be waived for any total or partial
redemption in connection with a lump-sum or other distribution from an
Individual Retirement Account ("IRA"), a custodial account maintained pursuant
to Internal Revenue Code of 1986, as amended ("IRC") section 403 (b) (7), or a
qualified pension or profit sharing plan ("Retirement Plans") following
retirement or, in the case of an IRA or Keogh Plan or custodial account pursuant
to IRC section 403 (b) (7), after attaining age 59 1/2. The charge also may be
waived on any redemption which results from a tax-free return of an excess
contribution pursuant to section 408 (d) (4) or (5) of the IRC, the return of
excess deferral amounts pursuant to IRC section 401 (k) (8) or 402 (g) (2), or
from the death or disability of the employee. In summary, the CDSC may be waived
on redemptions of shares which constitute Retirement Plan distributions which
are permitted to be made without penalty pursuant to the IRC, other than
tax-free rollovers or transfers of assets.

EXCHANGE PRIVILEGE

Shareholders may exchange shares of each Fund for the same class of shares in
any other fund in the Composite Group. A brief discussion of such privileges is
in the prospectus under "Exchanges for other Composite funds." Exchanges will be
made at the respective net asset values in effect on the date of such exchange.
Shares previously subject to a sales charge may be exchanged without incurring
any additional initial or contingent deferred sales charge. Any gains or losses
realized on an exchange should be recognized for federal income tax purposes, as
required. This privilege is not an option or right to purchase securities but is
a revocable privilege permitted under the present policies of each of the Funds.
This privilege is not available in any state or other jurisdiction where the
shares of the Fund into which the transfer is to be made are not available for
sale, or when the value of the shares presented for exchange is less than the
minimum dollar purchase required by the appropriate prospectus. Each Fund
reserves the right to terminate or end the privilege of any shareholder who
attempts to use the privilege to take advantage of short-term swings in the
market.

An investor may exchange some or all of his shares in a Fund for the same class
of any other fund in the Composite Group of Funds, except Composite Deferred
Series, Inc. These currently include:

COMPOSITE GROUP OF FUNDS

I. Composite Bond & Stock Fund: primary objective is continuity of income
and conservation of capital with long-term growth a secondary
objective.

II. Composite Growth & Income Fund: primary objective is long-term growth
of principal with current income a secondary objective.

III. Composite Northwest Fund: designed to provide long-term growth of
capital by investing in a broadly diversified portfolio of common
stocks selected from companies located or doing business in the
Northwest.

IV. Composite Income Fund: primary objective is current income with
preservation of principal a secondary consideration.

V. Composite U.S. Government Securities: primary objective is to provide
a high level of current income, consistent with safety and liquidity,
by investing in U.S. government- backed securities.

VI. Composite Tax-Exempt Bond Fund: primary objective is a high level of
current income exempt from federal income taxes as is consistent with
prudent investment risk and protection of capital. (Not allowed in
IRAs)

VII. Composite Cash Management Company, Money Market Portfolio: invests in
high grades of money market instruments for maximum current income,
while preserving capital and allowing liquidity.

VIII. Composite Cash Management Company, Tax-Exempt Portfolio: invests in
high quality, short-term municipal obligations for maximum current
income exempt from federal income tax while preserving capital and
allowing liquidity. (Not allowed in IRAs)

SERVICES PROVIDED BY THE FUNDS

SYSTEMATIC WITHDRAWAL PLAN

As described in the prospectus, each Fund offers a Systematic Withdrawal Plan.
All dividends and distributions on shares owned by shareholders participating in
this plan are reinvested in additional shares. Since withdrawal payments
represent the proceeds from sales of shares, any gain or loss on such
redemptions must be reported for tax purposes. In each case, shares will be
redeemed at the close of business on or about the 25th day of each month
preceding payment, and payments will be distributed within three business days
thereafter.

The Systematic Withdrawal Plan may involve the use of principal and is not a
guaranteed annuity. Payments under such a plan do not represent income or a
return on investment but instead are made from the redemption of Fund shares.
Naturally, withdrawals that continually exceed reinvested dividend income and
capital gains will eventually exhaust the account.

Class B shareholders who establish a Systematic Withdrawal Plan may make annual
redemptions up to 12% of the value of the account, measured at the time the plan
is established, without paying a contingent deferred sales charge.

A Systematic Withdrawal Plan may be terminated at any time by directing a
written request to the applicable Fund or the Transfer Agent. Upon termination,
all future dividends and capital gain distributions will continue to be
reinvested in additional shares unless a shareholder requests otherwise.

TAX-SHELTERED RETIREMENT PLANS

As described in the prospectus, shares of Bond & Stock, Growth & Income, and
Northwest may be purchased as an investment medium for various tax-sheltered
retirement plans. The amounts of contributions to such plans are generally
limited by the Internal Revenue Code. Each of these plans involves a long-term
commitment of assets, and participants may be subject to possible regulatory
penalties for excess contributions, premature distributions, excess
distributions, or for insufficient distributions after age 70 1/2.

QUALIFIED RETIREMENT PLANS

Self-employed individuals (as sole proprietors or partnerships) or corporations
may wish to purchase Fund shares in a retirement plan. Investors may obtain
information regarding these plans by contacting an investment representative or
the Funds' offices.

INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)

IRA contributions are invested when received. However, individuals establishing
a new IRA plan may rescind their plan within seven days. In the event of such
termination, their entire purchase price will be refunded by the Distributor
provided they notify the Distributor of their desire to rescind the purchase.
Termination during the seven-day period through regular redemption rather than
through rescission will result in adverse tax consequences. Internal Revenue
Service regulations prohibit revocation of rollover contributions. Any losses
derived through rescission will be absorbed by the Distributor.

Persons who request information regarding IRA plans will be provided with
application forms and information regarding eligibility and permissible
contributions.

IRA CUSTODY AGREEMENT AND SERVICE CHARGES

The IRA plan provides that the Distributor will furnish custodial services
either as agent for Washington Mutual Bank or as the named custodian. There are
set annual fees for IRA plans per participant unless made under an
employer-sponsored plan, in which case the custodial fee is negotiable. If
custodial fees are not paid annually by separate check, shares will
automatically be liquidated to cover such fees.

Unless participants elect otherwise, any capital gain distributions and income
dividends are reinvested on the ex-dividend date in full and fractional shares
of the applicable Fund at net asset value.

IRA BONUSES

"IRA Bonuses" may periodically be credited to IRA accounts for contributions,
transfers and/or rollovers. Payments will be made at a uniform rate determined
by the Distributor or its affiliates and will be based on the value of the
rollovers and/or transfers. IRA Bonuses are not paid by the applicable Fund.

DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES

Each 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"). Each Fund so qualified during the 1996 fiscal year. As a result, under
Subchapter M of the Code, each 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 in
which it 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. In addition, if each Fund distributes 98% of its ordinary income
and capital gain net income for each calendar year, it will not be subject to
excise tax on undistributed income. Each Fund intends to distribute such amounts
as necessary to avoid federal income and excise taxes.

A portion of dividends paid by Bond & Stock, Growth & Income, or Northwest from
net investment income will generally qualify for the 70% dividends received
deduction for corporate shareholders. The qualifying portion is based on the
aggregate amount of that income derived by the Fund from the dividends of
domestic corporations. Dividends in excess of the foregoing are treated as
non-qualifying income. As such, they are taxed as ordinary income, as are any
net realized short-term capital gains.

Shareholders will usually pay federal income taxes on distributions designated
as net realized long-term capital gains, whether or not received in cash or
shares of the Fund, and regardless of how long the shares have been owned by the
shareholders. Because long-term capital gain distributions reduce the value of
the shares, losses may occur upon subsequent sale. Special holding period
requirements may make the losses long-term rather than short-term under the
Internal Revenue Code.

Advice as to the tax status of each year's dividends and distributions will be
mailed annually to each shareholder. Shareholders are urged to consult their own
tax advisors regarding specific questions about federal, state and local taxes.
Shareholders not subject to tax on their income will not be required to pay tax
on amounts distributed to them.

Income dividends and capital gain distributions recorded and made shortly after
a purchase of shares by an investor will have the effect of reducing the net
asset value per share by the per share amount of the distribution. They are,
nevertheless, subject to income taxes despite the fact that this is, in effect,
a return of capital.

INVESTMENT PRACTICES

BOND & STOCK AND GROWTH & INCOME

Investments may include 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
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 of these securities. The guarantees, however, do not extend to the
securities' yield or value, which are likely to vary inversely with fluctuation
in interest rates, nor do the guarantees extend to the yield or value of the
Funds' 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 of 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 Funds reinvest the prepaid
amounts in securities whose yields reflect interest rates prevailing at the
time. Therefore, each Fund's ability to maintain high-yielding, mortgage-backed
securities in its portfolio 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.

Each Fund may also purchase or sell securities on a when-issued or
delayed-delivery basis (known generally as forward commitments).
Delayed-delivery or when-issued transactions arise when securities are purchased
or sold by a Fund 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 Fund
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 Fund engages in delayed-delivery or when-issued
transactions, it relies on the seller or buyer, as the case may be, to
consummate the transaction. Failure to consummate the transaction may result in
a missed opportunity by the Fund to obtain 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 Fund until it receives delivery or
payment from the other party to the transaction.

Neither fund currently intends to invest more than 35% of its assets in debt
securities rated lower than investment grade.

BOND & STOCK

The investment objective and policies of the Fund are described in the
prospectus. The Fund endeavors to function as a conservative, well-rounded,
investment account with the long-range objectives of: (1) continuity of income;
(2) conservation of principal; and (3) long-term growth of principal and income.
Investments in bonds and preferred stocks are made with the objectives of
continuity of income and conservation of principal. Investments in common stocks
and convertible bonds are made with the objective of long-term growth of
principal and income. The proportion of each will vary because management will
make such changes from time to time as it believes necessary to meet the
objectives of the Fund and the best interests of the shareholders. At least 25%
of its assets will be invested in fixed income senior securities. Investments
are diversified among industries as well as among individual companies.
Depending on market conditions, the Fund may also invest in mortgage-backed
securities including those on a forward commitment basis, and repurchase
agreements, as well as write covered call options.

The average ratings of all debt securities held by the Fund, expressed as a
percentage of total assets, during the fiscal year ended October 31, 1996 is
presented below:
Percentage of Average

S&P Rating Total Assets

AAA (or US Treasury) 58%
AA 2
A 5
BBB 18
BB 7
B 6
Not Rated 4

GROWTH & INCOME

The investment objective and policies of the Fund are described in the
prospectus. The Fund aims to achieve long-term growth of principal with current
income a secondary consideration. It pursues its objective by placing emphasis
on the selection and ownership of common stocks (although the Fund may also
invest in bonds, preferred stocks, U.S. Treasury bills, certificates of deposit,
mortgage-backed securities including those on a forward commitment basis, and
repurchase agreements, as well as write covered call options). There may be
times when it appears prudent to reduce the proportion of common stocks held.
During such periods, the investment in the above-noted alternative instruments
may exceed that of common stocks.

NORTHWEST

The Fund'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). 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.

ALL FUNDS

In pursuit of the Funds' investment objectives, they may engage in repurchase
agreement transactions. Under the terms of a typical repurchase agreement, a
Fund would acquire an underlying debt obligation for a relatively short period,
subject to an obligation of the seller to repurchase, and the Fund to resell,
the obligation at an agreed-upon price and time, thereby determining the yield
during the Fund's holding period. Under each repurchase agreement, the selling
institution will be required to maintain the value of the securities subject to
the repurchase agreement at not less than 102% of their repurchase price,
including accrued interest earned on the underlying securities. Repurchase
agreements could involve certain risks in the event of default or insolvency of
the other party, including possible delays or restrictions upon a Fund's ability
to dispose of the underlying securities. The Adviser, acting under the
supervision of the Boards of Directors, reviews the creditworthiness of those
banks and dealers with which the Funds enter into repurchase agreements to
evaluate these risks, and monitors on an ongoing basis the value of the
securities subject to repurchase agreements to ensure that the collateral is
maintained at the required level. To limit risk, repurchase agreements maturing
in more than seven (7) days will not exceed 10% of the total assets of the Fund.

The Funds may lend their securities to brokers, dealers, domestic and foreign
banks, or other financial institutions to increase their net investment income.
These loans must be secured continuously in one of these ways: (1) by cash, (2)
by equivalent collateral, or (3) by a letter of credit at least equal to the
market value of the securities loaned plus accrued interest or income. There may
be risks of delay in recovery of the securities or even loss of rights in the
collateral if the borrower of the securities fails financially.

A Fund will not enter into securities loan transactions exceeding, in aggregate,
33% of the market value of the Fund's total assets. They would consider such
transactions only with National Association of Securities Dealers' registered
broker or member banks of the Federal Reserve.

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

INVESTMENT RESTRICTIONS

While many decisions of the Adviser depend on flexibility, there are several
principles so fundamental to each Fund's philosophy that neither they, nor the
investment objective, may be changed without a vote of a majority of the
outstanding shares of that Fund.

Each Fund may NOT:

* invest more than 5%* of its total assets in securities of any single issuer
other than U.S. government securities, except that up to 25% of a Fund's assets
may be invested without regard to this 5% limitation;

* acquire more than 10%* of the voting securities of any one company;

* invest in any company for the purpose of management or exercising control;

* invest in real estate (except publicly traded real estate investment trusts);

* invest in commodities;

* invest in oil, gas or other mineral leases;

* invest in other investment companies (except as part of a merger);

* invest more than 20%* of its total assets in forward commitments or repurchase
agreements;

* invest more than 25%* of its total assets in any single industry;

* act as underwriter of securities issued by others;

* borrow money for investment purposes (it may borrow up to 5% of its total net
assets for emergency, non-investment purposes);

* lend money (except for the execution of repurchase agreements);

* issue senior securities;

* buy or sell options, with the exception of covered call options which must be
limited to 20% of total assets;

* buy or sell futures-related securities;

* invest in securities restricted under federal securities laws;

* invest more than 15%* of its net assets in illiquid securities;

* buy securities on margin, mortgage or pledge its securities, or engage in
"short" sales;

* invest more than 5%* of its net assets in warrants including not more than 2%
of such net assets in warrants that are not listed on either New York Stock
Exchange or American Stock Exchange; however, warrants acquired in units or
attached to securities may be deemed to be without value for the purpose of this
restriction;

* invest more than 25%* of its total assets in foreign securities and then only
in U.S dollar-denominated foreign securities.

* Percentage at the time the investment is made.

PERFORMANCE INFORMATION

Total returns quoted in advertising include the effect of applicable sales
charges, reinvesting dividends and capital gain distributions (at net asset
value), and any change in net asset value per share over the period. Total
returns will be quoted for each class of shares in any advertisement presenting
the total return of either class. The following total returns reflect the
maximum 4.5% initial sales charge for Class A shares and the contingent deferred
sales charge appropriate to the period for Class B shares.

Average annual total returns are calculated by determining the change in value
of a hypothetical investment over a stated period of time and then calculating
the annual compounded rate of return that would have produced the same result
had the rate of growth or decline in value been constant over the entire period.

Cumulative total return is the simple change in value of a hypothetical
investment over a stated period of time. The cumulative total return may be
quoted as a percentage or a dollar amount and may be presented numerically or in
a table, graph, or similar illustration.

