FUNDS' HIGHLIGHTS............2
FUNDS' PORTFOLIOS............5
FINANCIAL INFORMATION
INDEPENDENT PUBLIC
ACCOUNTANTS' REPORT....20
FINANCIAL STATEMENTS...21
FINANCIAL HIGHLIGHTS...24
NOTES TO FINANCIAL
STATEMENTS.............27
IT'S BEEN A WONDERFUL YEAR AND THEN SOME
[PHOTO, WILLIAM PAPESH, PRESIDENT, COMPOSITE FUNDS]
As you will see from the commentary which follows, the equity funds in our
Composite Group produced strong returns for the fiscal year ended October 31,
1997. Indeed, if you have been a longer-term investor you will have benefited
from the gains produced by the unprecedented bull market in equities over the
past 15 years.
To be sure, there were some anticipated setbacks in stock valuations over
the past decade including a pronounced market correction in the days preceding
the end of this fiscal year. But market direction reversed and a broad upward
trend in stock prices re-asserted itself. I want to caution against boundless
enthusiasm, however. There will be turbulence which, if nothing else, should
prompt all of us to, once again, evaluate our financial goals and investment
strategies.
Here are two steps you can take to help build on the gains you've achieved
First, make sure that your assets are allocated among investment sectors
appropriate for you. Asset allocation should change as your circumstances change
- - your age and goals, for example, will be important determinants in refining
your investment program.
Second, if you're not now making consistent, regular investments, consider
doing so. Using this strategy, known as dollar cost averaging, you make regular
contributions of the same amount regardless of market direction. While neither
profit - nor protection against decline in a down market - is assured, you can
turn market volatility to your advantage by acquiring more shares in periods of
lower prices and fewer shares when prices are higher. This can help in reducing
the average cost per share as well as instilling discipline to your program. Of
course, since such a plan involves continuous investment in securities
regardless of fluctuating prices, you should consider your financial ability to
continue purchases through periods of low price levels. Look to your financial
consultant for guidance on both steps.
I appreciate very much your business and the trust you place in us.
WILLIAM G. PAPESH
PRESIDENT
FOOTNOTES TO INVESTMENT PERFORMANCE CHARTS ON PAGES 2, 3, & 4.
Investment returns and principal values of fund shares will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
Comparisons to fund performance on the following pages include the Consumer
Price Index (CPI), as a measure of change in consumer prices as determined by
the U.S. Bureau of Labor Statistics; the S&P 500 Stock Index (S&P 500), which is
considered generally representative of the U.S. Stock Market; and the Lehman
Government/Corporate Bond Index (LGCB), which is considered representative of
the U.S. government and corporate bond markets.
These indices are unmanaged and do not reflect actual investment-related
expenses incurred by the Funds with which they are compared. Fund values
presented in the graphs are for Class A shares. Class B share performance would
vary due to different expenses. Except as noted, performance is calculated after
the 4.5% maximum sales charge for Class A shares and for Class B shares, a
contingent deferred sales charge of 3% for one year or 1% since 3/30/94. All
Funds' Class B information is presented since 3/30/94, the commencement of
offering of Class B shares.
<PAGE>
FUND HIGHLIGHTS
COMPOSITE BOND & STOCK FUND
Impacts on recent performance
Financial markets continued their upward trajectory especially during the
last six months of the fiscal year. Lack of meaningful inflation in our economy
led to gains in bonds while stocks were buoyed by reports of strong earnings at
many leading companies. Only with the currency scare in the Asian economies late
in October has there been a significant correction in stock prices.
Along with lower yields in the bond market, stocks generally moved higher on
improved earnings for many companies. Such companies were well represented in
the Fund. An example is our investment in Time-Warner Inc. (1.0% of the
portfolio). A leading media company, Time Warner's stock has failed to keep pace
with the rest of the market until recently when the merger with Turner
Broadcasting resulted in a new management focus on delivering value to
shareholders. We increased our stake in Time Warner significantly early in 1997
and have seen this investment appreciate 54% this fiscal year, handily beating
the unmanaged S&P 500 index. Conversely, stocks with earnings reports that
disappointed the market saw large price declines. The health care services area
generally reported earnings short of expectations. Our investment in Aetna Inc.
(0.6% of the portfolio) suffered a stock price decline on this basis, as did
Olsten Corp. (0.4% of the portfolio) which we liquidated on October 31, 1997.
Obviously, portfolio holdings, including those shown above, are subject to
change without notice.
What's ahead?
Despite the recent volatility in the market, we continue to think that the
economy will grow modestly, without substantial inflation pressures, providing a
backdrop that continues to favor owning financial assets.
Key investment strategies
Our strategy emphasizes quality and value. We continue to favor equity
investments, i.e. common stocks, real estate investment trusts, and convertible
securities. These investments offer greater potential for capital growth at the
cost of higher price volatility. To add stability to the Fund and to generate
current income, we include a bond portfolio concentrated on high-quality U.S.
Treasury issues, supplemented by higher yielding corporate bonds and
mortgage-backed securities.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 10/31/97
------------------------------
WITHOUT WITH
Class A SALES SALES
Shares CHARGE CHARGE
------ ------ ------
One Year 20.81% 15.37%
Five Years 14.10% 13.06%
Ten Years 12.51% 11.99%
Class B
Shares
------
One Year 19.86% 16.86%
Since 3/94 16.01% 15.82%
------------------------------
Past performance cannot predict
future results. See footnotes on
page 1 for additional information.
[PERFORMANCE CHART]
INVESTMENT PERFORMANCE - COMPOSITE BOND & STOCK FUND
---------------------------------------------------------
Comparative Ending Values of $10,000 Invested on 10/31/87
$50,000 [LEGEND]
Fund Class A Shares $30,781
45,000 S&P 500 (Stocks) $48,738
LGCB (Bonds) $24,089
40,000 CPI (Inflation) $14,016
35,000
30,000
25,000
20,000
15,000
10,000
5,000
10/31/87 10/31/89 10/31/91 10/31/93 10/31/95 10/31/97
<TABLE>
<CAPTION>
Investment Performance - Composite Bond & Stock Fund
Comparative Ending Values of $10,000 Invested on 10/31/87
Composite
Bond & Stock Fund S&P 500 LGCB CPI
----------------- ------- ------ -------
<S> <C> <C> <C> <C>
10/31/87 $ 9,550 $10,000 $10,000 $10,000
$11,237 $11,487 $11,062 $10,425
10/31/89 $12,554 $14,506 $12,406 $10,893
$11,643 $13,436 $13,088 $11,578
10/31/91 $14,484 $17,912 $15,099 $11,917
$15,914 $19,695 $16,687 $12,298
10/31/93 $18,139 $22,637 $18,962 $12,637
$17,976 $23,513 $18,082 $12,966
10/31/95 $22,030 $29,730 $21,005 $13,330
$25,479 $36,893 $22,138 $13,729
10/31/97 $30,781 $48,738 $24,089 $14,016
</TABLE>
<PAGE>
FUND HIGHLIGHTS
COMPOSITE GROWTH & INCOME FUND
Impacts on recent performance
The stock market has been strong most of 1997. This performance was fueled
by continued economic growth with very modest inflation. The month of October
ended with the stock market's first 10% correction in over 3 years. This
correction stemmed from fear that the collapse of Asian currencies would have an
effect on corporate earning growth rates here in the U.S. Corporate mergers and
acquisitions have been strong all year. Our performance was positively impacted
by the acquisition of our holdings in Northrop (1.9% of the portfolio) and
Integon Corp. (0.2% of the portfolio which was liquidated in August). On the
negative side, our new positions in Waste Management (1.1% of the portfolio) and
Columbia Hospital (0.4% of the portfolio) have performed poorly. The market,
however, has yet to realize the substantial undervaluation that we believe is
inherent in these securities. Of course, portfolio holdings, including those
shown above, are subject to change without notice.
What's ahead?
We look for slower economic growth in 1998 than was achieved globally in
1997. Inflation should remain low, as Asian countries try to export their way
out of their currency problems. The Federal Reserve should not have to take much
action to keep the economy from overheating in 1998. We believe the stock market
will reflect concerns about earnings growth of cyclical issues in 1998. We
expect consumer non-durables and other stocks that do well in a low interest
rate environment to continue their relatively strong performance.
Key investment strategies
Our basic strategy, as always, is to buy stocks of good businesses when
they are at "sale prices." Good businesses generate a high return on investment,
generate positive free cash, have a competitive advantage and have barriers to
entry.
The healthcare industry is filled with good companies that represent
attractive values. This situation has been created by fears of deep budget cuts
in Medicaid and Medicare. We believe the aging of the population should fuel the
demand for healthcare services for many years to come. Many investors who have
ignored this area in favor of technology stocks could come rushing back as the
economy slows.
Finally, restructuring situations could represent good investments in 1998.
Many companies have trapped asset value that can only be realized by partial or
full sale.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 10/31/97
------------------------------
WITHOUT WITH
Class A SALES SALES
Shares CHARGE CHARGE
------ ------ ------
One Year 31.24% 25.34%
Five Years 18.77% 17.69%
Ten Years 14.37% 13.85%
Class B
Shares
------
One Year 30.20% 27.20%
Since 3/94 21.81% 21.65%
------------------------------
Past performance cannot predict
future results. See footnotes on
page 1 for additional information.
[PERFORMANCE CHART]
INVESTMENT PERFORMANCE - COMPOSITE GROWTH & INCOME FUND
---------------------------------------------------------
Comparative Ending Values of $10,000 Invested on 10/31/87
$50,000 [LEGEND]
Fund Class A Shares $36,127
45,000 S&P 500 (Stocks) $48,738
CPI (Inflation) $14,016
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
10/31/87 10/31/89 10/31/91 10/31/93 10/31/95 10/31/97
<TABLE>
<CAPTION>
Investment Performance - Composite Growth & Income Fund
Comparative Ending Values of $10,000 Invested on 10/31/87
Composite
Growth & Income Fund S&P 500 CPI
-------------------- ------- -------
<S> <C> <C> <C>
10/31/87 $ 9,550 $10,000 $10,000
$11,154 $11,487 $10,425
10/31/89 $12,604 $14,506 $10,893
$10,510 $13,436 $11,578
10/31/91 $13,945 $17,912 $11,917
$15,283 $19,695 $12,298
10/31/93 $16,972 $22,637 $12,637
$18,423 $23,513 $12,966
10/31/95 $22,269 $29,730 $13,330
$27,527 $36,893 $13,729
10/31/97 $36,127 $48,738 $14,016
</TABLE>
<PAGE>
FUND HIGHLIGHTS (CONTINUED)
COMPOSITE NORTHWEST FUND
Impacts on recent performance
As indicated in the accompanying table, Composite Northwest Fund (Class A
shares) had a total return of 44.5% for the fiscal year ended October 31, 1997,
which compared quite favorably to the unmanaged Standard & Poor's 500 Index
which returned 32.1% over the same period.
