<PAGE>
NORWEST
PASSAGE
VARIABLE ANNUNITY
[LOGO]
NORWEST PASSAGE VARIABLE ANNUITY
IS DISTRIBUTED BY FORTIS INVESTORS, INC.
NORWEST SELECT FUNDS
ANNUAL REPORT FOR:
- - INTERMEDIATE BOND FUND
- - INCOME EQUITY FUND
- - VALUGROWTH-SM- STOCK FUND
- - SMALL COMPANY STOCK FUND
DECEMBER 31, 1996
NORWEST SELECT FUNDS ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE SYSTEM, U.S.
GOVERNMENT, OR ANY OTHER GOVERNMENT AGENCY, ARE NOT BANK DEPOSITS, ARE NOT
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. PLEASE SEE INSIDE
COVER FOR ADDITIONAL DISCLOSURE INFORMATION.
<PAGE>
Norwest Select Funds is a family of open-end investment companies commonly known
as mutual funds. FORUM FINANCIAL SERVICES, INC. ("FORUM"), MEMBER NASD, is the
manager and distributor of Norwest Select Funds. Forum is not affiliated with
Norwest Corporation, Norwest Bank Minnesota, N.A. or Norwest Investment
Services, Inc. SHARES OF THE FUNDS ARE NOT INSURED OR GUARANTEED BY OR ARE NOT
OBLIGATIONS OF THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
SYSTEM, THE U.S. GOVERNMENT OR ANY GOVERNMENT AGENCY. EVEN THOUGH NORWEST
INVESTMENT MANAGEMENT, A PART OF NORWEST BANK MINNESOTA, N.A. (THE "BANK"), ACTS
AS THE INVESTMENT ADVISER, AND THE BANK ACTS AS THE TRANSFER AGENT AND CUSTODIAN
OF NORWEST SELECT FUNDS, AND EACH RECEIVES FEES FOR SUCH SERVICES AS DISCLOSED
IN THE PROSPECTUS, SHARES OF THE FUNDS ARE NOT BANK DEPOSITS, AND ARE NOT
OBLIGATIONS OF, GUARANTEED OR ENDORSED BY THE BANK, ANY OTHER BANK, OR ANY OF
THE BANK'S AFFILIATES, INCLUDING NORWEST CORPORATION AND NORWEST INVESTMENT
SERVICES, INC., NOR ARE THEY GUARANTEED BY OR DO THEY CONSTITUTE OBLIGATIONS OF
FORUM.
INVESTMENT IN SHARES OF MUTUAL FUNDS IS SUBJECT TO RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL, THAT MAY CAUSE THE VALUE OF THE INVESTMENT AND THE INVESTMENT
RETURN TO FLUCTUATE. WHEN THE INVESTMENT IS SOLD, THE VALUE MAY BE HIGHER OR
LOWER THAN THE AMOUNT ORIGINALLY INVESTED.
Mutual funds are sold only by prospectus. Shares of the Norwest Select Funds
are currently sold only to separate accounts ("Separate Accounts") of certain
insurance companies (the "Insurance Companies"), as each Fund of the Trust
serves as an investment medium for variable life insurance policies and variable
annuity contracts (collectively the "Contracts") issued by the Insurance
Companies.
<PAGE>
NORWEST SELECT FUNDS
TABLE OF CONTENTS DECEMBER 31, 1996
A MESSAGE TO CONTRACT HOLDERS . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT ADVISER'S REPORT AND PERFORMANCE DATA
Intermediate Bond Fund . . . . . . . . . . . . . . . . . . . . . . . 2
Income Equity Fund . . . . . . . . . . . . . . . . . . . . . . . . . 3
ValuGrowth-SM- Stock Fund . . . . . . . . . . . . . . . . . . . . . 4
Small Company Stock Fund . . . . . . . . . . . . . . . . . . . . . . 5
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . . . . . . . 6
FINANCIAL STATEMENTS
Statements of Assets and Liabilities . . . . . . . . . . . . . . . . . 7
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . 8
Statements of Changes in Net Assets . . . . . . . . . . . . . . . . . 9
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 10
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . 13
Schedules of Investments
Intermediate Bond Fund. . . . . . . . . . . . . . . . . . . . . . 15
Income Equity Fund. . . . . . . . . . . . . . . . . . . . . . . . 17
ValuGrowth-SM- Stock Fund . . . . . . . . . . . . . . . . . . . . 19
Small Company Stock Fund. . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
NORWEST SELECT FUNDS
A MESSAGE TO CONTRACT HOLDERS
February 13, 1997
Dear Contract Holders:
We are pleased to present the Annual Report for the year ended December 31,
1996, for the Norwest Select Funds. The Norwest Select Funds experienced
significant growth over the last year with net assets more than tripling from
one year ago. We strongly believe that this success is the result of the
continued positive performance of the Norwest Select Funds and the confidence
and support of the contract holders of Norwest Passage Variable Annuity.
The stock market performed exceptionally well over the past year with the
Standard & Poor's 500 Index returning 23.0% for the twelve months ended December
31, 1996, compared to a 14.8% average annual return for the past ten years. The
bond market, however, did not fare as well over the same period with the Lehman
Brothers Aggregate Bond Index returning 3.6%, compared to an 8.5% average annual
return for the past ten years.
Volatility increased in both the stock and bond markets during 1996. For
example, the Dow Jones Industrial Average fell 114 points on July 8th and
another 161 points on July 16th to settle below 5400, a 7% decline in a two-week
period. Yet, by December 27th, the Dow had reached 6561 - its highest for the
year. Similarly, the 30-year Treasury bond started the year below 6.0%, reached
a high of 7.2% in July, and settled at 6.7% at the end of the period.
The increased volatility in both the stock and bond markets in 1996 was driven
by signs of a strengthening economy fueling fears of inflation. For stock
mutual funds, volatility was also due to varying performance among different
classes of stocks and among individual stocks within each mutual fund. Although
market volatility can cause anxiety for some investors, it is a benefit to those
who invest regularly toward long-term goals. Many of you have found that
investing in the Norwest Select Funds through a variable annuity will earn the
benefits of tax deferral today and seeks to provide you retirement income in the
future.
The Norwest Select Funds will continue to pursue the highest level of
performance. If you have any questions or would like additional information
about the Norwest Select Funds, please call (800) 338-1348 or (612) 667-8833
(press 1). For variable annuity information, please call Fortis Benefits
Insurance Company at (800) 780-7743. We appreciate your confidence in the
Norwest Select Funds.
Sincerely,
/s/ John Y. Keffer
John Y. Keffer
CHAIRMAN AND PRESIDENT
NORWEST SELECT FUNDS
1
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NORWEST SELECT FUNDS
1996 PERFORMANCE REVIEW
INTERMEDIATE BOND FUND
For the twelve-month period ended December 31, 1996, the fund had a total return
of 2.37%. The Lehman Brothers Intermediate Government/Corporate Bond Index,
which reflects the overall marketplace in which the fund invests, had a return
of 4.06% over the same period.
The twelve-month period ended December 31, 1996 was a volatile time in the
fixed-income markets. Through the first half of 1996, many market participants
saw economic expectations of a short-term rate increase from the Fed. Then, in
the third quarter, there were signs of a slowing economy and inflation fears
disappeared. As a result, market expectations for higher short-term interest
rates began to ease. As the period closed, market debate was still centered on
whether the next Fed move might in fact be to ease, rather than tighten,
monetary policy.
Our goal continues to provide a high level of income by utilizing a portfolio of
U.S. Treasury and Agency Notes, supplemented with higher yielding mortgage
backed securities and corporate bonds.