PERIODS ENDED OCTOBER 31, 1996
1 Year 5 Years 10 Years
---------- ---------- ----------
AVERAGE ANNUAL TOTAL RETURN

Bond & Stock, Class A 10.45% 10.98% 9.50%
Bond & Stock, Class B 11.73% 13.93%**
Growth & Income, Class A 18.05% 13.59% 10.82%
Growth & Income, Class B 19.55% 18.13%**
Northwest, Class A 9.39% 8.62% 13.20%*
Northwest, Class B 10.54% 12.06%**

CUMULATIVE TOTAL RETURN

Bond & Stock, Class A 10.45% 68.38% 147.75%
Bond & Stock, Class B 11.73% 40.21%**
Growth & Income, Class A 18.05% 89.11% 179.25%
Growth & Income, Class B 19.55% 54.02%**
Northwest, Class A 9.39% 51.18% 242.02%*
Northwest, Class B 10.54% 34.34%**

* SINCE 11/86 (LIFE OF FUND)
** CLASS B SHARES' TOTAL RETURNS FROM THE COMMENCEMENT OF PUBLIC OFFERING ON
MARCH 30, 1994.

The total returns are calculated as follows:

Average annual total return: ERV = P(1+A)n
Cumulative total return (as a percentage): T = (ERV-P)/P

Where:

P = a hypothetical initial investment of $1,000
A = average annual total return
T = total return
n = number of years
ERV = ending redeemable value of a $1,000 hypothetical investment

Comparative Performance Data

Fund literature may occasionally refer to information about the Fund which is
published by mutual funds rating services. Comparisons of fund performance may
be made to various market, economic or other indices. Industry publications may
also be referred to from time to time.

BROKERAGE ALLOCATIONS AND PORTFOLIO TRANSACTIONS

Under terms of the Investment Management Agreements, Composite Research &
Management Co. acts as agent for each 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 Funds.

In executing portfolio transactions and selecting broker-dealers, the Adviser
uses its best efforts to seek, on behalf of each 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 timing 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 which is in excess of the amount of commission 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 Funds 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 Funds and/or its
other clients. Research services furnished to the Adviser include, for example,
written and electronic reports analyzing economic and financial 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 clients, although
not all of these services are necessarily useful and of value in managing the
Funds. The management 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 Funds to secure a net price
by dealing with a broker that is as good as or better than the price the Funds
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.

The Adviser estimates that all portfolio transactions during the year were
executed by broker-dealers who provided research services to the Adviser. The
Adviser has advised that it is not possible to place a value on their services
and that research services received do not materially reduce the cost to the
Adviser of fulfilling its contract.

Total Brokerage Commissions Paid by each Fund:

Bond & Stock Growth & Income Northwest
-------------- --------------- ---------

1996 $199,663 $292,486 $123,164

1995 $137,742 $163,180 $37,280

1994 $176,662 $115,573 $76,990

None of the brokers with whom the Funds deal have any interest in the Adviser or
the Distributor. The Distributor did not execute any portfolio orders for the
Funds during the fiscal year, nor did the Distributor or the Adviser receive any
direct or indirect compensation as a result of portfolio transactions of the
Funds. Shares may be sold by brokers who execute portfolio transactions for the
Fund; however, no brokerage fees will be allocated for such sales.

The Funds do not trade in securities for short-term profits but, if the
circumstances warrant, securities may be sold without regard to the length of
time held. Therefore, the Funds cannot accurately predict their portfolio
turnover rate. The turnover rates for the fiscal years 1996 and 1995 were 46%
and 32%, respectively, for Bond & Stock; 52% and 39%, respectively, for Growth &
Income; and 42% and 9%, respectively, for Northwest.

GENERAL INFORMATION

ORGANIZATION AND AUTHORIZED CAPITAL

Composite Bond & Stock Fund, Inc. was incorporated under the laws of the state
of Washington on June 22, 1939, under a certificate of incorporation granting
perpetual existence. The Fund has an authorized capitalization of 300 million
shares of capital stock, $0.0005 par value.

Composite Equity Series, Inc. (formerly Composite Growth Fund, Inc.) was
incorporated under the laws of the state of Washington on August 10, 1949, under
a certificate of incorporation granting perpetual existence with an authorized
capitalization of 40 million shares of capital stock, $0.0001 par value.

Composite Northwest Fund, Inc. (formerly Composite Northwest 50 Fund, Inc.) was
incorporated under the laws of the state of Washington on May 27, 1986, as the
Composite Select Fund, Inc., under a certificate of incorporation granting
perpetual existence. The Fund has an authorized capitalization of 10 billion
shares of capital stock, $.00001 par value.

Each Fund offers two classes of shares. Each class of shares represents
interests in the assets of the Fund. The shares do not have preemptive rights,
and none of the shares have any preference as to conversion, exchange,
dividends, retirement, liquidation, redemption or any other feature. Class B
shares convert to Class A shares six years after purchase, exchanges are
restricted to shares of the same class, and each class bears different expenses
related to their distribution. Shares have equal voting rights except that each
class has exclusive voting rights with respect to provisions of each Fund's
Distribution Plan that pertains to a particular class.

VOTING PRIVILEGES

The Funds are not required to hold annual meetings. When meetings are called to
elect directors, a shareholder may exercise cumulative voting privileges in the
election of directors under Washington state law. Using this privilege,
shareholders are entitled to one vote per share for each director candidate. The
total number of votes for directors to which a shareholder is entitled may be
accumulated and cast for each candidate in such proportion that the shareholder
may designate.

CUSTODIAN

The securities and cash owned by each Fund 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 PLLC, Certified Public Accountants, has been
selected as the independent public accountants of each Fund. LeMaster & Daniels
performs audit services for each Fund including the examination of the financial
statements included in annual reports to shareholders, which are 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 statements each Fund has filed
with the Securities and Exchange Commission. Complete registration statements
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 Funds' annual report to shareholders
dated October 31, 1996, which is incorporated by reference into this Statement
of Additional Information, may be obtained without charge by contacting the
Funds' offices.

<PAGE>

APPENDIX A

SPECIMEN PRICE MAKE-UP SHEET

COMPOSITE BOND & STOCK FUND, INC.
COMPOSITE EQUITY SERIES, INC. (GROWTH & INCOME FUND)
COMPOSITE NORTHWEST FUND, INC.
October 31, 1996

GROWTH &
BOND & STOCK INCOME NORTHWEST
-------------- ------------- -------------
Assets $279,311,840 $203,202,475 $193,179,356

Liabilities 1,654,274 2,020,579 1,819,938
-------------- ------------- -------------
Net Assets $277,657,566 $201,181,896 $191,359,418
============== ============= =============
CLASS A SHARES

Net Assets $255,414,120 $178,330,523 $176,706,441

Shares Outstanding 17,361,806 10,334,058 8,972,376
-------------- ------------- -------------
Net Asset Value Per Share $14.71 $17.26 $19.69
============== ============= =============
Maximum Offering Price
(Net Asset Value
Per Share ./. 955/1000) $15.40 $18.07 $20.62
============== ============= =============
CLASS B SHARES

Net Assets $ 22,243,446 $ 22,851,373 $ 14,652,997

Shares Outstanding 1,514,671 1,331,165 753,528
-------------- ------------- -------------
Net Asset Value and
Offering Price Per Share $14.69 $17.17 $19.45
============== ============= =============

<PAGE>

APPENDIX B

DESCRIPTION OF SECURITY RATINGS

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

Corporate and Municipal Ratings

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 likely 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 out- standing
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 thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position 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.

STANDARD & POOR'S CORPORATION (S & P)
CORPORATE AND MUNICIPAL RATINGS

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. BB indicates the least degree of speculation and C
the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major exposures to adverse conditions.

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.

COMMERCIAL PAPER

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

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
maybe 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.

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.

ABSENCE OF RATING:

Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to quality of the issue. Should no
rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.

3. There is a lack of essential data pertaining to the issue or issuer.

4. The issue was privately placed, in which case the rating is not
published.

<PAGE>

PART C

OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements. The annual report to shareholders dated October
31, 1996, was filed with the Securities and Exchange Commission on December 23,
1996. The annual report is incorporated by reference in both Parts B and C.

Filing Date
(b) Exhibits Incorporated With Filed
---------------- ----------------- -----
(1) Articles of Incorporation Form N-1A 2-25-97
(as amended)
(2) Bylaws Form N-1A 2-25-97
(3) Voting Trust Agreement INAP
(4) Specimen Capital Stock
Certificate Form N-1A 2-25-97
(5) Investment Advisory Contract Form N-SAR 6-21-94
(6a) Distribution Contract Form N-1A 2-25-97
(6b) Specimen Selling Agreement Form N-1A 2-25-97
(7) Bonus, profit sharing, pension
or other similar contracts
for benefit of directors or
officers of the Registrant INAP
(8) Custodial Agreement Form N-1A 2-25-97
(9) Shareholders Service Contract Form N-1A 2-25-97
(10) Opinion & Consent of Counsel Form N-1A 2-25-97
(11) Accountants' Consent Form N-1A 2-25-97
(12) All financial statements
omitted from Item 23.
Annual Report Form N-1A 2-25-97
(13) Agreements or understandings
made in consideration
for providing initial
capital. Form N-8B-1 9-19-49
(14) Retirement Plan and Forms Form N-8B-1 11-13-75
(15) 12b-1 Plan See (6a) above 2-25-97

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

The Registrant is operated under the supervision of Composite Research &
Management Co. Composite Research is affiliated with Murphey Favre, Inc. and
Murphey Favre Securities Services, Inc. through common ownership and management.
Murphey Favre serves as principal underwriter and distributor for the
Registrant. Murphey Favre Securities Services serves as transfer agent for the
Registrant. Composite Research, Murphey Favre, and Murphey Favre Securities
Services serve in their same capacities for the seven other investment companies
within the Composite Group of Funds, namely: Composite Income Fund, Inc.;
Composite Tax- Exempt Bond Fund, Inc.; Composite Cash Management Company;
Composite Northwest Fund, Inc.; Composite U.S. Government Securities, Inc.;
Composite Bond & Stock Fund, Inc.; and Composite Deferred Series, Inc. Composite
Research & Management Co., Murphey Favre, and Murphey Favre Securities Services
are all wholly-owned subsidiaries of Washington Mutual, Inc. All companies'
named are incorporated in the state of Washington.

Item 26. NUMBER OF HOLDERS OF SECURITIES.

As of February 13, 1997, there were 11,607 Class A shareholders and 2,904 Class
B shareholders.

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 any time 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., which is a Washington
corporation, organized in 1889. The Adviser serves in that capacity for seven
(7) other investment companies within 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 July 10, 1996, and is incorporated herein by reference.

Item 29. PRINCIPAL UNDERWRITERS.

The principal underwriter for the Registrant is Murphey Favre, Inc. 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 7, 1997, 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 West Main Avenue, Suite 801,
Spokane, Washington 99201. The Registrant's custodian activities are performed
at Investors Fiduciary Trust Company (IFTC), 127 West 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 32C. UNDERTAKINGS.

The management discussion of fund performance required by Item 5A is contained
in the 10/31/96 annual report to shareholders which will be provided to each
person to whom a prospectus is delivered, 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(b) 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 25 day of February, 1997.

COMPOSITE EQUITY 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 September 24, 1996
- -------------------------------------------
Wayne L. Attwood, Director (Date)

/s/ Kristianne Blake September 24, 1996
- -------------------------------------------
Kristianne Blake, Director (Date)

/s/ Anne V. Farrell September 24, 1996
- -------------------------------------------
Anne V. Farrell, Director (Date)

/s/ Michael K. Murphy September 24, 1996
- -------------------------------------------
Michael K. Murphy, Director (Date)

/s/ William G. Papesh September 24, 1996
- -------------------------------------------
William G. Papesh, Director (Date)

/s/ Jay Rockey September 24, 1996
- -------------------------------------------
Jay Rockey, Director (Date)

/s/ Richard C. Yancey September 24, 1996
- -------------------------------------------
Richard C. Yancey, Director (Date)

<PAGE>

- --------------------------------------------------------------------------------
EXHIBIT INDEX
- --------------------------------------------------------------------------------
EX-99.B1 CHARTER
EX-99.B2 BYLAWS
EX-99.B4 SPECIMEN CAPITAL STOCK CERTIFICATE
EX-99.B6 6(a) DISTRIBUTION CONTRACT
EX-99.B6 6(b) SPECIMEN SELLING AGREEMENT
EX-99.B8 CUSTODY AGREEMENT
EX-99.B9 SHAREHOLDERS SERVICE AGREEMENT
EX-99.B10 OPINION & CONSENT OF COUNSEL
EX-99.B11 ACCOUNTANT'S CONSENT
EX-27.CLASS A FINANCIAL DATA SCHEDULE - CLASS A
EX-27.CLASS B FINANCIAL DATA SCHEDULE - CLASS B
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EXHIBIT 1
ARTICLES OF INCORPORATION
of
COMPOSITE STOCK FUND, INC.
(As Amended September 3, 1949)

THIS IS TO CERTIFY that we, the undersigned persons, all being residents
and citizens of the United States of America and of the State of Washington, do
hereby associate ourselves together for the purpose of forming a corporation
under the laws of the State of Washington, and for that purpose do execute the
following ARTICLES OF INCORPORATION:

The name of this corporation shall be COMPOSITE STOCK FUND, INC.

II.

The nature of the business and the objects and purposes to be transacted or
carried on by the Corporation are as follows, viz.:

1. To invest and reinvest the proceeds of the sale of its capital stock,
together with the whole or such part as may be determined to be
advantageous of the income, earnings, profits and proceeds thereof, in
selected and diversified securities, and to acquire, own, hold and
dispose of the same. The term "securities" shall be deemed to include
stocks, bonds, coupons, debentures, notes, evidences of indebtedness
of domestic and foreign, private or public corporations, with or
without warrants, or rights appertaining thereto, certificates
representing any interest in the foregoing and including certificates
of deposit and trust receipts for the foregoing, and obligations of
the governments of foreign nations and of the United States of America
including all bonds and notes guaranteed to both principal and
interest by the United States of America, or of any state of the
United States, or any municipal or public corporation of any of the
states or of the United States.
2. To receive, sell, exchange, own, hold or otherwise acquire and dispose
of securities of every kind and character, and while the owner of any
securities to exercise all rights, powers and privileges of ownership.
3. To receive, sell, exchange and dispose of such securities, including
bonds, coupons, debentures, notes and other evidences of indebtedness,
shares of stock, voting trust certificates, certificates of deposit,
trust receipts, warrants and rights, as may be appurtenant to
securities held by it or into which securities held by it have been
converted or transferred, and while remaining the owner thereof to
exercise all rights, powers and privileges of ownership, including the
right to vote thereon and assent or consent with respect thereto.
4. In general, to carry on any other activity in connection with the
foregoing, and to have and exercise all the powers conferred by the
laws of the State of Washington upon corporations, and to do any or
all of the things herein set forth (except as herein specifically
limited) to the same extent as a natural person might or could do.
5. Anything contained in these Articles of Incorporation to the contrary
notwithstanding this Corporation may not and shall not:

(a) Buy securities "on margin";
(b) Effect "short sales"of securities;
(c) Mortgage, pledge or hypothecate securities in any manner
whatsoever.

III.

