<PAGE>
NORWEST PASSAGE-Registered Trademark- NORWEST SELECT FUNDS
ANNUAL REPORT FOR:
VARIABLE ANNUITY - INCOME FUND
- INCOME EQUITY FUND
- VALUGROWTH-SM- STOCK FUND
[LOGO] - SMALL COMPANY STOCK FUND
Norwest Passage Variable
Annuity is distributed
by Fortis Investors, Inc.
DECEMBER 31, 1998
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. ("FFSI"),
MEMBER NASD, is the distributor of Norwest Select Funds. FFSI is not
affiliated with Wells Fargo & Company, Norwest Bank Minnesota, N.A. or
Norwest Investment Services, Inc. SHARES OF THE FUNDS ARE NOT INSURED OR
GUARANTEED BY AND 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, INC., A
SUBSIDIARY 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 WELLS
FARGO & COMPANY AND NORWEST INVESTMENT SERVICES, INC., NOR ARE THEY
GUARANTEED BY, NOR DO THEY CONSTITUTE OBLIGATIONS OF, FFSI.
INVESTMENT IN SHARES OF MUTUAL FUNDS IS SUBJECT TO RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL, WHICH 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>
TABLE OF CONTENTS DECEMBER 31, 1998
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
A MESSAGE TO OUR CONTRACT HOLDERS......................................... 1
1998 PERFORMANCE REVIEW
Income Fund........................................................ 2
Income Equity Fund................................................. 3
ValuGrowth 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
Financial Highlights............................................... 10
Notes to Financial Statements...................................... 12
Schedules of Investments
Income Fund................................................. 15
Income Equity Fund.......................................... 16
ValuGrowth Stock Fund....................................... 17
Small Company Stock Fund.................................... 18
Notes to Schedules of Investments........................... 19
</TABLE>
<PAGE>
MESSAGE TO CONTRACT HOLDERS
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February 24, 1999
Dear Norwest Passage Contract Holders:
We are pleased to provide you with the Norwest Select
Funds Annual Report. It covers the four Norwest Select
variable subaccounts available through your Norwest
Passage Variable Annuity.
Investors experienced unprecedented market volatility
this year. After climbing 20% during the first half of the
year, the stock market dropped nearly 20% between mid July
and September, only to reach record highs by late
November, ending the year with recoveries that in some
cases exceed the magnitude of the autumn declines. At the
same time, government bonds, especially the 30-year
Treasury bond, rallied due to an influx of cash from
investors seeking shelter from volatility.
While Asia's economic problems continued to shake the
world's financial markets, the U.S. economy withstood the
storm for three reasons. First, the fundamentals
underlying our economy remain solid: low unemployment, low
inflation and sustained growth. Second, both consumers and
businesses benefited from falling commodity prices. Third,
the Federal Reserve cut interest rates three times over a
two-month period, which restored confidence in financial
markets. Consumers capitalized on their good fortune with
a spending spree that has kept corporate profits healthy.
Looking forward, we urge investors to manage their
performance expectations for 1999. Consumer spending will
ultimately slow, as will economic growth. Indeed, we've
already witnessed a slowdown in the manufacturing sector
due to weakening foreign demand for U.S. goods. Plus, we
may not have experienced the worst of Asia's problems.
In closing, you are undoubtedly aware that Norwest
Corporation has merged with Wells Fargo & Company. We are
confident the new organization will continue to serve your
investment needs; you can expect the same level of quality
service you have to come to expect from Norwest, plus
several new and enhanced products and services designed to
give you even more choices.
Thank you for choosing Norwest Passage Variable
Annuity. We look forward to working with you in the
future.
Sincerely,
/s/ John Y. Keffer
John Y. Keffer,
CHAIRMAN, NORWEST SELECT
FUNDS
1
<PAGE>
1998 PERFORMANCE REVIEW
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INCOME FUND
The Norwest Select Income Fund provided its shareholders a total return that
outpaced most of its competitors for the year ended December 31, 1998. The
Fund's total return exceeded its benchmark, the Lipper Corporate A Average, by
165 basis points, returning 9.12% vs. 7.47% for the peer group.
Three main reasons account for the out-performance during 1998. The first reason
was longer maturity. For most of the year, we kept our average maturity longer
than our competition, as we had for the previous two years. This strategy proved
to be successful as interest rates declined in response to a weak stock market
and continued problems in Asia and Russia. We began to shorten our maturities in
October, as we became concerned that interest rates would move back up after
moving down so quickly.
Second, underweighting both corporate bonds and mortgage-backed securities
provided out-performance as it has in the previous two years. These "spread
sectors" underperformed during 1998. In October, however, we began to add more
corporate bonds as yield spreads over equivalent Treasuries widened
considerably. Also, we felt that the bulk of the interest rate move was now
behind us and we needed to look toward additional "spread product," such as
corporate bonds, to provide incremental yield.
Third, we have continued our strategy of purchasing high quality corporate
bonds.
As we enter 1999, we continue to be bullish on the bond market but plan to
continue adding more corporate and mortgage-backed securities in anticipation of
a more stable period for interest rates.
THE OPINIONS EXPRESSED REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH
DECEMBER 31, 1998. THE MANAGER'S OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME
BASED ON MARKET AND OTHER CONDITIONS. THE COMPOSITION, INDUSTRIES AND HOLDINGS
OF THE PORTFOLIO ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
INCOME FUND VS. LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX
("LEHMAN INDEX")
- --------------------------------------------------------------------------------
This chart reflects a comparison of the change in value of a $10,000 investment
in the Income Fund compared to the performance of the Lehman Index from the
period of the inception date of the Fund through December 31, 1998. It is
important to keep in mind that the Lehman 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. PAST
PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998
----------------------------
LEHMAN
FUND INDEX
------------- -------------
<S> <C> <C>
ONE YEAR 9.12% 8.42%
SINCE INCEPTION 7.94% 7.83%
INCEPTION DATE 6/1/94 5/31/94
VALUE DECEMBER 31,
1998 $14,197 $14,131
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FUND LEHMAN INDEX
<S> <C> <C>
05/31/94 $10,000.00 $10,000.00
06/30/94 $9,880.00 $10,001.00
07/31/94 $10,010.00 $10,145.01
08/31/94 $10,030.00 $10,176.46
09/30/94 $9,930.00 $10,082.84
10/31/94 $9,910.00 $10,081.93
11/30/94 $9,890.00 $10,036.56
12/31/94 $9,950.00 $10,071.69
01/31/95 $10,090.00 $10,241.90
02/28/95 $10,280.00 $10,453.91
03/31/95 $10,350.00 $10,513.50
04/30/95 $10,460.00 $10,642.81
05/31/95 $10,880.00 $10,964.23
06/30/95 $10,970.00 $11,037.69
07/31/95 $10,930.00 $11,038.79
08/31/95 $11,040.00 $11,139.24
09/30/95 $11,148.68 $11,219.45
10/31/95 $11,300.98 $11,343.98
11/30/95 $11,483.74 $11,492.59
12/31/95 $11,649.70 $11,613.26
01/31/96 $11,681.53 $11,713.14
02/29/96 $11,479.95 $11,576.09
03/31/96 $11,395.07 $11,517.05
04/30/96 $11,310.19 $11,476.74
05/31/96 $11,288.97 $11,467.56
06/30/96 $11,416.29 $11,589.12
07/31/96 $11,426.90 $11,623.89
08/31/96 $11,426.90 $11,633.19
09/30/96 $11,613.92 $11,794.89
10/31/96 $11,858.09 $12,003.66
11/30/96 $12,070.41 $12,162.10
12/31/96 $11,926.33 $12,084.27
01/31/97 $11,948.58 $12,131.40
02/28/97 $11,970.83 $12,154.45
03/31/97 $11,837.33 $12,070.58
04/30/97 $11,993.08 $12,211.81
05/31/97 $12,093.21 $12,313.16
06/30/97 $12,226.71 $12,425.21
07/31/97 $12,593.85 $12,677.44
08/31/97 $12,426.97 $12,614.06
09/30/97 $12,627.22 $12,760.38
10/31/97 $12,838.60 $12,902.02
11/30/97 $12,883.10 $12,930.41
12/31/97 $13,009.60 $13,033.85
01/31/98 $13,186.04 $13,204.59
02/28/98 $13,138.99 $13,194.03
03/31/98 $13,186.04 $13,236.25
04/30/98 $13,244.85 $13,302.43
05/31/98 $13,409.53 $13,399.54
06/30/98 $13,527.16 $13,485.30
07/31/98 $13,538.92 $13,532.49
08/31/98 $13,785.94 $13,744.95
09/30/98 $14,279.97 $14,089.95
10/31/98 $14,115.30 $14,075.86
11/30/98 $14,150.58 $14,074.45
12/31/98 $14,196.60 $14,130.75
</TABLE>
TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN FEES AND EXPENSES NOT BEEN
VOLUNTARILY WAIVED AND/OR REIMBURSED.
THE FUND IS PROFESSIONALLY MANAGED WHILE THE INDEX IS UNMANAGED AND IS NOT
AVAILABLE FOR INVESTMENT.
