FIRST AMERICAN STRATEGY FUNDS INC
485BPOS, 2000-12-28
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                                             1933 Act Registration No. 333-07463
                                             1940 Act Registration No. 811-07687

    As filed with the Securities and Exchange Commission on December 28, 2000

                                   FORM N-1A

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


           REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|

         Pre-Effective Amendment No.         | |
         Post-Effective Amendment No. 8      |X|

                                     and/or

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

                                Amendment No. 8

                      FIRST AMERICAN INVESTMENT FUNDS, INC.
               (Exact Name of Registrant as Specified in Charter)

                             601 Second Avenue South
                          Minneapolis, Minnesota 55402
               (Address of Principal Executive Offices) (Zip Code)

                                 (612) 973-0384
              (Registrant's Telephone Number, including Area Code)

                             Christopher O. Petersen
                              U.S. Bank - MPFP2016
                             601 Second Avenue South
                          Minneapolis, Minnesota 55402
                     (Name and Address of Agent for Service)


It is proposed that this filing shall become effective (check appropriate box):

         | | immediately upon filing pursuant to paragraph (b) of Rule 485
         |X| on December 30, 2000 pursuant to paragraph (b) of Rule 485
         | | 60 days after filing pursuant to paragraph (a)(1) of Rule 485
         | | on February 1, 1999 pursuant to paragraph (a)(1) of Rule 485
         | | 75 days after filing pursuant to paragraph (a)(2) of Rule 485
         | | on (date) pursuant to paragraph (a)(2) of Rule 485

<PAGE>


                                                      DECEMBER 30, 2000


                                                      ASSET CLASSES

                                                       *   EQUITY FUNDS
                                                      (*)  FUNDS OF FUNDS
                                                       *   BOND FUNDS
                                                       *   TAX FREE FUNDS
                                                       *   MONEY MARKET FUNDS


PROSPECTUS

FIRST AMERICAN STRATEGY FUNDS, INC.



FIRST AMERICAN

STRATEGY
      FUNDS


CLASS A SHARES


AGGRESSIVE GROWTH FUND
GROWTH FUND
GROWTH AND INCOME FUND
INCOME FUND



AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE SHARES OF THESE FUNDS, OR DETERMINED IF THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY STATEMENT TO THE
CONTRARY IS A CRIMINAL OFFENSE.


[LOGO] FIRST AMERICAN FUNDS(R)
       THE POWER OF DISCIPLINED INVESTING(R)

<PAGE>


Table of
CONTENTS


       FUND SUMMARIES
--------------------------------------------------------------------------------
         Objectives and Main Investment Strategies                  2
--------------------------------------------------------------------------------
         Main Risks                                                 3
--------------------------------------------------------------------------------
         Fund Performance                                           4
--------------------------------------------------------------------------------
         Fees and Expenses                                          6
--------------------------------------------------------------------------------
       POLICIES & SERVICES
--------------------------------------------------------------------------------
         Buying Shares                                              8
--------------------------------------------------------------------------------
         Selling Shares                                            10
--------------------------------------------------------------------------------
         Managing Your Investment                                  11
--------------------------------------------------------------------------------
       ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
         Management                                                12
--------------------------------------------------------------------------------
         More About The Funds                                      14
--------------------------------------------------------------------------------
         The Underlying Funds                                      15
--------------------------------------------------------------------------------
         Financial Highlights                                      25
--------------------------------------------------------------------------------
       FOR MORE INFORMATION                                Back Cover
--------------------------------------------------------------------------------

<PAGE>


Fund Summaries
INTRODUCTION



This section of the prospectus describes the objectives of the First American
Strategy Funds, summarizes the main investment strategies used by each fund in
trying to achieve its objectives, and highlights the risks involved with these
strategies. It also provides you with information about the performance, fees,
and expenses of the funds.



AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF U.S. BANK NATIONAL ASSOCIATION
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY.