In furtherance but not in limitation of the general powers of the
Corporation, the business and affairs thereof shall be conducted in accordance
with the following provisions:

1. No stockholder of the Corporation shall have any preference right of
subscription to any shares of stock of the Corporation, whether now or
hereafter authorized, other than such, if any, and to such price, as
the Board of Directors, in its discretion, from time to time, may
determine, and the Board of Directors may issue stock of the
Corporation without offering the same, either in whole or in part, to
the stockholders. The acceptance of stock in the Corporation shall be
a waiver of any preferential right which, in the absence of this
provision, might otherwise be asserted by stockholders of the
Corporation, or any of them.
2. Upon all sales of stock of the Corporation, whether upon original
issuance or from treasury stock, the Corporation shall receive not
less than the net asset value thereof in effect at the time of sale.
The time at which the calculation of the net asset value of a share of
stock of the Corporation shall remain in effect shall be prescribed by
resolution of the Board of Directors of the Corporation.
3. The method of determination of the net asset value of a share of stock
shall be as follows:

(a) The value of all bonds and securities of any kind contained in
the portfolio shall be taken at the first quoted sales price
during the twenty-four hours preceding the calculation, or if no
sale has been reported within that period, then at a reasonable
price to be computed under rules prescribed by the Corporation
but limited to the price between the last bid and asked price
preceding the calculation, or should any bond or security
contained in its portfolio have no noted sales price, or bid and
asked prices, then the value of such bonds and securities shall
be computed under rules prescribed by the Board of Directors.
(b) By including the amount of all uninvested cash.
(c) By included accrued income.
(d) By subtracting all sums for which the Corporation is liable.
(e) The net sums thus derived shall represent the net asset value of
the capital stock of the fund in its entirety and the value of
each share then issued and outstanding shall be its aliquot of
the whole.
(f) In calculations of the net asset value made at times other than
at the close of business on the New York Stock Exchange valuation
of portfolio securities may be made by adjusting the valuation
used in the most recently determined net asset valuation in
accordance with the changes in any well recognized index of stock
prices.
(g) The Board of Directors is empowered in its discretion, to
establish other methods for determining such asset value whenever
such other methods are deemed by it to be necessary or desirable
in order to enable the Company to comply with any provision of
the Investment Company Act of 1940 or any rule or regulation
thereunder.

4. Any owner of stock of the Corporation desiring to dispose of all or
any part thereof may present the same to the Corporation by depositing
with the Corporation the certificate or certificates therefor or a
delivery undertaking satisfactory to the Corporation, and the
Corporation, to the full extent to which the Corporation at the time
of purchase may legally do so under the laws of the State of
Washington, shall purchase the stock so presented out of surplus at
the net liquidating value thereof. All stock certificates so deposited
with the Corporation shall be properly exercised for transfer and
accompanied by the necessary stock transfer stamps. The net
liquidating value of shares presented for purchase shall be computed
on the first day on which the New York Stock Exchange is opened
following the day of presentation; provided that the Board of
Directors may provide for the computation of the net liquidating value
on the day of presentation; provided further that the computation of
the net liquidating value and the payment thereof may be postponed in
an emergency in accordance with the provisions of the Investment
Companies Act of 1940, and any orders, rules or regulations of the
Securities and Exchange Commission of the United States. Payment
therefor at the net liquidating value shall be made in the regular
course of business and shall not be postponed for more than seven (7)
days after the date of computation.

5. The method of determining the net liquidating value of a share of
stock shall be as follows:

(a) The value of all bonds and securities of any kind contained in
the portfolio shall be taken at the last quoted sales price
during the day fixed for the computation of the net liquidating
value, or if no sale has been reported within that period, then
at a reasonable price to be computed under rules prescribed by
the Corporation but limited to a price between the last bid and
asked prices preceding the calculation, or should any bond or
security contained in its portfolio give no quoted sales price,
or bid and asked price, then the value of such bonds and
securities shall be computed under rules prescribed by the Board
of Directors.

(b) By including the amount of all uninvested cash.

(d) By subtracting all sums for which the Corporation is liable. The
Fund, however, reserves the right (in its discretion), by
computing the liquidating value, to deduct in addition to actual
liabilities owed, a reasonable approximation for brokerage
commissions, taxes and other costs which would be payable if it
is necessary to liquidate assets of the Fund to provide cash for
the redemption of shares rendered.

(e) The net sums thus derived shall represent the net liquidation
value of the capital of the Fund in its entirety and the value of
each share then issued and outstanding shall be its aliquot of
the whole.

6. The Corporation in such year shall make such distribution to its
stockholders as may be ordered by the Board of Directors.

7. The Corporation may employ, by contract or otherwise, any partnership
or corporation to act as manager or managers of the Fund, custodians
of its assets, and distributors of its stock, or in any other
capacity, whether or not any member, officer, or director thereof is
an officer or director or stockholder of this Corporation.

8. No contract or other transaction between the Corporation and any
partnership or corporation, and no act of the Corporation shall in
any way be effected or invalidated by the fact that any officer or
director of the Corporation is pecuniary or otherwise interested in
or a member, officer or director of such partnership or other
corporation; provided, that the fact of such interest shall be known
to the Board of Directors of the Corporation.

IV.

The amount of the capital stock of this Corporation shall be $400,000
divided into 400,000 shares of the par value of $.50 per share. The minimum
amount of capital with which this Corporation shall commence business is $500.
Each share of stock of the Corporation shall be of the same class, described as
"Common Stock," and shall be entitled to one vote at all meetings of
stockholders for each issued and outstanding share of stock.

The period of existence of this Corporation shall be perpetual.

VI.

The number of directors shall be not less than three nor more than fifteen
and the names and places of residence of the first directors of this Corporation
are as follows:
Name Address
Robert M. Williams 601 Riverside Avenue,
Spokane, Washington

George R. Yancey 601 Riverside Avenue,
Spokane, Washington

Earl David Moscow, Idaho

Alan G. Paine Spokane and Eastern Building
Spokane, Washington

Harlan I. Peyton Peyton Building
Spokane, Washington

Fred M. Shields Radio Central Building
Spokane, Washington

Noel E. Thompson 1126 Paulsen Building,
Spokane, Washington

Warren L. Williams Columbia Building
Spokane, Washington

Clarence E. Johnston South 165 Howard Street,
Spokane, Washington

The term of office of each director shall be until the first annual meeting
of the stockholders of the Corporation and thereafter until their successors are
elected and qualified.
The names and places of residence of each of the incorporators of this
Corporation are as follows:

NAME ADDRESS NUMBER OF SHARES SUBSCRIBED

Robert M. Williams 601 Riverside Avenue, 50
Spokane, Washington

George R. Yancey 601 Riverside Avenue, 25
Spokane, Washington

Alan G. Paine Spokane and Eastern Building 25
Spokane, Washington

VII.

The principal place of business of this Corporation shall be 601 Riverside
Avenue, Spokane County, State of Washington.

VIII.

The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.

IN WITNESS WHEREOF, we have hereunto set our hands in triplicate this 5th
day of August, 1949.
/s/ R.M. WILLIAMS
/s/ GEORGE R. YANCEY
/s/ ALAN G. PAINE

STATE OF WASHINGTON )
County of Spokane )ss.

I, the undersigned, a notary public in and for said state, residing at
Spokane, do hereby certify that on the 5th day of August 1949, before me
personally appeared ROBERT M. WILLIAMS, GEORGE R. YANCEY and ALAN G. PAINE, to
me known to be the individuals described in and who executed the within ARTICLES
OF INCORPORATION, and they acknowledged to me that they signed the same as their
voluntary act and deed for the uses and purposes therein mentioned.
GIVEN under my hand and official seal this 5th day of August, 1949.

RUTH H. SIMONS
Notary Public for the State of
Washington, residing at Spokane

I hereby certify that the attached is a true and correct copy of the
Articles of Incorporation (as amended) of Composite Stock Fund, Inc.
H.P. LOWRY

Subscribed and sworn to before me this 13th day of September, 1949.

RUTH H. SIMONS
Notary Public for the State of
Washington, residing at Spokane

AMENDMENT TO ARTICLES OF INCORPORATION
of
COMPOSITE STOCK FUND, INC.

This is to certify that at a regular meeting of the shareholders of
Composite Stock Fund, Inc., held at the offices of the company in Spokane,
Washington, on January 9, 1951, pursuant to written notice to all stockholders,
notifying them of the proposal to amend the Articles of Incorporation, to change
the name from Composite Stock Fund, Inc. to Composite Fund, Inc. Amendment to
Articles of Incorporation hereinafter stated was adopted by more than fifty per
cent of the shareholders of all the stock entitled to vote then outstanding:

ARTICLE I

The name of the corporation shall be
COMPOSITE FUND, Inc.

GEORGE R. YANCEY
VICE PRESIDENT

H.P. LOWRY
SECRETARY

Subscribed and sworn to before me this 9th day of January, 1951.

M.J. SICHAFOOSE
Notary Public for the State of
Washington, residing at Spokane.

<PAGE>
AMENDMENT TO ARTICLES OF INCORPORATION
of
COMPOSITE STOCK FUND, INC.

This is to certify that at a regular meeting of the shareholders of
Composite Stock Fund, Inc., held at the offices of the company in Spokane,
Washington, on January 9, 1951, pursuant to written notice to all shareholders,
notifying them of the proposal to amend the Articles of Incorporation, to change
the name from Composite Stock Fund, Inc. to Composite Fund, Inc. Amendment to
the Articles of Incorporation hereinafter stated was adopted by more than fifty
per cent of the shareholders of all the stock entitled to vote then outstanding:

ARTICLE I

The name of the corporation shall be
COMPOSITE FUND, INC.

GEORGE R. YANCEY
VICE PRESIDENT

H.P. LOWRY
SECRETARY

Subscribed and sworn to before me this 9th day of January, 1951.

M.J. SICHAFOOSE
Notary Public for the State of
Washington, residing at Spokane.

Article No. 117178 The Seal of the State of Washington, 1889 Domestic

Department of State
Olympia
Office of the
Secretary of State

I, EARL COE, Secretary of State of the State of Washington, do hereby
certify that

AMENDED

ARTICLES OF INCORPORATION
of the
COMPOSITE STOCK FUND, INC.
(Changing name to Composite Fund, Inc.)

a Domestic Corporation, of SPOKANE, Washington, were, on the 10th day of
January, A.D. 1951, at 3:40 o'clock P.M., filed for record in this office and
now remain on file herein, being duly recorded in Book 19, at page 204-205,
Domestic Corporations.
IN TESTIMONY WHEREOF, I have
hereunto set my hand and affixed
hereto the Seal of the State of
Washington.
Done at the Capitol, at Olympia, this
IMPRESSION 10th day of January, A.D. 1951.
OF THE SEAL
OF THE STATE EARL COE,
OF WASHINGTON Secretary of State
1889.

By RAY J. YEOMAN
Assistant Secretary of State.

ARTICLES OF AMENDMENT
OF
COMPOSITE FUND, INC.

Articles of Amendment of the Articles of Incorporation of COMPOSITE FUND,
INC. are herein executed by said corporation, pursuant to the provisions of
Revised Code of Washington 23A.16.040 and 23A.16.050, as follows:

1. The name of the corporation is COMPOSITE FUND, INC.

2. The amendment to the Articles of Incorporation of said corporation is as
follows:

Article I shall be amended to read as follows:

ARTICLE I
The name of this corporation shall be COMPOSITE GROWTH FUND, INC.

ARTICLE IV shall be amended to read as follows:

ARTICLE IV
The amount of the capital stock of this corporation shall be $20,000,000 divided
into 40,000,000 shares of the par value of $.50 per share. The minimum amount of
capital with which this Corporation shall commence business is $500. Each issued
and outstanding share of stock of the Corporation shall be of the same class,
described as 'common shares' and shall be entitled to one vote at all meetings
of the stockholders.

3. The date of the adoption of said amendment by the shareholders of said
corporation is January 14, 1986.

4. The number of shares outstanding of said corporation as of the record
date of November 29, 1985 is 4,661,045.

5. The number of shares entitled to vote on said amendment, all of which
are capital common stock, was 4,661,045.

6. The number of shares voted for and against the amendment to Article I
were as follows:

For amendment: 3,183,519
Against amendment: 139,976.415
Abstained: 105,588.953

The number of shares voted for and against the amendment to Article IV were as
follows:

For amendment: 3,163,125
Against amendment: 103,490.406
Abstained: 162,469.074

7. The manner in which said amendment effects a change in the amount of
stated capital of said corporation is as follows:

The amount of stated capital has been increased by said
amendment from $4,000,000 to $20,000,000.

DATED: January 20, 1986

COMPOSITE FUND, INC.
By Lee J. Sahlin
President

By B.L. Brooks
Secretary

ARTICLES OF AMENDMENT
OF
COMPOSITE GROWTH FUND, INC.

Articles of Amendment of the Articles of Incorporation of COMPOSITE GROWTH
FUND, INC. (the "Corporation") are herein executed by the Corporation pursuant
to the provisions of RCW 23B.10.060 as follows:

1. The name of the Corporation is COMPOSITE GROWTH FUND, INC.

2. The amendment to the Articles of Incorporation of the Corporation is as
follows:

Article IV of the Articles of Incorporation hereby is amended in its
entirety to read as set forth below:

ARTICLE IV

AUTHORIZED SHARES

The total number of shares which the Corporation shall have the
authority to issue is forty million (40,000,000) shares having a par
value of $.0001 per share. The shares shall be classified initially
into two classes, consisting of twenty-five million (25,000,000)
shares of Class A Common Stock and fifteen million (15,000,000) shares
of Class B Common Stock. The shares of the Corporation's capital stock
issued and outstanding at the effective date of the amendment adding
this provision are hereby reclassified as "Class A Common Stock."

The Board of Directors is authorized to classify or to reclassify,
from time to time, any unissued shares of any class of the
Corporation, including classes established in separate portfolios, by
setting, changing, eliminating or designating specific distinctions
and preferences, conversion or other rights, powers, restrictions,
limitations as to dividends, and qualifications or terms and
conditions of or rights to require redemption of such shares.

Each holder of record of a share of capital stock of the Corporation
shall be entitled to one vote for each share registered in such
holder's name, irrespective of the class thereof, and all shares of
all classes shall vote together as a single class; provided, however,
that (i) as to any matter with respect to which a separate vote of any
class or of any classes voting together as a single class is required
by law pursuant to any applicable order, rule or interpretation issued
by the Securities and Exchange Commission, or otherwise, such
requirement as to a separate vote by that class or those classes
voting together as a single class is required by law pursuant to any
applicable order, rule or interpretation issued by the Securities and
Exchange Commission, or otherwise, such requirement as to a separate
vote by that class or those classes voting together as a single class,
as the case may be, shall apply in lieu of a general vote of all
classes as described above, (ii) in the event that the separate vote
requirements referred to in (i) above apply with respect to one or
more classes, voting separately or as a single class, then subject to
paragraph (iii) below, the shares of all other classes not entitled to
a vote of a separate class or of separate classes voting together as a
single class, and (iii) as to any matter which does not affect the
interest of a particular class, such class shall not be entitled to
any vote and only holders of shares of the one or more affected
classes shall be entitled to vote.

Shares of each class of stock shall be entitled to such dividends or
distributions, in stock or in cash or both, as may be declared from
time to time by the Board of Directors with respect to such class.
Dividends and distributions of income and capital gains with respect
to the Class A Common Stock or the Class B Common Stock, and any other
class hereafter created may vary among the classes to reflect
differing allocations of expenses of the Corporation among the holders
of the various classes and any resultant differences among the net
asset value of the various classes of Common Stock to such extent and
for such purposes as the Board of Directors may deem necessary or
appropriate.

3. The date of the adoption of the amendment by the Corporation is
December 21, 1993.

4. The amendment was adopted by (check one of the following statements):

( ) The incorporators. Shareholder action was not required.
( ) The board of directors. Shareholder action was not required.
(X) Duly approved shareholder action in accordance with the
provisions of RCW 23B.10.030 and RCW 23B.10.040.

5. These Articles of Amendment shall be effective upon filing.

DATED: February 7, 1994

COMPOSITE GROWTH FUND, INC.
By William G. Papesh, President

STATE OF WASHINGTON)
)ss.
County of Spokane )

I certify that I know or have satisfactory evidence that William G. Papesh
is the person who appeared before me, and said person acknowledged that he
signed this instrument, on oath stated that he was authorized to execute the
instrument and acknowledged it as the President of COMPOSITE GROWTH FUND, INC.
to be the free and voluntary act of such party for the uses and purposes
mentioned in the instrument.