FUND & INDEX INTERMEDIATE BOND FUND VS.
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE INDEX
DATE ENDING 12/31/96
FUND LOOKUP COLUMN 36
INDEX LOOKUP COLUMN 5
Investment Value on 12/31/96
- ----------------------------
Intermediate Bond Fund $11,904
Lehman Interm Govt/Corp Index $12,084
Since Inception
Average Annual Total Return 1 Year on 06/01/94
- --------------------------- ------ -----------
Intermediate Bond Fund 2.37% 7.05%
Lehman Interm Govt/Corp Index 4.06% 7.60%
Lehman
Intermediate Interm
Bond Govt/Corp
Date Fund Index
---- ------------ ---------
Inception to Date 19.28% 20.84%
1-Jun-94 $10,000 $10,000
Jun-94 $9,880 $10,001
Jul-94 $10,010 $10,145
Aug-94 $10,030 $10,176
Sep-94 $9,930 $10,083
Oct-94 $9,910 $10,082
Nov-94 $9,890 $10,037
Dec-94 $9,951 $10,072
Jan-95 $10,091 $10,242
Feb-95 $10,281 $10,454
Mar-95 $10,351 $10,513
Apr-95 $10,460 $10,643
May-95 $10,881 $10,964
Jun-95 $10,971 $11,038
Jul-95 $10,932 $11,039
Aug-95 $11,042 $11,139
Sep-95 $11,150 $11,219
Oct-95 $11,303 $11,344
Nov-95 $11,486 $11,493
Dec-95 $11,653 $11,613
Jan-96 $11,684 $11,713
Feb-96 $11,482 $11,576
Mar-96 $11,397 $11,517
Apr-96 $11,313 $11,477
May-96 $11,291 $11,468
Jun-96 $11,419 $11,589
Jul-96 $11,429 $11,624
Aug-96 $11,405 $11,633
Sep-96 $11,592 $11,795
Oct-96 $11,836 $12,004
Nov-96 $12,048 $12,162
Dec-96 $11,904 $12,084
THIS CHART REFLECTS A COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN INTERMEDIATE BOND FUND COMPARED TO THE PERFORMANCE OF THE LEHMAN INT.
GOV'T/CORP. INDEX. IT IS IMPORTANT TO KEEP IN MIND THAT THE LEHMAN INTERM.
GOV'T./CORP. INDEX EXCLUDES THE EFFECT OF ANY FEES. TOTAL RETURN FOR THE FUND
INCLUDES REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. IT DOES NOT REFLECT
CHARGES FOR THE VARIABLE ANNUITY AND VARIABLE LIFE CONTRACTS OR CERTIFICATES
THEREUNDER WHOSE PROCEEDS ARE INVESTED IN THE FUND. IF PERFORMANCE INFORMATION
INCLUDED THE EFFECT OF THESE CHARGES, TOTAL RETURNS WOULD HAVE BEEN LOWER. PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
2
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NORWEST SELECT FUNDS
1996 PERFORMANCE REVIEW
INCOME EQUITY FUND
Norwest Select Income Equity Fund commenced the first week of May 1996, and,
since then, we have seen strong cash flows into the Fund. For the eight-month
period ended December 31, 1996, the Fund had a total return of 9.95%. The stock
market, as measured by the Standard & Poor's 500 Index, performed well over the
period, returning 5.48%. The bond market, however, did not fare quite as well
returning 5.3% as measured by the Lehman Brothers Aggregate Bond Index.
The initial portfolio structure emphasized high quality growth companies, with
an overall portfolio dividend yield higher than the market and with investments
diversified among nine separate market sectors. Overall, the portfolio has
emphasized very high quality, stable companies that have demonstrated more
consistent earnings and dividend growth than the market averages.
FUND & INDEX INCOME EQUITY FUND VS. S&P 500 INDEX
DATE ENDING 12/31/96
FUND LOOKUP COLUMN 39
INDEX LOOKUP COLUMN 15
Investment Value on 12/31/96
- ----------------------------
Income Equity Fund $10,995
S&P 500 Index $10,548
Since Inception
Total Return on 07/01/96
- ------------ ---------------
Income Equity Fund 9.95%
S&P 500 Index 5.48%
Income
Equity S&P 500
Date Fund Index
---- ------- -------
Inception to Date 9.95% 5.48%
6-May-96 $10,000 $10,000
May-96 $10,000 $10,402
Jun-96 $10,110 $9,978
Jul-96 $9,710 $9,127
Aug-96 $9,830 $9,657
Sep-96 $10,250 $10,034
Oct-96 $10,490 $9,878
Nov-96 $11,169 $10,283
Dec-96 $10,995 $10,548
THIS CHART REFLECTS A COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN INCOME EQUITY FUND COMPARED TO THE PERFORMANCE OF THE S&P 500 INDEX FOR THE
EIGHT-MONTH PERIOD ENDED 12/31/96. IT IS IMPORTANT TO KEEP IN MIND THAT THE S&P
500 INDEX EXCLUDES THE EFFECT OF ANY FEES. TOTAL RETURN FOR THE FUND INCLUDES
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. IT DOES NOT REFLECT CHARGES FOR
THE VARIABLE ANNUITY AND VARIABLE LIFE CONTRACTS OR CERTIFICATES THEREUNDER
WHOSE PROCEEDS ARE INVESTED IN THE FUND. IF PERFORMANCE INFORMATION INCLUDED
THE EFFECT OF THESE CHARGES, TOTAL RETURNS WOULD HAVE BEEN LOWER. PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
3
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NORWEST SELECT FUNDS
1996 PERFORMANCE REVIEW
VALUGROWTH-SM- STOCK FUND
For the twelve-month period ended December 31, 1996, the Fund had a total return
of 20.21%. The Standard & Poor's 500 Index, which reflects the overall
marketplace in which the Fund invests, had a return of 22.96% over the same
period.
Looking back to 1996, we believe ValuGrowth-SM- was well positioned for the
economic and market environment. The Fund was biased toward companies with
global franchises and international distribution. In addition, ValuGrowth-SM-
was focused on companies with new products, rising demand, financial or
operational restructuring or a combination of these factors.
Looking forward, we believe that the companies currently held in the Fund should
be able to generate earnings that meet or exceed expectations regardless of the
economic environment. We believe that attractive relative earnings momentum,
combined with diversification and compelling relative value, should continue to
make ValuGrowth-SM- an attractive investment opportunity.
FUND & INDEX VALUGROWTH STOCK FUND VS. S&P 500 INDEX
DATE ENDING 12/31/96
FUND LOOKUP COLUMN 37
INDEX LOOKUP COLUMN 16
Investment Value on 12/31/96
- ----------------------------
ValuGrowth Stock Fund $14,641
S&P 500 Index $17,297
Since Inception
Average Annual Total Return 1 Year on 06/01/94
- --------------------------- ------ ---------------
ValuGrowth Stock Fund 20.21% 15.88%
S&P 500 Index 22.96% 23.57%
ValuGrowth
Stock S&P 500
Date Fund Index
---- ---------- -------
Inception to Date 46.41% 72.97%
1-Jun-94 $10,000 $10,000
Jun-94 $9,550 $9,755
Jul-94 $9,900 $10,075
Aug-94 $10,339 $10,488
Sep-94 $10,069 $10,232
Oct-94 $10,209 $10,461
Nov-94 $9,779 $10,080
Dec-94 $9,810 $10,229
Jan-95 $9,950 $10,494
Feb-95 $10,300 $10,903
Mar-95 $10,521 $11,224
Apr-95 $10,711 $11,555
May-95 $10,911 $12,015
Jun-95 $11,211 $12,294
Jul-95 $11,512 $12,702
Aug-95 $11,502 $12,734
Sep-95 $11,743 $13,271
Oct-95 $11,522 $13,223
Nov-95 $12,234 $13,803
Dec-95 $12,181 $14,069
Jan-96 $12,312 $14,547
Feb-96 $12,677 $14,683
Mar-96 $12,869 $14,824
Apr-96 $13,071 $15,042
May-96 $13,314 $15,430
Jun-96 $13,233 $15,489
Jul-96 $12,676 $14,805
Aug-96 $13,101 $15,117
Sep-96 $13,919 $15,967
Oct-96 $13,950 $16,408
Nov-96 $14,861 $17,647
Dec-96 $14,641 $17,297
THIS CHART REFLECTS A COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN VALUGROWTH-SM- STOCK FUND COMPARED TO THE PERFORMANCE OF THE S&P 500 INDEX.