Our most successful stock over the year was Immunex (1.8% of the portfolio)
which vaulted over 374% thanks to a successful trial for its arthritis drug
candidate and a full research pipeline. However, the worst performer in the
portfolio also came from the biotechnology sector as Ostex (0.2% of the
portfolio) lost 60.4% of its value due to very slow sales growth.
Other successes in our portfolio included Airborne Freight (1.6% of the
portfolio), which rose 218.9% due to sharply improved earnings, and
Electro-Scientific Industries (2.0% of the portfolio), which rose 136.6% thanks
to improved prospects for the semiconductor equipment demand and several
strategic acquisitions. Losers for the year included Oregon Metallurgical (2.2%
of the portfolio, down 25.6%) which is under a cloud due to imports of competing
Russian titanium, and Merix (0.6% of the portfolio, down 27.4%) which has
struggled to find high margin business. Overall, 61 stocks representing 81.6% of
the portfolio showed gains for the year, while only 14 stocks representing 15.5%
of the portfolio showed losses. Portfolio holdings, of course, including those
shown above, are subject to change without notice.
What's ahead?
We continue to believe that the Northwest economy will be strong for the
next several years. Boeing continues to increase production rates. It has
encountered some significant difficulties with the production ramp and will need
to adjust employment to meet the current and anticipated demand for aircraft.
The other growth engine in the region, technology, is still running smoothly as
Microsoft and Intel continue to spend billions to support their ambitious
business plans.
Key investment strategies
We continue in our quest to own stocks of Northwest based companies and
those doing significant business in the region. Increasingly, performance of the
Fund is influenced not only by our regional economy, but by national and global
economies as well. In late October, concerns over global currency and economic
issues caused significant volatility in the stock market and in your Fund. Such
volatility, while unsettling, is a normal part of investing. We continue to
believe, however, that shareholders with a long investment horizon will be well
rewarded.
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 10/31/97
------------------------------
WITHOUT WITH
Class A SALES SALES
Shares CHARGE CHARGE
------ ------ ------
One Year 44.47% 37.95%
Five Years 16.68% 15.60%
Since 11/86 18.07% 17.53%
Class B
Shares
------
One Year 43.17% 40.17%
Since 3/94 20.47% 20.29%
------------------------------
Past performance cannot predict
future results. See footnotes on
page 1 for additional information.
[PERFORMANCE CHART]
INVESTMENT PERFORMANCE - COMPOSITE NORTHWEST FUND
---------------------------------------------------------
Comparative Ending Values of $10,000 Invested on 10/31/87
$60,000 [LEGEND]
Fund Class A Shares $50,271
50,000 S&P 500 (Stocks) $48,738
CPI (Inflation) $14,016
40,000
30,000
20,000
10,000
10/31/87 10/31/89 10/31/91 10/31/93 10/31/95 10/31/97
<TABLE>
<CAPTION>
Investment Performance - Composite Northwest Fund
Comparative Ending Values of $10,000 Invested on 10/31/87
Composite
Northwest Fund S&P 500 CPI
---------------- ------- -------
<S> <C> <C> <C>
10/31/87 $ 9,550 $10,000 $10,000
$12,073 $11,487 $10,425
10/31/89 $16,436 $14,506 $10,893
$13,695 $13,436 $11,578
10/31/91 $21,979 $17,912 $11,917
$23,247 $19,695 $12,298
10/31/93 $24,135 $22,637 $12,637
$24,851 $23,513 $12,966
10/31/95 $30,379 $29,730 $13,330
$34,796 $36,893 $13,720
10/31/97 $50,271 $48,738 $14,016
</TABLE>
<PAGE>
COMPOSITE BOND & STOCK FUND, INC.
PORTFOLIO OF INVESTMENTS
IN SECURITIES
OCTOBER 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
COMPOSITE BOND & STOCK FUND PORTFOLIO
PRINCIPAL MARKET
AMOUNT FIXED INCOME SECURITIES-33.88% VALUE
---------- U.S. TREASURY AND AGENCY OBLIGATIONS-16.17% ----------
$ 2,000,000 Federal National Mortgage Association, 8.25%,
due 12/18/2000........................................... $ 2,137,486
3,000,000 U.S. Treasury Bond, 7.50%, due 11/15/2016.................. 3,430,314
9,000,000 U.S. Treasury Bond, 6.25%, due 08/15/2023.................. 9,025,317
4,250,000 U.S. Treasury Bond, 6.50%, due 11/15/2026.................. 4,429,299
1,000,000 U.S. Treasury Note, 6.375%, due 08/15/2002................. 1,025,938
5,000,000 U.S. Treasury Note, 5.25%, due 07/31/1998.................. 4,990,630
4,000,000 U.S. Treasury Note, 5.50%, due 02/28/1999.................. 3,993,752
2,250,000 U.S. Treasury Note, 6.375%, due 03/31/2001................. 2,294,298
2,000,000 U.S. Treasury Note, 6.25%, due 04/30/2001.................. 2,033,126
19,300,000 U.S. Treasury Note, 5.875%, due 10/31/1998-11/15/1999...... 19,377,045
2,800,000 U.S. Treasury Note, 5.875%, due 09/30/2002................. 2,815,753
4,000,000 U.S. Treasury Bond, zero coupon, due 08/15/2012............ 1,612,788
-----------
TOTAL U.S. TREASURY & AGENCY OBLIGATIONS (cost $55,302,023) 57,165,746
-----------
MORTGAGE BACKED SECURITIES-6.51%
GOVERNMENT AGENCY-4.33%
1,642,398 Federal National Mortgage Association, 8.00%,
due 12/01/2026........................................... 1,702,449
555,381 Government National Mortgage Association,
10.00%, due 08/15/2019................................... 610,391
3,192,120 Government National Mortgage Association,
7.00%, due 12/15/2025-03/15/2027......................... 3,212,070
8,998,126 Government National Mortgage Association,
6.50%, due 01/15/2024-05/15/2026......................... 8,902,522
921,789 Government National Mortgage Association,
6.00%, due 01/15/2026-02/15/2026......................... 890,393
-----------
15,317,825
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS -
GOVERNMENT AGENCY BACKED-1.31%
1,000,000 Federal Home Loan Mortgage Corporation -
CMO PAC-1(11) 1311H, 7.50%, due 07/15/2020............... 1,020,185
2,000,000 Federal Home Loan Mortgage Corporation -
GNMA PAC-1(11) 2E, 6.85%, due 07/25/2018................. 2,021,160
1,519,797 Weyerhaeuser 1982-C FHA Putable, 7.43%, due 06/01/2022..... 1,597,196
-----------
4,638,541
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS-0.87%
1,250,000 DLJ Mortgage Acceptance Corp., 1993-M17, 7.35%
due 12/18/2003........................................... 1,292,462
117,293 Merrill Lynch Mortgage Investors, Inc.,
1988-P, 10.05%, due 12/15/2008........................... 126,362
857,901 Resolution Trust Corporation - 1991-M2 - A-2,
7.375%, due 09/25/2020................................... 674,638
1,000,000 Ryland Mortgage Securities Corporation - 1992 - 12A - 1D,
6.50%, due 09/25/2023.................................... 975,760
-----------
3,069,222
-----------
TOTAL MORTGAGE BACKED SECURITIES (cost $22,194,904) 23,025,588
-----------
CORPORATE BONDS-10.58%
$ 1,500,000 Aetna Services, Inc., 7.625%, due 08/15/2026............... $ 1,593,683
1,250,000 American Home Products Corporation, 7.250%, due 03/01/2023. 1,290,119
1,000,000 Bank of New York, 7.875%, due 11/15/2002................... 1,067,831
1,200,000 Burlington Northern, 8.75%, due 02/25/2022................. 1,432,535
1,000,000 Coastal Corporation, 9.625%, due 05/15/2012................ 1,257,030
750,000 Conagra, Inc., 9.75%, due 03/01/2021....................... 974,260
1,000,000 Conagra, Inc., 6.70%, due 08/01/2027....................... 1,016,936
1,000,000 Continental Corporation, 7.25%, due 03/01/2003............. 1,031,302
1,000,000 Dart & Kraft Finance, 7.75%, due 11/30/1998................ 1,015,691
500,000 Developers Diversified Realty, 6.58%, due 02/06/2001....... 503,554
2,000,000 FHP International, 7.00%, due 09/15/2003................... 2,035,592
1,250,000 First Nationwide, 10.00%, due 10/01/2006................... 1,478,836
1,000,000 Franchise Finance Corporation of America, 7.00%,
due 11/30/2000........................................... 1,018,550
1,000,000 Franchise Finance Corporation of America, 7.875%,
due 11/30/2005........................................... 1,069,639
1,000,000 Golden Books Publishing, 7.65%, due 09/15/2002............. 945,000
1,500,000 Integon Corporation, 8.00%, due 08/15/1999................. 1,522,827
2,000,000 Loral Corporation, 7.625%, due 06/15/2025.................. 2,144,122
1,000,000 Medpartners, Inc., 7.375%, due 10/01/2006.................. 1,044,043
1,000,000 Mercantile Bank, 7.625%, due 10/15/2002.................... 1,051,787
1,100,000 Niagara Mohawk Power, 9.50%, due 06/01/2000................ 1,169,031
985,000 Niagara Mohawk Power, 8.77%, due 01/01/2018................ 1,049,325
1,000,000 Ohio Edison 1st Mortgage, 8.75%, due 02/15/1998............ 1,006,843
1,000,000 Price/Costco, Inc., 7.125%, due 06/15/2005................. 1,017,741
500,000 Public Service Company of New Hampshire,
9.17%, due 05/15/1998.................................... 506,824
1,750,000 Raytheon Company, 7.20%, due 08/15/2027.................... 1,774,008
1,250,000 Riviera Holdings Corporation, 11.00%, due 12/31/2002....... 1,343,750
500,000 Summit Bancorp, 8.625%, due 12/10/2002..................... 546,899
110,000 System Energy Resources, 11.375%, due 09/01/2016........... 119,308
1,000,000 Tenet Heathcare Corporation, 7.875%, due 01/15/2003........ 1,011,250
2,000,000 Time Warner, Inc., 9.15%, due 02/01/2023................... 2,383,660
1,000,000 U.S. West Capital Funding, Inc., 6.95%, due 01/15/2037..... 1,025,073
1,000,000 Westinghouse Electric Corporation, 7.875%, due 09/01/2023.. 976,145
-----------
TOTAL CORPORATE BONDS (cost $35,933,740)................... 37,423,194
-----------
U.S. DOLLAR FOREIGN OBLIGATIONS-0.62%
1,000,000 Province of Alberta, 9.20%, due 11/01/1997................. 1,001,500
1,500,000 United Mexican States, Series A, 6.25%, due 12/31/2019..... 1,173,750
-----------
TOTAL FOREIGN OBLIGATIONS (cost $1,796,522)................ 2,175,250
-----------
TOTAL FIXED INCOME SECURITIES (cost $115,227,189) 119,789,778
-----------
EQUITY SECURITIES-64.69% MARKET