DATED: February 7, 1994
/s/
Name: Lawrence R. Small
Notary Public in and for the State of
Washington, residing at Spokane
My commission expires: 9/26/95

EXHIBIT 2

As Revised 1/23/96

BYLAWS
OF
COMPOSITE EQUITY SERIES, INC.

ARTICLE I.

STOCKHOLDERS' MEETINGS

SECTION 1. ANNUAL MEETING: The corporation shall not be required to hold an
annual meeting of the shareholders unless an election of Directors is required
by the Investment Company Act of 1940. This provision shall not prohibit the
President or the Board of Directors from calling an annual meeting of
stockholders for any purpose. (Amended 3/22/94)
SECTION 2. SPECIAL MEETINGS: Special meetings of the shareholders may be
called at any time by the President or by the Board of Directors. At any time,
upon receipt of written request of shareholders holding in the aggregate
one-tenth (1/10) of the voting power of all shareholders, it shall be the duty
of the Secretary or other person duly authorized, to call a special meeting of
shareholders to be held at the registered office at such time as the Secretary
or other duly authorized person may fix; the notice of such meeting shall comply
with the requirements set forth in Section 4 of this Article and shall further
state the purpose or purposes for which the meeting is called. If the Secretary
or other duly authorized person shall neglect or refuse to issue such call, the
shareholders making the request may do so.
SECTION 3. PLACE OF MEETING: The annual meeting of shareholders or any
special meeting of shareholders shall be held at the principal office of the
corporation or at such other place either within or without the State of
Washington as determined by the Board of Directors.
SECTION 4. NOTICE OF MEETINGS: Except as otherwise required by statute,
notice of the time and place of each meeting of shareholders, whether annual or
special, shall be given to each shareholder of record entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before the date of
such meeting, by delivering a written or printed notice thereof to him
personally, or by mailing such notice by certified mail, with return receipt
requested, in a postage-prepaid envelope addressed to him at his address as it
appears on the stock transfer books of the corporation.
SECTION 5. WAIVERS: Notice of any meeting of shareholders shall not be
required as to any shareholder who shall attend such meeting in person or by
proxy; and if any shareholder shall, in person or by attorney duly authorized,
waive notice of any meeting, whether before or after such meeting, notice
thereof shall not be required as to him.
SECTION 6. QUORUM: Unless otherwise provided in the Articles of
Incorporation, the presence in person or by proxy duly authorized, of the
holders of the majority of the shares entitled to vote shall constitute a quorum
for the transaction of business; if a quorum be present, the affirmative vote of
the majority of the shares represented at such meeting and entitled to vote on
the subject matter shall be the act of the shareholders, unless the vote of a
greater number is required by law or by the Articles of Incorporation, or other
sections of these Bylaws.
SECTION 7. VOTING: Unless otherwise provided in the Articles of
Incorporation, every shareholder of record shall be entitled to one vote per
share on each matter submitted to a vote at any meeting of shareholders. No
proxy shall be valid after eleven (11) months from the date of its execution,
unless such proxy provides for a longer period. The Board of Directors may fix
in advance a record date for the determination of shareholders entitled to vote
at such meeting, or for any other purpose. No share of stock shall be voted at
any meeting which shall have been transferred on the books of the corporation
subsequent to the record date fixed herein and prior to the date of the meeting.
When a determination of the shareholders entitled to vote at any meeting of
shareholders has been made, such determination shall apply to any adjournment
thereof.

ARTICLE II.

BOARD OF DIRECTORS

SECTION 1. NUMBER AND TERM OF OFFICE: The business of this corporation
shall be managed by a Board of Directors which shall be composed of not less
than three nor more than fifteen directors, the specific number to be set by
Resolution of the Board or the shareholders. The numbers of directors may be
changed from time to time by amendment of these Bylaws, but no decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. Unless a director dies, resigns, or is removed, his or her
term of office shall continue until his or her successor is elected and
qualified, or until there is a decrease in the authorized number of directors.
Directors need not be stockholders of the corporation or residents of the State
of Washington and need not meet any other qualifications. (Amended 3/22/94)
SECTION 2. PLACE OF MEETING: Meetings of the Board of Directors may be held
either within or without the State of Washington.
SECTION 3. STATED MEETINGS: The Board of Directors may, by resolution
adopted by the affirmative vote of a majority of the whole board, from time to
time, appoint the time and place for holding stated meetings of the Board if it
be deemed advisable and such stated meetings shall thereupon be held at the time
and place so appointed, without the giving of any special notice with regard
thereto. In case the day appointed for a stated meeting shall fall upon a legal
holiday, such meeting shall be held on the next following day not a legal
holiday, at the regularly appointed hour. Except as otherwise provided in the
Bylaws, any type of business may be transacted at any stated meeting.
SECTION 4. SPECIAL MEETINGS: Special meetings of the Board of Directors
shall be held whenever called by the President, or by a majority of the
directors. Notice of any such meeting or any adjournment thereof shall be mailed
to each director, addressed to him at his residence or usual place of business,
not later than five (5) days before the day on which the meeting is to be held,
or shall be sent to him at such place by telegraph, or delivered personally or
by telephone, not later than the day before such day of meeting. Notice of any
meeting of the Board need not, however, be given to any director if waived by
him in writing or if he shall be present at the meeting; and any meeting of the
Board of Directors shall be a legal meeting without any notice thereof having
been given if all the members shall be present thereat except as otherwise
provided in the Bylaws or as may be indicated in the notice thereof, and any and
all business may be transacted at any special meeting.
SECTION 5. QUORUM AND MANNER OF ACTING: A majority of the number of
directors fixed by resolution of the directors shall constitute a quorum for the
transaction of business. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
In the absence of a quorum, a majority of the Directors present may adjourn any
meeting, from time to time, until a quorum is present.
SECTION 6. RESIGNATIONS: Any director of the corporation may resign at any
time either by oral tender of resignation at any meeting of the Board or by
giving written notice thereof to the Secretary. Such resignation shall take
effect at the time specified therefor; and unless otherwise specified with
respect thereto, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 7. FILLING OF VACANCIES: In the case of any vacancy or vacancies in
the Board of Directors, such vacancy or vacancies shall be filled by the
remaining directors.
SECTION 8. SALARIES AND BONUSES: The Board of Directors shall have power to
fix salaries of officers, and the Board shall further have power to determine
and authorize payment of bonuses from time to time as may be best determined by
the financial condition of the corporation.
SECTION 9. MEETINGS: Meetings of the Board of Directors or of any
committees thereof may be held by conference telephone or similar communication
equipment so long as all participants can hear each other and participate in
discussion without restriction.
SECTION 10. COMMITTEE DESIGNATION: In addition to the committees designated
in this section, the Board of Directors, by resolution adopted by a majority of
the members, may designate from among its members one or more other committees,
each of which, to the extent provided in such resolution, shall have and may
exercise all the authority of the Board of Directors to the extent permitted by
applicable law. Designated Board of Directors' committees and responsibilities
are:

1) AUDIT COMMITTEE - consisting of three (or more) disinterested
Directors: This committee is responsible for overseeing the financial
reporting process and assuring the objectivity of the independent
audit. The committee will hold periodic meetings with the independent
auditors and make recommendations to the Directors about the adequacy
and accuracy of systems, acceptance of audits and suggestions on
internal control improvements.

2) NOMINATING COMMITTEE - consisting of three (or more) Directors: This
committee will nominate or recommend a slate of Directors each year
and make preparations and recommendations for replacements.
Responsibilities will also include the initial review of policy issues
regarding Board compensation, size of the Board, and composition of
the Board.

3) INVESTMENT COMMITTEE - consisting of three (or more) Directors: This
committee will perform interim functions for the Board including, but
not limited to, dividend declaration, investment policy preparation
and recommendations, and portfolio pricing matters. The committee will
have the authority to act on behalf of the Board with any policy
recommendations subsequently reported to the Board for ratification.

4) VALUATION COMMITTEE:

a. Membership. The Board of Directors may annually appoint a Valuation
Committee comprised of two or more individuals. The names of persons
serving on the Committee will be named in the Committee guidelines.
b. Responsibilities and Duties. The purpose of the Valuation Committee
shall be to value any security held by a Fund or any Series which
cannot otherwise be valued under the Fund's guidelines for valuation
of portfolio securities.
c. Rules of Procedures. In determining the fair value of a security, the
Valuation Committee shall consider such factors and follow such
procedures as may be established under guidelines approved by the
Board of Directors. The guidelines shall be reviewed and approved by
the Board as frequently as the Board shall deem appropriate, but in no
event less than annually. A record of each meeting shall be kept. At
the next regularly scheduled Board of Directors meeting following the
Valuation Committee's determination of a fair value for a security,
the Board of Directors shall consider ratifying the Valuation
Committee's action.
d. Vote Required. The members of the Valuation Committee must unanimously
approve a fair value for the security.
e. Action Without Meeting. Any action that may be or is required to be
taken at a meeting of the Valuation Committee may be conducted by
telephone or may be taken without a meeting, if a consent in writing
setting forth the action so taken shall be signed by all members of
the Valuation Committee. Such consent shall have the same effect as a
unanimous vote.
f. Compensation of Committee Members. Each committee member who is not an
interested person of the Fund may receive such compensation from the
Fund for his or her services and reimbursement for his or her expenses
as may be fixed from time to time by the Directors.

ARTICLE III.

OFFICERS

(Amended 5/31/89) The officers of the Company shall be the Chairman of the
Board of Directors, a President, a Treasurer, and a Secretary. Persons elected
to those offices by the Board of Directors shall serve at the will of the Board
of Directors and continue in office until such time as their successors are
elected and qualified. Any two of the foregoing officers may be united in one
person. A Vice President or Vice Presidents may be added from time to time as
determined by the Board of Directors who may also appoint one or more Assistant
Secretaries and one or more Assistant Treasurers.
The Chairman of the Board of Directors shall preside at all meetings of the
stockholders and of the Board of Directors and shall have further duties and
responsibilities as the Board of Directors may determine. The President, subject
to the general supervision and control of the Board of Directors, shall be
responsible for the affairs of the company and shall perform such other duties
as may be assigned to him from time to time by the Board of Directors.
The Secretary shall issue notices for all meetings, shall have charge of
the seal and the corporate books, shall sign with the President such instruments
as require such signature and shall perform such other duties as are incident to
his office or are particularly required of him by the Board of Directors.
The Treasurer shall have the custody of monies and securities of the
Company. He shall sign and issue checks, notes and other obligations of the
Company not under seal, and shall perform all duties incident to his office or
that are particularly required of him by the Board of Directors.
The Vice Presidents, Assistant Secretaries and Assistant Treasurers shall
perform the duties of the President, Secretary or Treasurer in his or their
offices or during their inability to act; such officer shall have such other and
further powers and perform such other and further duties as may be assigned to
him or them, respectively, by the Board of Directors.

ARTICLE IV.

AUDITS

The accounts and transactions of the Corporation shall be submitted for
audit at least once a year to reputable certified public accountants to be
chosen by the Board of Directors. These audits are to be directed to a
verification as of the date selected of the assets and liabilities and principal
and income accounts and are to include a detailed check of the sales price and
liquidation value make-up sheets for at least one day in each calendar month.

ARTICLE V.

COMMON STOCK

SECTION 1. STOCK CERTIFICATES: Certificates shall not be issued until the
shares represented thereby shall have been fully paid for. Certificates will not
be issued unless requested by the stockholder.
SECTION 2. TRANSFERS: Shares may be transferred by assignment and delivery,
but no such transfer shall be binding upon the Corporation until same shall have
been entered upon the share register as provided in Section 3 of this Article.
SECTION 3. SHARE REGISTER: The Secretary shall keep a stock book and a
record of the shares issued in accordance with procedures established by the
distributor and/or as may be required by the Investment Company Act of 1940 and
rules promulgated thereunder.

ARTICLE VI.

CORPORATE SEAL

The Corporate Seal of this Corporation shall consist of an impression on
paper or wax circular in form, bearing the words:
COMPOSITE EQUITY SERIES, INC.
CORPORATE SEAL
Spokane, Washington

as indicated by the impression on the margin hereof. The seal shall be
prepared only if requested by an officer and upon a showing of legal necessity.

ARTICLE VII.

BOOKS AND RECORDS

The Corporate Minute Book, Record of Shareholders, Share Register and other
corporate records, shall be kept at the registered office of the Corporation in
Spokane, Washington, and the location of such registered office may be changed
at any time by resolution of the Board of Directors regularly adopted, and by
filing a proper notice of such change in such public office as the law may
require.

ARTICLE VIII.

AMENDMENTS

These Bylaws may be amended or repealed, or new Bylaws may be adopted, by
the Board of Directors at any meeting thereof, provided, however, that notice of
such meeting shall have been given as provided in these Bylaws, which notice
shall mention that amendment or repeal of the Bylaws, or the adoption of new
Bylaws, is one of the purposes of such meeting. Any such Bylaws adopted by the
Board may be amended or repealed, or new Bylaws may be adopted, by vote of the
stockholders of the Corporation, at any annual or special meeting thereof;
provided, however, that the notice of such meeting shall have been given as
provided in these Bylaws, which notice shall mention that amendment or repeal of
these Bylaws, or the adoption of new Bylaws, is one of the purposes of such
meeting.

EXHIBIT 4
SPECIMEN CAPITAL STOCK CERTIFICATE

Certificate No. Date Shares Account No.

COMPOSITE GROUP OF FUNDS

THIS IS TO CERTIFY THAT
See Reverse for
Certain Definitions

is the registered holder of

fully paid and non-assessable shares, of the par value of each of
the CAPITAL STOCK of the

incorporated under the laws of the state of Washington, transferable on the
books of the Corporation by said owner in person or by duly authorized attorney,
upon surrender of this certificate properly endorsed. This certificate is not
valid until countersigned by the Fund.
WITNESS the seal of the Corporation and the signatures of its duly
authorized officers.

Affixed: At Spokane, Washington

---------------- ----------------
Signature Signature

---------------- ----------------
Title Title
Composite Group of Funds

AUTHORIZED SIGNATURES

EXHIBIT 6(a)
DISTRIBUTION CONTRACT

THIS AGREEMENT, dated this 23rd day of January 1997, is a continuation of
Agreements initially adopted in 1983 (with the exception of Composite Northwest
Fund, Inc. which adopted the Plan in 1987), by and between individual funds
within the Composite Group of Funds (corporations duly incorporated and existing
under the laws of the State of Washington), and MURPHEY FAVRE, INC., doing
business at Seattle, Washington, herein sometimes referred to as the
"DISTRIBUTOR." This Agreement is by and between the Composite Group of Funds and
the Distributor.

RECITALS

WHEREAS, the Composite Group of Funds ("Composite") is a family of funds
registered as open-end, management investment companies under the Investment
Company Act of 1940, as amended (the "1940 Act");

WHEREAS, the Composite Group of Funds and the Distributor desire to enter
into an agreement that sets forth standard terms and conditions for distribution
services for the individual funds, as noted on the signatory page, and in
accordance with the schedule of fees attached as Exhibit A;

WHEREAS, the payments contemplated herein intend to result in the sale of
Composite shares of common stock with the allocation of certain charges and
expenses in paragraph 6 hereof and the reimbursement of expenses incurred by the
Distributor as agent for Composite for advertisement, promotional material,
sales literature and printing and mailing of prospectuses to other than current
Composite shareholders;

WHEREAS, such payments may be considered the financing of activities
intended to result in the sale of Composite shares;

WHEREAS, this Agreement is intended to be a "written plan" of the
reimbursement type for Class A shares and of the compensation type for Class B
shares as contemplated by Rule 12b-1 promulgated pursuant to the provisions of
the 1940 Act;

NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:

1. APPOINTMENT. Composite hereby appoints Murphey Favre as the Distributor for
the funds for the period and on terms set forth in this Agreement. The
Distributor accepts such appointment and agrees to render the services
herein set forth, for the payments herein provided (including reimbursement
of expenses).