2
<PAGE>
1998 PERFORMANCE REVIEW
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INCOME EQUITY FUND
For the twelve months ended December 31, 1998 the Fund outperformed its
benchmark, the Lipper Equity Income Average, returning 18.42% vs. 10.89%. The
Fund's sectors took turns during the year in providing solid returns.
The strategy utilized in managing the Income Equity Fund remained consistent
with the Fund's overall objectives. The Fund's style is to focus on quality,
large capitalization companies with an above average dividend yield and better
future growth prospects than the market in general, while selling at a better
valuation.
The results of this disciplined process were very competitive returns with less
volatility (risk) than the market benchmarks. We have also increased the
dividend yield relative to the S&P 500 Index to a 50% premium at 2.0% versus
1.3% for the S&P.
Three sectors had the most significant positive impact on the Fund's performance
in 1998: namely Technology, Consumer Staples, and Capital Goods. The Technology
sector was paced by AMP and Lucent Technologies, which nearly tripled in price
during the year. Lucent continues to aggressively compete in the ever-changing
telecommunications industry via product development and acquisitions. The
healthcare stocks (Consumer Staples sector), especially the drug companies, have
been in favor because they have historically produced consistent revenue and
earnings gains, even in economic slowdowns, which many economists expect to
continue in 1999. The Capital Goods sector was led by Waste Management, United
Technologies and General Electric.
The economic downturn internationally impacted several sectors, including
Consumer Cyclicals (retailers in particular), Financials, Basic Materials, and
Energy. Retailers have had little or no pricing power due to low cost imports.
Financial companies, especially those doing business internationally, have been
adversely impacted by the economic uncertainties worldwide. The Basic Materials
sector (chemical companies in particular) has also been impacted by the economic
downturn as well as low commodity prices. Energy stocks continue to be under
pressure as oil prices remain at the lowest levels in the last twenty years.
The strategy going forward will be to take advantage of the decline in those
sectors that have been impacted by short-term cyclical pressures including
currency risk, price competition, excess inventories, etc. We will concentrate
on those companies with management teams that have shown strong leadership in
dealing with short-term problems. Growth of earnings and dividends, as well as
overall higher dividend yield at a reasonable price, continue to be the focus.
THE OPINIONS EXPRESSED REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH
DECEMBER 31, 1998. THE MANAGER'S OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME
BASED ON MARKET AND OTHER CONDITIONS. THE COMPOSITION, INDUSTRIES AND HOLDINGS
OF THE PORTFOLIO ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
INCOME EQUITY FUND VS. STANDARD & POOR'S 500 INDEX ("S&P INDEX")
- --------------------------------------------------------------------------------
This chart reflects a comparison of the change in value of a $10,000 investment
in the Income Equity Fund compared to the performance of the S&P Index from the
period of the inception date of the Fund through December 31, 1998. It is
important to keep in mind that the S&P 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. PAST
PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998
----------------------------
S&P
FUND INDEX
------------- -------------
<S> <C> <C>
ONE YEAR 18.42% 28.58%
SINCE INCEPTION 20.71% 28.94%
INCEPTION DATE 5/6/96 4/30/96
VALUE DECEMBER 31,
1998 $16,523 $19,717
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FUND S&P INDEX
<S> <C> <C>
04/30/96 $10,000.00 $10,000.00
05/31/96 $10,000.00 $10,257.49
06/30/96 $10,110.00 $10,296.58
07/31/96 $9,710.00 $9,841.88
08/31/96 $9,830.00 $10,049.78
09/30/96 $10,250.00 $10,614.92
10/31/96 $10,490.00 $10,907.59
11/30/96 $11,170.00 $11,731.34
12/31/96 $10,995.35 $11,498.94
01/31/97 $11,539.57 $12,216.94
02/28/97 $11,690.75 $12,312.84
03/31/97 $11,348.09 $11,807.89
04/30/97 $11,680.67 $12,512.19
05/31/97 $12,214.81 $13,273.47
06/30/97 $12,718.73 $13,867.82
07/31/97 $13,535.06 $14,970.94
08/31/97 $12,910.21 $14,132.86
09/30/97 $13,524.98 $14,906.41
10/31/97 $13,131.93 $14,409.13
11/30/97 $13,716.47 $15,075.60
12/31/97 $13,953.36 $15,334.31
01/31/98 $13,994.15 $15,503.74
02/28/98 $14,901.94 $16,621.30
03/31/98 $15,646.53 $17,471.77
04/30/98 $15,799.52 $17,647.49
05/31/98 $15,585.33 $17,344.48
06/30/98 $15,830.12 $18,048.46
07/31/98 $15,381.33 $17,856.78
08/31/98 $13,545.36 $15,278.26
09/30/98 $14,289.95 $16,257.10
10/31/98 $15,289.53 $17,578.30
11/30/98 $15,993.32 $18,643.24
12/31/98 $16,523.33 $19,716.87
</TABLE>
TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN FEES AND EXPENSES NOT BEEN
VOLUNTARILY WAIVED AND/OR REIMBURSED.
THE FUND IS PROFESSIONALLY MANAGED WHILE THE INDEX IS UNMANAGED AND IS NOT
AVAILABLE FOR INVESTMENT.
3
<PAGE>
1998 PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
VALUGROWTH STOCK FUND
For the twelve months ended December 31, 1998, the total return of the Norwest
Select ValuGrowth Fund was 16.18%. The Fund underperformed its peer group, the
Lipper Growth Fund Average, by 6.68%. The Fund suffered from its investment in
smaller capitalization stocks early in 1998. Small cap stocks on average posted
losses for the year, even though the smaller caps selected for investment in the
Fund performed in line with small cap indices. These investments were financed
through the sale of large cap stocks, some of which went on to outperform, so
the Fund suffered both on the buy side and, in terms of lost opportunity, on the
sell side.
Charles J. Meyer, CFA, became the Fund's manager in December 1998. Mr. Meyer
joined Norwest Investment Management, Inc., as an institutional portfolio
manager in March 1998. Prior to Norwest he managed the Montana Board of
Investments' $2 billion stock fund. Prior to that he was portfolio manager for
Columbia Partners, Inc., and pension investments manager for The Standard Oil
Company, both in Cleveland, Ohio.
The Fund has begun a shift away from smaller cap issues and toward a greater
emphasis on firms that have sufficient product strength to be recognized as
dominant forces in their industries. Product strength arises from strong brands,
technological leadership, and focused, entrepreneurial management. Holdings in
the Fund that best exemplify these characteristics are EMC Corp, Cisco Systems,
and Merck.
EMC is the world's leading supplier of computer storage products for large
companies. EMC's products consolidate business information and provide
management tools that make information from across the enterprise accessible to
all users regardless of their computing environment. EMC is a fast growing,
successful company. Its third quarter 1998 revenues were up 82% over the same
quarter two years ago, and it has handily beat consensus earnings forecasts for
six quarters in a row. The Fund's cost in EMC is $19.47 per share, and at the
end of 1998 the stock was at $85.
Cisco Systems is the global leader in providing equipment and software for
computer networks, including the Internet. Cisco's routers and switches guide
information and communication across all the world's various computer systems.
Its latest quarterly revenues were up 80% over the same quarter in 1996, and it
also has beat earnings forecasts for six quarters. The Fund's cost in Cisco is
$32, and it ended 1998 at $92.
Merck is a research-driven pharmaceutical company with leading positions in the
development of treatments for cardiovascular disease, osteoporosis, and asthma.
Its latest quarter revenues were 37% ahead of the 1996 quarter, and it has met
or beat estimates for six quarters. From our cost of $87, it's at $147.
EMC and Cisco will continue to benefit as information solutions, data
management, and the Internet grow in importance into the foreseeable future.
Merck will continue to benefit from an aging population and greater needs for
wellness management. When they are at good valuations, EMC, Cisco, and Merck are
the kinds of companies that are targeted for investment in the Fund going
forward.