SHARES COMMON STOCKS-56.51% VALUE
---------- AEROSPACE/DEFENSE-2.53% ----------
25,000 General Dynamics Corporation............................... $ 2,029,688
33,500 Northrop Grumman Corporation............................... 3,659,875
60,000 Raytheon Company........................................... 3,255,000
-----------
8,944,563
-----------
APPAREL & SHOES-1.43%
64,000 Nike, Inc., Class B........................................ 3,008,000
175,000 Stride Rite Corporation.................................... 2,056,250
-----------
5,064,250
-----------
BANKS/SAVINGS & LOANS-2.62%
26,000 Chase Manhattan Corporation................................ 2,999,750
53,500 Mellon Bank Corporation.................................... 2,758,594
12,000 Wells Fargo & Company...................................... 3,496,500
-----------
9,254,844
-----------
BEVERAGES-1.00%
105,000 Seagram Company, Ltd....................................... 3,537,187
-----------
COMPUTER SOFTWARE-1.98%
75,800 Adobe Systems, Inc. ....................................... 3,619,450
45,000 Computer Associates International, Inc. ................... 3,355,313
250 Siebel Systems, Inc.* ..................................... 10,099
-----------
6,984,862
-----------
COMPUTER SYSTEMS-1.81%
70,000 Electronic Data Systems Corporation........................ 2,708,125
60,000 Hewlett-Packard Company.................................... 3,701,250
-----------
6,409,375
-----------
CONSUMER DURABLES-1.02%
60,000 Eastman Kodak Company...................................... 3,592,500
-----------
ELECTRICAL EQUIPMENT-0.78%
42,700 General Electric Company................................... 2,756,819
-----------
ELECTRONICS - GENERAL-0.98%
59,500 Tektronix, Inc. ........................................... 3,517,938
-----------
ELECTRONICS - SEMICONDUCTORS / COMPONENTS-1.05%
60,000 Motorola, Inc. ............................................ 3,705,000
-----------
FINANCIAL SERVICES-4.02%
50,000 Advanta Corporation, Class A............................... 1,625,000
50,000 Advanta Corporation, Class B............................... 1,534,375
72,000 Federal National Mortgage Association...................... 3,487,500
50,000 Green Tree Financial Corporation........................... 2,106,250
57,800 Liberty Financial Companies................................ 3,005,600
50,000 Morgan Stanley Dean Witter Discover & Company.............. 2,450,000
-----------
14,208,725
-----------
FOODS & FOOD RETAILERS-2.87%
70,000 Dole Food Company.......................................... $ 3,101,875
66,000 Sara Lee Corporation....................................... 3,374,250
100,000 Supervalu, Inc. ........................................... 3,662,500
-----------
10,138,625
-----------
HEALTHCARE PRODUCTS-4.69%
53,500 Abbott Laboratories........................................ 3,280,219
80,000 Becton Dickinson & Company................................. 3,685,000
76,000 Baxter International, Inc. ................................ 3,515,000
65,000 Johnson & Johnson.......................................... 3,729,375
50,000 Smithkline Beecham PLC, American Depository Receipt........ 2,381,250
-----------
16,590,844
-----------
HEALTHCARE SERVICES-1.72%
30,000 Aetna, Inc. ............................................... 2,131,875
95,000 Columbia/HCA Healthcare Corporation........................ 2,683,750
50,000 Medpartners, Inc.*......................................... 1,271,875
-----------
6,087,500
-----------
HOUSEHOLD PRODUCTS-1.06%
70,000 Unilever Group............................................. 3,736,250
-----------
INSURANCE-2.62%
28,600 American International Group, Inc. ........................ 2,918,988
15,000 General Re Corporation..................................... 2,957,812
100,000 TIG Holdings, Inc. ........................................ 3,387,500
-----------
9,264,300
-----------
MACHINERY-1.01%
86,000 Crane Company.............................................. 3,574,375
-----------
MEDIA-1.78%
60,000 Time Warner, Inc. ......................................... 3,461,250
94,500 Viacom, Inc., Class A*..................................... 2,823,187
-----------
6,284,437
-----------
METALS & MINING-0.84%
40,000 Phelps Dodge Corporation................................... 2,975,000
-----------
OIL & GAS-3.59%
56,500 Amerada Hess Corporation................................... 3,471,219
36,500 Atlantic Richfield Company................................. 3,004,406
130,000 Occidental Petroleum Corporation........................... 3,623,750
61,000 Shell Transport & Trading Company,
American Depository Receipt.............................. 2,603,938
-----------
12,703,313
-----------
PAPER & FOREST PRODUCTS-2.07%
50,000 Boise Cascade Corporation.................................. $ 1,731,250
40,000 Georgia-Pacific Corporation................................ 3,392,500
50,000 Rayonier, Inc. ............................................ 2,184,375
-----------
7,308,125
-----------
REAL ESTATE INVESTMENT TRUSTS-6.36%
60,000 Boston Properties, Inc. ................................... 1,920,000
50,000 Capstone Capital Trust, Inc. .............................. 1,181,250
72,500 CarrAmerica Realty Corporation............................. 2,161,406
100,000 Duke Realty Investments, Inc. ............................. 2,250,000
35,000 Essex Property Trust, Inc. ................................ 1,198,750
45,000 First Industrial Realty Trust.............................. 1,558,125
60,000 Health Care Property Investors, Inc. ...................... 2,302,500
46,700 Hospitality Properties Trust............................... 1,660,769
80,000 Mid Atlantic Realty Trust.................................. 1,080,000
75,800 Nationwide Health Properties, Inc. ........................ 1,710,237
80,000 Security Capital Pacific Trust............................. 1,790,000
4,211 Security Capital Group, Inc. Warrants...................... 20,265
50,000 Shurgard Storage Centers, Inc. ............................ 1,412,500
178,000 Taubman Centers, Inc. ..................................... 2,225,000
-----------
22,470,802
-----------
RETAIL SALES-1.07%
160,000 Limited, Inc. ............................................. 3,770,000
-----------
TOBACCO-2.27%
78,500 Phillip Morris Companies, Inc. ............................ 3,110,563
75,000 RJR Nabisco Holdings Corporation........................... 2,376,562
85,000 UST, Inc. ................................................. 2,544,688
-----------
8,031,813
-----------
UTILITIES-GAS & ELECTRIC-0.52%
41,500 NIPSCO Industries, Inc. ................................... 1,823,406
-----------
UTILITIES-TELECOMMUNICATIONS-4.82%
84,000 Alltel Corporation......................................... 2,971,500
67,500 AT&T Corporation........................................... 3,303,281
25,000 Ameritech Corporation...................................... 1,625,000
130,000 Frontier Corporation....................................... 2,811,250
51,000 Southern New England Telecommunications Corporation........ 2,186,625
80,000 Sprint Corporation......................................... 4,160,000
-----------
17,057,656
-----------
TOTAL COMMON STOCKS (cost $151,888,310).................... 199,792,509
-----------
PRINCIPAL
AMOUNT
---------- CONVERTIBLE BONDS-2.88%
$1,300,000 Alberto-Culver Corporation, 5.50%, due 06/30/2005.......... $ 2,128,750
1,080,000 CII Financial, 7.50%, due 09/15/2001....................... 1,030,050
1,000,000 First State Bancorp, 7.50%, due 04/30/2017................. 1,193,750
1,850,000 Jumbosports, Inc., 4.25%, due 11/01/2000................... 1,239,500
1,750,000 Rockefeller Center Property Trust, zero coupon,
due 12/31/2000........................................... 1,233,750
1,600,000 Spectrum Holobyte, Inc., 6.50%, due 09/15/2002............. 1,364,000
2,000,000 Tenet Healthcare Corporation, 6.00%, due 12/01/2005........ 1,997,500
-----------
TOTAL CONVERTIBLE BONDS (cost $10,000,213)................. 10,187,300
-----------
CONVERTIBLE PREFERRED STOCKS-5.30%
40,000 Loral Space & Communication, 6% Series 144................. 2,435,000
112,500 Medpartners, Inc., 6.5%.................................... 2,728,125
14,200 Microsoft Corporation, $2.196 Series A..................... 1,253,150
4,250 Loral Space and Communications, 3%......................... 258,719
87,500 Pacificare Health Systems, Inc., $1.00 Series A ........... 2,362,500
35,000 Penncorp Financial Group, $3.375 Series.................... 2,633,750
40,000 Sinclair Broadcasting Group, Inc., 6%...................... 1,995,000
16,500 TCI Pacific Communications, 5%............................. 2,299,688
64,000 Time Warner Financing - $1.24 Series....................... 2,768,000
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS (cost $16,235,345)...... 18,733,933
-----------
TOTAL EQUITY SECURITIES (cost $168,123,656)................ 228,713,742
-----------
TOTAL INVESTMENTS (cost $293,351,061)...................... 348,503,520
Other assets net of liabilities............................ 5,070,231
-----------
NET ASSETS................................................. $353,573,751
===========
</TABLE>
*Non-income producing security
FEDERAL INCOME TAX INFORMATION:
Net unrealized appreciation of investments at October 31, 1997, of $55,152,459,
based on aggregate cost of $293,351,061, was composed of gross appreciation of
$57,075,510 for investments having an excess of value over cost and gross
depreciation of $1,923,051 for investments having an excess of cost over value.
OTHER INFORMATION:
Purchases and sales (including maturities and principal repayments) of
investment securities, other than short-term investments, aggregated
$215,934,521 and $165,783,792, respectively, for the year ended October 31,
1997, including purchases and sales of U. S. government securities of
$41,237,917 and $23,942,383, respectively. See accompanying notes to financial
statements.
See accompanying notes to financial statements.