IT IS IMPORTANT TO KEEP IN MIND THAT THE S&P 500 INDEX EXCLUDES THE EFFECT OF
ANY FEES. TOTAL RETURN FOR THE FUND INCLUDES REINVESTMENT OF DIVIDENDS AND
DISTRIBUTIONS. IT DOES NOT REFLECT CHARGES FOR THE VARIABLE ANNUITY AND
VARIABLE LIFE CONTRACTS OR CERTIFICATES THEREUNDER WHOSE PROCEEDS ARE INVESTED
IN THE FUND. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE CHARGES,
TOTAL RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NOT PREDICTIVE OF
FUTURE PERFORMANCE.
4
<PAGE>
NORWEST SELECT FUNDS
1996 PERFORMANCE REVIEW
SMALL COMPANY STOCK FUND
For the twelve-month period ended December 31, 1996, the Fund had a total return
of 31.47%. The Russell 2000 Index, which reflects the overall marketplace in
which the Fund invests, had a return of 16.54% over the same period.
The market has been very favorable to small cap stocks during last year. We
believe good stock selection and the avoidance of any serious mistakes led to
the Fund's positive performance. Looking forward, we believe the Fund should be
well positioned for the economic and market environment we foresee.
FUND & INDEX SMALL COMPANY STOCK FUND VS. RUSSELL 2000 INDEX
DATE ENDING 12/31/96
FUND LOOKUP COLUMN 38
INDEX LOOKUP COLUMN 15
Investment Value on 12/31/96
- ----------------------------
Small Company Stock Fund $15,247
Russell 2000 Index $13,968
Since Inception
Average Annual Total Return 1 Year on 05/01/95
- --------------------------- ------ ---------------
Small Company Stock Fund 31.47% 28.72%
Russell 2000 Index 16.54% 22.02%
Small
Company Russell
Date Stock Fund 2000 Index
---- ---------- ----------
Inception to Date 52.43% 39.68%
1-May-95 $10,000 $10,000
May-95 $10,040 $10,164
Jun-95 $10,670 $10,681
Jul-95 $11,740 $11,296
Aug-95 $11,970 $11,522
Sep-95 $11,919 $11,728
Oct-95 $11,279 $11,205
Nov-95 $11,590 $11,688
Dec-95 $11,594 $11,986
Jan-96 $11,636 $11,972
Feb-96 $11,957 $12,351
Mar-96 $12,484 $12,596
Apr-96 $13,891 $13,273
May-96 $14,419 $13,806
Jun-96 $13,406 $13,243
Jul-96 $12,113 $12,087
Aug-96 $13,179 $12,789
Sep-96 $13,821 $13,289
Oct-96 $14,091 $13,082
Nov-96 $14,753 $13,619
Dec-96 $15,247 $13,958
THIS CHART REFLECTS A COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN SMALL COMPANY STOCK FUND COMPARED TO THE PERFORMANCE OF THE RUSSELL 2000
INDEX. IT IS IMPORTANT TO KEEP IN MIND THAT THE RUSSELL 2000 INDEX EXCLUDES THE
EFFECT OF ANY FEES. TOTAL RETURN FOR THE FUND INCLUDES REINVESTMENT OF
DIVIDENDS AND DISTRIBUTIONS. IT DOES NOT REFLECT CHARGES FOR THE VARIABLE
ANNUITY AND VARIABLE LIFE CONTRACTS OR CERTIFICATES THEREUNDER WHOSE PROCEEDS
ARE INVESTED IN THE FUND. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF
THESE CHARGES, TOTAL RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE PERFORMANCE.
5
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NORWEST SELECT FUNDS
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
Norwest Select Funds
We have audited the accompanying statements of assets and liabilities of
Intermediate Bond Fund, Income Equity Fund, ValuGrowth-SM- Stock Fund and Small
Company Stock Fund, portfolios of Norwest Select Funds (the Funds), including
the schedules of investments, as of December 31, 1996, and the related
statements of operations for the year ended December 31, 1996 for Intermediate
Bond Fund, ValuGrowth-SM- Stock Fund and Small Company Stock Fund and the period
from May 6, 1996 (commencement of operations) to December 31, 1996 for Income
Equity Fund, the statements of changes in net assets for each of the years in
the two-year period ended December 31, 1996 for Intermediate Bond Fund and
ValuGrowth-SM- Stock Fund, the statements of changes in net assets and financial
highlights for the year ended December 31, 1996 and the period from May 1, 1995
(commencement of operations) to December 31, 1995 for Small Company Stock Fund
and the period from May 6, 1996 (commencement of operations) to December 31,
1996 for Income Equity Fund and financial highlights for the two-year period
ended December 31, 1996 and the period from June 1, 1994 to December 31, 1994
for Intermediate Bond Fund and Valugrowth-SM- Stock Fund. 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 audited 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 confirmation of securities owned as of December 31,
1996 by correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Intermediate Bond Fund, Income Equity Fund, ValuGrowth-SM- Stock Fund and Small
Company Stock Fund as of December 31, 1996, the results of their operations,
changes in their net assets, and financial highlights for the periods referred
to above in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
February 14, 1997
6
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<TABLE>
<CAPTION>
NORWEST SELECT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1996
INTERMEDIATE INCOME VALUGROWTH-SM- SMALL COMPANY
BOND EQUITY STOCK STOCK
FUND FUND FUND FUND
------------ ------------ -------------- -------------
<S> <C> <C> <C> <C>
Assets
Investments, at value (Note 2) $ 5,828,507 $ 9,323,502 $ 10,640,742 $ 6,334,658
Interest, dividends and other receivables 90,744 35,673 24,880 15,410
Receivable for Fund shares sold 21,740 72,905 37,278 -
Organization Costs, net of amortization (Note 2) 23,943 - 23,943 -
------------ ------------ -------------- -------------
Total Assets 5,964,934 9,432,080 10,726,843 6,350,068
------------ ------------ -------------- -------------
Liabilities
Payable for securities purchased - - 117,853 242,577
Payable for Fund shares redeemed - - - 2,635
Dividends payable - - - 221
Accrued fees and expenses 6,146 16,844 25,605 13,968
------------ ------------ -------------- -------------
Total Liabilities 6,146 16,844 143,458 259,401
------------ ------------ -------------- -------------
Net Assets $ 5,958,788 $ 9,415,236 $ 10,583,385 $ 6,090,667
------------ ------------ -------------- -------------
------------ ------------ -------------- -------------
Components of Net Assets
Paid in capital $ 5,940,886 $ 8,915,597 $ 8,698,759 $ 5,385,754
Undistributed net investment income (loss) (422) 90 156 32
Unrealized appreciation on investments 18,486 499,608 1,934,190 704,881
Accumulated net realized gain (loss) from
investments sold (162) (59) (49,720) -
------------ ------------ -------------- -------------
Net Assets $ 5,958,788 $ 9,415,236 $ 10,583,385 $ 6,090,667
------------ ------------ -------------- -------------
------------ ------------ -------------- -------------
Shares of Beneficial Interest, No Par Value 555,820 862,697 737,045 451,235
------------ ------------ -------------- -------------
------------ ------------ -------------- -------------
Net Asset Value Per Share,
(Net Assets divided by Shares Outstanding) $ 10.72 $ 10.91 $ 14.36 $ 13.50
------------ ------------ -------------- -------------
------------ ------------ -------------- -------------
Investments at cost $ 5,810,021 $ 8,823,894 $ 8,706,552 $ 5,629,777