THE OPINIONS EXPRESSED REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH
DECEMBER 31, 1998. THE MANAGER'S OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME
BASED ON MARKET AND OTHER CONDITIONS. THE COMPOSITION, INDUSTRIES AND HOLDINGS
OF THE PORTFOLIO ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
VALUGROWTH STOCK FUND VS. STANDARD & POOR'S 500 INDEX ("S&P INDEX")
- --------------------------------------------------------------------------------
This chart reflects a comparison of the change in value of a $10,000 investment
in the ValuGrowth Stock Fund compared to the performance of the S&P Index from
the period of the inception date of the Fund through December 31, 1998. It is
important to keep in mind that the S&P 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. PAST
PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998
----------------------------
S&P
FUND INDEX
------------- -------------
<S> <C> <C>
ONE YEAR 16.18% 28.58%
SINCE INCEPTION 17.57% 26.73%
INCEPTION DATE 6/1/94 5/31/94
VALUE DECEMBER 31,
1998 $21,019 $29,659
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FUND S&P INDEX
<S> <C> <C>
05/31/94 $10,000.00 $10,000.00
06/30/94 $9,550.00 $9,755.10
07/31/94 $9,900.00 $10,075.19
08/31/94 $10,340.00 $10,487.55
09/30/94 $10,070.00 $10,231.55
10/31/94 $10,210.00 $10,460.66
11/30/94 $9,780.00 $10,080.20
12/31/94 $9,810.00 $10,229.42
01/31/95 $9,950.00 $10,494.48
02/28/95 $10,300.00 $10,903.08
03/31/95 $10,520.00 $11,224.29
04/30/95 $10,710.00 $11,554.59
05/31/95 $10,910.00 $12,015.49
06/30/95 $11,210.00 $12,294.37
07/31/95 $11,510.00 $12,701.85
08/31/95 $11,500.00 $12,733.66
09/30/95 $11,741.91 $13,270.75
10/31/95 $11,521.12 $13,223.36
11/30/95 $12,233.66 $13,803.27
12/31/95 $12,179.57 $14,069.15
01/31/96 $12,311.08 $14,547.43
02/29/96 $12,675.25 $14,682.68
03/31/96 $12,867.45 $14,824.07
04/30/96 $13,069.77 $15,042.40
05/31/96 $13,312.55 $15,429.73
06/30/96 $13,231.63 $15,488.53
07/31/96 $12,675.25 $14,804.56
08/31/96 $13,100.12 $15,117.29
09/30/96 $13,919.51 $15,967.40
10/31/96 $13,949.86 $16,407.63
11/30/96 $14,860.29 $17,646.75
12/31/96 $14,641.12 $17,297.17
01/31/97 $15,497.57 $18,377.21
02/28/97 $15,466.98 $18,521.47
03/31/97 $14,794.06 $17,761.90
04/30/97 $15,538.35 $18,821.35
05/31/97 $16,374.40 $19,966.49
06/30/97 $16,935.17 $20,860.53
07/31/97 $18,413.56 $22,519.88
08/31/97 $17,465.35 $21,259.22
09/30/97 $18,209.64 $22,422.82
10/31/97 $17,414.37 $21,674.80
11/30/97 $17,903.77 $22,677.32
12/31/97 $18,090.97 $23,066.49
01/31/98 $18,332.05 $23,321.35
02/28/98 $19,663.19 $25,002.42
03/31/98 $20,281.60 $26,281.75
04/30/98 $20,596.04 $26,546.06
05/31/98 $20,009.08 $26,090.27
06/30/98 $20,533.15 $27,149.22
07/31/98 $19,610.78 $26,860.89
08/31/98 $16,602.61 $22,982.18
09/30/98 $17,650.75 $24,454.58
10/31/98 $18,803.71 $26,441.98
11/30/98 $20,009.08 $28,043.91
12/31/98 $21,018.95 $29,658.91
</TABLE>
TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN FEES AND EXPENSES NOT BEEN
VOLUNTARILY WAIVED AND/OR REIMBURSED.
THE FUND IS PROFESSIONALLY MANAGED WHILE THE INDEX IS UNMANAGED AND IS NOT
AVAILABLE FOR INVESTMENT.
4
<PAGE>
1998 PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
SMALL COMPANY STOCK FUND
1998 was a disappointing year for the Norwest Select Small Company Stock Fund.
The Fund underperformed its benchmark, the Lipper Small Cap Average, with a
return of (14.47%) vs. (0.31%). The Russell 2000 Index returned (2.24%) for the
same period. Large cap and growth stocks dominated small cap stocks. In
particular, the year was dominated by large cap technology stocks. Small cap
stocks were hit especially hard during the correction that occurred during May
through October. Although a rebound during the fourth quarter recovered some of
the damage, it too, was centered in technology and growth issues, and it was not
enough to overcome a discouraging year.
We attribute most of the index-related underperformance to the smaller size of
the average company in the Fund, compared to the index. During this correction,
it was a widely accepted concept that the smaller the company's size, the worse
the performance.
Leading up to the correction (which for small caps began in late April), the
Fund was strategically trying to get bigger, more liquid and cheaper (i.e.,
lower relative valuations). From year-end 1997 to June 30, 1998, the Fund had
increased its average weighted market cap from $400 million to $594 million and
its relative P/E valuation from a 10% discount to a 17% discount. At the same
time, the Fund was becoming much more closely weighted, in a sector sense, to
the market. The purpose of these moves was to reduce volatility (therefore risk)
and seek to produce a more consistent pattern of outperformance. These moves
toward a more conservative fund posture with respect to liquidity and valuation
should have produced a better experience in a correction than they actually did.
It is our belief that investors panicked out of small caps.
By the end of November, the Fund's average market cap was above $800 million and
its relative P/E discount to the market was 24%. As stocks recovered from early
October lows, small caps participated, but again slightly lagged large caps. The
past twelve months as a whole produced a startling gap in performance between
market cap and styles. The Fund is now conservatively positioned for the small
cap market in 1999.
We worked hard to improve the Fund's performance, and the year had many good
points. Some of these include the fact that we reduced the volatility and the
turnover of stocks held in the Fund, we invested in more "liquid" small cap
value stocks, we became more tax efficient for our taxable clients, and we made
even better allocations in the various small cap sectors.
Several harsh realities as the year unfolds include the approaching new
millennium, and uncertainty in the global markets and economies. Our investment
philosophy won't change, but we will temper it with caution as we approach the
new year.
THE OPINIONS EXPRESSED REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH
DECEMBER 31, 1998. THE MANAGER'S OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME
BASED ON MARKET AND OTHER CONDITIONS. THE COMPOSITION, INDUSTRIES AND HOLDINGS
OF THE PORTFOLIO ARE SUBJECT TO CHANGE.
- --------------------------------------------------------------------------------
SMALL COMPANY STOCK FUND VS. RUSSELL 2000 INDEX ("RUSSELL INDEX")
- --------------------------------------------------------------------------------
This chart reflects a comparison of the change in value of a $10,000 investment
in the Small Company Stock Fund compared to the performance of the Russell Index
from the period of the inception date of the Fund through December 31, 1998. It
is important to keep in mind that the Russell 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. PAST PERFORMANCE IS NOT PREDICTIVE NOR A GUARANTEE OF FUTURE RESULTS.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1998
----------------------------
RUSSELL
FUND INDEX
------------- -------------
<S> <C> <C>
ONE YEAR (14.47%) (2.24%)
SINCE INCEPTION 10.26% 14.96%
INCEPTION DATE 5/1/95 4/30/95
VALUE DECEMBER 31,
1998 $14,312 $16,690
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FUND RUSSELL INDEX
<S> <C> <C>
04/30/95 $10,000.00 $10,000.00
05/31/95 $10,040.00 $10,163.98
06/30/95 $10,670.00 $10,681.46
07/31/95 $11,740.00 $11,295.91
08/31/95 $11,970.00 $11,522.09
09/30/95 $11,920.00 $11,728.47
10/31/95 $11,280.00 $11,205.03
11/30/95 $11,590.00 $11,687.76
12/31/95 $11,594.84 $11,986.19
01/31/96 $11,636.22 $11,972.49
02/29/96 $11,956.86 $12,350.88
03/31/96 $12,484.37 $12,595.85
04/30/96 $13,891.06 $13,272.67
05/31/96 $14,418.57 $13,805.68
06/30/96 $13,404.92 $13,242.82
07/31/96 $12,112.01 $12,087.12
08/31/96 $13,177.37 $12,789.02
09/30/96 $13,818.65 $13,288.34
10/31/96 $14,087.58 $13,081.57
11/30/96 $14,749.55 $13,618.24
12/31/96 $15,243.36 $13,968.08
01/31/97 $15,570.81 $14,244.52
02/28/97 $14,690.08 $13,899.66
03/31/97 $13,481.90 $13,247.91
04/30/97 $13,086.70 $13,280.55
05/31/97 $15,728.89 $14,761.60
06/30/97 $16,011.17 $15,388.80
07/31/97 $17,038.69 $16,106.81
08/31/97 $17,467.76 $16,470.28
09/30/97 $18,777.56 $17,672.64
10/31/97 $17,569.38 $16,887.10
11/30/97 $16,824.15 $16,772.13
12/31/97 $16,734.71 $17,073.19
01/31/98 $16,341.26 $16,813.16
02/28/98 $17,888.83 $18,073.86
03/31/98 $18,387.20 $18,833.33
04/30/98 $18,426.54 $18,936.78
05/31/98 $17,088.81 $17,920.82
06/30/98 $17,233.08 $17,972.11
07/31/98 $15,396.98 $16,504.51
08/31/98 $11,816.59 $13,304.28
09/30/98 $12,419.88 $14,333.69
10/31/98 $12,944.48 $14,921.69
11/30/98 $13,705.15 $15,709.54
12/31/98 $14,312.47 $16,690.30
</TABLE>
TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN FEES AND EXPENSES NOT BEEN
VOLUNTARILY WAIVED AND/OR REIMBURSED.