<PAGE>
COMPOSITE GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS
IN SECURITIES
OCTOBER 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
COMPOSITE GROWTH & INCOME FUND PORTFOLIO
MARKET
SHARES COMMON STOCKS-95.77% VALUE
---------- AEROSPACE/DEFENSE-2.89% ----------
36,719 Lockheed Martin Corporation................................ $ 3,490,600
60,700 Northrop Grumman Corporation............................... 6,631,475
-----------
10,122,075
-----------
APPAREL & SHOES-0.36%
26,800 Nike, Inc., Class B........................................ 1,259,600
-----------
BANKS/SAVINGS & LOANS-5.81%
80,500 Bank of New York Company, Inc. ............................ 3,788,531
58,000 Mellon Bank Corporation.................................... 2,990,625
150,924 Norwest Bancorp............................................ 4,839,001
51,500 Prime Bancshares, Inc.*.................................... 981,719
108,750 Washington Federal, Inc. .................................. 3,208,125
15,475 Wells Fargo & Company...................................... 4,509,028
-----------
20,317,029
-----------
BASIC INDUSTRY-1.13%
169,700 Waste Management, Inc...................................... 3,966,738
-----------
BEVERAGES-2.38%
134,000 PepsiCo, Inc. ............................................. 4,932,875
100,700 Seagram Company, Ltd....................................... 3,392,331
-----------
8,325,206
-----------
BUSINESS SERVICES-1.45%
72,000 HFS, Inc.*................................................. 5,076,000
-----------
CAPITAL GOODS-1.81%
125,424 Donaldson Company, Inc. ................................... 6,349,590
-----------
CHEMICALS-0.67%
99,200 Millenium Chemicals, Inc. ................................. 2,331,200
-----------
COMPUTER SOFTWARE-6.81%
97,700 Adobe Systems, Inc. ....................................... 4,665,175
193,650 Barra, Inc.*............................................... 4,986,488
57,000 Computer Associates International, Inc. ................... 4,250,063
288,700 Mentor Graphics............................................ 3,157,656
52,000 Microsoft Corporation*..................................... 6,760,000
309 Siebel Systems, Inc.*...................................... 12,484
-----------
23,831,866
-----------
COMPUTER SYSTEMS-3.20%
89,000 Cabletron Systems.......................................... 2,581,000
25,000 Cisco Systems, Inc......................................... 2,050,781
84,810 Electronic Data Systems Corporation........................ 3,281,087
53,000 Hewlett-Packard Company.................................... 3,269,438
-----------
11,182,306
-----------
CONSUMER DURABLES-3.14%
85,283 Castle & Cooke, Inc.*...................................... $ 1,519,103
127,042 Mattel, Inc. .............................................. 4,938,758
135,400 Zurn Industries, Inc....................................... 4,544,363
-----------
11,002,224
-----------
ELECTRICAL EQUIPMENT-4.21%
119,450 Emerson Electric Company................................... 6,263,659
131,000 General Electric Company................................... 8,457,688
-----------
14,721,347
-----------
ELECTRONICS-GENERAL-2.15%
150,400 DSC Communications Corporation*............................ 3,666,000
182,950 Loral Space & Communications*.............................. 3,841,950
-----------
7,507,950
-----------
ELECTRONICS-SEMICONDUCTORS/COMPONENTS-3.16%
155,950 Integrated Device Technology, Inc.*........................ 1,803,172
52,000 Intel Corporation.......................................... 4,004,000
85,300 Motorola, Inc. ............................................ 5,267,275
-----------
11,074,447
-----------
FINANCIAL SERVICES-5.44%
217,700 Federal Home Loan Mortgage Corporation..................... 8,245,388
76,850 Green Tree Financial Corporation........................... 3,237,306
39,333 Legg Mason, Inc. .......................................... 1,929,775
100,900 Liberty Financial Companies................................ 5,246,800
5,000 Salomon, Inc. ............................................. 388,438
-----------
19,047,707
-----------
FOOD & FOOD RETAILERS-2.14%
38,000 Campbell Soup Company...................................... 1,959,375
56,500 Sara Lee Corporation....................................... 2,888,563
72,200 Supervalu, Inc. ........................................... 2,644,325
-----------
7,492,263
-----------
HEALTHCARE PRODUCTS-7.09%
100,100 Abbott Laboratories........................................ 6,137,381
70,800 Forest Laboratories*....................................... 3,274,500
119,550 Johnson & Johnson.......................................... 6,859,181
52,275 Merck and Company, Inc. ................................... 4,665,544
81,000 Smithkline Beecham PLC, American Depository Receipt........ 3,857,625
-----------
24,794,231
-----------
HEALTHCARE SERVICES-5.15%
102,500 Cognizant Corporation...................................... 4,016,718
45,550 Columbia/HCA Healthcare Corporation........................ 1,286,788
114,000 Manor Care, Inc. .......................................... 3,911,625
198,801 Medpartners, Inc.*......................................... 5,057,000
58,833 Pacificare Health Systems, Class A......................... 3,743,250
-----------
18,015,381
-----------
HOUSEHOLD PRODUCTS-5.03%
36,150 Alberto Culver Company, Class A............................ $ 937,641
94,300 Kimberly Clark Corporation................................. 4,897,706
237,200 Kimberly Clark De Mexico, American Depository Receipt...... 5,159,100
44,000 Proctor & Gamble Company................................... 2,992,000
68,000 Unilever NV................................................ 3,629,500
-----------
17,615,947
-----------
INSURANCE-3.58%
42,498 American International Group, Inc. ........................ 4,337,452
54,000 Penncorp Financial Group, Inc. ............................ 1,758,375
67,800 TIG Holdings, Inc. ........................................ 2,296,725
59,016 Travelers Group, Inc. ..................................... 4,131,120
-----------
12,523,672
-----------
LODGING & RESTAURANTS-1.09%
179,115 Choice Hotels International, Inc.*......................... 3,145,707
65,705 Sunburst Hospitality Corporation........................... 665,263
-----------
3,810,970
-----------
MACHINERY-1.87%
98,450 Crane Company.............................................. 4,091,828
46,500 Deere & Company............................................ 2,447,063
-----------
6,538,891
-----------
MEDIA-5.81%
192,733 ACNielson Corporation*..................................... 4,408,767
120,000 Dun & Bradstreet Corporation............................... 3,427,500
115,500 Lee Enterprises, Inc. ..................................... 3,067,969
80,000 Time Warner, Inc. ......................................... 4,615,000
161,375 Viacom Inc., Class A*...................................... 4,821,078
-----------
20,340,314
-----------
OILS & GAS-6.75%
61,160 Exxon Corporation.......................................... 3,757,518
59,200 Mobil Corporation.......................................... 4,310,500
154,450 Occidental Petroleum Corporation........................... 4,305,294
18,800 Pennzoil Company........................................... 1,391,200
85,800 Royal Dutch Petroleum Company.............................. 4,515,224
70,000 Texaco, Inc. .............................................. 3,985,625
55,200 Union Pacific Resources Group.............................. 1,359,300
-----------
23,624,661
-----------
PAPER & FOREST PRODUCTS-1.39%
179,800 Asia Pulp & Paper Company, Ltd.*........................... 2,045,225
59,200 Weyerhaeuser Company....................................... 2,826,800
-----------
4,872,025
-----------
REAL ESTATE INVESTMENT TRUSTS-1.85%
61,500 CCA Prison Realty Trust.................................... $ 2,121,750
113,200 Health Care Property Investors, Inc. ...................... 4,344,050
-----------
6,465,800
-----------
RETAIL SALES-1.87%
157,200 Intimate Brands, Inc. ..................................... 3,360,150
111,790 Fred Meyer, Inc., Class A*................................. 3,193,002
-----------
6,553,152
-----------
TOBACCO-1.40%
123,300 Phillip Morris Companies, Inc. ............................ 4,885,763
-----------
TRANSPORTATION SERVICES-2.91%
118,200 Expeditors International of Washington, Inc. .............. 4,343,850
104,100 Sabre Group Holdings, Inc.*................................ 2,758,650
50,300 Union Pacific Corporation.................................. 3,080,875
-----------
10,183,375
-----------
UTILITIES-GAS & ELECTRIC-0.87%
80,000 Enron Corporation.......................................... 3,040,000
-----------
UTILITIES-TELECOMMUNICATIONS-2.36%
71,500 Aliant Communications, Inc. ............................... 1,832,185
5,000 Bell Atlantic Corporation.................................. 399,375
20,000 MCI Communications Corporation............................. 710,000
102,000 Sprint Corporation......................................... 5,304,000
-----------
8,245,560
-----------
TOTAL COMMON STOCKS (cost $248,442,755).................... 335,117,290
-----------
CONVERTIBLE PREFERRED STOCKS-3.46%
87,000 Medpartners, Inc., 6.5% ................................... 2,109,750
20,000 Loral Space & Communications, 3%........................... 1,217,500
88,900 Pacificare Health Systems, Inc., $100 Series A............. 2,400,300
35,800 Penncorp Financial Group, $3.375 Series.................... 2,693,950
73,950 Sinclair Broadcasting Group, Inc., 6%...................... 3,688,256
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS (cost $12,370,445)...... 12,109,756
-----------
PRINCIPAL
AMOUNT CONVERTIBLE BOND-0.27%
- ----------
$ 580,000 Alberto Culver Corporation, 5.50%, 06/30/2005
(cost $885,431).......................................... 949,750
-----------
TOTAL INVESTMENTS (cost $261,698,631)...................... 348,176,796
Other assets net of liabilities............................ 1,745,562
-----------
NET ASSETS................................................. $349,922,358
===========
</TABLE>
*Non-income producing security.
FEDERAL INCOME TAX INFORMATION:
Net unrealized appreciation of investments at October 31, 1997, of $86,478,165,
based on aggregate cost of $261,698,631, was composed of gross appreciation of
$89,299,982 for investments having an excess of value over cost and gross
depreciation of $2,821,817 for investments having an excess of cost over value.
OTHER INFORMATION:
Purchases and sales of investment securities, other than short-term investments,
aggregated $270,431,388 and $186,713,939, respectively, for the year ending
October 31, 1997, including purchases and sales of U.S. government securities of
$25,062,973 and $25,355,012, respectively. See accompanying notes to financial
statements.
See accompanying notes to financial statements.