2. DELIVERY OF DOCUMENTS. Composite has furnished the Distributor with copies
of:

(a) Articles of Incorporation and all amendments thereto for each fund;
(b) Bylaws and all amendments thereto for each fund;
(c) Each fund's most recent prospectus and recent registration statement.

From time to time, each fund will furnish the Distributor properly
certified or authenticated copies of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the
Securities and Exchange Commission (the "SEC").

3. DUTIES OF THE DISTRIBUTOR. The Distributor shall provide each fund with the
benefit of its best judgment, efforts and facilities in rendering its
services as Distributor. The Distributor will act as the exclusive
Distributor, subject to the supervision of each fund's board of directors
and the following understandings: (i) directors shall be responsible for
and control the conduct of each fund's affairs; (ii) in all matters
relating to the performance of this Agreement, the Distributor will act in
conformity with the Articles of Incorporation, Bylaws and Prospectus of
each fund and with the instructions and directions of each fund's board of
directors and will conform to and comply with the requirements of the 1940
Act and all other applicable federal or state laws and regulations. In
carrying out its obligations hereunder, the Distributor shall:

(a) provide to each fund's board of directors, at least quarterly, a
written report of the amounts expended in connection with all
distribution services rendered pursuant to this Agreement, including
an explanation of the purposes for which such expenditures were made;
and

(b) take, on behalf of each fund, all actions which appear to be necessary
to carry into effect the distribution of each fund's shares as
provided in paragraph 4.

4. DISTRIBUTION OF SHARES. It is mutually understood and agreed that the
Distributor does not undertake to sell all or any specific portion of the
shares of common stock of any of the funds. A fund shall not sell any
shares of its common stock except through the Distributor. Notwithstanding
the provisions of the foregoing sentence:

(a) A fund may issue its shares at their net asset value to any
shareholder of the fund purchasing such shares with dividends or other
cash distributions received from the fund pursuant to any special or
continuing offer made to shareholders;

(b) the Distributor may, and when requested by a fund, shall, suspend its
efforts to effectuate sales of the shares of common stock of a fund at
any time when in the opinion of the Distributor or of the fund no
sales should be made because of market or other economic
considerations or abnormal circumstances of any kind and may in its
sole discretion reject orders for the purchase of a fund's shares;

(c) a fund may withdraw the offering of its shares of common stock (i) at
any time with the consent of the Distributor or (ii) without such
consent when so required by the provisions of any statute or of any
order, rule or regulation of any governmental body having
jurisdiction; and

(d) the price at which the shares may be sold (the "offering price") shall
be the net asset value per share, plus a sales charge which shall be
determined in the manner established from time to time by a fund's
Distributor and set forth in a fund's then current prospectus.

5. COMPENSATION FOR SERVICING SHAREHOLDER ACCOUNTS. Composite acknowledges
that the Distributor may compensate its investment representatives for
opening accounts, processing investors' purchase and redemption orders,
responding to inquiries from fund shareholders concerning the status of
their accounts and the operations of a fund, and communicating with a fund
and its transfer agent on behalf of fund shareholders in such manner and
amount as the Distributor may deem appropriate.

6. EXPENSES. The expenses connected with distribution shall be allocable
between the funds and the Distributor as follows:

(a) the Distributor shall furnish the services of personnel to the extent
that such services are required to carry out its obligations under
this Agreement.

(b) Composite agrees that each fund assumes and shall pay or cause to be
paid the following expenses incurred on its behalf:

registration of common stock (except the initial registration)
including the expense of printing and distributing prospectuses;
expenses incurred for corporate services; taxes and expenses related
to portfolio transactions; charges and expenses of any registrar,
custodian or depository for portfolio securities and other property,
and any stock transfer, dividend or account agent or agents; brokers'
commissions chargeable in connection with portfolio securities
transactions; all taxes, including securities issuance and transfer
taxes, and corporate fees payable to federal, state or other
governmental agencies; the costs and expenses of engraving or printing
of stock certificates representing shares of a fund; costs and
expenses in connection with the registration and maintenance of
registration of a fund and its shares with the SEC and various states
and other jurisdictions (including filing fees, legal fees and
disbursements of counsel); expenses of shareholders' and directors'
meetings and of preparing, printing, and mailing of proxy statements
and reports to shareholders; fees and travel expenses of
"disinterested" directors; expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in shares or
in cash; charges and expenses of any outside service used for pricing
of a fund's shares; fees and expenses of legal counsel and of
independent accountants; membership dues of industry associations;
postage (excluding postage for promotional and sales literature);
insurance premiums on property of personnel (including, but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of a
fund's operation unless otherwise explicitly provided herein.

(c) With respect to Class A shares, the Distributor shall request
reimbursement for distribution expenses not otherwise described above,
including, without limitation, the direct cost of advertising,
marketing, selling, and distributing shares of common stock of each
fund; printing and mailing prospectuses to other than current
shareholders; the cost of preparation, printing, and mailing of
promotional and sales literature; and compensation paid to registered
representatives of the Distributor, affiliates of the Manager or other
dealers. Reimbursement for these distribution expenses will be subject
to the provisions of Rule 12b-1 and will not exceed an annual rate of
a fund's average daily net assets attributable to Class A shares as
set forth in Exhibit A. Such expenditures will be reviewed at least
quarterly by the board of directors. In addition, the Distributor and
its affiliates or the Manager and its affiliates may pay additional
expenses of any type or nature which are reported to and deemed by the
directors to be appropriate for reimbursement within the provisions of
this paragraph.

(d) With respect to Class B shares, the Distributor shall be compensated
with a distribution fee equal to an annual rate of .75 of 1% of a
fund's average net assets attributable to Class B shares and a service
fee at an annual rate of .25 of 1% of such assets. Proceeds from any
contingent deferred sales charges are paid to the Distributor.

(e) The distributor will furnish the board of directors statements of
distribution revenues and expenditures at least quarterly with respect
to each class of shares. Only distribution expenses properly
attributable to Class A shares will be used to support the
reimbursement charged to Class A shareholders.

(f) Each fund will record all payments made under the Plan as expenses in
the calculation of its net investment income. The amount of
distribution expenses incurred by the Distributor that may be paid
pursuant to the Plan in future periods will not be incurred as a
liability, unless the standards for accrual of a liability under
generally accepted accounting principles have been satisfied. Such
distribution expenses will be recorded as an expense in future periods
as they are paid by a fund.

(g) For purposes of Section 6 of this Distribution Contract, the
Distributor shall not be responsible for the payment of distribution
expenses that are subject to reimbursement, as the Distributor has
acted solely as the agent of Composite or of a specific fund in
connection therewith.

7. EXPENSE LIMITATION. In the event the operating expenses of any fund, for
any fiscal year exceed the expense limitations imposed by the securities
laws or regulations thereunder of any state in which that fund's shares are
qualified for sale, as such limitations may be raised or lowered from time
to time, the Distributor will reimburse that fund for annual operating
expenses in excess of any expense limitation that may be applicable;
provided, however, there shall be excluded from such expenses the amount of
all distribution costs as well as any interest, taxes, brokerage
commissions, and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund.

8. NON-EXCLUSIVITY. The services of the Distributor are not exclusive and the
Distributor shall be entitled to render distribution or other services to
others (including other investment companies) and to engage in other
activities. It is understood and agreed that officers of the Distributor
may serve as officers or directors of Composite, and that officers or
directors of Composite may serve as officers of the Distributor to the
extent permitted by law; and that officers of the Distributor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers or
directors of any other firm or corporation, including other investment
companies.

9. TERM AND APPROVAL. This Agreement shall become effective upon execution and
shall continue in force and effect from year to year, provided that such
continuance is specifically approved at least annually:

(a) by Composite's board of directors or (ii) by the vote of a majority of
the outstanding voting securities of any fund (as defined in Section
2{1}{42} of the 1940 Act), and

(b) the affirmative vote of a majority of the directors who are not
parties to this Agreement or interested persons of any such party or
have no direct or indirect financial interest in the operation of this
Agreement or any agreement related to this Agreement, by votes cast in
person at a meeting specifically called for the purpose of voting on
such approval.

10. TERMINATION. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of Composite's board of directors, by a
vote of a majority of the members of the board of directors of Composite
who are not interested persons of any fund and have no direct or indirect
financial interest in the operation of this Agreement or in agreement
related to this Agreement, or by a vote of a majority of any fund's
outstanding voting securities (as defined in Section 2{a}{42} of the 1940
Act), or by the Distributor on sixty (60) days' written notice to the other
party. The notice provided for herein may be waived by either party. This
Agreement shall automatically terminate in the event of its assignment, the
term "assignment" for this purpose having the meaning defined in Section
{a}{4} of the 1940 Act.

11. AMENDMENTS.

(a) This Agreement may be amended by the parties hereto only if such
amendment is specifically approved (i) by the board of directors of
Composite or by the vote of majority of outstanding voting securities
of any fund, and (ii) by a majority of those directors who are not
parties to this Agreement or disinterested persons of any such party,
which vote must be cast in person at a meeting called for the purpose
of voting on such approval; provided, however, that if any such
amendment is "material" as such word is used in Rule 12b-1 under the
1940 Act, such amendment shall be approved in the manner prescribed in
paragraph 10 for the annual approval of the continuation of the
Agreement.

(b) In the event that this Agreement is proposed to be amended to increase
materially the amount to be spent for distribution, such amendment
will not be effected without shareholder approval.

12. LIABILITY OF THE DISTRIBUTOR. In the performance of its duties hereunder,
the Distributor shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within reasonable limits to
insure the accuracy of all services performed under this Agreement, but the
Distributor shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part
of the Distributor or reckless disregard by the Distributor of its duties
under this Agreement provided that the Distributor shall be responsible for
its own negligent failure to perform its duties under this Agreement.

13. NOTICES. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as
such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of
Composite shall be 601 West Main Avenue, Spokane, WA 99201, and the address
of the Distributor shall be 1201 Third Avenue, Seattle, WA 98101.

14. QUESTIONS OF INTERPRETATION. This Agreement shall be implemented and
continued in a manner consistent with the provisions of the 1940 Act and to
interpretations thereof, if any, of the United States Courts or, in the
absence of any controlling decision of any such court, by rules,
regulations or orders of the SEC issued pursuant to said 1940 Act. In
addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is revised by rule, regulation or order of
the SEC, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.

FUNDS BOUND BY THIS AGREEMENT COMPOSITE GROUP OF FUNDS

Composite Bond & Stock Fund, Inc. By:/s/ William G. Papesh
Composite Equity Series, Inc. William G. Papesh
Composite Northwest Fund, Inc. President
Composite U.S. Government Securities, Inc.
Composite Income Fund, Inc.
Composite Tax-Exempt Bond Fund, Inc.
Composite Cash Management Company

ATTEST:/s/ John T. West
John T. West
Secretary MURPHEY FAVRE, INC.

By:/s/ Douglas D. Springer
Douglas D. Springer
President

ATTEST:/s/ Suzanne M. Krahling
Suzanne M. Krahling
Secretary

EXHIBIT 6(b)
SELECTED DEALER AGREEMENT

Dear Sirs:

As the principal underwriter of shares in regulated investment companies
managed by Composite Research and Management co. which are distributed by us at
their respective net asset values plus any sales charges pursuant to each Fund's
prospectus, we invite you to participate as principal in the distribution of
shares of any and all of the Funds upon the following terms and conditions:

1. You are to offer and sell such shares only at the public offering prices
which shall be currently in effect, in accordance with the terms of the then
current prospectus of the Funds. You agree to act only as principal in such
transactions and shall not have authority to act as agent for the Funds, for us,
or for any other dealer in any respect. All orders are subject to acceptance by
us and become effective upon confirmation by us.

2. On each purchase of shares by you from us, the total sales charges and
discount to selected dealers shall be as stated in each Fund's then current
prospectus.

Such sales charges and discount to selected dealers are subject to
reductions under a variety of circumstances as described in each Fund's then
current prospectus. To obtain these reductions, we must be notified when the
sale, which qualifies for the reduced charge, takes place.

There is no sales charge applied on the reinvestment of dividends.

3. As a selected dealer, you are hereby authorized to place orders directly
with the Funds for their shares to be resold by us to you subject to the
applicable terms and conditions governing the placement of orders by us set
forth in the Distribution Contract between each Fund and us and subject to the
applicable compensation provisions set forth in each Fund's then current
prospectus. You may tender shares directly to the Funds or their transfer agent,
Murphey Favre Securities Services, Inc., for redemption.

4. Redemption and repurchases of shares will be made at the net asset value
of such shares in accordance with the then current prospectus of the Funds.

5. You represent that you are a member in good standing of the National
Association of Securities Dealers, Inc., subject to the Rules of Fair Practice
of such Association.

6. This Agreement is in all respects subject to Rule 26 of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. which
shall control any provisions to the contrary in this Agreement.

7. You agree:

(a) To purchase shares from us only for the purpose of covering purchase
orders already received or for your own bond fide investment.

(b) That you will not purchase any shares from your customers at prices
lower than the redemption or repurchase prices then quoted by the
Funds. You shall, however, be permitted to sell shares for the account
of their record owners to the Funds at the repurchase prices currently
established for such shares and may charge the owner a fair commission
for handling the transaction.

(c)That you will not withhold placing customers' orders for shares solely
for the purpose of increasing your profit as a result of such
withholding.

(d) That if any shares confirmed to you hereunder are redeemed or
repurchased by any of the Funds within seven business days after such
confirmation of your original order, you shall forthwith refund to us
the full discount reallowed to you on such sales. We shall forthwith
pay to the appropriate Fund our share of the "charge" on the original
sale, and shall also pay to such Fund the refund from you as herein
provided. We shall notify you of such redemption or repurchase within
ten days from the date of delivery of the certificate or certificates
to us or such Fund. Termination or cancellation of this Agreement shall
not relieve you or us from the requirements of this subparagraph.

8. We shall not accept from you any conditional orders for shares.
Delivery of certificates for shares purchased shall be made by the
Funds only against receipt of the purchase price, subject to deduction
for the discount reallowed to you and our portion of the sales charge
on such sale. If payment for the shares purchased is not received
within the time customary for such payments, the sale may be cancelled
without any responsibility or liability on our part or on the part of
the Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from your
failure to make payment as aforesaid), or, at our option, we may sell
the shares ordered back to the Funds (in which case we may hold you
responsible for any loss, including loss of profit suffered by us
resulting from your failure to make payment as aforesaid).

9. You will not offer or sell any of the shares except under circumstances
that will result in compliance with the applicable Federal and State
securities laws and in connection with sales and offers to sell shares
you will furnish to each person to whom any such sale or offer is made
a copy of the applicable then current prospectus. We shall be under no
liability to you except for obligations expressly assumed by us herein.
Nothing herein contained however, shall be deemed to be a condition,
stipulation or provision binding any persons acquiring any security to
waive compliance with any provision of the Securities Act of 1933, or
of the Rules and Regulations of the Securities and Exchange Commission,
or to relieve the parties hereto from any liability arising under the
Securities Act of 1933.

10. No person is authorized to make any representations concerning shares
of the Funds except those contained in the current prospectus and
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses,
reasonable quantities of supplemental sales literature, and additional
information as issued. You agree not to use other advertising or sales
material relating to the Funds unless approved in writing by us in
advance of such use. Any printed information furnished by us other than
the then current prospectus for each Fund, periodic reports and proxy
solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall have no
liability or responsibility to you in these respects unless expressly
assumed in connection therewith.

11. Either party to this Agreement may cancel this Agreement by giving
written notice to the other. Such notice shall be deemed to have been
given on the date on which it was either delivered personally to the
other party or any officer or member thereof, or was mailed postpaid or
delivered to a telegraph office for transmission to the other party at
his or its address as shown below. This Agreement may be amended by us
at any time and your placing of an order after the effective date of
any such amendment shall constitute your acceptance thereof.