THE FUND IS PROFESSIONALLY MANAGED WHILE THE INDEX IS UNMANAGED AND IS NOT
AVAILABLE FOR INVESTMENT.
5
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Norwest Select Funds:
We have audited the accompanying statements of assets
and liabilities of Income Fund (formerly, Intermediate
Bond Fund), Income Equity Fund, ValuGrowth Stock Fund, and
Small Company Stock Fund, portfolios of Norwest Select
Funds, (collectively, the "Funds"), including the
schedules of investments as of December 31, 1998, the
related statements of operations for the year then ended,
the statements of changes in net assets for each of the
years in the two-year period then ended and financial
highlights for each of the years in the four-year period
ended December 31, 1998 and the period from June 1, 1994
to December 31, 1994 for Income Fund and ValuGrowth Stock
Fund, the financial highlights for each of the years in
the two-year period ended December 31, 1998 and the period
from May 6, 1996 to December 31, 1996 for Income Equity
Fund and the financial highlights for each of the years in
the three-year period ended December 31, 1998 and the
period from May 1, 1995 to December 31, 1995 for Small
Company 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 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 confirmation of
securities owned as of December 31, 1998 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 Income Fund,
Income Equity Fund, ValuGrowth Stock Fund, and Small
Company Stock Fund as of December 31, 1998, the results of
their operations, changes in their net assets and
financial highlights for each of the years or periods
referred to above in conformity with generally accepted
accounting principles.
[SIGNATURE]
Boston, Massachusetts
February 5, 1999
6
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL
INCOME VALUGROWTH COMPANY
INCOME EQUITY STOCK STOCK
FUND FUND FUND FUND
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Investments (Note 2)
Investments at cost...................... $21,425,358 $69,362,790 $27,233,835 $11,555,032
Repurchase agreements at cost............ - 3,032,865 - -
Net unrealized appreciation.............. 411,527 14,010,486 8,638,079 1,474,049
----------- ----------- ------------ -----------
Total investments at value................. 21,836,885 86,406,141 35,871,914 13,029,081
Receivable for interest, dividends and
other receivables........................ 329,981 155,633 57,072 17,655
Receivable for Fund shares issued.......... 47,285 289,250 - 218,037
Receivable for investments sold............ - - - 109,372
Organization costs, net of amortization
(Note 2)................................. 4,128 - 4,128 -
----------- ----------- ------------ -----------
TOTAL ASSETS................................. 22,218,279 86,851,024 35,933,114 13,374,145
----------- ----------- ------------ -----------
LIABILITIES
Payable for investments purchased.......... - 711,037 - 64,939
Payable for Fund shares redeemed........... - - 84,310 -
Payable to investment adviser.............. 5,243 55,100 20,030 4,033
Accrued expenses and other liabilities..... 14,165 16,156 12,778 10,394
----------- ----------- ------------ -----------
TOTAL LIABILITIES............................ 19,408 782,293 117,118 79,366
----------- ----------- ------------ -----------
NET ASSETS................................... $22,198,871 $86,068,731 $35,815,996 $13,294,779
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
COMPONENTS OF NET ASSETS
Paid-in capital............................ $21,787,593 $72,058,303 $27,322,047 $15,196,024
Undistributed net investment income........ 4,800 - - -
Net unrealized appreciation on
investments.............................. 411,527 14,010,486 8,638,079 1,474,049
Accumulated net realized loss from
investments sold......................... (5,049) (58) (144,130) (3,375,294)
----------- ----------- ------------ -----------
NET ASSETS................................... $22,198,871 $86,068,731 $35,815,996 $13,294,779
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
SHARES OF BENEFICIAL INTEREST, NO PAR
VALUE...................................... 1,935,702 5,378,769 1,798,215 1,221,621
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
NET ASSET VALUE PER SHARE (Net Assets divided
by Shares of Beneficial Interest).......... $ 11.47 $ 16.00 $ 19.92 $ 10.88
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL
INCOME VALUGROWTH COMPANY
INCOME EQUITY STOCK STOCK
FUND FUND FUND FUND
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest income............................ $ 962,171 $ 137,537 $ 117,038 $ 68,673
Dividend income............................ - 1,299,378 355,442 72,559
---------- ----------- ----------- -----------
TOTAL INVESTMENT INCOME...................... 962,171 1,436,915 472,480 141,232
---------- ----------- ----------- -----------
EXPENSES
Investment advisory (Note 3)............... 89,772 507,440 234,312 101,914
Management and administration (Note 3)..... 14,962 63,430 29,290 12,740
Transfer agency (Note 3)................... 11,970 50,744 23,431 10,191
Custody (Note 3)........................... 2,992 12,686 5,858 2,548
Accounting (Note 3)........................ 44,000 38,000 39,000 44,000
Legal...................................... 1,114 2,702 1,311 631
Audit...................................... 16,750 14,875 13,850 14,950
Trustees................................... 165 718 341 156
Amortization of organization costs (Note
2)....................................... 9,907 - 9,907 -
Miscellaneous.............................. 7,284 10,121 7,489 5,810
---------- ----------- ----------- -----------
TOTAL EXPENSES............................... 198,916 700,716 364,789 192,940
Expenses reimbursed and fees waived (Note
5)....................................... (109,153) (193,842) (130,696) (91,022)
---------- ----------- ----------- -----------
NET EXPENSES................................. 89,763 506,874 234,093 101,918
---------- ----------- ----------- -----------
NET INVESTMENT INCOME........................ 872,408 930,041 238,387 39,314
---------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments
sold..................................... 227,141 124,787 (89,369) (3,079,073)
Net change in unrealized appreciation on
investments.............................. 208,640 9,270,806 4,222,047 1,006,437
---------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS................................. 435,781 9,395,593 4,132,678 (2,072,636)
---------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.................................. $1,308,189 $10,325,634 $4,371,065 $(2,033,322)
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1997 AND
1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL
INCOME VALUGROWTH COMPANY
INCOME EQUITY STOCK STOCK
FUND FUND FUND FUND
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
NET ASSETS -- DECEMBER 31, 1996.............. $ 5,958,788 $ 9,415,236 $10,583,385 $ 6,090,667
----------- ----------- ------------ -----------
OPERATIONS
Net investment income...................... 444,351 399,846 138,270 6,153
Net realized gain on investments sold...... 54,845 60,742 368,121 917,143
Net change in unrealized appreciation
(depreciation) on investments.............. 184,401 4,240,072 2,481,842 (237,269)
----------- ----------- ------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................. 683,597 4,700,660 2,988,233 686,027
----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income...................... (442,578) (402,934) (138,437) (6,441)
Net realized gain on investments........... (55,635) (60,744) (388,987) (1,219,084)
Return of capital.......................... - - (50,858) (291,400)
----------- ----------- ------------ -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS.......... (498,213) (463,678) (578,282) (1,516,925)
----------- ----------- ------------ -----------
CAPITAL SHARE TRANSACTIONS (a)
Sale of shares............................. 3,364,950 26,014,466 8,661,580 4,984,738
Reinvestment of distributions.............. 499,587 464,753 579,726 1,522,252
Redemption of shares....................... (779,711) (243,189) (471,118) (284,927)
----------- ----------- ------------ -----------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE
TRANSACTIONS............................... 3,084,826 26,236,030 8,770,188 6,222,063
----------- ----------- ------------ -----------
NET INCREASE IN NET ASSETS................... 3,270,210 30,473,012 11,180,139 5,391,165
----------- ----------- ------------ -----------
NET ASSETS -- DECEMBER 31, 1997 (I).......... 9,228,998 39,888,248 21,763,524 11,481,832
----------- ----------- ------------ -----------
OPERATIONS
Net investment income...................... 872,408 930,041 238,387 39,314
Net realized gain (loss) on investments
sold....................................... 227,141 124,787 (89,369) (3,079,073)
Net change in unrealized appreciation on
investments................................ 208,640 9,270,806 4,222,047 1,006,437
----------- ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. 1,308,189 10,325,634 4,371,065 (2,033,322)
----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income...................... (867,581) (932,147) (239,000) (39,617)
Net realized gain on investments........... (232,217) (124,789) - -
----------- ----------- ------------ -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS.......... (1,099,798) (1,056,936) (239,000) (39,617)
----------- ----------- ------------ -----------
CAPITAL SHARE TRANSACTIONS (b)