<PAGE>
COMPOSITE NORTHWEST FUND
PORTFOLIO OF INVESTMENTS
IN SECURITIES
OCTOBER 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
COMPOSITE NORTHWEST FUND PORTFOLIO
MARKET
SHARES COMMON STOCKS-97.19% VALUE
---------- AEROSPACE/DEFENSE-4.38% ----------
201,674 Boeing Company............................................. $ 9,655,143
56,675 Precision Castparts Corporation............................ 3,333,198
-----------
12,988,341
-----------
APPAREL & SHOES-1.29%
81,200 Nike, Inc., Class B........................................ 3,816,400
-----------
BANKS/SAVINGS & LOANS-8.86%
163,800 First Savings Bank of Washington Bancorp, Inc. ............ 3,890,250
27,947 Horizon Financial Corporation.............................. 457,632
76,700 Interwest Bancorp, Inc. ................................... 2,933,775
136,300 Klamath First Bancorp, Inc. ............................... 3,049,712
102,900 Sterling Financial Corporation*............................ 2,186,625
78,656 US Bancorp................................................. 7,998,332
195,288 Washington Federal, Inc. .................................. 5,760,996
-----------
26,277,322
-----------
BASIC INDUSTRY-0.29%
71,800 Morrison Knudsen Corporation*.............................. 843,650
-----------
BUSINESS SERVICES-0.89%
208,100 Barrett Business Services, Inc.*........................... 2,627,262
-----------
CAPITAL GOODS-2.23%
237,400 Greenbrier Companies, Inc. ................................ 4,035,800
57,020 PACCAR, Inc. .............................................. 2,569,463
-----------
6,605,263
-----------
COMPUTER SOFTWARE-9.73%
128,600 Adobe Systems, Inc. ....................................... 6,140,650
433,500 Mentor Graphics Corporation................................ 4,741,406
86,150 Microsoft Corporation*..................................... 11,199,500
173,900 Orcad, Inc.*............................................... 1,532,494
424 Siebel Systems, Inc.*...................................... 17,134
13,600 Visio Corporation*......................................... 505,750
287,200 Wall Data, Inc.*........................................... 4,702,900
-----------
28,839,834
-----------
COMPUTER SYSTEMS-8.28%
246,500 In Focus Systems, Inc.*.................................... 8,072,875
241,200 Planar Systems, Inc.*...................................... 2,683,350
151,700 Radisys Corporation*....................................... 7,054,050
321,300 Sequent Computer Systems, Inc.* ........................... 6,727,219
-----------
24,537,494
-----------
CONSUMER DURABLES-1.13%
140,100 Monaco Coach Corporation*.................................. $ 3,344,888
-----------
ELECTRICAL EQUIPMENT-1.31%
87,944 Fluke Corporation.......................................... 2,116,153
115,400 Merix Corporation*......................................... 1,759,850
-----------
3,876,003
-----------
ELECTRONICS - GENERAL-7.54%
122,500 Electro Scientific Industries, Inc.*....................... 5,941,250
293,200 FEI Company*............................................... 5,387,550
156,800 Flir Systems, Inc.*........................................ 3,292,800
42,200 Itron, Inc.*............................................... 865,100
116,200 Tektronix, Inc............................................. 6,870,325
-----------
22,357,025
-----------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS-3.27%
33,600 Intel Corporation.......................................... 2,587,200
53,900 Lattice Semiconductor Corporation*......................... 2,698,369
112,900 Micron Technology, Inc.*................................... 3,027,131
56,300 Triquint Semiconductor, Inc.*.............................. 1,379,350
-----------
9,692,050
-----------
FOOD & FOOD RETAILERS-3.14%
168,800 Albertson's, Inc. ......................................... 6,224,500
65,041 Quality Food Centers, Inc.*................................ 3,097,578
-----------
9,322,078
-----------
HEALTHCARE PRODUCTS-8.62%
93,800 Advanced Technology Laboratories Ultrasound, Inc.*......... 4,033,400
283,900 Corixa Corporation*........................................ 3,584,237
492,850 Icos Corporation*.......................................... 6,899,900
83,600 Immunex Corporation*....................................... 5,350,400
502,000 Neorx Corporation*......................................... 3,294,375
187,100 Ostex International, Inc.*................................. 491,138
52,800 Pathogenesis Corporation*.................................. 1,900,800
-----------
25,554,250
-----------
HEALTHCARE SERVICES-1.96%
97,760 Foundation Health Systems, Inc., Class A*.................. 2,810,600
46,200 Pacificare Health Systems, Inc., Class B*.................. 2,991,450
-----------
5,802,050
-----------
INSURANCE-2.09%
130,400 Safeco Corporation......................................... 6,210,300
-----------
LODGING & RESTAURANTS-1.04%
93,700 Starbucks Corporation*..................................... 3,092,100
-----------
MEDIA-0.46%
51,600 Lee Enterprises, Inc. ..................................... 1,370,625
-----------
METALS & MINING-4.57%
281,100 Oregon Metallurgical Corporation*.......................... 6,588,281
184,000 Oregon Steel Mills, Inc. .................................. 3,875,500
106,300 Schnitzer Steel Industries Inc., Class A................... 3,095,988
-----------
13,559,769
-----------
PAPER & FOREST PRODUCTS-3.57%
31,633 Boise Cascade Corporation.................................. 1,095,293
51,700 TJ International, Inc...................................... 1,189,100
89,800 Weyerhaeuser Company....................................... 4,287,950
121,600 Willamette Industries, Inc................................. 4,020,400
-----------
10,592,743
-----------
REAL ESTATE INVESTMENT TRUSTS-2.57%
39,537 Equity Residential Properties Trust........................ 1,996,618
168,900 Pacific Gulf Properties, Inc. ............................. 3,821,363
64,300 Shurgard Storage Centers, Inc. ............................ 1,816,475
-----------
7,634,456
-----------
RETAIL SALES-10.26%
358,200 Building Materials Holding Corporation*.................... 4,477,500
245,225 Costco Companies, Inc.*.................................... 9,441,163
367,800 Fred Meyer Inc., Class A*.................................. 10,505,287
302,500 Hollywood Entertainment Corporation*....................... 3,705,625
288,100 Multiple Zones International, Inc. ........................ 1,728,600
9,400 Nordstrom, Inc. ........................................... 575,750
-----------
30,433,925
-----------
TRANSPORTATION SERVICES-5.40%
76,650 Airborne Freight Corporation............................... 4,857,694
169,800 Alaska Air Group, Inc.*.................................... 5,667,075
149,200 Expeditors International of Washington, Inc................ 5,483,100
-----------
16,007,869
-----------
UTILITIES - GAS & ELECTRIC-1.02%
79,616 Enron Corporation.......................................... 3,025,408
-----------
UTILITIES - TELECOMMUNICATIONS-3.30%
37,600 Century Telephone Enterprise............................... 1,595,650
202,200 General Communication, Inc.*............................... 1,516,500
346,800 Metro One Telecommunications*.............................. 3,164,550
196,400 Western Wireless Corporation, Class A*..................... 3,510,650
-----------
9,787,350
-----------
TOTAL COMMON STOCKS (cost $180,734,238).................... 288,198,455
-----------
PRINCIPAL
AMOUNT REPURCHASE AGREEMENT-2.54%
- -----------
$7,545,000 Repurchase agreement with First Boston, collateralized by
a U.S. Treasury Note in a joint trading account at 5.60%, dated
10/31/97, due 11/03/97 with a maturity value of $7,548,521
(cost $7,545,000).......................................... $ 7,545,000
-----------
TOTAL INVESTMENTS (cost $188,279,238)...................... 295,743,455
Other assets net of liabilities............................ 791,229
-----------
NET ASSETS................................................. $296,534,684
===========
</TABLE>
* Non-income producing security.
FEDERAL INCOME TAX INFORMATION:
Net unrealized appreciation of investments at October 31, 1997, of $107,464,217,
based on aggregate cost of $188,279,238, was composed of gross appreciation of
$113,396,790 for investments having an excess of value over cost, and gross
depreciation of $5,932,573 for investments having an excess of cost over value.
OTHER INFORMATION:
Purchases and sales of investment securities, other than short-term investments,
aggregated $100,731,423 and $88,826,431, respectively, for the year ended
October 31, 1997.
See accompanying notes to financial statements.
<PAGE>
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,
1997, and the related statements of operations for the year then ended and the
statements of changes in net assets for the years ended October 31, 1997 and
1996 and the financial highlights for each of the five years in the period ended
October 31, 1997. 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, 1997, 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, 1997, and their results of
their operations, the changes in their net assets, and their financial
highlights for the above-stated periods in conformity with generally accepted
accounting principles.
LEMASTER & DANIELS PLLC
CERTIFIED PUBLIC ACCOUNTANTS
SPOKANE, WASHINGTON
NOVEMBER 24, 1997
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<S> <C> <C> <C>
COMPOSITE COMPOSITE COMPOSITE
BOND & STOCK GROWTH & NORTHWEST
FUND, INC. INCOME FUND FUND, INC.
ASSETS ------------ ----------- ----------
Investments at market (identified cost - $293,351,061,
$261,698,631 and $188,279,238, respectively)............... $348,503,520 $348,176,796 $295,743,455
Cash......................................................... - - 31,313
Prepaid expense.............................................. 19,616 14,343 24,041
Receivable for:
Investment securities sold................................. 4,132,848 7,898,579 1,102,101
Interest................................................... 2,323,766 10,749 6,713
Sale of Fund's shares...................................... 785,210 943,751 1,001,485
Dividends.................................................. 356,062 269,497 74,705
------------ ------------ ------------
Total assets................................................. 356,121,022 357,313,715 297,983,813
------------ ------------ ------------
LIABILITIES
Bank overdraft............................................... 946,072 789,322 -
Payable for:
Investment securities purchased............................ 1,118,435 6,099,186 1,075,758
Repurchase of Fund's shares................................ 171,318 214,793 226,489
Accrued expenses and other payables........................ 311,446 288,056 146,882
------------ ------------ ------------
Total liabilities............................................ 2,547,271 7,391,357 1,449,129
------------ ------------ ------------
NET ASSETS .................................................. $353,573,751 $349,922,358 $296,534,684
============ ============ ============
COMPOSITION OF NET ASSETS
Capital stock, at par........................................ $ 10,962 $ 1,666 $ 115
Additional paid-in capital................................... 261,324,927 237,226,743 148,171,187
Undistributed net investment income (loss)................... 1,194,421 30,939 (422,848)
Accumulated net realized gain................................ 35,890,984 26,184,845 41,322,011
Net unrealized appreciation of investments................... 55,152,459 86,478,165 107,464,217
------------ ------------ ------------
$353,573,751 $349,922,358 $296,534,684
============ ============ ============
SHARES OUTSTANDING.......................................... 21,923,253 16,676,100 11,475,641
============ ============ ============
Class A Shares:
Net asset value and redemption price per share
(net assets of $307,017,592, $299,928,414, and $256,908,052,
respectively, for 19,030,734, 14,278,462, and 9,912,061
shares outstanding, respectively)......................... $16.13 $21.01 $25.92
============ ============ ============
Offering price per share (100/95.5 of net asset value per share) $16.89 $22.00 $27.14
============ ============ ============
Class B Shares:
Net asset value, offering price and redemption price per share
(net assets of $46,556,159, $49,993,944, and $39,626,632,
respectively, for 2,892,519, 2,397,638, and 1,563,580
shares outstanding, respectively)......................... $16.10 $20.85 $25.34
============ ============ ============
On sales of $25,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class B shares.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
<S> <C> <C> <C>
COMPOSITE COMPOSITE COMPOSITE
BOND & STOCK GROWTH & NORTHWEST
FUND, INC. INCOME FUND FUND, INC.