------------ ------------ -------------- -------------
------------ ------------ -------------- -------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
<TABLE>
<CAPTION>
NORWEST SELECT FUNDS
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996
INTERMEDIATE INCOME VALUGROWTH-SM- SMALL COMPANY
BOND EQUITY STOCK STOCK
FUND FUND (a) FUND FUND
------------ ------------ -------------- -------------
<S> <C> <C> <C> <C>
Investment Income
Interest income $ 287,955 $ 16,029 $ 19,510 $ 16,533
Dividend income - 74,249 124,369 21,223
------------ ------------ -------------- -------------
Total Income 287,955 90,278 143,879 37,756
------------ ------------ -------------- -------------
Expenses
Investment advisory fee (Note 3) 25,920 23,198 61,011 31,252
Management fee (Note 3) 8,640 5,799 15,253 7,813
Transfer agent fee (Note 3) 3,456 2,320 6,101 3,125
Custodian fees (Note 3) 864 580 1,526 781
Accounting fee (Note 3) 38,000 23,516 37,000 46,000
Legal fees (Note 3) 1,967 801 3,343 1,995
Audit fee 12,865 12,602 12,001 13,510
Trustees' fees 85 39 146 73
Amortization of organization costs (Note 2) 9,907 - 9,907 -
Miscellaneous 6,958 3,788 7,796 5,572
------------ ------------ -------------- -------------
Total Expenses 108,662 72,643 154,084 110,121
Expenses reimbursed and fees waived (Note 3) (82,675) (49,420) (92,958) (78,812)
------------ ------------ -------------- -------------
Net Expenses 25,987 23,223 61,126 31,309
------------ ------------ -------------- -------------
Net Investment Income 261,968 67,055 82,753 6,447
------------ ------------ -------------- -------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain (loss) on investments sold 9,221 5,479 47,040 507,685
Net change in unrealized appreciation
(depreciation) on investments (118,049) 499,608 1,317,836 592,999
------------ ------------ -------------- -------------
Net Realized and Unrealized Gain (Loss)
on Investments (108,828) 505,087 1,364,876 1,100,684
------------ ------------ -------------- -------------
Increase (Decrease) in Net Assets from Operations $ 153,140 $ 572,142 $ 1,447,629 $ 1,107,131
------------ ------------ -------------- -------------
------------ ------------ -------------- -------------
</TABLE>
(a) See Note 1 of Notes to Financial Statements for date of commencement of
operations.
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
NORWEST SELECT FUNDS
STATEMENTS OF CHANGES FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
INTERMEDIATE INCOME VALUGROWTH-SM- SMALL COMPANY
BOND EQUITY STOCK STOCK
FUND FUND (c) FUND FUND (c)
------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
NET ASSETS - DECEMBER 31, 1994 $ 1,255,171 $ - $ 1,910,104 $ -
Operations
Net investment income 131,801 - 37,370 9,729
Net realized gain (loss) on investments sold 10,898 - (77,676) 54,909
Net change in unrealized appreciation on
investments 174,654 - 646,711 111,882
------------ ------------- -------------- -------------
317,353 - 606,405 176,520
------------ ------------- -------------- -------------
Distribution to Shareholders From
Net investment income (174,448) - (51,011) (9,738)
Net realized gain on investments - - - (57,306)
------------ ------------- -------------- -------------
(174,448) - (51,011) (67,044)
------------ ------------- -------------- -------------
Capital Share Transactions (a)
Sales of shares 2,603,356 - 3,071,041 1,854,563
Reinvestment of dividends 174,503 - 51,056 67,046
Cost of repurchasing shares (1,086,022) - (794,583) (3,587)
------------ ------------- -------------- -------------
1,691,837 - 2,327,514 1,918,022
------------ ------------- -------------- -------------
Net Assets - December 31, 1995 3,089,913 - 4,793,012 2,027,498
------------ ------------- -------------- -------------
Operations
Net investment income 261,968 67,055 82,753 6,447
Net realized gain (loss) on investments sold 9,221 5,479 47,040 507,685
Net change in unrealized appreciation (depreciation)
on investments (118,049) 499,608 1,317,836 592,999
------------ ------------- -------------- -------------
153,140 572,142 1,447,629 1,107,131
------------ ------------- -------------- -------------
Distribution to Shareholders From
Net investment income (262,553) (66,965) (82,597) (6,415)
Net realized gain on investments (11,766) (5,538) - (505,292)
------------ ------------- -------------- -------------
(274,319) (72,503) (82,597) (511,707)
------------ ------------- -------------- -------------
Capital Share Transactions (b)
Sales of shares 3,418,591 8,938,723 4,742,341 3,076,390
Reinvestment of dividends 275,308 73,059 82,886 511,483
Cost of repurchasing shares (703,845) (96,185) (399,886) (120,128)
------------ ------------- -------------- -------------
2,990,054 8,915,597 4,425,341 3,467,745
------------ ------------- -------------- -------------
NET ASSETS - DECEMBER 31, 1996 $ 5,958,788 $ 9,415,236 $ 10,583,385 $ 6,090,667
------------ ------------- -------------- -------------
------------ ------------- -------------- -------------
(a) Shares Issued (Redeemed) - 1995
Sale of shares 242,293 - 274,670 175,170
Reinvestment of shares 15,954 - 4,293 6,002
Repurchased (102,837) - (75,453) (314)
------------ ------------- -------------- -------------
Net increase in shares outstanding 155,410 - 203,510 180,858
------------ ------------- -------------- -------------
------------ ------------- -------------- -------------
(b) Shares Issued (Redeemed) - 1996
Sale of shares 313,226 865,655 363,105 241,806
Reinvestment of shares 25,680 6,697 5,772 37,887
Repurchased (64,627) (9,655) (30,064) (9,316)
------------ ------------- -------------- -------------
Net increase in shares outstanding 274,279 862,697 338,813 270,377
------------ ------------- -------------- -------------
------------ ------------- -------------- -------------
</TABLE>
(c) See Note 1 of Notes to Financial Statements for date of commencement of
operations.
9
<PAGE>
NORWEST SELECT FUNDS
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996
NOTE 1. ORGANIZATION
Norwest Select Funds (the "Trust") is registered as an open-end management
investment company. The Trust currently has four diversified investment
portfolios (each, a "Fund" and collectively, the "Funds"). Intermediate Bond
Fund and ValuGrowth-SM- Stock Fund commenced operations on June 1, 1994. Small
Company Stock Fund commenced operations on May 1, 1995. Income Equity Fund
commenced operations on May 6, 1996.
Shares of the Trust's Funds may be sold only to separate accounts of insurance
companies to serve as an investment medium for variable life insurance policies
and variable annuity contracts issued by the insurance companies.
The Trust Instrument authorizes the issuance of an unlimited number of shares of
beneficial interest without par value.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates but are expected to be immaterial to the net assets of the Funds.