12. This Agreement shall be construed in accordance with the laws of the
State of Washington and shall be binding upon both parties hereto when
signed by us and accepted by you in the space provided below.

Very truly yours,

MURPHEY FAVRE, INC.

By------------------------------------------------------
(Authorized Signature)

Firm Name
Address
City State Zip Code
ACCEPTED BY (signature)
Name (print)
Date 19

Please return two signed copies of this Agreement (one of which will be signed
by us and thereafter returned to you).

Murphey Favre, Inc.
601 West Main Avenue
Suite 801
Spokane, Washington 99201

EXHIBIT 8
CUSTODY AGREEMENT

THIS AGREEMENT made the 1st day of September, 1992 by and between INVESTORS
FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of the state
of Missouri, having its trust office located at 127 West 10th Street, Kansas
City, Missouri 64105 ("Custodian"), and COMPOSITE GROWTH FUND, INC., a
Washington corporation, having its principal office and place of business at 601
West Riverside Avenue, Spokane Washington 99201 ("Fund").

WITNESSETH:

WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
Custodian of the securities and monies of Fund's investment portfolio; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutual covenant and
agree as follows:

1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints
Custodian as custodian of the securities and monies at any time
owned by the Fund.

2. DELIVERY OF CORPORATE DOCUMENTS. Fund has delivered or will
deliver to Custodian prior to the effective date of this
Agreement, copies of the following documents and all amendments
or supplements thereto, properly certified or authenticated:

A. Resolutions of the Board of Directors of the Fund appointing
Custodian as custodian hereunder and approving the form of
this Agreement; and

B. Resolutions of the Board of Directors of the Fund
designating certain persons to give instructions on behalf
of the Fund to Custodian and authorizing Custodian to rely
upon written instructions over their signatures.

3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.

A. Delivery of Assets
Fund will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as
practicable, and from time to time thereafter, all portfolio
securities acquired by it and monies then owned by it except as
permitted by the Investment Company Act of 1940 or from time to
time coming into its possession during the time this Agreement
shall continue in effect. Custodian shall have no responsibility
or liability whatsoever for or on account of securities or monies
not so delivered. All securities so delivered to Custodian (other
than bearer securities) shall be registered in the name of Fund
or its nominee, or of a nominee of Custodian, or shall be
properly endorsed and in form for transfer satisfactory to
Custodian.

B. Delivery of Accounts and Records
Fund shall turn over to Custodian all of the Fund's relevant
custody accounts and records previously maintained by it or a
prior custodian in order to perform its duties hereunder.
Custodian shall be entitled to rely conclusively on the
completeness and correctness of the accounts and records turned
over to it by Fund, and Fund shall indemnify and hold Custodian
harmless of and from any and all expenses, damages and losses
whatsoever arising out of or in connection with any error,
omission, inaccuracy or other deficiency of such accounts and
records or in the failure of Fund to provide any portion of such
or to provide any information needed by the Custodian
knowledgeably to perform its function hereunder.

C. Delivery of Assets to Third Parties.
Custodian will receive delivery of and keep safely the assets of
Fund delivered to it from time to time and the assets of each
Portfolio segregated in a separate account. Custodian will not
deliver, assign, pledge or hypothecate any such assets to any
person except as permitted by the provisions of this Agreement or
any agreement executed by it according to the terms of Section
3.S. of this Agreement. Upon delivery of any such assets to a
subcustodian pursuant to Section 3.S. of this Agreement,
Custodian will create and maintain records identifying those
assets which have been delivered to the subcustodian as belonging
to the applicable Portfolio of the Fund. The Custodian is
responsible for the safekeeping of the securities and monies of
Fund only until they have been transmitted to and received by
other persons as permitted under the terms of this Agreement,
except for securities and monies transmitted to United Missouri
Bank of Kansas City, N.A. (UMBKC), United Missouri Trust Company
of New York (UMBTC), and First National Bank of Chicago (FNBC)
for which Custodian remains responsible. Custodian shall be
responsible for the monies and securities of Fund(s) held by
eligible foreign subcustodians to the extent the domestic
subcustodian with which the Custodian contracts is responsible to
Custodian. Custodian may participate directly or indirectly
through a subcustodian in the Depository Trust Company,
Treasury/Federal Reserve Book Entry System, Participant Trust
Company, Treasury/Federal Reserve Book Entry System, Participant
Trust Company or other depository approved by the Fund (as such
entities are defined at 17 CFR Section 270.17f(b)).

D. Registration of Securities
Custodian will hold stocks and other registerable portfolio
securities of Fund registered in the name of the Fund or in the
name of any nominee of Custodian for whose fidelity and liability
Custodian will be fully responsible, or in street certificate
form, so-called, with or without any indication of fiduciary
capacity. Unless otherwise instructed, Custodian will register
all such portfolio securities in the name of its authorized
nominee. All securities, and the ownership thereof by Fund, which
are held by Custodian hereunder, however, shall at all times be
identifiable on the records of the Custodian. The Fund agrees to
hold Custodian and its nominee harmless for any liability as a
record holder of securities held in custody.

E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other
securities or cash issued or paid in connection with any
reorganization, recapitalization, merger, consolidation, split-up
of shares, change of par value, conversion or otherwise, and will
deposit any such securities in accordance with the terms of any
reorganization or protective plan. Without instructions,
Custodian is authorized to exchange securities held by it in
temporary form for securities in definitive form, to effect an
exchange of shares when the par value of the stock is changed,
and upon receiving payment therefor, to surrender bonds or other
securities held by it at maturity or when advised of earlier call
for redemption, except that Custodian shall receive instructions
prior to surrendering any convertible security.

F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of securities
shall be made by it, deliver to Custodian instructions which
shall specify with respect to each such purchase:

1. The name of the Portfolio making such purchase;
2. The name of the issuer and description of the security;
3. The number of shares or the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission,
taxes and other expenses payable in connection with the
purchase;
7. The total amount payable upon such purchase; and
8. The name of the person from whom or the broker or dealer
through whom the purchase was made.

In accordance with such instructions, Custodian will pay for out
of monies held for the account of Fund, but only insofar as
monies are available therein for such purpose, and receive the
portfolio securities so purchased by or for the account of Fund
except that Custodian may in its sole discretion advance funds to
the Fund which may result in an overdraft because the monies held
by the Custodian on behalf of the Fund are insufficient to pay
the total amount payable upon such purchase. Such payment will be
made only upon receipt by Custodian of the securities so
purchased in form for transfer satisfactory to Custodian.

G. Sales and Deliveries of Investments of the Fund - Other than
Options and Futures Fund will, on each business day on which
a sale of investment securities of Fund has been made,
deliver to Custodian instructions specifying with respect to
each such sale:

1. The name of the Portfolio making such sale;
2. The name of the issuer and description of the securities;
3. The number of shares or principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or
other information identifying the securities sold and to be
delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes
or other expenses payable in connection with such sale;
8. The total amount to be received by Fund upon such sale; and
9. The name and address of the broker or dealer through whom or
person to whom the sale was made.

In accordance with such instructions, Custodian will deliver or
cause to be delivered the securities thus designated as sold for
the account of Fund to the broker or other person specified in
the instructions relating to such sale, such delivery to be made
only upon receipt of payment therefor in such form as is
satisfactory to Custodian, with the understanding that Custodian
may deliver or cause to be delivered securities for payment in
accordance with the customs prevailing among dealers in
securities.

H. Purchases or Sales of Security Options, Options on Indices
and Security Index Futures Contracts Fund will, on each
business day on which a purchase or sale of the following
options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to
each such purchase or sale:
1. The name of the Portfolio making such purchase or sale;
2. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded;
j. Name and address of the broker or dealer through whom
the sale or purchase was made.

3. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising,
expiring or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased;
j. The name and address of the broker or dealer through
whom the sale or purchase was made, or other applicable
settlement instructions.
4. Security Index Futures Contracts
a. The last trading date specified in the contract and,
when available, the closing level, thereof;
b. The index level on the date the contract is entered
into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition
to instructions, and if not already in the possession
of Custodian, Fund shall deliver a substantially
complete and executed custodial safekeeping account and
procedural agreement which shall be incorporated by
reference into this Custody Agreement); and
f. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions.
5. Option on Index Future Contracts
a. The underlying index futures contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.

I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of Fund:
1. Upon receipt of instructions, Custodian will release or
cause to be released securities held in custody to the
pledgee designated in such instructions by way of pledge or
hypothecation to secure any loan incurred by Fund; provided,
however, that the securities shall be released only upon
payment to Custodian of the monies borrowed, except that in
cases where additional collateral is required to secure a
borrowing already made, further securities may be released
or caused to be released for that purpose upon receipt of
instructions. Upon receipt of instructions, Custodian will
pay, but only from funds available for such purpose, any
such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or
notes evidencing such loan.
2. Upon receipt of instructions, Custodian will release
securities held in custody to the borrower designated in
such instructions; provided, however, that the securities
will be released only upon deposit with Custodian of full
cash collateral as specified in such instructions, and that
Fund will retain the right to any dividends, interest or
distribution on such loaned securities. Upon receipt of
instructions and the loaned securities, Custodian will
release the cash collateral to the borrower.

J. Routine Matters
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution,
purchase, transfer, or other dealings with securities or other
property of Fund except as may be otherwise provided in this
Agreement or directed from time to time by the Board of Directors
of Fund.

K. Deposit Account
Custodian will open and maintain a special purpose deposit
accounts in the name of Custodian ("Account"), subject only to
draft or order by Custodian upon receipt of instructions. All
monies received by Custodian from or for the account of a
portfolio shall be deposited in said Account, barring events not
in the control of the Custodian such as strikes, lockouts or
labor disputes, riots, war or equipment or transmission failure
or damage, fire, flood, earthquake or other natural disaster,
action or inaction of governmental authority or other causes
beyond its control, at 9:00 a.m., Kansas City time, on the second
business day after deposit of any check into Fund's Account,
Custodian agrees to make Fed Funds available to the Fund in the
amount of the check. Deposits made by Federal Reserve wire will
be available to the Fund immediately and ACH wires will be
available to the Fund on the next business day. Income earned on
the portfolio securities will be credited to the applicable
portfolio of the Fund based on the schedule attached as Exhibit
A. The Custodian will be entitled to reverse any credited amounts
where credits have been made and monies are not finally
collected. If monies are collected after such reversal, the
Custodian will credit the applicable portfolio in that amount.
Custodian may open and maintain an Account in such other banks or
trust companies as may be designated by it or by properly
authorized resolution of the Board of Directors of Fund, such
Account, however, to be in the name of custodian and subject only
to its draft or order.

L. Income and other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the Account of
Fund all income and other payments which become due and
payable on or after the effective date of this Agreement
with respect to the securities deposited under this
Agreemenet, and credit the account of Fund in accordance
with the schedule attached hereto as Exhibit A. If for any
reason, the Fund is credited with income that is not
subsequently collected, Custodian may reverse that credited
amount;
2. Execute ownership and other certificates and affidavits for
all federal, state and local tax purposes in connection with
the collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
a. The collection, receipt and deposit of such income and
other payments, including but not limited to the
presentation for payment of:
1. all coupons and other income items requiring
presentation; and
2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the Custodian has actual knowledge, or
notice of which is contained in publications of the type
to which it normally subscribes for such purpose; and
b. the endorsement for collection, in the name of the Fund, of
all checks, drafts or other negotiable instruments.

Custodian, however, will not be required to institute suit or
take other extraordinary action to enforce collection except upon
receipt of instructions and upon being indemnified to its
satisfaction against the costs and expenses of such suit or other
actions. Custodian will receive, claim and collect all stock
dividends, rights or other similar items and will deal with the
same pursuant to instructions. Unless prior instructions have
been received to the contrary, Custodian will, without further
instructions, sell any rights held for the account of Fund on the
last trade date prior to the date of expiration of such rights.

M. Payment of Dividends and other Distributions
On the declaration of any dividend or other distribution on the
shares of Capital Stock of Fund ("Fund Shares") by the Board of
Directors of Fund, Fund shall deliver to Custodian instructions
with respect thereto, including a copy of the Resolution of said
Board of Directors certified by the Secretary or Assistant
Secretary of Fund wherein there shall be set forth the record
date as of which shareholders entitled to receive such dividend
or other distribution shall be determined, the date of payment of
such dividend or distribution, and the amount payable per share
on such dividend or distribution. Except if the ex-dividend date
and the reinvestment date of any dividend are the same, in which
case funds shall remain in the Custody Account, on the date
specified in such Resolution for the payment of such dividend or
other distribution, Custodian will pay out of the monies held for
the account of Fund, insofar as the same shall be available for
such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be necessary to pay
the amount per share payable in cash on Fund Shares issued and
outstanding on the record date established by such Resolution.

N. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund,
Fund or its agent shall advise Custodian of the aggregate dollar
amount to be paid for such shares and shall confirm such advice
in writing. Upon receipt of such advice, Custodian shall charge
such aggregate dollar amount to the Account of Fund and either
deposit the same in the account maintained for the purpose of
paying for the repurchase or redemption of Fund Shares or deliver
the same in accordance with such advice.

Custodian shall not have any duty or responsibility to determine
that Fund Shares have been removed from the proper shareholder
account or accounts or that the proper number of such shares have
been cancelled and removed from the shareholder records.

O. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will deposit
or cause to be deposited with Custodian the amount received for
such shares. Custodian shall not have any duty or responsibility
to determine that Fund Shares purchased from Fund have been added
to the proper shareholder account or accounts or that the proper
number of such shares have been added to the shareholder records.

P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or
mailed to Fund all proxies properly signed, all notices of
meetings, all proxy statements and other notices, requests or
announcements affecting or relating to securities held by
Custodian for Fund and will, upon receipt of instructions,
execute and deliver or cause its nominee to execute and deliver
or mail or have delivered or maield such proxies or other
authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by
Custodian, neither it nor its nominee will exercise any power
inherent in any such securities, including any power to vote the
same, or execute any proxy, power of attorney, or other similar
instrument voting any of such securities, or give any consent,
approval or waiver with respect thereto, or take any other
similar action.

Q. Disbursements
Custodian will pay or cause to be paid insofar as funds are
available for the purpose, bills, statements and other
obligations of Fund (including but not limited to obligations in
connection with the conversion, exchange or surrender of
securities owned by Fund, interest charges, dividend
disbursements, taxes, management fees, custodian fees, legal
fees, auditors' fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting forth
the name of the person to whom payment is to be made, the amount
of the payment, and the purpose of the payment.

R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund as of
the close of business on each day, a detailed statement of the
amounts received or paid and of securities received or delivered
for the account of Fund during said day. Custodian will, from
time to time, upon request by Fund, render a detailed statement
of the securities and monies held for Fund under this Agreement,
and Custodian will maintain such books and records as are
necessary to enable it to do so and will permit such persons as
are authorized by Fund including Fund's independent public
accountants, access to such records or confirmation of the
contents of such records; and if demanded, will permit federal or
state regulatory agencies to examine the securities, books and
records. Upon the written instructions of Fund or as demanded by
federal or state regulatory agencies, Custodian will instruct any
subcustodian to give such persons as are authorized by Fund
including Fund's independent public accountants, access to such
records or confirmation of the contents of such records; and if
demanded, to permit federal and state regulatory agencies to
examine the books, records and securities held by subcustodian
which relate to Fund.