------------ ------------- -----------
INVESTMENT INCOME
Income:
Dividends................................................... $ 5,322,979 $ 4,332,639 $ 2,113,823
Interest.................................................... 8,412,688 188,590 242,821
----------- ----------- -----------
Total income.................................................. 13,735,667 4,521,229 2,356,644
----------- ----------- ------------
Expenses:
Management fees............................................. 1,912,341 1,630,777 1,538,183
Distribution expenses - Class A............................. 701,288 563,809 537,269
Distribution expenses - Class B............................. 334,855 365,290 247,630
Shareholder servicing fees - Class A........................ 198,953 188,439 290,223
Shareholder servicing fees - Class B........................ 36,983 56,918 57,338
Postage, printing and office expense........................ 123,830 124,511 154,301
Registration and filing fees................................ 56,359 80,933 40,153
Custodial fees.............................................. 45,819 55,954` 32,497
Auditing and legal fees..................................... 16,551 15,587 15,558
Insurance................................................... 5,602 4,332 4,338
Directors' fees............................................. 8,745 8,745 8,745
Expense reimbursement....................................... - - (137,944)
----------- ----------- -------------
Total expenses................................................ 3,441,326 3,095,295 2,788,291
Fees paid indirectly.......................................... (9,658) (10,113) (7,353)
----------- ----------- -------------
Net expenses.................................................. 3,431,668 3,085,182 2,780,938
----------- ----------- -------------
Net investment income (loss).................................. 10,303,999 1,436,047 (424,294)
----------- ----------- -------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Realized gain from investment transactions.................... 36,021,498 26,629,017 41,408,116
Unrealized appreciation of
investments during the year................................. 12,620,413 37,406,069 45,605,120
----------- ----------- -----------
Net realized and unrealized gain on investments............... 48,641,911 64,035,086 87,013,236
----------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .................................... $58,945,910 $65,471,133 $86,588,942
=========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
COMPOSITE BOND & STOCK COMPOSITE GROWTH COMPOSITE NORTHWEST
FUND, INC. & INCOME FUND FUND, INC.
------------------------ ------------------------ ------------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1997 1996 1997 1996 1997 1996
------------------------ ------------------------ ------------------------
OPERATIONS
Net investment income (loss)........$ 10,303,999 $ 9,075,835 $ 1,436,047 $ 2,016,068 $ (424,294) $ 197,430
Realized gain from
investment transactions........... 36,021,498 17,743,293 26,629,017 14,044,609 41,408,116 18,297,956
Unrealized appreciation of
investments during the year....... 12,620,413 8,484,821 37,406,069 18,741,419 45,605,120 5,491,521
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations......... 58,945,910 35,303,949 65,471,133 34,802,096 86,588,942 23,986,907
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Class A.......................... (9,565,088) (8,283,363) (1,646,567) (1,970,751) - (276,041)
Class B.......................... (866,492) (404,212) (33,995) (63,860) - -
From net capital gains from
investment transactions:
Class A.......................... (16,337,631) (4,933,381) (12,746,652) (4,850,669) (16,815,468) (1,664,400)
Class B.......................... (1,513,284) (193,534) (1,708,904) (350,319) (1,448,706) (80,343)
NET CAPITAL SHARE TRANSACTIONS
Class A.......................... 24,198,233 26,512,465 79,235,236 22,518,259 18,342,906 (2,041,396)
Class B.......................... 21,054,537 13,691,710 20,170,211 11,596,203 18,507,592 6,398,405
------------ ------------ ------------ ------------ ------------ ------------
Total increase in net assets........ 75,916,185 61,693,634 148,740,462 61,680,959 105,175,266 26,323,132
NET ASSETS
Beginning of the year............... 277,657,566 215,963,932 201,181,896 139,500,937 191,359,418 165,036,286
------------ ------------ ------------ ------------ ------------ ------------
End of the year.....................$353,573,751 $277,657,566 $349,922,358 $201,181,896 $296,534,684 $191,359,418
============ ============ ============ ============ ============ ============
UNDISTRIBUTED NET INVESTMENT
INCOME (ACCUMULATED NET INVESTMENT
LOSS) AT END OF YEAR................$ 1,194,421 $ 1,322,002 $ 30,939 $ 275,454 $ (422,848) $ 1,446
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
COMPOSITE BOND & STOCK FUND, INC.
<S> <C> <C> <C> <C> <C>
CLASS A YEARS ENDED OCTOBER 31,
---------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
NET ASSET VALUE, BEGINNING OF YEAR............................ $14.71 $13.48 $11.53 $12.23 $11.27
INCOME FROM INVESTMENT OPERATIONS ------ ------ ------ ------ ------
Net investment income........................................ 0.50 0.52 0.50 0.46 0.48
Net gains or losses on securities (both realized
and unrealized)............................................ 2.37 1.53 2.02 (0.57) 1.06
------ ------ ------ ------ ------
Total from investment operations........................... 2.87 2.05 2.52 (0.11) 1.54
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends (from net investment income)....................... (0.51) (0.50) (0.49) (0.44) (0.46)
Distributions (from capital gains)........................... (0.94) (0.32) (0.08) (0.15) (0.12)
------ ------ ------ ------ ------
Total distributions........................................ (1.45) (0.82) (0.57) (0.59) (0.58)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR ................................. $16.13 $14.71 $13.48 $11.53 $12.23
====== ====== ====== ====== ======
TOTAL RETURN (1) ............................................. 20.81% 15.66% 22.55% -0.90% 13.99%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($1,000's)...........................$307,018 $255,414 $208,592 $191,615 $180,281
Ratio of expenses to average net assets(2) .................. 0.99% 0.98% 1.02% 1.06% 1.13%
Ratio of net income to average net assets.................... 3.31% 3.68% 3.98% 3.97% 4.01%
Portfolio turnover rate...................................... 54% 46% 32% 25% 19%
Average commission paid(3) .................................. $0.0561 $0.0632 - - -
MARCH 30,
CLASS B YEARS ENDED OCTOBER 31, TO
------------------------ OCTOBER 31,
1997 1996 1995 1994(4)
------ ------ ------ ----------
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $14.69 $13.47 $11.51 $11.49
INCOME FROM INVESTMENT OPERATIONS ------ ------ ------ ----------
Net investment income........................................ 0.39 0.41 0.39 0.18
Net gains on securities (both realized and unrealized)....... 2.36 1.53 2.03 0.04
------ ------ ------ ----------
Total from investment operations........................... 2.75 1.94 2.42 0.22
------ ------ ------ ----------
LESS DISTRIBUTIONS
Dividends (from net investment income)....................... (0.40) (0.40) (0.38) (0.20)
Distributions (from capital gains)........................... (0.94) (0.32) (0.08) -
------ ------ ------ ----------
Total distributions........................................ (1.34) (0.72) (0.46) (0.20)
------ ------ ------ ----------
NET ASSET VALUE, END OF PERIOD ............................... $16.10 $14.69 $13.47 $11.51
====== ====== ====== ==========
TOTAL RETURN (1) ............................................. 19.86% 14.73% 21.60% 1.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($1,000's)......................... $46,556 $22,243 $ 7,372 $ 3,362
Ratio of expenses to average net assets(2) .................. 1.79% 1.86% 1.84% 1.77%(5)
Ratio of net income to average net assets.................... 2.48% 2.80% 3.10% 3.22%(5)
Portfolio turnover rate...................................... 54% 46% 32% 25%
Average commission paid(3) .................................. $0.0561 $0.0632 - -
</TABLE>
(1) Total returns do not reflect a sales charge and are not annualized.
(2) Ratio of expenses to average net assets include expenses paid indirectly
beginning in fiscal 1995.
(3) Average commission paid disclosure beginning in fiscal 1996.
(4) From the commencement of offering of Class B shares.
(5) Annualized.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
COMPOSITE GROWTH & INCOME FUND
<S> <C> <C> <C> <C> <C>
CLASS A YEARS ENDED OCTOBER 31,
------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
NET ASSET VALUE, BEGINNING OF YEAR............................$ 17.26 $14.65 $12.71 $12.81 $12.02
INCOME FROM INVESTMENT OPERATIONS ------ ------ ------ ------ ------
Net investment income........................................ 0.12 0.20 0.22 0.18 0.21
Net gains on securities (both realized and unrealized)....... 4.98 3.16 2.31 0.85 1.10
------ ------ ------ ------ ------
Total from investment operations........................... 5.10 3.36 2.53 1.03 1.31
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends (from net investment income)....................... (0.14) (0.21) (0.19) (0.18) (0.21)
Distributions (from capital gains)........................... (1.21) (0.54) (0.40) (0.95) (0.31)
------ ------ ------ ------ ------
Total distributions........................................ (1.35) (0.75) (0.59) (1.13) (0.52)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR .................................$ 21.01 $17.26 $14.65 $12.71 $12.81
====== ====== ====== ====== ======
TOTAL RETURN (1) ............................................. 31.24% 23.61% 20.87% 8.55% 11.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($1,000's)...........................$299,928 $178,331 $130,630 $102,837 $95,229
Ratio of expenses to average net assets(2) .................. 1.05% 1.03% 1.07% 1.10% 1.17%
Ratio of net income to average net assets.................... 0.66% 1.26% 1.62% 1.45% 1.67%
Portfolio turnover rate...................................... 71% 52% 39% 34% 54%
Average commission paid(3) ..................................$ 0.0581 $ 0.0654 - - -
MARCH 30
CLASS B YEARS ENDED OCTOBER 31, TO
------------------------- OCTOBER 31,
1997 1996 1995 1994(4)
------ ------ ------ --------
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $17.17 $14.59 $12.68 $12.00
INCOME FROM INVESTMENT OPERATIONS ------ ------ ------ --------
Net investment income........................................ (0.02) 0.06 0.11 0.05
Net gains on securities (both realized and unrealized)....... 4.93 3.14 2.31 0.69
------ ------ ------ --------
Total from investment operations........................... 4.91 3.20 2.42 0.74
------ ------ ------ --------
LESS DISTRIBUTIONS
Dividends (from net investment income)....................... (0.02) (0.08) (0.11) (0.06)
Distributions (from capital gains)........................... (1.21) (0.54) (0.40) -
------ ------ ------ --------
Total distributions........................................ (1.23) (0.62) (0.51) (0.06)
------ ------ ------ --------
NET ASSET VALUE, END OF PERIOD ............................... $20.85 $17.17 $14.59 $12.68
====== ====== ====== ========
TOTAL RETURN (1) ............................................. 30.20% 22.55% 19.95% 6.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($1,000's)......................... $49,994 $22,851 $8,871 $2,082
Ratio of expenses to average net assets(2) .................. 1.88% 1.94% 1.91% 1.85%(5)
Ratio of net income to average net assets.................... -0.19% 0.34% 0.69% 0.65%(5)
Portfolio turnover rate...................................... 71% 52% 39% 34%
Average commission paid(3) .................................. $0.0581 $0.0654 - -
</TABLE>
(1) Total returns do not reflect a sales charge and are not annualized.