The following represent significant accounting policies of the Funds:
SECURITY VALUATION - Securities purchased that mature in 60 days or less are
valued at amortized cost. Securities for which market quotations are readily
available are valued using the last reported sales price provided by independent
pricing services. If no sales are reported, the mean of the last bid and asked
price is used. Fixed-income securities and other securities traded on an
exchange for which market quotations are readily available are valued at the
mean of the last bid and asked price provided by independent pricing services.
If no mean price is available, the last bid price is used. In the absence of
readily available market quotations, securities are valued at fair value
determined in accordance with procedures adopted by the Board of Trustees (the
"Board").
INTEREST AND DIVIDEND INCOME - Interest income is accrued as earned. Dividends
on securities held by the Funds are recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends to shareholders of net
investment income, if any, are declared and paid annually by each Fund. Net
capital gain, if any, is distributed to shareholders at least annually.
Distributions from net investment income and realized capital gain are based on
amounts calculated in accordance with applicable income tax regulations. Any
differences between financial statement amounts available for distribution and
distributions made in accordance with income tax regulations are primarily
attributable to certain income tax calculations being based on an October 31
year end, wash sales (the purchase of a security within a specified time frame
in conjunction with a loss being realized on the sale of a similar security),
and the utilization of capital loss carryovers.
PREMIUM AMORTIZATION AND DISCOUNT ACCRETION - Fixed-income investments with a
maturity greater than sixty days and purchased at a premium or discount (other
than original issue discount) are amortized or accreted over the life of the
respective securities.
EXPENSE ALLOCATION -The Trust accounts separately for the assets and liabilities
and operations of each Fund. Expenses that are directly attributable to a Fund
are charged to the Fund, while expenses attributable to more than one Fund are
allocated among the respective Funds.
REPURCHASE AGREEMENTS - Each Fund along with certain other Norwest Advantage
Funds may transfer uninvested cash balances into a joint trading account. These
balances are invested in one or more repurchase agreements. The Funds, through
their custodian, receive delivery of the underlying securities, whose market
value must always equal or exceed the repurchase price. The investment adviser
(Norwest) is responsible for determining the value of the underlying securities
at all times. In the event of default, a Fund may have difficulties with the
disposition of such securities.
REALIZED GAIN AND LOSS - Security transactions are recorded on a trade date
basis, and realized gain and loss on investments sold are determined on the
basis of identified cost.
FEDERAL INCOME TAX - Each Fund intends to qualify and continue to qualify each
year as a regulated investment company and distribute all of its taxable income.
Therefore, no federal income tax provision is required.
ORGANIZATIONAL COSTS - The costs incurred by certain Funds in connection with
their organization and registration of shares have been capitalized and are
being amortized using the straight line method over a five-year period beginning
with the commencement of the respective Fund's operations.
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The investment adviser of each Fund is Norwest Investment
Management ("the Adviser"), a part of the Norwest Bank ("the Bank"), which is a
subsidiary of Norwest Corporation. The Adviser receives an annual advisory fee
from each Fund based on a percentage of average daily net assets of the
respective Fund at the following annual rates: Intermediate Bond Fund - 0.60%;
Income Equity Fund, ValuGrowth-SM- Stock Fund, and Small Company Stock fund -
0.80%.
10
<PAGE>
NORWEST SELECT FUNDS
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996
NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
(CONTINUED)
MANAGER AND OTHER SERVICES - As manager of the Trust, Forum, a registered
broker-dealer, is entitled to receive a management fee of 0.20% of the average
daily net assets of each Fund. In addition, for the period ended December 31,
1996, Forum charged the Trust legal expenses aggregating $4,578.
Forum Financial Corp. ("FFC"), an affiliate of Forum, provides fund accounting
services to the Funds. For these services, FFC is entitled to receive a fee of
$36,000 per year per Fund plus certain amounts based upon the number of classes
of fund shares and number and types of portfolio transactions within each Fund.
The Bank serves as the Trust's transfer agent, dividend disbursing agent and
custodian. For these services the Bank is entitled to receive a fee at an
annual rate of 0.10% of the average daily net assets attributable to each Fund.
VOLUNTARY WAIVERS AND REIMBURSEMENTS - For the period ended December 31, 1996,
the Trust's service providers voluntarily waived and/or reimbursed certain fees
or expenses incurred by the Funds.
<TABLE>
<CAPTION>
EXPENSES
FEES WAIVED REIMBURSED
--------------------------------------- ----------
CUSTODIAN AND
FUND TRANSFER AGENT ADVISER FORUM FORUM
---- -------------- ------- ----- -----
<S> <C> <C> <C> <C>
Intermediate Bond Fund $4,320 $25,920 $16,640 $35,795
Income Equity Fund 2,900 23,198 9,718 13,604
ValuGrowth-SM- Stock Fund 7,626 61,011 22,253 2,068
Small Company Stock Fund 3,906 31,252 23,814 19,840
</TABLE>
NOTE 4. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales (including maturities) of securities
(excluding short-term investments) during the year ended December 31, 1996 were
as follows:
FUND COST OF PURCHASES PROCEEDS FROM SALES
---- ----------------- -------------------
Intermediate Bond Fund $ 8,041,027 $ 5,139,163
Income Equity Fund 8,354,187 186,343
ValuGrowth-SM- Stock Fund 7,187,167 2,751,157
Small Company Stock Fund 9,919,324 7,177,165
The federal tax cost basis of investments and related gross unrealized
appreciation and depreciation for federal income tax purposes as of December 31,
1996 were as follows:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED NET
FUND APPRECIATION DEPRECIATION APPRECIATION TAX COST
---- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Intermediate Bond Fund $ 43,014 $ 24,528 $ 18,486 $ 5,810,021
Income Equity Fund 586,372 86,822 499,550 8,823,952
ValuGrowth-SM- Stock Fund 2,004,653 82,011 1,922,642 8,718,100
Small Company Stock Fund 838,253 133,372 704,881 5,629,777
</TABLE>
11
<PAGE>
NORWEST SELECT FUNDS
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996
NOTE 4. SECURITIES TRANSACTIONS (CONTINUED)
As of December 31, 1996, ValuGrowth-SM- Stock Fund had capital loss carryovers
available to offset future capital gains as follows:
CARRYOVER AMOUNT YEAR OF EXPIRATION
---------------- ------------------
$ 38,217 2003
OTHER TAX INFORMATION (UNAUDITED)
The funds have designated 100%, 4.75%, and 100% of the investment income for
ValuGrowth-SM- Stock Fund , Small Company Stock Fund, and Income Equity Fund,
respectively, as qualified for the dividend received deduction for corporations.
12
<PAGE>
NORWEST SELECT FUNDS
FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING DURING EACH PERIOD
<TABLE>
<CAPTION>
INTERMEDIATE INCOME
BOND EQUITY
FUND FUND
------------------------------------------- ----------------
Year Ended Year Ended Period Ended (c) Period Ended (c)
31-Dec-96 31-Dec-95 31-Dec-94 31-Dec-96
<S> <C> <C> <C> <C>
Beginning net asset value per share $ 10.98 $ 9.95 $ 10.00 $ 10.00
Net investment income 0.50 0.33 0.33 0.08
Net realized and unrealized gain (loss) on investments (0.24) 1.36 (0.38) 0.92
Distributions from net investment income (0.50) (0.66) - (0.08)
Distributions from net realized gain on investments (0.02) - - (0.01)
-------- -------- --------- ----------
Ending net asset value per share $ 10.72 $ 10.98 $ 9.95 $ 10.91
-------- -------- --------- ----------
-------- -------- --------- ----------
Ratio to average net assets:
Expenses (a): 0.60% 0.60% 0.60%(b) 0.80%(b)
Net investment income 6.05% 6.33% 6.45%(b) 2.31%(b)
Total return 2.37% 17.08% (0.50)% 9.95%
Portfolio turnover rate 125.23% 54.04% 52.61% 4.20%
Net assets at end of period
(000's omitted) $ 5,959 $ 3,090 $ 1,255 $ 9,415
Average commission rate paid on portfolio
investment transactions N/A N/A N/A $ 0.0971(d)
(a) During the period, various fees and expenses
were waived and reimbursed, respectively. Had
such waivers not occurred, the ratio of expenses
to average net assets would have been: 2.52% 4.67% 9.31%(b) 2.51%(b)
(b) Annualized.