Sale of shares............................. 12,671,207 37,717,863 11,482,359 6,332,722
Reinvestment of distributions.............. 1,099,798 1,056,936 239,000 39,617
Redemption of shares....................... (1,009,523) (1,863,014) (1,800,952) (2,486,453)
----------- ----------- ------------ -----------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE
TRANSACTIONS............................... 12,761,482 36,911,785 9,920,407 3,885,886
----------- ----------- ------------ -----------
NET INCREASE IN NET ASSETS................... 12,969,873 46,180,483 14,052,472 1,812,947
----------- ----------- ------------ -----------
NET ASSETS -- DECEMBER 31, 1998 (II)......... $22,198,871 $86,068,731 $35,815,996 $13,294,779
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
(I) Includes undistributed (distributions in
excess of) net investment income of........ $ (422) $ 90 $ 156 $ 32
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
(II) Includes undistributed (distributions in
excess of) net investment income of........ $ 4,800 $ - $ - $ -
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
(a) Shares Issued (Redeemed) - For the Year
Ended December 31, 1997
Sale of shares........................... 304,026 2,037,173 518,411 343,812
Reinvestment of distributions............ 45,212 34,503 34,243 124,571
Redemption of shares..................... (70,814) (19,482) (28,590) (20,356)
----------- ----------- ------------ -----------
Net increase in shares outstanding..... 278,424 2,052,194 524,064 448,027
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
(b) Shares Issued (Redeemed) - For the Year
Ended December 31, 1998
Sale of shares........................... 1,091,411 2,522,285 622,388 515,865
Reinvestment of distributions............ 95,885 66,058 11,998 3,641
Redemption of shares..................... (85,838) (124,465) (97,280) (197,147)
----------- ----------- ------------ -----------
Net increase in shares outstanding..... 1,101,458 2,463,878 537,106 322,359
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET REALIZED FROM NET
BEGINNING AND DIVIDENDS REALIZED ENDING
NET ASSET NET UNREALIZED FROM NET GAINS NET ASSET
VALUE INVESTMENT GAIN (LOSS) ON INVESTMENT ON RETURN OF VALUE PER
PER SHARE INCOME INVESTMENTS INCOME INVESTMENTS CAPITAL SHARE
--------- ----------- -------------- ---------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FUND
January 1, 1998 to
December 31, 1998.... $11.06 $0.48 $ 0.53 $(0.47) $(0.13) $ - $11.47
January 1, 1997 to
December 31, 1997.... 10.72 0.56 0.41 (0.56) (0.07) - 11.06
January 1, 1996 to
December 31, 1996.... 10.98 0.50 (0.24) (0.50) (0.02) - 10.72
January 1, 1995 to
December 31, 1995.... 9.95 0.33 1.36 (0.66) - - 10.98
June 1, 1994(a) to
December 31, 1994.... 10.00 0.33 (0.38) - - - 9.95
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME EQUITY FUND
January 1, 1998 to
December 31, 1998.... 13.68 0.18 2.34 (0.18) (0.02) - 16.00
January 1, 1997 to
December 31, 1997.... 10.91 0.14 2.79 (0.14) (0.02) - 13.68
May 6, 1996(a) to
December 31, 1996.... 10.00 0.08 0.92 (0.08) (0.01) - 10.91
- -----------------------------------------------------------------------------------------------------------------------------------
VALUGROWTH STOCK FUND
January 1, 1998 to
December 31, 1998.... 17.26 0.13 2.66 (0.13) - - 19.92
January 1, 1997 to
December 31, 1997.... 14.36 0.11 3.26 (0.11) (0.32) (0.04) 17.26
January 1, 1996 to
December 31, 1996.... 12.04 0.11 2.32 (0.11) - - 14.36
January 1, 1995 to
December 31, 1995.... 9.81 0.07 2.30 (0.14) - - 12.04
June 1, 1994(a) to
December 31, 1994.... 10.00 0.07 (0.26) - - - 9.81
- -----------------------------------------------------------------------------------------------------------------------------------
SMALL COMPANY STOCK FUND
January 1, 1998 to
December 31, 1998.... 12.77 0.03 (1.89) (0.03) - - 10.88
January 1, 1997 to
December 31, 1997.... 13.50 0.01 1.24 (0.01) (1.59) (0.38) 12.77
January 1, 1996 to
December 31, 1996.... 11.21 0.02 3.51 (0.02) (1.22) - 13.50
May 1, 1995(a) to
December 31, 1995.... 10.00 0.06 1.54 (0.06) (0.33) - 11.21
</TABLE>
(a) Commencement of operations.
(b) Total return does not reflect any separate account charges under variable
annuity contracts or life insurance policies.
(c) Annualized.
See Notes to Financial Statements
10
<PAGE>
SELECTED DATA FOR A SHARE OUTSTANDING DURING THE PERIODS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
NET ASSETS AT
------------------------------ END OF
NET PORTFOLIO PERIOD
NET GROSS INVESTMENT TOTAL TURNOVER (000'S
EXPENSES EXPENSES INCOME RETURN(b) RATE OMITTED)
------ ------ -------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
INCOME FUND
January 1, 1998 to
December 31, 1998.... 0.60% 1.33% 5.83% 9.12% 122.86% $22,199
January 1, 1997 to
December 31, 1997.... 0.60% 1.97% 6.00% 9.08% 179.37% 9,229
January 1, 1996 to
December 31, 1996.... 0.60% 2.52% 6.05% 2.37% 125.23% 5,959
January 1, 1995 to
December 31, 1995.... 0.60% 4.67% 6.33% 17.08% 54.04% 3,090
June 1, 1994(a) to
December 31, 1994.... 0.60%(c) 9.31%(c) 6.45%(c) (0.50%) 52.61% 1,255
- -----------------------------------------------------------------------------------------------------
INCOME EQUITY FUND
January 1, 1998 to
December 31, 1998.... 0.80% 1.10% 1.47% 18.42% 1.58% 86,069
January 1, 1997 to
December 31, 1997.... 0.80% 1.34% 1.85% 26.90% 2.85% 39,888
May 6, 1996(a) to
December 31, 1996.... 0.80%(c) 2.51%(c) 2.31%(c) 9.95% 4.20% 9,415
- -----------------------------------------------------------------------------------------------------
VALUGROWTH STOCK FUND
January 1, 1998 to
December 31, 1998.... 0.80% 1.25% 0.81% 16.18% 16.94% 35,816
January 1, 1997 to
December 31, 1997.... 0.80% 1.50% 0.87% 23.56% 34.58% 21,764
January 1, 1996 to
December 31, 1996.... 0.80% 2.02% 1.08% 20.21% 37.57% 10,583
January 1, 1995 to
December 31, 1995.... 0.80% 3.81% 1.24% 24.15% 25.44% 4,793
June 1, 1994(a) to
December 31, 1994.... 0.80%(c) 8.00%(c) 1.67%(c) (1.90%) 16.77% 1,910
- -----------------------------------------------------------------------------------------------------
SMALL COMPANY STOCK FUND
January 1, 1998 to
December 31, 1998.... 0.80% 1.51% 0.31% (14.47%) 135.30% 13,295
January 1, 1997 to
December 31, 1997.... 0.80% 1.88% 0.07% 9.87% 208.95% 11,482
January 1, 1996 to
December 31, 1996.... 0.80% 2.82% 0.16% 31.47% 194.87% 6,091
May 1, 1995(a) to
December 31, 1995.... 0.80%(c) 5.38%(c) 1.02%(c) 15.95% 51.16% 2,027
</TABLE>
(a) Commencement of operations.
(b) Total return does not reflect any separate account charges under variable
annuity contracts or life insurance policies.
(c) Annualized.
See Notes to Financial Statements
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Norwest Select Funds (the "Trust") was organized as a Delaware business trust on
December 7, 1993, and is registered as an open-end management investment company
under the Investment Company Act of 1940. The Trust currently has four
diversified investment portfolios (each a "Fund" and, collectively, the
"Funds"). Income Fund (renamed from Intermediate Bond Fund on May 1, 1998) and
ValuGrowth 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
These 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. The following summarizes the significant accounting policies of the
Funds:
SECURITY VALUATION--Short-term securities that mature in sixty days or less are
valued at amortized cost. Equity securities for which market quotations are
readily available are valued using the last reported sales price (prior to the
time assets are valued) 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 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.
INVESTMENT INCOME--Dividend income is recorded on the ex-dividend date. Interest
income is recorded as earned.
PREMIUM AMORTIZATION AND DISCOUNT ACCRETION--Fixed income investments with a
maturity greater than sixty days and purchased at a premium or discount are not
amortized or accreted.
DISTRIBUTIONS TO SHAREHOLDERS--Dividends from net investment income and capital
gain distributions, if any, are distributed to shareholders at least annually.
Distributions are based on amounts calculated in accordance with applicable
federal income tax regulations, which may differ from generally accepted
accounting principles. These differences are due primarily to differing
treatments of income and gain on various investment securities held by a Fund,
timing differences and differing characterizations of distributions made by a
Fund.
FEDERAL TAXES--Each Fund intends to qualify, and continue to qualify, each year
as a regulated investment company and distribute all its taxable income. In
addition, by distributing in each calendar year substantially all its net
investment income, capital gain and certain other amounts, if any, the Fund will
not be subject to a federal income or excise tax. Therefore, no federal income
or excise tax provision is required.
EXPENSE ALLOCATION--The Trust accounts separately for the assets and liabilities
and operations of each Fund. Expenses that are attributable to more than one
Fund are allocated among the respective Funds.
REALIZED GAIN AND LOSS--Security transactions are recorded on the trade date.
Identified cost of investments sold is used to determine realized gains and
losses for both financial statement and federal income tax purposes.
REPURCHASE AGREEMENTS--Each Fund 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
collateral, whose market value must always equal or exceed the repurchase price.