(2) Ratio of expenses to average net assets include expenses paid indirectly
beginning in fiscal 1995.
(3) Average commission paid disclosure beginning in fiscal 1996.
(4) From the commencement of offering of Class B shares.
(5) Annualized.
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
COMPOSITE NORTHWEST FUND, INC.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS A YEARS ENDED OCTOBER 31,
------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
NET ASSET VALUE, BEGINNING OF YEAR............................$ 19.69 $17.40 $14.30 $14.50 $14.04
INCOME FROM INVESTMENT OPERATIONS ------ ------ ------ ------ ------
Net investment income (loss)................................. (0.02) 0.03 0.07 0.08 0.07
Net gains on securities (both realized and unrealized)....... 8.13 2.47 3.10 0.35 0.46
------ ------ ------ ------ ------
Total from investment operations........................... 8.11 2.50 3.17 0.43 0.53
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends (from net investment income)....................... - (0.03) (0.07) (0.08) (0.07)
Distributions (from capital gains)........................... (1.88) (0.18) - (0.55) -
------ ------ ------ ------ ------
Total distributions........................................ (1.88) (0.21) (0.07) (0.63) (0.07)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR .................................$ 25.92 $19.69 $17.40 $14.30 $14.50
====== ====== ====== ====== ======
TOTAL RETURN (1) ............................................. 44.47% 14.54% 22.24% 2.97% 3.82%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year ($1,000's)...........................$256,908 $176,706 $157,953 $152,622 $168,840
Ratio of expenses to average net assets(2) .................. 1.05% 1.08% 1.10% 1.09% 1.09%
Ratio of net income to average net assets.................... -0.08% 0.16% 0.44% 0.51% 0.48%
Portfolio turnover rate...................................... 37% 42% 9% 11% 8%
Average commission paid(3) ..................................$ 0.0557 $ 0.0665 - - -
MARCH 30
CLASS B YEARS ENDED OCTOBER 31, TO
------------------------- OCTOBER 31,
1997 1996 1995 1994(4)
------ ------ ------ --------
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $19.45 $17.31 $14.28 $14.42
INCOME FROM INVESTMENT OPERATIONS ------ ------ ------ --------
Net investment income (loss)................................. (0.08) (0.08) (0.05) (0.02)
Net gains on securities (both realized and unrealized)....... 7.85 2.40 3.08 (0.12)
------ ------ ------ --------
Total from investment operations........................... 7.77 2.32 3.03 (0.14)
------ ------ ------ --------
LESS DISTRIBUTIONS
Dividends (from net investment income)....................... - - - -
Distributions (from capital gains)........................... (1.88) (0.18) - -
------ ------ ------ --------
Total distributions........................................ (1.88) (0.18) - -
------ ------ ------ --------
NET ASSET VALUE, END OF PERIOD ............................... $25.34 $19.45 $17.31 $14.28
====== ====== ====== ========
TOTAL RETURN (1) ............................................. 43.17% 13.54% 21.25% -0.97%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($1,000's)......................... $39,627 $14,653 $7,083 $3,102
Ratio of expenses to average net assets(2) .................. 1.91% 1.98% 1.95% 1.96%(5)
Ratio of net income to average net assets.................... -0.96% -0.76% -0.45% -0.39%(5)
Portfolio turnover rate...................................... 37% 42% 9% 11%
Average commission paid(3) .................................. $0.0557 $0.0665 - -
</TABLE>
(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>
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997
NOTE 1 - ACCOUNTING POLICIES
Composite Bond & Stock Fund, Inc., Composite Equity Series, Inc., and
Composite Northwest Fund, Inc., collectively the Funds, are registered under the
Investment Company Act of 1940, as amended, as open-end diversified management
investment companies. Composite Growth & Income Fund is a portfolio of Composite
Equity Series, Inc.
The Funds offer both Class A and Class B shares. The two classes of shares
differ in their respective sales charges, shareholder servicing fees, and
distribution and service fees. All shareholders bear the common expenses of the
Fund pro rata, based on value of shares outstanding, without distinction between
share class. Dividends are declared separately for each class.
Following is a summary of significant accounting policies, in conformity with
generally accepted accounting principles, which are consistently followed by
each Fund in the preparation of its financial statements.
a. Investment securities are stated on the basis of valuations provided by an
independent pricing service, approved by the Boards of Directors, which uses
information with respect to last reported sales price for securities traded
on a national securities exchange (or reported on the National Association of
Securities Dealers Automated Quotation [NASDAQ] National Market System) or
securities traded over-the-counter, in determining value. Investment
securities with less than 60 days to maturity when purchased are valued at
amortized cost which approximates market value. Investment securities not
currently quoted as described above will be priced at fair market value as
determined in good faith in a manner prescribed by the Boards of Directors.
b. Each Fund requires the custodian to take possession, to have legally
segregated in the Federal Reserve Book Entry System or to have segregated
within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is
required to be at least 102% of the resale price at the time of purchase. If
the seller of the agreement defaults and the value of collateral declines, or
if the seller enters an insolvency proceeding, realization of the value of
the collateral by the Fund may be delayed or limited.
c. Income, expenses (other than those attributable to a specific class) and
gains and losses are allocated daily to each class based on value of shares
outstanding. Dividends are declared separately for each class. Neither class
has preferential dividend rights; differences in per-share dividend rates are
generally due to differences in separate class expenses, including
distribution and service fees.
d. Interest income is earned from the settlement date on securities purchased
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date.
e. Dividends and distributions to shareholders are recorded on the ex-dividend
date.
f. Security transactions are accounted for on the trade date (execution date of
the order to buy or sell). Realized gain or loss from security transactions
and the change in unrealized appreciation or depreciation are determined on
the basis of identified cost.
g. Each Fund complies with requirements of the Internal Revenue Code applicable
to regulated investment companies and distributes taxable income so that no
provision for federal income or excise tax is required. Income dividends and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatment for deferral of
wash sales.
h. Custodial fees have been increased by $9,658, $10,113, and $7,353, for the
Bond & Stock Fund, Inc., the Growth & Income Fund, and the Northwest Fund,
Inc., respectively. Such amounts relate to "expense offset arrangements." The
Funds could have otherwise employed the assets to produce income if they had
not entered into such arrangements. In accordance with regulations, such
amounts are added to net custodial fees and then reflected as a deduction,
"fees paid indirectly," to derive net expenses. There were no "expense offset
arrangements" other than custodial fees.
i. The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE>
NOTE 2 - COVERED CALL OPTIONS WRITTEN
Each Fund may write listed covered call options in which premiums received
are recorded as a liability which is marked to market to reflect the current
value of options written. A covered call option gives the holder the right to
buy the underlying security, which each Fund owns, at any time during the option
period at a predetermined exercise price. The risk in writing a covered call
option is that each Fund gives up the opportunity to participate in any increase
in price of the underlying security beyond the exercise price. Proceeds from the
call options exercised are increased by the amount of premium received. If an
option expires or is canceled in a closing transaction, each Fund will realize a
gain or loss depending on whether the cost of the closing transaction, if any,
is less than or greater than the premium originally received.
Transactions in written covered call options during the year ended October
31, 1997, were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COMPOSITE BOND & COMPOSITE GROWTH &
STOCK FUND, INC. INCOME FUND
-------------------- --------------------
NUMBER OF NUMBER OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
--------- --------- --------- ---------
Outstanding at October 31, 1996............................... 150 $ 59,473 305 $ 76,899
Options written............................................... 440 89,707 225 78,842
Options closed................................................ 0 0 (45) (38,091)
Options expired............................................... (150) (59,473) (120) (32,329)
Options exercised............................................. (440) (89,707) (365) (85,321)
--------- --------- --------- ---------
Outstanding at October 31, 1997............................... 0 $ 0 0 $ 0
========= ========= ========= =========
</TABLE>
<PAGE>
NOTE 3 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
The amounts of fees and expenses described below are shown on each Fund's
statement of operations. Composite Research & Management Co. (the "Adviser")
manages each Fund and Murphey Favre Securities Services, Inc. (the "Transfer
Agent") is the transfer and shareholder servicing agent. On July 14, 1997,
Composite Funds Distributor, Inc. (the "Distributor") began operations as the
principal underwriter. Prior to July 13, 1997, Murphey Favre, Inc., was the
principal underwriter. All are affiliates of Washington Mutual Bank and
Washington Mutual fsb and subsidiaries of Washington Mutual, Inc.
Management fees were paid by each Fund to the Adviser. Management fees for
the Bond & Stock Fund and Growth & Income Fund are equal to an annual rate of
.625% of each Fund's average daily net assets. Fees are reduced to .50% of
average daily net assets in excess of $250 million. The management fee for the
Northwest Fund is equal to an annual rate of .625% of the Fund's average daily
net assets. Should the assets of the Fund grow to greater than $500 million, the
fee would be decreased. Also, under terms of the Northwest Fund's management
agreement, the Adviser will reimburse Northwest should fund expenses (excluding
taxes, interest, portfolio brokerage, and the .75% Class B distribution fee)
exceed, in any fiscal year, 1.50% of the average daily net assets up to $30
million, and 1% of such net assets over $30 million. For the year ended October
31, 1997, the Northwest Fund was reimbursed $137,944 under this agreement.
Directors' fees and expenses were paid directly by each Fund to directors
having no affiliation with the Funds other than in their capacity as directors.
Other officers and directors received no compensation from the Funds.
Shareholder servicing fees were paid to the Transfer Agent for services
incidental to issuance and transfer of shares, maintaining shareholder lists,
and issuing and mailing distributions and reports. The authorized monthly
shareholder servicing fees are $1.25 and $1.35 ($1.35 and $1.45 prior to April
1, 1997) per Class A and Class B shares accounts, respectively.