(c) See Note 1 of Notes to Financial Statements for date of commencement of operations.
(d) Amount represents the average commission per share paid to brokers on the purchase or sale of equity securities.
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
NORWEST SELECT FUNDS
FINANCIAL HIGHLIGHTS
(concluded) SELECTED DATA FOR A SHARE OUTSTANDING DURING EACH PERIOD
<TABLE>
<CAPTION>
VALUGROWTH-SM- SMALL COMPANY
STOCK STOCK
FUND FUND
-------------------------------------- ---------------------------
Year Ended Year Ended Period Ended(c) Year Ended Period Ended(c)
31-Dec-96 31-Dec-95 31-Dec-94 31-Dec-96 31-Dec-95
<S> <C> <C> <C> <C> <C>
Beginning net asset value per share $ 12.04 $ 9.81 $ 10.00 $ 11.21 $ 10.00
Net investment income 0.11 0.07 0.07 0.02 0.06
Net realized and unrealized gain (loss) on investments 2.32 2.30 (0.26) 3.51 1.54
Distributions from net investment income (0.11) (0.14) - (0.02) (0.06)
Distributions from net realized gain on investments - - - (1.22) (0.33)
--------- --------- --------- --------- ---------
Ending net asset value per share $ 14.36 $ 12.04 $ 9.81 $ 13.50 $ 11.21
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio to average net assets:
Expenses (a): 0.80% 8.00% 0.80%(b) 0.80% 0.80%(b)
Net investment income 1.08% 1.24% 1.67%(b) 0.16% 1.02%(b)
Total return 20.21% 24.15% (1.09)% 31.47% 15.95%
Portfolio turnover rate 37.57% 25.44% 16.77% 194.87% 51.16%
Net assets at end of period
(000's omitted) $ 10,583 $ 4,793 $ 1,910 $ 6,091 $ 2,027
Average commission rate paid on portfolio
investment transactions $ 0.0847(d) N/A N/A $ 0.0590(d) N/A
(a) During the period, various fees and expenses
were waived and reimbursed, respectively. Had
such waivers not occurred, the ratio of expenses
to average net assets would have been: 2.02% 3.81% 8.00%(b) 2.82% 5.38%(b)
(b) Annualized.
(c)See Note 1 of Notes to Financial Statements for date of commencement of operations.
(d) Amount represents the average commission per share paid to brokers on the purchase or sale of equity securities.
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
- -------------------------------------------------------------------------------
NORWEST SELECT FUNDS
SCHEDULES OF INVESTMENTS DECEMBER 31, 1996
- --------------------------------------------------------------------------------
INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
FACE/SHARE
AMOUNT VALUE
- -------------- ------------
<C> <S> <C>
ASSET BACKED SECURITIES (6.7%)
$ 200,000 Discover Card Master Trust I
Series 1996-3, 6.05%, due 8/18/08 $ 189,652
200,000 Green Tree Financial Corp.
Series 1996-F, Class HEA-5, 6.85%, 1/15/28 199,734
------------
TOTAL ASSET BACKED SECURITIES (COST $387,369) 389,386
------------
CORPORATE BONDS & NOTES (40.4%)
200,000 AMBAC, Inc., 9.375%, due 8/1/11 241,250
200,000 American Home Products Corp., 7.25%, due 3/1/23 201,250
200,000 Atlantic Richfield Co., 9.875%, due 3/1/16 253,250
125,000 Beneficial Corp., 8.40%, due 5/15/08 140,716
200,000 Boeing Co., 8.75%, due 8/15/21 235,500
200,000 Consolidated Natural Gas Co., 6.625%, due 12/1/08 195,500
250,000 GTE California, Inc., 6.75%, due 3/15/04 250,625
185,000 General Electric Capital Corp., 7.875%, due 12/1/06 199,338
150,000 International Lease Finance, 6.50%, due 7/15/97 150,722
100,000 Philip Morris, 9.00%, due 5/15/98 103,595
75,000 Southwest Airlines Co., 8.00%, due 3/1/05 79,406
200,000 Swiss Bank Corp., 7.375%, due 7/15/15 201,500
100,000 Unum Corp., 6.56%, due 5/27/97 100,355
------------
TOTAL CORPORATE BONDS & NOTES (COST $2,349,961) 2,353,007
------------
GOVERNMENT AGENCY NOTES (1.7%)
100,000 Federal Home Loan Mortgage Corp., 8.05%, due 5/19/04,
callable 5/19/97 at 100 (cost $100,597) 100,498
------------
MORTGAGE BACKED SECURITIES (10.3%)
286,562 Government National Mortgage Association, Pool 405481,
8.50%, due 8/15/25 296,901
298,225 Government National Mortgage Association, Pool 421752,
8.00%, due 7/15/26 304,464
------------
TOTAL MORTGAGE BACKED SECURITIES (COST $594,301) 601,365
------------
U.S. TREASURY OBLIGATIONS (35.9%)
200,000 U.S. Treasury Notes, 7.875%, due 4/15/98 205,192
100,000 U.S. Treasury Notes, 6.125%, due 8/31/98 100,482
300,000 U.S. Treasury Notes, 8.875%, due 11/15/98 315,756
300,000 U.S. Treasury Notes, 5.125%, due 12/31/98 296,010
200,000 U.S. Treasury Notes, 7.00%, due 4/15/99 204,530
300,000 U.S. Treasury Notes, 5.875%, due 11/15/99 298,995
100,000 U.S. Treasury Notes, 7.75%, due 2/15/01 105,733
200,000 U.S. Treasury Notes, 6.375%, due 8/15/02 201,524
200,000 U.S. Treasury Bonds, 11.75%, due 2/15/01 240,586
100,000 U.S. Treasury Bonds, 9.00%, due 11/15/18 125,514
------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $2,087,864) 2,094,322
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 15
<PAGE>
- --------------------------------------------------------------------------------
NORWEST SELECT FUNDS
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
- --------------------------------------------------------------------------------
INTERMEDIATE BOND FUND (CONCLUDED)
<TABLE>
<CAPTION>
FACE/SHARE
AMOUNT VALUE
- ---------- --------------
<C> <S> <C>
SHORT-TERM HOLDINGS (5.0%)
218,019 Dreyfus Cash Management Fund $ 218,019
71,910 Federated Treasury Obligations Fund 71,910
------------
TOTAL SHORT-TERM HOLDINGS (COST $289,929) 289,929
------------
TOTAL INVESTMENTS (100.0%) (COST $5,810,021) $ 5,828,507
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 16
<PAGE>
- --------------------------------------------------------------------------------
NORWEST SELECT FUNDS
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
- --------------------------------------------------------------------------------
INCOME EQUITY FUND
<TABLE>
<CAPTION>
FACE/SHARE
AMOUNT VALUE
- -------------- ------------
<C> <S> <C>
COMMON STOCKS (93.0%)
BASIC MATERIALS (9.6%)
3,110 Du Pont (E.I.) De Nemours $ 293,506
3,400 Minnesota Mining & Mfg 281,775
4,200 Morton International 171,150