                               1      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Fund Summaries
OBJECTIVES AND MAIN INVESTMENT STRATEGIES

Each of the funds described in this prospectus is a "fund of funds." The funds
are intended to provide differing balances between the objectives of current
income and growth of capital. Each fund seeks to achieve its objectives by
investing in a variety of other mutual funds which are also advised by the
funds' investment advisor.

--------------------------------------------------------------------------------
OBJECTIVES

STRATEGY AGGRESSIVE GROWTH FUND seeks a high level of capital growth.

STRATEGY GROWTH FUND seeks capital growth with a moderate level of current
income.

STRATEGY GROWTH AND INCOME FUND seeks both capital growth and current income.

STRATEGY INCOME FUND seeks a high level of current income consistent with
limited risk to capital.

--------------------------------------------------------------------------------
MAIN INVESTMENT STRATEGIES

Each fund seeks to achieve its objectives by investing in a variety of other
mutual funds that are also advised by the funds' investment advisor. Strategy
Aggressive Growth Fund and Strategy Growth Fund seek their objectives by
providing high allocations to various equity categories, including small company
and international company equity securities, with relatively little emphasis on
fixed income securities. Strategy Growth and Income Fund takes a more evenly
balanced approach to equity securities and fixed income investments. Strategy
Income Fund provides a high allocation to fixed income investments, but also has
a limited equity component designed to help offset inflation and provide a
source for potential increases in income over time.

The underlying funds in which the Strategy Funds invest include the 11 equity
funds and two fixed income funds named in the table below and Prime Obligations
Fund, a money market fund. The funds' advisor allocates and reallocates each
fund's assets among the underlying funds within ranges designed to reflect the
funds' differing balances between the investment objectives of current income
and growth of capital. The following table illustrates these ranges, expressed
as percentages of the funds' net assets.


<TABLE>
<CAPTION>
                                     Aggressive                             Growth and
                                     Growth Fund        Growth Fund         Income Fund        Income Fund
----------------------------------------------------------------------------------------------------------
                                     MIN      MAX       MIN      MAX       MIN      MAX       MIN      MAX
----------------------------------------------------------------------------------------------------------
<S>                                  <C>     <C>        <C>      <C>        <C>     <C>       <C>      <C>
EQUITY FUNDS AS A WHOLE              60%     100%       50%      90%        35%     75%       15%      45%
Equity Income Fund                    0%      15%        0%      25%         0%     35%        0%      45%
Equity Index Fund                     0%      80%        0%      75%         0%     60%        0%      35%
Large Cap Growth Fund                 5%      50%        5%      45%         5%     40%        0%      25%
Large Cap Value Fund                  5%      50%        5%      45%         5%     40%        0%      25%
Mid Cap Growth Fund                   0%      40%        0%      30%         0%     20%        0%      10%
Mid Cap Value Fund                    0%      40%        0%      30%         0%     20%        0%      10%
Small Cap Growth Fund                 0%      40%        0%      30%         0%     20%        0%      10%
Small Cap Value Fund                  0%      40%        0%      30%         0%     20%        0%      10%
Real Estate Securities Fund           0%      15%        0%      15%         0%     15%        0%      15%
Emerging Markets Fund                 0%      15%        0%      15%         0%     10%        0%       5%
International Fund                    0%      35%        0%      30%         0%     25%        0%      15%

FIXED INCOME FUNDS AS A WHOLE         0%      40%       10%      50%        25%     65%       55%      85%
Fixed Income Fund                     0%      40%        0%      50%        10%     65%       25%      85%
Strategic Income Fund                 0%      15%        0%      20%         0%     20%        0%      25%

PRIME OBLIGATIONS FUND                0%      35%        0%      35%         0%     35%        0%      35%
----------------------------------------------------------------------------------------------------------
</TABLE>


In addition to investing in Prime Obligations Fund, each fund also may invest in
cash, U.S. dollar-denominated high-quality money market instruments and other
short-term securities. Normally, each fund's aggregate investment in these items
and in Prime Obligations Fund will not exceed the maximum percentage in the
above table for Prime Obligations Fund. However, in an attempt to respond to
adverse market, economic, political or other conditions, each fund may
temporarily invest without limit in cash, U.S. dollar-denominated high-quality
money market instruments and other short-term securities. Investing a
significant percentage of a fund's assets in these securities may prevent the
fund from achieving its objectives.