S. Appointment of Subcustodians
1. Notwithstanding any other provisions of this Agreement, all or
any of the monies or securities if Fund may be held in
Custodian's own custody or in the custody of one or more other
banks or trust companies selected by Custodian. Any such
subcustodian selected by the Custodian must have the
qualifications required for custodian under the Investment
Company Act of 1940, as amended. The Custodian may participate
directly or indirectly in the Depository Trust Company,
Treasury/Federal Reserve Book Entry System, Participant Trust
Company (as such entities are defined at 17 CFR Sec.
270.17f-4(b)), or other depository approved by the Fund and with
which Custodian has a satisfactory direct or indirect contractual
relationship. Custodian will appoint UMBKC and UMBNY as
subcustodians and Custodian shall be responsible for UMBKC and
UMBNY to the same extent it is responsible to the Fund under
Section 5 of this Agreement. Custodian is not responsible for
DTC, the Treasury/Federal Reserve Book Entry System, and PTC
except to the extent such entities are responsible to Custodian.
Upon instruction of the Fund, Custodian shall be willing to
contract with such entities as Bank of New York (BONY), Morgan
Guaranty and Trust Company (MGTC), Chemical Bank (CB), and
Bankers Trust Company (BT) for variable rate securities and
Custodian will be responsible to the Fund to the same extent
those entities are responsible to Custodian. The Fund shall be
entitled to review Custodian's contracts with BONY, MGTC, CB, and
BT.

T. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records
maintained by Custodian pursuant to this Agreement are the
property of Fund, and will be made available to Fund for
inspection or reproduction within a reasonable period of time,
upon demand. Custodian will assist Fund's independent auditors,
or upon approval of Fund, or upon demand, any regulatory body
having jurisdiction over the Fund or Custodian, in any requested
review of Fund's accounts and records but shall be reimbursed for
all expenses and employee time invested in any such review
outside of routine and normal periodic reviews.

U. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no
procedure approved by Fund, or directed by Fund, conflicts with
or violates any requirements of its prospectus, "Articles of
Incorporation," Bylaws, or any rule or regulation of any
regulatory body or governmental agency. Fund will be responsible
to notify Custodian of any changes in statutes, regulations,
rules or policies which might necessitate changes in Custodian's
responsibilities or procedures.

V. Overdrafts
If Custodian shall in its sole discretion advance funds to the
account of the Fund which results in an overdraft because the
monies held by Custodian on behalf of the Fund are insufficient
to pay the total amount payable upon a purchase of securities as
specified in a Fund's instructions or for some other reason, the
amount of the overdraft shall be payable by the Fund to Custodian
upon demand and shall bear an interest rate determined by
Custodian from the date advanced until the date of payment.
Custodian shall have a lien on the assets of Fund in the amount
of any outstanding overdraft.

4. INSTRUCTIONS.
A. The term "instructions," as used herein, means written or oral
instructions to Custodian from a designated representative of
Fund. Certified copies of resolutions of the Board of Directors
of Fund naming one or more designated representatives to give
instructions in the name and on behalf of Fund, may be received
and accepted from time to time by Custodian as conclusive
evidence of the authority of any designated representative to act
for Fund and may be considered to be in full force and effect
(and Custodian will be fully protected in acting in reliance
thereon) until receipt by Custodian of notice to the contrary.
Unless the resolution delegating authority to any person to give
instructions specifically requires that the approval of anyone
else will first have been obtained, Custodian will be under no
obligation to inquire into the right of the person giving such
instructions to do so. Notwithstanding any of the foregoing
provisions of this Section 4. no authorizations or instructions
received by Custodian from Fund, will be deemed to authorize or
permit any director, trustee, officer, employee, or agent of Fund
to withdraw any of the securities or similar investments of Fund
upon the mere receipt of such authorization or instructions from
such director, trustee, officer, employee or agent.

B. No later than the next business day immediately following each
oral instruction, Fund will send Custodian written confirmation
of such oral instruction. At Custodian's sole discretion,
Custodian may record on tape, or otherwise, any oral instruction
whether given in person or via telephone, each such recording
identifying the parties, the date and the time of the beginning
and ending of such oral instruction.

5. LIMITATION OF LIABILITY OF CUSTODIAN.

A. Custodian shall hold harmless and indemnify Fund from and against
any loss or liability arising out of Custodian's negligence or
bad faith. Custodian shall not be liable for consequential
damages, special, or punitive damages. Custodian may request and
obtain the advice and opinion of counsel for Fund, or of its own
counsel with respect to questions or matters of law, and it shall
be without liability to Fund for any action taken or omitted by
it in good faith, in conformity with such advice or opinion. If
Custodian reasonably believes that it could not prudently act
according to the instructions of the Fund or the Fund's counsel,
it may in its discretion, with notice to the Fund, not act
according to such instructions.

B. Custodian may rely upon the advice of Fund and upon statements of
Fund's accountants and other persons believed by, it in good
faith, to be expert in matters upon which they are consulted, and
Custodian shall not be liable for any actions taken, in good
faith, upon such statements.

C. If Fund requires Custodian in any capacity to take, with respect
to any securities, any action which involves the payment of money
by it, or which in Custodian's opinion might make it or its
nominee liable for payment of monies or in any other way,
Custodian, upon notice to Fund given prior to such actions, shall
be and be kept indemnified by Fund in an amount and form
satisfactory to Custodian against any liability on account of
such action.

D. Custodian shall be entitled to receive, and Fund agrees to pay
Custodian, on demand, reimbursement for such cash disbursements,
costs and expenses as may be agreed upon from time to time by
Custodian and Fund.

E. Custodian shall be protected in acting as custodian hereunder
upon any instructions, advice, notice, request, consent,
certificate or other instrument or paper reasonably appearing to
it to be genuine and to have been properly executed and shall,
unless otherwise specifically provided herein, be entitled to
receive as conclusive proof of any fact or matter required to be
ascertained from Fund hereunder, a certificate signed by the
Fund's President, or other officer specifically authorized for
such purpose.

F. Without limiting the generality of the foregoing, Custodian shall
be under no duty or obligation to inquire into, and shall not be
liable for:

1. The validity of the issue of any securities purchased by or
for Fund, the legality of the purchase thereof or evidence
of ownership required by Fund to be received by Custodian,
or the propriety of the decision to purchase or amount paid
therefor;
2. The legality of the sale of any securities by or for Fund,
or the propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any shares of the
Capital Stock of Fund, or the sufficiency of the amount to
be received therefor;
4. The legality of the repurchase or redemption of any Fund
Shares, or the propriety of the amount to be paid therefor;
or
5. The legality of the declaration of any dividend by Fund, or
the legality of the issue of any Fund Shares in payment of
any stock dividend.

G. Custodian shall not be liable for, or considered to be
Custodian of, any money represented by any check, draft,
wire transfer, clearing house funds, uncollected funds, or
instrument for the payment of money received by it on behalf
of the Fund, until Custodian actually receives such money,
provided only that it shall advise Fund promptly if it fails
to receive any such money in the ordinary course of
business, and use its best efforts and cooperate with Fund
toward the end that such money shall be received.

H. Custodian shall not be responsible for loss occasioned by
the acts, neglects, defaults or insolvency of any broker,
bank, trust company, or any other person with whom Custodian
may deal in the absence of negligence, or bad faith on the
part of the Custodian.

I. Notwithstanding anything herein to the contrary, Custodian
may, and with respect to any foreign subcustodian appointed
under Section 3.S.2. must, provide the Fund for its
approval, agreements with banks or trust companies which
will act as subcustodians for Fund pursuant to Section 3.S
of this Agreement.

6. COMPENSATION. Fund will pay Custodian such compensation as is
stated in the Fee Schedule attached hereto as Exhibit B which may
be changed from time to time as agreed to in writing by Custodian
and Fund. Custodian may charge such compensation against monies
held by it for the account of Fund. Custodian will also be
entitled, notwithstanding the provisions of Sections 5.C. or 5.D.
hereof, to charge against any monies held by it for the account
of Fund the amount of any loss, damage, liability, advance, or
expense for which it shall be entitled to reimbursement under the
provisions of this Agreement including fees or expenses due to
Custodian for other services provided to the Fund by the
Custodian.

7. TERMINATION. Either party to this Agreement may terminate the
same by notice in writing, delivered or mailed, postage prepaid,
to the other party hereto and received not less than ninety (90)
days prior to the date upon which such termination will take
effect. Upon termination of this Agreement, Fund will pay to
Custodian such compensation for its reimbursable disbursements,
costs and expenses paid or incurred to such date and Fund will
use its best efforts to obtain a successor custodian. Unless the
holders of a majority of the outstanding shares of "Capital
Stock" of Fund vote to have the securities, funds and other
properties held under this Agreement delivered and paid over to
some other person, firm or corporation specified in the vote,
having not less than Two Million Dollars ($2,000,000) aggregate
capital, surplus and undivided profits, as shown by its last
published report, and meeting such other qualifications for
custodian as set forth in the Bylaws of Fund, the Board of
Directors of Fund will, forthwith upon giving or receiving notice
of termination of this Agreement, appoint as successor custodian
a bank or trust company having such qualifications. Custodian
will, upon termination of this Agreement, deliver to the
successor custodian so specified or appointed, at Custodian's
office, all securities then held by Custodian hereunder, duly
endorsed and in form for transfer, all funds and other properties
of Fund deposited with or held by Custodian hereunder, or will
cooperate in effecting changes in book-entries at the Depository
Trust Company or in the Treasury/Federal Reserve Book-Entry
System pursuant to 31 CFR Sec. 306.118. In the event no such vote
has been adopted by the stockholders of Fund and no written order
designating a successor custodian has been delivered to Custodian
on or before the date when such termination becomes effective,
then Custodian will deliver the securities, funds and properties
of Fund to a bank or trust company at the selection of Custodian
and meeting the qualifications for custodian, if any, set forth
in the Bylaws of Fund and having not less than Two Million
Dollars ($2,000,000) aggregate capital, surplus and undivided
profits, as shown by its last published report. Upon either such
delivery to a successor custodian, Custodian will have no further
obligations or liabilities under this Agreement. Thereafter such
bank or trust company will be the successor custodian under this
Agreement and will be entitled to reasonable compensation for its
services. In the event that no such successor custodian can be
found, Fund will submit to its shareholders, before permitting
delivery of the cash and securities owned by Fund to anyone other
than a successor custodian, the question of whether Fund will be
liequidated or function without a custodian. Notwithstanding the
foregoing requirement as to delivery upon termination of this
Agreement, Custodian may make any other delivery of the
securities, funds and property of Fund which is permitted by the
Investment Company Act of 1940, Fund's Certificate of
Incorporation and Bylaws then in effect or apply to a court of
competent jurisdiction for the appointment of a successor
custodian.

8. NOTICES. Notices, requests, instructions and other writings
received by Fund at 601 West Riverside Avenue, Suite 900,
Spokane, Washington, 99201 or at such other address as Fund may
have designated to Custodian in writing, will be deemed to have
been properly given to Fund hereunder; and notices, requests,
instructions and other writings received by Custodian at its
offices at 127 West 10th Street, Kansas City, Missouri 64105, or
to such other address as it may have designated to Fund in
writing, will be deemed to have been properly given to Custodian
hereunder.

9. MISCELLANEOUS.

A. This Agreement is executed and delivered in the State of Missouri
and shall be governed by the laws of said state.

B. All the terms and provisions of this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the
respective successor and assigns of the parties hereto.

C. No provisions of the Agreement may be amended or modified, in any
manner except by a written agreement properly authorized and
executed by both parties hereto.

D. The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.

E. This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original but all of
which together will constitute one and the same instrument.

F. If any part, term or provision of this Agreement is by the courts
held to be illegal, in conflict with any law or otherwise
invalid, the remaining portion or portions shall be considered
severable and not be affected, and the rights and obligations of
the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be
illegal or invalid.

G. Custodian will not release the identity of Fund to an issuer
which requests such information pursuant to the Shareholder
Communications Act of 1985 for the specific purpose of direct
communications between such issuer and Fund unless the Fund
directs the Custodian otherwise.

H. This Agreement may not be assigned by either party without prior
written consent of the other party.

I. If any provision of the Agreement, either in its present form or
as amended from time to time, limits, qualifies, or conflicts
with the Investment Company Act of 1940, as amended, and the
rules and regulations promulgated thereunder, such statutes,
rules and regulations shall be deemed to control and supercede
such provision without nullifying or terminating the remainder of
the provisions of this Agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly respective authorized officers.

INVESTORS FIDUCIARY TRUST
COMPANY

By: /s/ Allen Strain
Title: Senior V.P.

COMPOSITE GROWTH FUND, INC.

By: /s/ William G. Papesh
Title: President

<PAGE>
<TABLE>
<CAPTION>
TRANSACTION DTC PHYSICAL FED
<S> <C> <C> <C> <C> <C> <C>
TYPE CR DATE FDS TYPE CR DATE FDS TYPE CR DATE FDS TYPE
Calls Puts As Received C of F* As Received C or F*
Maturities As Received C or F* Mat. Date C or F* Mat. Date F
Tender Reorgs. As Received C or F* As Received C N/A
Dividends Paydate C Paydate C N/A
Floating Rate Paydate C Paydate C N/A
Int.
Floating Rate N/A As Rate C N/A
Int. (No Rate) Received
Mtg. Backed P&I Paydate C Paydate + 1 C Paydate F
Bus. Day
Fixed Rate Int. Paydate C Paydate C Paydate F
Euroclear N/A C Paydate C

Legend
C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
* Availability based on how received.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Appendix I
Murphey Favre (Composite 9/95)
Global Custody Fees
I. Country Based Charges:

Market Asset Transaction Market Asset Transaction
Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C>
Argentina 40 $120 Malaysia 15 $20
Australia 15 $20 Mauritius 40 $120
Austria 14 $20 Mexico 15 $20
Bangladesh 40 $120 Morocco 40 $120
Belgium 15 $20 Namibia 40 $20
Belize 40 $120 Netherlands 15 $20
Botswana 40 $120 New Zealand 15 $20
Brazil 40 $120 Norway 15 $20
Canada 15 $20 Pakistan 40 $120
Euroclear 5 $25 Peru 40 $120
Chile 40 $120 Philippines 15 $120
Colombia 40 $120 Poland 40 $120
Czech Republic 40 $120 Portugal 15 $120
Denmark 15 $20 Shanghai (China) 35 $120
Egypt 40 $120 Shenzhen (China) 35 $120
ECU* 15 $20 Singapore 15 $20
Finland 15 $20 South Africa 15 $20
France 15 $20 South Korea 40 $120
Germany 15 $20 Spain 15 $20
Ghana 40 $120 Sri Lanka 35 $120
Greece 40 $120 Swaziland 40 $120
Hong Kong 15 $20 Sweden 15 $20
Hungary 40 $120 Switzerland 15 $20
India 40 $120 Taiwan 35 $120
Indonesia 15 $120 Thailand 15 $20
Ireland 15 $20 Turkey 40 $120
Israel 40 $120 United Kingdom 15 $20
Italy 15 $20 Uruguay 40 $120
Japan 10 $20 Venezuela 40 $120
Jordan 45 $120 Zimbabwe 40 $120
Luxembourg 15 $20

NOTE: Any country not listed above will be negotiated at time of investment.
Out of Pocket Expenses: As incurred (e.g. stamp taxes, registration costs,
script fees, special transportation costs, etc.). *ECU = European Currency Unit
</TABLE>

EXHIBIT 9

SHAREHOLDERS SERVICE CONTRACT

AGREEMENT, dated March 26, 1996, between COMPOSITE EQUITY SERIES, INC. (the
"Fund"), a Washington corporation with offices at 601 West Main Avenue, Suite
801, Spokane, Washington 99201, and MURPHEY FAVRE SECURITIES SERVICES, INC. (the
"Transfer Agent"), a Washington corporation with offices located at 601 West
Main Avenue, Suite 801, Spokane, Washington 99201:

W I T N E S S E T H

WHEREAS, the Fund is an investment company registered under the Investment
Company Act of 1940, whose shares will be registered under the Securities Act of
1933; and

WHEREAS, the Transfer Agent engages in the business of rendering computer
and related services and acting as transfer agent and shareholder servicing
agent for investment companies;

WHEREAS, the Fund desires the Transfer Agent to perform the services set
forth in Schedule A attached hereto and incorporated herein by reference, and
the Transfer Agent is willing to perform such services;

NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the Fund and the Transfer Agent agree as follows:

1. The Transfer Agent shall perform for the Fund the services set forth in
Schedule A for a monthly fee as detailed in Schedule C (see attached addenda).