1,800 Pfizer, Inc. 149,175
------------
895,606
------------
CAPITAL GOODS (9.5%)
1,800 Emerson Electric Co 174,150
2,075 General Electric Co. 205,165
4,290 Honeywell, Inc. 282,067
7,000 WMX Technologies, Inc. 228,375
------------
889,757
------------
CONSUMER CYCLICAL (10.6%)
2,970 Dayton Hudson Corp. 116,572
5,590 Deluxe Corp. 183,072
2,665 Eastman Kodak 213,866
3,900 J.C. Penney Co., Inc. 190,125
4,075 May Department Stores (a) 190,506
1,980 Sears Roebuck Co. 91,327
------------
985,468
------------
CONSUMER STAPLES (18.8%)
5,790 American Brands, Inc. 287,328
2,800 American Home Products 164,150
3,900 Johnson & Johnson 194,025
2,500 McDonalds Corp. 113,125
1,970 Merck & Co., Inc. 156,122
5,420 PepsiCo, Inc. 158,535
2,050 Philip Morris Cos., Inc. 230,881
2,240 Procter & Gamble Co. 240,800
5,700 Sara Lee Corp. 212,325
------------
1,757,291
------------
ENERGY (11.1%)
1,400 Atlantic Richfield Co. 185,500
3,000 Chevron Corp. 195,000
1,850 Exxon Corp. 181,300
1,080 Mobil Corp. 132,030
700 Royal Dutch Petroleum ADR 119,525
2,180 Schlumberger Ltd. 217,727
------------
1,031,082
------------
FINANCIAL (10.7%)
2,420 Allstate Corp. 140,057
2,980 American Express Co. 168,370
4,010 American General Corp. 163,908
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 17
<PAGE>
- --------------------------------------------------------------------------------
NORWEST SELECT FUNDS
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
- --------------------------------------------------------------------------------
INCOME EQUITY FUND (CONCLUDED)
<TABLE>
<CAPTION>
FACE/SHARE
AMOUNT VALUE
- -------------- ------------
<C> <S> <C>
FINANCIAL (CONTINUED)
2,260 First Bank Systems, Inc. $ 154,245
2,270 J.P. Morgan & Co. 221,609
1,945 Transamerica Corp. 153,655
------------
1,001,844
------------
MISCELLANEOUS (4.1%)
4,760 Cognizant Corp. 157,080
9,400 Dun & Bradstreet Corp. 223,250
------------
380,330
------------
TECHNOLOGY (3.6%)
6,600 Hewlett-Packard Co. 331,650
------------
TRANSPORTATION (2.5%)
3,600 United Technologies Corp. 237,600
------------
UTILITIES AND TELECOMMUNICATIONS (12.5%)
5,900 American Tel & Telegraph 256,650
2,830 Consolidated Natural Gas 156,358
1,710 FPL Group, Inc. 78,660
4,410 GTE Corp. 200,655
2,876 Lucent Technologies, Inc. 133,015
5,910 Pacific Gas & Electric Co. 124,110
4,850 Public Service Enterprise 132,169
1,980 Texas Utilities Co. 80,685
------------
1,162,302
------------
TOTAL COMMON STOCKS (COST $8,173,322) 8,672,930
------------
REPURCHASE AGREEMENTS (7.0%)
$ 325,286 Bear Stearns & Co., 6.375%, due 1/2/97, to be
repurchased at $325,344, (Collateralized by U.S.
Treasury Notes, 5.875% to 8.25%, due 7/15/98 to 10/31/98,
Par $80,830,000; U.S. Treasury STRIPS, 5.873% to
6.032%, due 8/15/99 to 2/15/01, Par $200,000,000) 325,286
------------
325,286 Lehman Brothers, Inc., 6.375%, due 1/2/97, to be
repurchased at $325,344, (Collateralized by Federal
Home Loan Discount Notes, 5.26%, due 3/3/97 to 3/21/97,
Par $50,000,000; Federal National Mortgage Association
Discount Note, 5.40%, due 2/19/97, Par $19,840,000) 325,286
------------
TOTAL REPURCHASE AGREEMENTS (COST $650,572) 650,572
------------
TOTAL INVESTMENTS (100.0%) (COST $8,823,894) $ 9,323,502
------------
------------
</TABLE>
(a) Non income producing securities
ADR - American Depositary Receipts
SEE NOTES TO FINANCIAL STATEMENTS. 18
<PAGE>
- -------------------------------------------------------------------------------
NORWEST SELECT FUNDS
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
- -------------------------------------------------------------------------------
VALUGROWTH-SM- STOCK FUND
<TABLE>
<CAPTION>
FACE/SHARE
AMOUNT VALUE
- -------------- ------------
<C> <S> <C>
COMMON STOCKS (95.8%)
BASIC MATERIALS (5.5%)
2,100 Du Pont (E.I.) De Nemours $ 198,187
4,600 Millipore Corp. 190,325
5,100 Monsanto Co. 198,263
------------
586,775
------------
CAPITAL GOODS (9.6%)
1,750 Emerson Electric Co. 169,313
1,600 General Electric Co. 158,200
3,200 Honeywell, Inc. 210,400
6,350 Thermo Electron Corp. (a) 261,937
4,100 York International Corp. 229,087
------------
1,028,937
------------
CONSUMER CYCLICAL (9.6%)
3,300 Black & Decker Corp. 99,412
1,800 Home Depot, Inc. 90,225
2,000 Lowe's Companies, Inc. 71,000
4,000 May Department Stores Co. (a) 187,000
6,300 Newell Co. 198,450
3,800 Sears Roebuck and Co. 175,276
2,900 Walt Disney Co. 201,912
------------
1,023,275
------------
CONSUMER STAPLES (23.6%)
5,800 Albertson's, Inc. 206,625
3,400 American Home Products Corp. 199,326
4,800 Baxter International, Inc. 196,800
5,316 Columbia HCA Healthcare Corp. 216,627
3,400 Coca-Cola Co. 178,925
2,850 Crown Cork & Seal Company, Inc. 154,968
1,200 Duracell International, Inc. 83,851
2,200 Gillette Co. 171,050
2,200 Medtronic, Inc. 149,600
2,400 Merck & Co., Inc. 190,200
6,000 PepsiCo, Inc. 175,500
1,800 Proctor & Gamble Co. 193,500
5,605 Sonoco Products Co. 145,029
7,800 Vencor, Inc. (a) 246,676
------------
2,508,677
------------
ENERGY (6.0%)
2,800 Chevron Corp. 182,000
1,500 Mobil Corp. 183,375
700 Royal Dutch Petroleum Co., ADR 119,525
1,500 Schlumberger, Ltd. 149,813
------------
634,713
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 19
<PAGE>
- -------------------------------------------------------------------------------
NORWEST SELECT FUNDS
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
- -------------------------------------------------------------------------------
VALUGROWTH-SM- STOCK FUND (concluded)
<TABLE>
<CAPTION>
FACE/SHARE
AMOUNT VALUE
- ------------- -----------
<C> <S> <C>
FINANCIAL (12.1%)
1,500 American International Group, Inc. $ 162,376
3,400 Chubb Corp. 182,750
4,800 Federal National Mortgage Association 178,800
2,400 First Union Corp. 177,600
2,500 Franklin Resources, Inc. 170,937
3,050 State Street Boston Corp. 196,725
4,850 SunAmerica, Inc. 215,218
------------
1,284,406
------------
MISCELLANEOUS (2.9%)