                               2      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Fund Summaries
MAIN RISKS

The value of your investment in a fund will change daily, which means you could
lose money. The main risks of investing in the funds include:

ACTIVE MANAGEMENT


Each fund is actively managed and its performance therefore will reflect in part
the advisor's ability to make asset allocation and other investment decisions
which are suited to achieving the fund's investment objectives. Due to their
active management, the funds could underperform other mutual funds with similar
investment objectives.


ADDITIONAL EXPENSES

Investing in the underlying funds through an investment in one of the funds
involves additional expenses that would not be present in a direct investment in
the underlying funds. See "Fund Summaries -- Fees and Expenses."


RISKS ASSOCIATED WITH THE UNDERLYING FUNDS

The funds are subject to the risks of the underlying funds in which they invest.
These risks, some of which are discussed in more detail under "The Underlying
Funds," include:

*  The underlying funds (other than Equity Index Fund) are actively managed and
   therefore may underperform other mutual funds with similar investment
   objectives.
*  Each underlying fund is subject to the risk of generally adverse markets. In
   general, the market prices of equity securities frequently are subject to
   greater volatility than the prices of fixed income securities. Therefore, the
   net asset values of funds which invest higher proportions of their assets in
   equity funds may be more volatile than funds which are limited to lower
   proportions.
*  Small Cap Growth Fund, Small Cap Value Fund, Emerging Markets Fund and
   International Fund are subject to the risks of investing in
   small-capitalization companies. These stocks historically have experienced
   greater price volatility than stocks of larger capitalization companies.

*  Mid Cap Growth Fund and Small Cap Growth Fund invest in initial public
   offerings (IPOs). IPOs generally have limited operating histories, and
   prospects for future profitability are uncertain. Prices of IPOs may also be
   unstable due to the absence of a prior public market, the small number of
   shares available for trading, and limited investor information.
*  Mid Cap Growth Fund and Mid Cap Value Fund invest in stocks of
   mid-capitalization companies. Although these stocks may be slightly less
   volatile than those of small-capitalization companies, they still involve
   substantial risk.

*  Real Estate Securities Fund is subject to risks associated with
   non-diversification and with concentrating its investments in the real estate
   industry, and to the risks associated with direct investments in real estate
   investment trusts.
*  International Fund, Emerging Markets Fund and Strategic Income Fund are
   subject to risks associated with investing in foreign securities, including
   currency risk. These risks are particularly significant in emerging markets,
   where Strategic Income Fund may invest and where Emerging Markets Fund
   primarily invests. International Fund and Emerging Markets Fund are also
   subject to the risks of entering into foreign currency hedging transactions.
*  Most of the other equity funds invest a portion of their assets in foreign
   securities which are dollar-denominated and publicly traded in the United
   States, and which may involve risks not associated with the securities of
   domestic issuers.
*  Equity Index Fund is subject to risks associated with its use of options,
   futures, contracts and options on futures contracts if securities prices do
   not move in the direction anticipated by the fund's advisor when entering
   into the options or the futures contracts.
*  The fixed income funds are subject to interest rate risk (the risk that debt
   securities held by a fund will decrease in value when interest rates rise),
   income risk (the risk that a fund's income could decline due to falling
   market interest rates), credit risk (the risk that the issuer of debt
   securities will not make timely principal or interest payments on its
   securities), and call risk (the risk that the issuer of debt securities will
   prepay those securities before their stated maturity, requiring the fund to
   reinvest the prepayment at a lower interest rate).
*  The fixed income funds may invest in mortgage- and/or asset-backed
   securities. These are subject to the risk that falling interest rates will
   cause faster than expected prepayments of the obligations underlying the
   securities, which must be reinvested at lower interest rates. They are also
   subject to the risk that rising interest rates will cause prepayments to
   slow, extending the life of mortgage- and asset-backed securities with lower
   interest rates.
*  Each fixed income fund may invest up to 25% of its total assets in dollar
   roll transactions, which could increase the volatility of the fund's share
   price and possibly diminish the fund's investment performance.
*  Most of the underlying funds lend their portfolio securities to
   broker-dealers, banks and other institutions. These funds are subject to the
   risk that the other party to the securities lending agreement will default on
   its obligations.
*  Strategic Income Fund may invest a significant portion of its assets in
   non-investment grade debt obligations, which are commonly called "high-yield"
   securities or "junk bonds." In addition, Equity Income Fund may invest in
   non-investment grade convertible debt obligations. High yield securities
   generally have more volatile prices and carry more risk to principal than
   investment grade securities.