2. The Fund agrees to reimburse the Transfer Agent for postage, the
procurement and/or printing of share certificates, statements, envelopes,
checks, reports, tax forms, proxies, or other forms of printed material required
in the performance of its services to the Fund under this agreement.

3. The Fund agrees to reimburse the Transfer Agent for all freight and
other delivery charges and insurance or bonding charges incurred by the Transfer
Agent in delivering materials to and from the Fund and for certificates
delivered to shareholders.

4. The Fund agrees to reimburse the Transfer Agent for all direct telephone
expenses incurred by the Fund in calling shareholders regarding their Fund
transactions, accounts, and for any other Fund business.

5. The Transfer Agent at the end of each month during the term of this
agreement will render an itemized statement to the Fund for its charges under
this agreement. Payment by the Fund is due 10 (ten) days from the date such
statement is received.

6. The Fund agrees that all computer programs and procedures developed to
perform services required under this agreement are the property of the Transfer
Agent and the Transfer Agent agrees that all records and other data, except
computer programs and procedures, are the property of the Fund. The Transfer
Agent agrees that it will furnish all records and other data as may be requested
to the Fund immediately upon termination of this agreement for any reason
whatsoever.

7. The Transfer Agent agrees to treat all records and other information
relative to the Fund with utmost confidence and further agrees that all records
maintained by the Transfer Agent for the Fund shall be open to inspection and
audit at reasonable times by the officers, agents or auditors employed by the
Fund and that such records shall be preserved and retained by the Transfer Agent
so long as this agreement shall remain in effect.

8. The Transfer Agent shall not be liable for any damage, loss of data,
delay or any other loss caused by any such power failure or machine breakdown,
except that the Transfer Agent shall be liable for actual out-of-pocket costs
caused by any such power failure or machine breakdown, and the Transfer Agent
shall recover the data in process that is assumed lost during any power failure
or machine breakdown.

9. The Transfer Agent will maintain in force through the duration of this
agreement at least $1,000,000 or more fidelity bond written by a reputable
bonding company, covering theft, embezzlement, forgery and other acts of
malfeasance by the Transfer Agent, its employees, or agents in connection with
services performed for the Fund.

10. This agreement is a continuation of the agreement dated March 26, 1991.
This agreement may be terminated without the payment of any penalty by either
party upon (90) days' written notice thereof given by the Fund to the Transfer
Agent and upon one hundred eighty (180) days' written notice thereof given by
the Transfer Agent to the Fund.

11. Any notice shall be officially given when sent by registered or
certified mail by either party to the foregoing addresses, provided that either
party may notify the other of any changed address to which such notices should
be mailed hereunder.

12. This agreement constitutes the entire agreement between the parties and
shall be governed by, and its provision shall be construed in accordance with,
the laws of the state of Washington.

13. This contract will be subject to review annually.

IN WITNESS WHEREOF, the parties hereto cause this agreement to be executed
by their officers designated below as of the date first above-written.

COMPOSITE EQUITY SERIES, INC.

By:/s/ WILLIAM G. PAPESH
President

MURPHEY FAVRE SECURITIES SERVICES, INC.

By:/s/ WILLIAM G. PAPESH
President

<PAGE>
SCHEDULE A

I. Shareholder Services

A. Maintain all shareholder records on electronic data processing
equipment, including:

1. Share balances

2. Account transaction history

3. Names and addresses

4. Certificate records

5. Distribution records

6. Transfer records

7. Over-all control records

B. New Accounts

1. Deposit all monies received into transfer account maintained
for the Custodian.

2. Set up account according to shareholders' instructions as
to:

a. Amount of shares purchased

b. Retain shares or deliver to shareholder

3. Issue and mail shareholder confirmations

C. Additional Purchases

1. Deposit monies received into transfer account maintained for
the Custodian.

2. Issue shareholder confirmations

D. Liquidations - Full and Partial

1. Liquidate shares upon shareholder request

2. Issue checks for amount of liquidation

3. Issue and mail shareholder confirmation

E. Transfer shares as requested which includes obtaining necessary
papers and documents to satisfy transfer requirements. On
irregular transfer requiring special legal opinions, such special
legal fees, if any, are to be paid for by the Company.

F. Prepare and mail certificates as requested by shareholders

G. Process changes, corrections of addresses and registrations

H. Maintain service with shareholders as follows:

1. Activity required to receive, process and reply to
shareholders' correspondence regarding account matters

2. Refer correspondence regarding investment matters to the
Company with sufficient account data to answer

3. Contact shareholders directly to settle problems and
questions

I. Compute distributions, dividends and capital gains

1. Reinvest in additional shares

2. Advise each shareholder of amount of dividends received and
tax status annually

J. Handle replacement of lost certificates

K. Produce transcripts of shareholder account history as required

L. Maintain the controls associated with the computer programs and
manual systems to arrive at the Company's total shares
outstanding

M. Receive mail and perform other administrative functions relating
to transfer agent work.

II. Reports and Schedules

A. Daily

1. Name and address changes

2. Name and address additions and deletions

3. Transaction Register

a. Purchases

b. Sales

c. Adjustments

4. Cash reconciliation - cash received for day

5. Check reconciliation - checks issued for day

6. Transaction reconciliation

a. Amount received

b. Total shares purchased

c. Number of purchase transactions

d. Amount liquidated

e. Total shares liquidated

f. Number of liquidations

g. Checks issued for liquidations

B. Bi-Monthly

1. Balance list of shareholders in account number sequence

a. Number of issued shares outstanding

b. Number of unissued shares outstanding

c. Total shares outstanding

2. a. Purchases, sales and adjustments

b. Certificates issued

c. Certificate, redemptions and transfers

d. Certificate reconciliation by certificate number

C. Monthly

1. Sales by states for month

D. Periodically

1. Alphabetical account listing

III. Other Services

*A. Mailing labels or other mailing services to shareholders

*B. Services in connection with any stock splits

*C. The computer system is designed to produce almost any display of
statistical management or accounting data in almost any format
desired by the management, auditors or directors. The parameters
of reporting are only limited to the data contained on disc.
With sufficient notice, this information is available to
management in accordance with charges as itemized in Schedule B.

* Extra charge services, per Schedule B.

<PAGE>
SCHEDULE B

TIME AND MATERIAL SERVICES

Computer..............................................$50/hour

Keypunch..............................................$10/hour

Clerical..............................................$10/hour

Programming and Direct Technical Management $25/hour

Travel and per diem expenses (chargeable only
when authorized by Company).........................At Cost

Mailing Services......................................At Cost

Any of the above services when performed outside regular working hours of
Murphey may be billed at 150 percent of the above.

<PAGE>

SCHEDULE C: MONTHLY SHAREHOLDER SERVICING FEES
March 26, 1996

Fee Per Account Per Month

Class A Class B

Composite Bond & Stock Fund $1.35 $1.45

Composite Growth & Income Fund $1.35 $1.45

Composite Northwest Fund $1.35 $1.45

Composite Income Fund $1.60 $1.70

Composite Tax-Exempt Bond Fund $1.60 $1.70

Composite U.S. Government Securities $1.60 $1.70

Composite Cash Management Company
Money Market Portfolio
First 25,000 accounts $1.55 $1.65
Each additional account $1.25 $1.35

Composite Cash Management Company
Tax-Exempt Portfolio
First 25,000 accounts $1.55 $1.65
Each additional account $1.25 $1.35

EXHIBIT 10

February 12, 1997

COMPOSITE EQUITY SERIES INC
601 W MAIN AVE STE 801
SPOKANE WA 99201-0694

Gentlemen:

We hereby consent to the use of our written opinion dated February 12, 1997,
upon the validity of the organization of Composite Equity Series, Inc., and upon
the designation of authorized capital stock of said company in the Articles of
Incorporation as an exhibit to the amendments to the Registration Statement now
being filed with the Securities and Exchange Commission and any Prospectus
relating to the proposed offer and sale of the capital stock of the corporation.

Very truly yours,

PAINE, HAMBLEN, COFFIN,
BROOKE & MILLER LLP

/s/ Lawrence R. Small
Lawrence R. Small

<PAGE>

EXHIBIT 10

February 12, 1997

Composite Equity Series, Inc.
601 W. Main Avenue
Spokane, WA 99201

Gentlemen:

In connection with Post-Effective Amendment No. 59 to the Registration Statement
now being filed by your company with the Securities and Exchange Commission
relating to an offering of shares of common stock, we certify that, as attorneys
for this corporation, we have examined the corporate proceedings relating to its
incorporation, the Bylaws, the Distributor and Management Contracts, and such
other matters and documents as we deem necessary. It is our opinion that:

(a) Composite Equity Series, Inc. is a corporation duly incorporated and
existing under the laws of the State of Washington, with authorized capital
stock consisting of 40,000,000 shares with 25,000,000 shares denominated as
Class A and 15,000,000 shares denominated as Class B; the par value is
$.0001 per share with all shares having equal voting rights.

(b) All of the 40,000,000 shares have been validly and legally authorized to be
issued by proper corporate action and in conformity with the laws of the
State of Washington applicable thereto. Such authorized shares, upon their
issuance, will be for proceeds to the company of not less than the net
asset value of such shares at the time of sale after adjusting to the
nearer full cent, and will be fully paid and nonassessable. The Composite
Growth and Income Fund is the only portfolio of the corporation at this
time.

Very truly yours,

PAINE, HAMBLEN, COFFIN,
BROOKE & MILLER
/s/ Lawrence R. Small
Lawrence R. Small

EXHIBIT 11

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We hereby consent to the incorporation by reference into the Prospectus and
Statement of Additional Information in Post-Effective Amendment No. 59 to the
Registration Statement on Form N-1A of Composite Growth & Income Fund (a
portfolio of Composite Equity Series, Inc.) of our report dated November 20,
1996, on the financial statements and financial highlights included in the
October 31, 1996 Annual Report to Shareholders of Composite Growth & Income Fund
We further consent to the reference to our Firm under the heading "Financial
Highlights" in the Prospectus and "Independent Public Accountants" in the
Statement of Additional Information.

/s/ LeMaster & Daniels, PLLC
LeMaster & Daniels, PLLC
Spokane, Washington
February 14, 1997

<PAGE>

EXHIBIT 11

INDEPENDENT PUBLIC ACCOUNTANTS' REPORT

To the Board of Directors and Shareholders of:
Composite Bond & Stock Fund, Inc.
Composite Growth & Income Fund
Composite Northwest Fund, Inc.

We have audited the accompanying statements of assets and liabilities of
Composite Bond & Stock Fund, Inc., Composite Growth & Income Fund, and Composite
Northwest Fund, Inc., including the investment portfolios, as of October 31,
1996, the related statements of operations for the year then ended, and the
related statements of changes in net assets for the years ended October 31, 1996
and 1995. For Composite Growth & Income Fund and Composite Northwest Fund, Inc.,
we have audited the financial highlights for each of the five years in the
period ended October 31, 1996. For Composite Bond & Stock Fund, Inc., we have
audited the financial highlights for each of the five fiscal years in the period
ended October 31, 1996. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirming securities owned as of October
31, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
Composite Bond & Stock Fund, Inc., Composite Growth & Income Fund and Composite
Northwest Fund, Inc., as of October 31, 1996, and the results of their
operations, the changes in their net assets, and the financial highlights for
the above-stated periods in conformity with generally accepted accounting
principles.

/s/ LeMaster & Daniels

Certified Public Accountants
Spokane, Washington
November 26, 1996

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT AND FORM N-SAR WHICH ARE ON FILE WITH THE
SECURITIES AND EXCHANGE COMMISSION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH DOCUMENTS.
</LEGEND>
<CIK> 0000022864
<NAME> COMPOSITE EQUITY SERIES, INC.
<SERIES>
<NUMBER> 011
<NAME> COMPOSITE GROWTH & INCOME FUND CLASS A

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 152,942,175
<INVESTMENTS-AT-VALUE> 202,032,592
<RECEIVABLES> 1,147,367
<ASSETS-OTHER> 22,516
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 203,202,475
<PAYABLE-FOR-SECURITIES> 1,774,380
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 246,199
<TOTAL-LIABILITIES> 2,020,579
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 137,822,961
<SHARES-COMMON-STOCK> 10,334,058
<SHARES-COMMON-PRIOR> 9,794,996
<ACCUMULATED-NII-CURRENT> 275,454
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,011,384
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 49,072,097
<NET-ASSETS> 201,181,896
<DIVIDEND-INCOME> 3,570,866
<INTEREST-INCOME> 340,632
<OTHER-INCOME> 0
<EXPENSES-NET> (1,895,430)
<NET-INVESTMENT-INCOME> 2,016,068
<REALIZED-GAINS-CURRENT> 14,044,609
<APPREC-INCREASE-CURRENT> 18,741,419
<NET-CHANGE-FROM-OPS> 34,802,096
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,970,751)
<DISTRIBUTIONS-OF-GAINS> (4,850,669)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,162,456
<NUMBER-OF-SHARES-REDEEMED> (1,172,395)
<SHARES-REINVESTED> 424,694
<NET-CHANGE-IN-ASSETS> 61,680,959
<ACCUMULATED-NII-PRIOR> 293,997
<ACCUMULATED-GAINS-PRIOR> 5,167,763
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,065,507
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,895,430
<AVERAGE-NET-ASSETS> 170,311,627
<PER-SHARE-NAV-BEGIN> 14.65
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 3.16
<PER-SHARE-DIVIDEND> (0.21)
<PER-SHARE-DISTRIBUTIONS> (0.54)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 17.26
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 152,942,175
<INVESTMENTS-AT-VALUE> 202,032,592
<RECEIVABLES> 1,147,367
<ASSETS-OTHER> 22,516
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 203,202,475
<PAYABLE-FOR-SECURITIES> 1,774,380
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 246,199
<TOTAL-LIABILITIES> 2,020,579
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 137,822,961
<SHARES-COMMON-STOCK> 1,331,165
<SHARES-COMMON-PRIOR> 968,397
<ACCUMULATED-NII-CURRENT> 275,454
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,011,384
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 49,072,097
<NET-ASSETS> 201,181,896
<DIVIDEND-INCOME> 3,570,866
<INTEREST-INCOME> 340,632
<OTHER-INCOME> 0
<EXPENSES-NET> (1,895,430)
<NET-INVESTMENT-INCOME> 2,016,068
<REALIZED-GAINS-CURRENT> 14,044,609
<APPREC-INCREASE-CURRENT> 18,741,419
<NET-CHANGE-FROM-OPS> 34,802,096
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (63,860)
<DISTRIBUTIONS-OF-GAINS> (350,319)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 781,671
<NUMBER-OF-SHARES-REDEEMED> (86,112)
<SHARES-REINVESTED> 27,517
<NET-CHANGE-IN-ASSETS> 61,680,959
<ACCUMULATED-NII-PRIOR> 293,997
<ACCUMULATED-GAINS-PRIOR> 5,167,763
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,065,507
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,895,430
<AVERAGE-NET-ASSETS> 170,311,627
<PER-SHARE-NAV-BEGIN> 14.59
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 3.14
<PER-SHARE-DIVIDEND> (0.08)
<PER-SHARE-DISTRIBUTIONS> (0.54)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 17.17
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>