Distribution expenses were paid to the Distributor in accordance with
separate distribution plans for Class A and Class B. Funds' Board of Directors
adopted the plans pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The Class A distribution plan provides that the Fund will reimburse the
Distributor up to 0.25% of the average daily net assets attributable to Class A
shares annually for a portion of its expenses incurred in distributing each
Fund's Class A shares, including payment to brokers. The Class B distribution
plan provides that the Funds will pay the Distributor a distribution fee, equal
to 0.75% annually, and a service fee of 0.25%, of the Funds' average daily net
assets attributable to Class B shares.
For the year ended October 31, 1997, commissions (sales charges paid by
investors) on the purchases of Class A shares totaled $885,598, $825,142, and
$799,120, of which $710,403, $666,246, and $551,530 was retained by the
Distributor and Murphey Favre, Inc. in the Bond & Stock Fund, the Growth &
Income Fund, and the Northwest Fund, respectively. For the year ended October
31, 1997, the Distributor and Murphey Favre, Inc. received contingent deferred
sales charges of $63,218, $63,310, and $37,195 for the Bond & Stock Fund, the
Growth & Income Fund, and the Northwest Fund, respectively, upon redemption of
Class B shares as reimbursement for sales commissions advanced by the
Distributor and Murphey Favre, Inc. at the time of such sales.
<PAGE>
NOTE 4 - CAPITAL STOCK
COMPOSITE BOND & STOCK FUND, INC
Capital stock authorized.............. 300,000,000
Designated as:
Class A............................. 200,000,000
Class B............................. 100,000,000
Par value per share................... $0.0005
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CLASS A CLASS B
----------------------- -----------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1997 1996 1997 1996
Shares ------ ------ ------ ------
Sold..................................................... 3,423,606 3,502,594 1,491,572 1,071,938
Issued for reinvestment of dividends and capital gains... 1,697,502 551,925 160,463 28,182
5,121,108 4,054,519 1,652,035 1,100,120
Reacquired............................................... (3,452,180) (2,170,504) (274,187) (132,719)
Net increase............................................. 1,668,928 1,884,015 1,377,848 967,401
Amount
Sold.....................................................$52,484,804 $44,698,687 $22,935,586 $14,984,826
Issued for reinvestment of dividends and capital gains... 24,871,733 12,571,523 2,352,873 592,143
77,356,537 57,270,210 25,288,459 15,576,969
Reacquired...............................................(53,158,304) (30,757,745) (4,233,922) (1,885,259)
Net increase.............................................$24,198,233 $26,512,465 $21,054,537 $13,691,710
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - CAPITAL STOCK (continued)
COMPOSITE GROWTH & INCOME FUND
Capital stock authorized.............. 40,000,000
Designated as:
Class A............................. 25,000,000
Class B............................. 15,000,000
Par value per share................... $0.0001
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CLASS A CLASS B
----------------------- -----------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1997 1996 1997 1996
------ ------ ------ ------
Shares
Sold..................................................... 5,205,714 2,162,456 1,165,851 781,671
Issued for reinvestment of dividends and capital gains... 798,609 424,694 101,631 27,517
6,004,323 2,587,150 1,267,482 809,188
Reacquired............................................... (2,059,919) (1,172,395) (201,009) (86,112)
Net increase............................................. 3,944,404 1,414,755 1,066,473 723,076
Amount
Sold.....................................................$106,141,702 $34,852,996 $22,289,439 $12,562,783
Issued for reinvestment of dividends and capital gains... 13,852,602 6,465,408 1,737,586 413,214
119,994,304 41,318,404 24,027,025 12,975,997
Reacquired............................................... (40,759,068) (18,800,145) (3,856,814) (1,379,794)
Net increase.............................................$ 79,235,236 $22,518,259 $20,170,211 $11,596,203
</TABLE>
COMPOSITE NORTHWEST FUND, INC.
Capital stock authorized..............10,000,000,000
Designated as:
Class A............................. 6,000,000,000
Class B............................. 4,000,000,000
Par value per share................... $0.00001
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CLASS A CLASS B
---------------------- ----------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
1997 1996 1997 1996
------ ------ ------ ------
Shares
Sold..................................................... 1,637,573 1,670,374 836,203 384,301
Issued for reinvestment of dividends and capital gains... 855,423 107,929 74,775 4,603
2,492,996 1,778,303 910,978 388,904
Reacquired............................................... (1,553,311) (1,881,146) (100,926) (44,652)
Net increase (decrease).................................. 939,685 (102,843) 810,052 344,252
Amount
Sold.....................................................$37,595,728 $30,838,126 $19,318,236 $7,154,271
Issued for reinvestment of dividends and capital gains... 16,535,329 1,894,196 1,445,397 80,228
54,131,057 32,732,322 20,763,633 7,234,499
Reacquired...............................................(35,788,151) (34,773,718) (2,256,041) (836,094)
Net increase (decrease)..................................$18,342,906 $(2,041,396) $18,507,592 $6,398,405
</TABLE>
<PAGE>
NOTE 5 - SUBSEQUENT EVENTS
On September 23, 1997, the Funds' Board of Directors authorized the
reorganization of each of the Funds into a series of a Massachusetts business
trust. The reorganization will not result in the dilution of the interests of
the Funds' shareholders and the shareholders will not bear any portion of the
expense incurred relating to the reorganization. The effective date of the
reorganization is expected to be December 1997.
Also on September 23, 1997, the Board of Directors of Composite Growth &
Income Fund approved the acquisition of the net assets of the Sierra Growth and
Income Fund, a series of Sierra Trust Funds. On October 28, 1997, the Trustees
of Sierra Growth & Income Fund approved the acquisition which is contingent upon
a vote of shareholders scheduled for December 23, 1997. If the shareholders of
Sierra Growth and Income Fund approve the proposal of the Trustees, the
transaction is expected to occur in January 1998. The transaction will not
result in the dilution of the interests of either Composite or Sierra
shareholders and they will not bear any portion of the expense relating to the
transaction.
<PAGE>
========================================
----------------------------------------
For further information, please contact:
FUND OFFICES
Composite Group of Funds
601 W. Main Avenue, Suite 300
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
Composite Funds Distributor, Inc.
601 W. Main Avenue, Suite 300 Spokane, WA 99201-0613
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 700 Spokane, WA 99201-0614
COUNSEL
Paine, Hamblen, Coffin, Brooke & Miller LLP
717 W. Sprague Avenue, Suite 1200 Spokane, WA 99204-0464
OFFICERS BOARD OF DIRECTORS
President Members
William G. Papesh Wayne L. Attwood, M.D.
Vice President Kristianne Blake
Gene G. Branson Anne V. Farrell
Vice President & Treasurer Michael K. Murphy
Monte D. Calvin William G. Papesh
Secretary Daniel L. Pavelich
John T. West Jay Rockey
Richard C. Yancey
This report is submitted for the general information of
shareholders of the Funds. For more detailed information
about the Funds, their officers and directors, fees, expenses
and other pertinent information, please see the prospectus
of the Funds. This report is not authorized for distribution
to prospective investors in the Funds unless preceded or
accompanied by an effective prospectus.
[RECYCLE LOGO] 12/97
55004
COMPOSITE GROUP
EQUITY
FUNDS
ANNUAL REPORT
OCTOBER 31,
1997
COMPOSITE BOND &
STOCK FUND, INC.
COMPOSITE GROWTH
& INCOME FUND
COMPOSITE
NORTHWEST
FUND, INC.
[COMPOSITE GROUP OF FUNDS LOGO]
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S SEMIANNUAL 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> 0000796533
<NAME> COMPOSITE NORTHWEST FUND, INC.
<SERIES>
<NUMBER> 001
<NAME> CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 188,279,238
<INVESTMENTS-AT-VALUE> 295,743,455
<RECEIVABLES> 2,185,004
<ASSETS-OTHER> 55,354
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 297,983,813
<PAYABLE-FOR-SECURITIES> 1,075,758
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 373,371
<TOTAL-LIABILITIES> 1,449,129
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 148,171,189
<SHARES-COMMON-STOCK> 9,912,061
<SHARES-COMMON-PRIOR> 9,922,336
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 422,848
<ACCUMULATED-NET-GAINS> 41,322,011
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107,464,217
<NET-ASSETS> 296,534,684
<DIVIDEND-INCOME> 2,113,823
<INTEREST-INCOME> 242,821
<OTHER-INCOME> 0
<EXPENSES-NET> (2,780,938)
<NET-INVESTMENT-INCOME> (424,294)
<REALIZED-GAINS-CURRENT> 41,408,116
<APPREC-INCREASE-CURRENT> 45,605,120
<NET-CHANGE-FROM-OPS> 86,588,942
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (16,815,468)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,637,573
<NUMBER-OF-SHARES-REDEEMED> (1,553,311)
<SHARES-REINVESTED> 855,423
<NET-CHANGE-IN-ASSETS> 105,175,266
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 17,833,507
<OVERDISTRIB-NII-PRIOR> (4,381)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,538,183
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,780,938
<AVERAGE-NET-ASSETS> 244,953,187
<PER-SHARE-NAV-BEGIN> 19.69
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 8.13
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.88)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 25.92
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S SEMIANNUAL 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> 0000796533
<NAME> COMPOSITE NORTHWEST FUND, INC.
<SERIES>
<NUMBER> 002
<NAME> CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 188,279,238
<INVESTMENTS-AT-VALUE> 295,743,455
<RECEIVABLES> 2,185,004
<ASSETS-OTHER> 55,354
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 297,983,813
<PAYABLE-FOR-SECURITIES> 1,075,758
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 373,371
<TOTAL-LIABILITIES> 1,449,129
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 148,171,189
<SHARES-COMMON-STOCK> 1,563,580
<SHARES-COMMON-PRIOR> 1,083,885
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 422,848
<ACCUMULATED-NET-GAINS> 41,322,011
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107,464,217
<NET-ASSETS> 296,534,684
<DIVIDEND-INCOME> 2,113,823
<INTEREST-INCOME> 242,821
<OTHER-INCOME> 0
<EXPENSES-NET> (2,780,938)
<NET-INVESTMENT-INCOME> (424,294)
<REALIZED-GAINS-CURRENT> 41,408,116
<APPREC-INCREASE-CURRENT> 45,605,120
<NET-CHANGE-FROM-OPS> 86,588,942
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,448,706)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 836,203
<NUMBER-OF-SHARES-REDEEMED> (100,926)
<SHARES-REINVESTED> 74,775
<NET-CHANGE-IN-ASSETS> 105,175,266
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 17,833,507
<OVERDISTRIB-NII-PRIOR> (4,381)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,538,183
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,780,938
<AVERAGE-NET-ASSETS> 244,953,187
<PER-SHARE-NAV-BEGIN> 19.45
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 7.85
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.88)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 25.34
<EXPENSE-RATIO> 1.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