4,000 Alco Standard Corp. 206,500
5,000 Gentax Corp. (a) 100,625
------------
307,125
------------
TECHNOLOGY (12.9%)
3,800 Cabletron Systems, Inc. (a) 126,350
4,900 EMC Corp. (a) 162,312
2,200 Electronic Data Systems Corp. 95,150
5,400 First Data Corp. 197,100
3,900 Hewlett-Packard Co. 195,975
1,700 Intel Corp. 222,594
2,100 Microsoft Corp. (a) 173,512
3,900 Xerox Corp. 205,237
------------
1,378,230
------------
TRANSPORTATION AND PROFESSIONAL SERVICES (5.5%)
7,300 ADT Ltd. (a) 166,987
6,300 USA Waste Services, Inc. (a) 200,812
3,400 Fluor Corp. 213,350
------------
581,149
------------
UTILITIES AND TELECOMMUNICATIONS (8.1%)
3,600 American Electric Power Co. 148,050
3,300 Consolidated Natural Gas Co. 182,325
6,900 DPL, Inc. 169,050
6,700 L.M. Ericsson Telephone Co., ADR 202,257
3,900 Texas Utilities Co. 158,925
------------
860,607
------------
TOTAL COMMON STOCKS (COST $8,259,704) 10,193,894
------------
SHORT-TERM HOLDINGS (4.2%)
237,266 Dreyfus Cash Management Fund 237,266
209,582 Provident Institutional Funds 209,582
------------
TOTAL SHORT-TERM HOLDINGS (COST $446,848) 446,848
------------
TOTAL INVESTMENTS (100.0%) (COST $8,706,552)
$ 10,640,742
------------
------------
</TABLE>
(a) Non income producing securities
ADR - American Depositary Receipts
SEE NOTES TO FINANCIAL STATEMENTS. 20
<PAGE>
- -------------------------------------------------------------------------------
NORWEST SELECT FUNDS
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
- -------------------------------------------------------------------------------
SMALL COMPANY STOCK FUND
<TABLE>
<CAPTION>
FACE/SHARE
AMOUNT VALUE
- ------------- ---------------
<C> <S> <C>
COMMON STOCKS (90.1%)
CONSUMER CYCLICAL (1.1%)
3,750 Ugly Duckling Corp. (a) $ 73,125
------------
CONSUMER STAPLES (13.7%)
4,200 Arrow International, Inc. 120,750
3,500 Express Scripts, Inc. (a) 125,563
4,400 HCIA, Inc. (a) 151,800
6,500 Inphynet Medical Management (a) 117,000
3,400 Lunar Corp. (a) 119,000
6,500 Physicians Resource Group (a) 115,375
5,800 Rotech Medical Corp. (a) 121,800
------------
871,288
------------
ENERGY (19.3%)
13,175 Abacan Resource Corp. (a) 114,458
6,800 FX Energy, Inc. (a) 62,900
2,100 Flores & Rucks, Inc. (a) 111,825
3,600 FORCENERGY, Inc. (a) 130,500
3,200 Input/Output, Inc. (a) 59,200
5,400 Key Energy Group, Inc. (a) 63,450
5,900 Marine Drilling Co., Inc. (a) 116,156
2,350 Neuvo Energy Co. (a) 122,200
3,200 Pride Petroleum Services (a) 74,400
5,200 Seagull Energy Corp. (a) 114,400
3,600 3DX Technologies (a) 39,600
5,850 Tuboscope Vetco International (a) 90,675
3,500 Vintage Petroleum, Inc. (a) 120,750
------------
1,220,514
------------
FINANCIAL (16.7%)
10,600 Bank Plus Corp. (a) 121,900
3,300 Coast Savings Financial (a) 120,862
3,900 Commonwealth Bancorp, Inc. 58,500
2,500 HealthCare Financial Partners (a) 31,875
6,200 Imperial Credit Industries (a) 130,200
4,800 Imperial Credit Mortgage 114,000
4,250 Medallion Financial Corp. 64,813
2,400 Ocean Financial Corp. (a) 61,200
8,200 Resource Bancshares Mortgage 116,850
2,000 Southern Pacific Funding (a) 62,250
3,700 Trenton Savings Bank 59,200
5,800 WFS Financial, Inc. (a) 115,275
------------
1,056,925
------------
MISCELLANEOUS (4.1%)
2,800 FYI, Inc. (a) 58,450
5,500 NHP, Inc. (a) 85,250
7,925 Renters Choice, Inc. (a) 114,913
------------
258,613
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS. 21
<PAGE>
- --------------------------------------------------------------------------------
NORWEST SELECT FUNDS
SCHEDULES OF INVESTMENTS (CONCLUDED) DECEMBER 31, 1996
- --------------------------------------------------------------------------------
SMALL COMPANY STOCK FUND (CONCLUDED)
<TABLE>
<CAPTION>
FACE/SHARE
AMOUNT VALUE
- ------------ --------------
<C> <S> <C>
NON-DURABLE GOODS (1.1%)
4,225 UNITED NATURAL FOODS, INC. (a) $ 71,825
------------
TECHNOLOGY (23.6%)
5,000 Actel Corp. (a) 118,750
2,000 Analysts International Corp. 56,500
1,800 Ciber, Inc. (a) 54,000
4,500 Ciprico, Inc. (a) 65,812
3,250 Computer Products, Inc. (a) 63,375
2,800 Computer Task Group, Inc. 120,750
2,200 ETEC Systems, Inc. (a) 84,150
4,000 Greenfield Industries 122,500
4,300 Keane, Inc. (a) 136,525
5,750 IKOS Systems, Inc. (a) 115,000
5,000 Information Management Res, Inc. (a) 105,625
8,700 Par Technology Corp. (a) 120,713
4,300 Tetra Technologies, Inc. (a) 108,575
6,700 USCS International, Inc. (a) 113,062
2,100 Zygo Corp. (a) 109,200
------------
1,494,537
------------
TELECOMMUNICATIONS (3.7%)
2,200 Harman International 122,375
5,700 Symmetricom, Inc. (a) 113,288
------------
235,663
------------
TRANSPORTATION AND PROFESSIONAL SERVICES (6.8%)
4,050 Atlas Air, Inc. (a) 193,387
17,300 Mesa Air Group (a) 116,775
5,000 Swift Transportation (a) 117,500
------------
427,662
------------
TOTAL COMMON STOCKS (COST $5,005,271) 5,710,152
------------
SHORT-TERM HOLDINGS (9.9%)
74,525 Fidelity Money Market Fund 74,525
229,338 Provident Institutional Funds, Fed Fund 229,338
221,265 Federated Trust U.S. Government Fund 221,265
99,378 Dreyfus Treasury Cash Management Fund 99,378
------------
TOTAL SHORT-TERM HOLDINGS (COST $624,506) 624,506
------------
TOTAL INVESTMENTS (100.0%) (COST $5,629,777) $6,334,658
------------
------------
</TABLE>
(a) Non income producing securities
ADR - American Depositary Receipts
SEE NOTES TO FINANCIAL STATEMENTS. 22
<PAGE>
Norwest Select Funds
Shareholders Services
Minneapolis/St. Paul 667-8833
Elsewhere 800-338-1348
Norwest Bank Minnesota, N.A.
Investment Adviser
Transfer Agent
Custodian
Forum Financial Services, Inc.
Manager and Distributor
- -C-1997 Norwest Select Funds
PVBAA 085 2/97
This report is authorized for distribution only to shareholders and to holders
of variable annuity contracts of Norwest Passage Variable Annuity. If it is
delivered to other than a current shareholder or contract holder, then it must
be accompanied by prospectuses for the Norwest Select Funds and the Norwest
Passage Variable Annuity.