The investment adviser is responsible for determining the value of the
collateral at all times. In the event of default, a Fund may have difficulties
with the disposition of such collateral.
ORGANIZATION 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.
3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER--The investment adviser to each Fund is Norwest Investment
Management, Inc. ("Adviser"), a wholly owned subsidiary of Norwest Bank
Minnesota, N.A. ("Norwest"), which is a subsidiary of Wells Fargo & Company. 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:
Income Fund -- 0.60%; Income Equity Fund, ValuGrowth Stock Fund, and Small
Company Stock Fund -- 0.80%.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
INVESTMENT SUBADVISER--To assist the Adviser in carrying out its obligations
under the investment advisory agreement with respect to Small Company Stock
Fund, Crestone Capital Management, Inc. ("Crestone"), an investment advisory
subsidiary of Norwest, acts as investment subadviser. The fee paid by the
Adviser to Crestone does not increase the amount paid by the Fund to the
Adviser.
ADMINISTRATOR, MANAGER AND OTHER SERVICES--Forum Financial Services, Inc.
("FFSI") supervises the overall management of the Trust other than investment
advisory services. FFSI is entitled to receive an annual fee of 0.05% of the
average daily net assets of each Fund. Forum Administrative Services, LLC
("FAdS") is the administrator to the Trust and receives a fee at an annual rate
of 0.05% of the average daily net assets of each Fund.
Forum Accounting Services, LLC ("FAcS") provides fund accounting services to the
Funds. For these services, FAcS is entitled to receive a fee of $36,000 per
year, per Fund, plus certain amounts based upon the number and types of
portfolio transactions within each Fund.
Norwest serves as the Trust's transfer agent, dividend disbursing agent and
custodian. For these services, Norwest is entitled to receive a fee at an annual
rate of 0.10% of the average daily net assets of each Fund.
NOTE 4. SECURITIES TRANSACTIONS
The cost of securities purchased and the proceeds from sales of securities
(including maturities and excluding short-term securities) for the year ended
December 31, 1998, were as follows:
<TABLE>
<CAPTION>
FUND COST OF PURCHASES PROCEEDS FROM SALES
- ---------------------------------------------------------------------------------------- ----------------- -------------------
<S> <C> <C>
Income Fund............................................................................. $30,184,612 $17,944,216
Income Equity Fund...................................................................... 36,385,708 957,051
ValuGrowth Stock Fund................................................................... 13,087,637 4,563,209
Small Company Stock Fund................................................................ 19,348,021 15,600,515
</TABLE>
For federal income tax purposes, the tax cost of investment securities owned,
the aggregate gross unrealized appreciation and the aggregate gross unrealized
depreciation and the capital loss carryovers (which expire in 2006) available to
offset future capital gains as of December 31, 1998, were as follows:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED NET UNREALIZED CAPITAL LOSS
FUND APPRECIATION DEPRECIATION APPRECIATION TAX COST CARRYOVERS
- ------------------------------------------------------- ------------ ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Income Fund............................................ $ 482,440 $ 75,960 $ 406,480 $21,430,405 $ --
Income Equity Fund..................................... 16,515,161 2,504,732 14,010,429 72,395,712 --
ValuGrowth Stock Fund.................................. 11,168,767 2,527,010 8,641,757 27,230,157 147,807
Small Company Stock Fund............................... 2,006,661 550,612 1,456,049 11,573,032 3,248,573
</TABLE>
NOTE 5. VOLUNTARY FEE WAIVERS AND EXPENSE REIMBURSEMENTS
For the year ended December 31, 1998, the Trust's service providers voluntarily
waived and/or reimbursed a portion of certain fees or reimbursed certain
expenses incurred by the Funds as follows:
<TABLE>
<CAPTION>
FEES WAIVED AND REIMBURSED
--------------------------------------------------
CUSTODIAN AND
FUND TRANSFER AGENT ADVISER FADS FFSI
- ------------------------------------------------------------ --------------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Income Fund................................................. $ 14,962 $ 79,229 $ 7,481 $ 7,481
Income Equity Fund.......................................... 63,430 66,982 31,715 31,715
ValuGrowth Stock Fund....................................... 29,288 72,118 14,645 14,645
Small Company Stock Fund.................................... 12,739 65,543 6,370 6,370
<CAPTION>
TOTAL FEES WAIVED AND
FUND EXPENSES REIMBURSED
- ------------------------------------------------------------ ---------------------
<S> <C>
Income Fund................................................. $ 109,153
Income Equity Fund.......................................... 193,842
ValuGrowth Stock Fund....................................... 130,696
Small Company Stock Fund.................................... 91,022
</TABLE>
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION (UNAUDITED)
Federal tax status of dividends declared per share during the fiscal year is as
follows:
<TABLE>
<CAPTION>
LONG TERM
FUND CAPITAL GAIN
- -------------------------------------------------------------------------------------------------- -------------
<S> <C>
Income Fund....................................................................................... $ 0.016877
Income Equity Fund................................................................................ 0.015441
ValuGrowth Stock Fund............................................................................. --
Small Company Stock Fund.......................................................................... --
</TABLE>
For federal income purposes, dividends from short term capital gain are
classified as ordinary income. The percentage of qualifying dividends eligible
for the corporate dividends received deduction for Income Equity Fund,
ValueGrowth Stock Fund and Small Company Stock Fund is 100%.
14
<PAGE>
SCHEDULES OF INVESTMENTS DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- -----------------------------------------------------------------
INCOME FUND
- -----------------------------------------------------------------
CORPORATE BONDS & NOTES (41.7%)
500,000 Alabama Power Co., 5.35%, 11/15/03 $ 499,755
200,000 AMBAC, Inc., 9.38%, 8/1/11 267,250
200,000 American Home Products Corp., 7.25%,
3/1/23 223,930
400,000 Amoco Canada, 7.25%, 12/1/02 428,020
200,000 Atlantic Richfield Co., 9.00%, 4/1/21 263,224
500,000 Case Corp., 6.25%, 12/1/03 (b) 497,055
500,000 CIT Group, Inc., 5.91%, 11/23/05 503,325
450,000 Clear Channel Communications, Inc.,
7.25%, 10/15/27 453,190
200,000 Dillard Department Stores, Inc., 9.13%,
8/1/11 246,562
500,000 Ford Motor Credit Co., 5.13%, 10/15/01 496,715
185,000 General Electric Capital Corp., 7.88%,
12/1/06 213,483
200,000 Gruma SA de CV, 7.63%, 10/15/07 179,058
125,000 Lehman Brothers Holdings, 6.63%,
12/27/02 125,494
250,000 Merck & Co, Inc., 6.40%, 3/1/28 267,272
325,000 Morgan Stanley Dean Witter & Co., 6.75%,
1/1/16 339,079
255,000 News America Holdings, 8.88%, 4/26/23 309,397
350,000 Oracle Corp., 6.72%, 2/15/04 364,189
500,000 PNC Bank Corp., 6.50%, 5/1/08 528,560
400,000 Royal Caribbean Cruises, 7.25%, 8/15/06 410,036
200,000 Tosco Corp., 7.80%, 1/1/27 218,734
500,000 Tyco International Ltd., 5.88%, 11/1/04
(b) 501,780
500,000 Walt Disney Co., 5.25%, 12/1/03 501,260
500,000 Wisconsin Power & Light Co., 5.70%,
10/15/08 511,610
250,000 Worldcom, Inc., 6.40%, 8/15/05 259,227
500,000 Yorkshire Power Finance, 6.15%, 2/25/03 502,920
---------------
TOTAL CORPORATE BONDS & NOTES (COST $8,963,037) 9,111,125
---------------
FOREIGN BONDS & NOTES (U.S. DOLLAR DENOMINATED) (4.6%)
500,000 Province of British Columbia, 5.38%,
10/29/08 498,265
500,000 Province of Ontario, 5.50%, 10/1/08 501,825
---------------
TOTAL FOREIGN BONDS & NOTES (COST $997,115) 1,000,090
---------------
GOVERNMENT AGENCY BONDS & NOTES (15.3%)
FEDERAL HOME LOAN BANK (3.2%)
400,000 FHLB, 5.63%, 3/19/01 406,556
300,000 FHLB, 5.13%, 9/15/03 300,534
---------------
TOTAL FEDERAL HOME LOAN BANK (COST $704,393) 707,090
---------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (5.8%)
300,000 FHLMC, 7.10%, 4/10/07 335,097
900,000 FHLMC, 5.75%, 4/15/08 932,643
---------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION
(COST $1,217,575) 1,267,740
---------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (3.9%)
300,000 FNMA, 6.50%, 7/16/07 324,150
500,000 FNMA, 6.00%, 5/15/08 528,940
---------------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION
(COST $811,590) 853,090
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- -----------------------------------------------------------------
INCOME FUND (continued)
- -----------------------------------------------------------------
</TABLE>
GOVERNMENT AGENCY BONDS & NOTES (continued)
<TABLE>
<C> <S> <C>
TENNESSEE VALLEY AUTHORITY (2.4%)
500,000 TVA, 6.00%, 3/15/13 (cost $524,090) $ 524,360
---------------
TOTAL GOVERNMENT AGENCY BONDS & NOTES (COST $3,257,648)
3,352,280
---------------
MORTGAGE BACKED SECURITIES (8.9%)
FEDERAL HOME LOAN MORTGAGE CORPORATION (3.3%)
234,784 FHLMC, Pool D70924, 6.50%, 5/1/26 236,691
498,296 FHLMC, Pool E73249, 5.50%, 11/1/13 492,690
---------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION (COST
$719,332) 729,381
---------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (4.6%)
1,008,875 FNMA, Pool 455607, 6.00%, 12/1/28 (cost
$998,944) 996,890
---------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (1.0%)
208,500 GNMA, Pool 445071, 7.50%, 1/15/27 (cost
$208,561) 215,147
---------------
TOTAL MORTGAGE BACKED SECURITIES (COST $1,926,837) 1,941,418
---------------
MUNICIPAL NOTES (1.0%)
200,000 Denver, CO, City and County SD #1,
Educational Facilities, Revenue Bonds,
Taxable Pension, School Facilities
Lease, AMBAC insured, 6.49%, 12/15/02
(cost $200,000) 207,998
---------------
U.S. TREASURY OBLIGATIONS (26.8%)
U.S. TREASURY BONDS (5.3%)
200,000 11.25%, 2/15/15 330,612
300,000 8.88%, 2/15/19 427,392
300,000 8.00%, 11/15/21 401,205
---------------
TOTAL U.S. TREASURY BONDS (COST $1,123,953) 1,159,209
---------------
U.S. TREASURY NOTES (21.5%)
400,000 7.88%, 8/15/01 431,788
400,000 7.50% 11/15/01 430,632
300,000 7.88%,11/15/04 347,619
700,000 10.75%, 8/15/05 934,052
700,000 7.00%, 7/15/06 799,190
400,000 6.63%, 5/15/07 450,936
650,000 6.13%, 8/15/07 711,581
500,000 6.63%, 2/15/27 590,475
---------------
TOTAL U.S. TREASURY NOTES (COST $4,588,276) 4,696,273
---------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $5,712,229) 5,855,482
---------------
SHORT-TERM HOLDINGS (1.7%)
368,492 Norwest Cash Investment Fund (cost
$368,492) 368,492
---------------
TOTAL INVESTMENTS (100.0%) (COST $21,425,358) $ 21,836,885
---------------
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
15
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- -----------------------------------------------------------------
INCOME EQUITY FUND
- -----------------------------------------------------------------
COMMON STOCK (96.5%)
BASIC MATERIALS (5.2%)
34,030 Du Pont (E.I.) de Nemours & Co. $ 1,805,717
19,750 Minnesota Mining & Manufacturing Co. 1,404,719
53,520 Morton International, Inc. 1,311,240
---------------
4,521,676
---------------
CAPITAL GOODS (9.4%)
23,890 Emerson Electric Co. 1,494,618
20,520 General Electric Co. 2,094,323
23,030 Honeywell, Inc. 1,734,447
14,170 United Technologies Corp. 1,540,988
26,359 Waste Management, Inc. 1,228,987
---------------
8,093,363
---------------
CONSUMER CYCLICAL (9.9%)
38,930 Dayton Hudson Corp. 2,111,953
19,580 Deluxe Corp. 715,894
22,805 Eastman Kodak Co. 1,641,960
27,365 J.C. Penney Co., Inc. 1,282,734
29,385 May Department Stores Co. 1,774,119
23,740 Sears, Roebuck & Co. 1,008,950
---------------
8,535,610
---------------
CONSUMER STAPLES (25.0%)
38,120 American Home Products Corp. 2,146,633
70,410 Fortune Brands, Inc. 2,226,716
20,830 Johnson & Johnson 1,747,116
22,700 McDonald's Corp. 1,739,388
12,190 Merck & Co., Inc. 1,800,311
63,870 PepsiCo, Inc. 2,614,678
21,100 Pfizer, Inc. 2,646,731
50,350 Philip Morris Cos., Inc. 2,693,725
21,620 Procter & Gamble Co. 1,974,176
69,790 Sara Lee Corp. 1,967,206
---------------
21,556,680
---------------
ENERGY (8.5%)
22,030 Atlantic Richfield Co. 1,437,458
18,365 Chevron Corp. 1,523,147
20,160 Exxon Corp. 1,474,200
14,920 Mobil Corp. 1,299,905
16,420 Royal Dutch Petroleum Co., ADR 786,108
18,260 Schlumberger Ltd. 842,243
---------------
7,363,061
---------------
<CAPTION>
FACE/SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- -----------------------------------------------------------------
INCOME EQUITY FUND (continued)
- -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
FINANCIAL (13.7%)
16,640 American Express Co. $ 1,701,440
27,040 American General Corp. 2,109,120
62,750 Dun & Bradstreet Corp. 1,980,547
16,235 J.P. Morgan & Co., Inc. 1,705,690
20,376 St. Paul Cos., Inc. 708,066
18,410 Transamerica Corp. 2,126,355
43,430 U.S. Bancorp 1,541,765
---------------
11,872,983
---------------
TECHNOLOGY (13.0%)
61,003 AMP, Inc. 3,175,969
42,260 Hewlett-Packard Co. 2,886,886
25,170 IMS Health, Inc. 1,898,762
29,850 Lucent Technologies, Inc. 3,283,500
---------------
11,245,117
---------------
UTILITIES & TELECOMMUNICATIONS (11.8%)
44,505 AT&T Corp. 3,349,001
20,060 Consolidated Natural Gas Co. 1,083,240
30,480 GTE Corp. 2,055,495
32,650 Pacific Gas & Electric Co. 1,028,475
27,030 Public Service Enterprise Group, Inc. 1,081,200
34,000 Texas Utilities Co. 1,587,375
---------------
10,184,786
---------------
TOTAL COMMON STOCK (COST $69,362,790) 83,373,276
---------------
REPURCHASE AGREEMENTS (3.5%)
3,032,865 NationsBanc Montgomery Securities, Inc.,
5.15%, due 1/4/99, to be repurchased
at $3,034,600 (Collateralized by FNMA,
6.00%, 10/1/13, market value
$3,158,603) (cost $3,032,865) 3,032,865
---------------
TOTAL INVESTMENTS (100.0%) (COST $72,395,655) $ 86,406,141
---------------
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
16
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- -----------------------------------------------------------------
VALUGROWTH STOCK FUND
- -----------------------------------------------------------------
COMMON STOCK (91.5%)
BASIC MATERIALS (4.5%)
6,000 Du Pont (E.I.) de Nemours & Co. $ 318,375
15,500 Ecolab, Inc. 560,906
6,100 Monsanto Co. 289,750
10,600 Newell Co. 437,250
---------------
1,606,281
---------------
CAPITAL GOODS (5.1%)
6,600 Emerson Electric Co. 412,913
5,600 General Electric Co. 571,550
6,600 Honeywell, Inc. 497,063
5,100 Philips Electronics NV 345,206
---------------
1,826,732
---------------
CONSUMER CYCLICAL (11.9%)
14,800 Billing Information Concepts (a) 162,800
6,000 Black & Decker Corp. 336,375
13,400 Borders Group, Inc. (a) 334,163
5,200 Callaway Golf Co. 53,300
8,500 Consolidated Stores Corp. (a) 171,594
4,400 Gartner Group, Inc. (a) 93,500
30,200 Gentex Corp. (a) 604,000
13,000 IKON Office Solutions, Inc. 111,313
13,100 Mattel, Inc. 298,844
6,800 May Department Stores Co. 410,550
3,900 National Data Corp. 189,881
6,100 Sears, Roebuck & Co. 259,250
9,600 Wal-Mart Stores, Inc. 781,800
15,300 Walt Disney Co. 459,000
---------------
4,266,370
---------------
CONSUMER STAPLES (20.0%)
11,000 American Home Products Corp. 619,436
9,300 Baxter International, Inc. 598,106
15,400 Becton, Dickinson & Co. 657,387
5,400 Bristol-Myers Squibb Co. 722,588
4,400 Coca-Cola Co. 294,250
8,968 Gillette Co. 433,267
3,300 Guidant Corp. 363,825
23,300 International Home Foods, Inc. (a) 393,188
6,200 Johnson & Johnson 520,025
7,200 Medtronic, Inc. 534,600
4,700 Merck & Co., Inc. 694,131
11,700 PepsiCo, Inc. 478,969
5,200 Procter & Gamble Co. 474,825
6,400 Watson Pharmaceuticals, Inc. (a) 402,400
---------------
7,186,997
---------------
ENERGY (3.7%)
4,000 Chevron Corp. 331,750
5,000 Mobil Corp. 435,625
5,400 Royal Dutch Petroleum Co. 258,525
6,600 Schlumberger, Ltd. 304,425
---------------
1,330,325
---------------
FINANCIAL (16.2%)
9,600 Allstate Corp. 370,800
6,525 American International Group, Inc. 630,478
<CAPTION>
SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- -----------------------------------------------------------------
VALUGROWTH STOCK FUND (continued)
- -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
FINANCIAL (continued)
<TABLE>
<C> <S> <C>
7,015 BankAmerica Corp. $ 421,777
5,400 Bank One Corp. 275,737
6,000 Chase Manhattan Corp. 408,375
5,000 Chubb Corp. 324,375
16,909 Equity Office Properties Trust 405,816
8,600 Federal National Mortgage Association 636,400
7,500 First Union Corp. 456,094
7,500 Franklin Resources, Inc. 240,000
9,300 H & R Block, Inc. 418,500
21,000 Patriot American Hospitality, Inc. 126,000
7,600 State Street Corp. 528,675
6,825 SunAmerica, Inc. 553,678
---------------
5,796,705
---------------
TECHNOLOGY (23.0%)
16,100 American Power Conversion Corp. (a) 779,844
6,600 Cerner Corp. (a) 176,550
3,200 CIENA Corp. (a) 46,800
9,787 Cisco Systems, Inc. (a) 908,356
18,200 Compaq Computer Corp. 763,262
8,850 Computer Associates International, Inc. 377,231
27,200 Electronics for Imaging, Inc. (a) 1,093,100
10,200 EMC Corp. (a) 867,000
4,100 HNC Software, Inc. (a) 165,794
5,700 Intel Corp. 675,806
4,400 Jabil Circuit, Inc. (a) 328,350
8,600 Legato Systems, Inc. (a) 567,063
2,400 Microsoft Corp. (a) 332,850
10,000 Parametric Technology Corp. (a) 163,750
3,000 Sun Microsystems, Inc. (a) 256,875
11,850 Thermo Electron Corp. (a) 200,709
4,700 Xerox Corp. 554,600
---------------
8,257,940
---------------
TRANSPORTATION (3.3%)
14,100 Carnival Corp. 676,800
13,400 CNF Transportation, Inc. 503,338
---------------
1,180,138
---------------
UTILITIES & TELECOMMUNICATIONS (3.8%)
10,000 CellStar Corp. (a) 68,125
10,100 Consolidated Natural Gas Co. 545,400
9,400 Telefonaktiebolaget LM Ericsson, Series
B ADR 225,013
11,100 Texas Utilities Co. 518,231
---------------
1,356,769
---------------
TOTAL COMMON STOCK (COST $24,170,178) 32,808,257
---------------
SHORT TERM HOLDINGS (8.5%)
1,470,334 Dreyfus Cash Management Fund 1,470,334
1,593,323 Institutional Funds Group Fund 1,593,323
---------------
TOTAL SHORT TERM HOLDINGS (COST $3,063,657) 3,063,657
---------------
TOTAL INVESTMENTS (100.0%) (COST $27,233,835) $ 35,871,914
---------------
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
17
<PAGE>
SCHEDULES OF INVESTMENTS (CONCLUDED) DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- -----------------------------------------------------------------
SMALL COMPANY STOCK FUND
- -----------------------------------------------------------------
COMMON STOCK (95.2%)
BASIC MATERIALS (0.7%)
3,200 Corn Products International, Inc. $ 97,200
---------------
CAPITAL GOODS (4.9%)
8,675 Brooks Automation, Inc. (a) 126,872
3,550 MasTec, Inc. (a) 74,550
3,100 MotivePower Industries (a) 99,781
6,050 United Stationers, Inc. (a) 157,300
4,600 VWR Scientific Corp. (a) 79,925
3,525 Zebra Technologies Corp. (a) 101,344
---------------
639,772
---------------
COMMUNICATIONS (2.3%)
8,200 COMSAT Corp. 295,200
---------------
CONSUMER CYCLICAL (26.5%)
3,500 CEC Entertainment, Inc. (a) 97,125
4,785 CKE Restaurants, Inc. 140,858
10,300 Central Garden & Pet Co. (a) 148,063
6,875 Family Golf Centers, Inc. (a) 135,781
10,500 Guitar Center, Inc. (a) 258,563
3,400 Harman International Industries, Inc. 129,625
12,825 Keystone Automotive Industies, Inc. (a) 268,523
16,350 Musicland Stores Corp. (a) 244,228
2,575 National Data Corp. 125,370
8,925 Pep Boys - Manny, Moe & Jack 140,011
12,100 Rainforest Cafe, Inc. (a) 73,356
15,000 SCP Pool Corp. (a) 226,875
3,500 Sodak Gaming, Inc. (a) 29,094
15,050 Stericycle, Inc. (a) 242,681
10,375 Sykes Enterprises, Inc. (a) 316,438
16,175 Tetra Tech, Inc. (a) 437,736
8,475 Valassis Communications, Inc. (a) 437,522
---------------
3,451,849
---------------
CONSUMER STAPLES (19.3%)
10,800 ACNielsen Corp. (a) 305,100
17,625 Foodmaker, Inc. (a) 388,852
7,500 Fresh Del Monte Produce, Inc. (a) 162,656
4,100 Henry Schein, Inc. (a) 183,475
14,750 Ivex Packaging Corp. (a) 342,938
10,225 Michael Foods, Inc. 306,750
10,400 Oshkosh B'Gosh, Inc. 209,950
4,850 QuadraMed Corp. (a) 99,425
11,900 Rayovac Corp. 317,581
7,500 True North Communications, Inc. 201,563
---------------
2,518,290
---------------
ENERGY (1.5%)
10,275 Basin Exploration, Inc. (a) 129,080
10,500 Ocean Energy, Inc. (a) 66,281
---------------
195,361
---------------
<CAPTION>
SHARE SECURITY
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- -----------------------------------------------------------------
SMALL COMPANY STOCK FUND (continued)
- -----------------------------------------------------------------
</TABLE>
COMMON STOCK (continued)
<TABLE>
<C> <S> <C>
FINANCIAL (14.5%)
5,675 BancWest Corp. $ 272,400
23,925 Cash America International, Inc. 363,361
5,275 Commercial Federal Corp. 122,314
9,575 Downey Financial Corp. 243,564
4,898 FelCor Lodging Trust, Inc. 112,960
5,000 GBC Bancorp 128,750
8,275 HCC Insurance Holdings, Inc. 145,847
12,600 Sunstone Hotel Investors, Inc. 118,913
6,250 Webster Financial Corp. 171,484
5,620 Westamerica Bancorp. 206,535
---------------
1,886,128
---------------
HEALTH CARE (8.1%)
11,700 American Retirement Corp. (a) 183,544
5,375 Barr Laboratories, Inc. (a) 258,000
11,075 Maxxim Medical, Inc (a) 329,481
22,600 PhyCor, Inc. (a) 153,963
3,325 Trigon Healthcare, Inc. (a) 124,064
---------------
1,049,052
---------------
TECHNOLOGY (11.5%)
7,650 Acxiom Corp. (a) 237,150
1,425 Alpha Industries, Inc. (a) 51,300
9,700 Ciber, Inc. (a) 271,021
3,800 Cohu, Inc. 83,600
4,050 Computer Task Group, Inc. 109,856
7,300 HBO & Co. 209,419
10,275 International Telecommunication Data
Systems, Inc. (a) 151,556
2,000 SDL, Inc. (a) 79,250
5,150 Smart Modular Technologies, Inc. (a) 142,912
11,825 Systems & Computers Technology Corp. (a) 162,594
---------------
1,498,658
---------------
TRANSPORTATION (1.1%)
5,250 Swift Transportation Co., Inc.(a) 147,164
---------------
UTILITIES (4.8%)
7,000 AGL Resources, Inc. 161,437
2,750 CILCORP, Inc. 168,266
17,375 El Paso Electric Co. (a) 152,031
3,900 Sierra Pacific Resources 148,200
---------------
629,934
---------------
TOTAL COMMON STOCK (COST $10,934,559) 12,408,608
---------------
SHORT-TERM HOLDINGS (4.8%)
385,946 Fidelity Money Market Fund 385,946
234,527 Provident Money Market Fund 234,527
---------------
TOTAL SHORT-TERM HOLDINGS (COST $620,473) 620,473
---------------
TOTAL INVESTMENTS (100.0%) (COST $11,555,032) $ 13,029,081
---------------
---------------
</TABLE>
See Notes to Schedules of Investments and Notes to Financial Statements
18
<PAGE>
NOTES TO SCHEDULES OF INVESTMENTS DECEMBER 31, 1998
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Securities that may be resold to "qualified institutional buyers" under rule
144A or securities offered pursuant to 4(2) of the Securities Act of 1933,
as amended.
ABBREVIATIONS
<TABLE>
<S> <C>
ADR American Depositary Receipts
AMBAC American Municipal Bond Assurance Corporation
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
SD School District
TVA Tennessee Valley Authority
</TABLE>
19
<PAGE>
[LOGO]
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Distributor
- -C- 1998 Norwest Select Funds This report is authorized for distribution
PVBAA 085 12/98 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.