*  Prime Obligations Fund seeks to preserve a value of $1.00 per share. A major
   change in interest rates or a default on a security or repurchase agreement
   held by the fund could cause the value to decline.


POSSIBLE CONFLICTS OF INTEREST

The funds and the underlying funds have the same officers, directors and
investment advisor. If situations arise in which the interests of the funds are
different from those of the underlying funds, these officers and directors and
the advisor could be subject to conflicts of interest. For example, the advisor
might determine that a fund should reduce its allocation of assets to a
particular underlying fund, thus requiring the fund to redeem shares of the
underlying fund, at a time when it is not in the best interests of the
underlying fund to sell portfolio securities in order to meet the redemption
request. The advisor will monitor the operations of the funds and the underlying
funds for potential conflicts of interest, and recommend to the funds' board of
directors the steps which it believes are necessary to avoid or minimize adverse
consequences to the funds and the underlying funds.


                               3      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Fund Summaries
FUND PERFORMANCE

The charts and tables that follow provide you with information on each fund's
volatility and performance. Of course, past performance does not guarantee
future results.


Each fund's bar chart shows you how performance of the fund's shares has varied
from year to year. Sales charges are not reflected in the chart; if they were,
returns would be lower.

The tables compare each fund's performance over different time periods to that
of the fund's benchmark indices, which are broad measures of market performance.
Effective December 31, 2000 each fund will charge a maximum front end sales
charge of 5.25%. Although this sales load was not charged to fund investors
prior to December 31, 2000, the tables have been adjusted to reflect performance
as if each fund had charged this sales load from its inception date. Each fund's
performance also reflects fund expenses. The benchmark indices are unmanaged and
have no sales loads or expenses.


Both the charts and the tables assume that all distributions have been
reinvested.


STRATEGY AGGRESSIVE GROWTH FUND


ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)


[BAR CHART]

  18.01%    7.36%    26.49%
-----------------------------
   1997     1998      1999

Best Quarter:    Quarter ending     December 31, 1999        20.43%
Worst Quarter:   Quarter ending     September 30, 1998      (14.93)%


AVERAGE ANNUAL TOTAL RETURNS                Inception                      Since
AS OF 12/31/99                                   Date     One Year     Inception
--------------------------------------------------------------------------------
Strategy Aggressive Growth Fund               10/1/96       19.88%        15.03%
--------------------------------------------------------------------------------
Standard & Poor's Composite 500 Index(2)                    21.04%        28.06%
--------------------------------------------------------------------------------
Lehman Government/Credit Bond Index(3)                      (2.15)%        5.48%
--------------------------------------------------------------------------------

(1)Total return for the period from 1/1/00 to 9/30/00 was 2.45%.

(2)An unmanaged index of large capitalization stocks. The since inception
   performance of the index is calculated from 10/31/96.

(3)An unmanaged index of Treasury securities, other securities issued by the
   U.S. government or its agencies or instrumentalities, and investment grade
   corporate debt securities. The since inception performance of the index is
   calculated from 10/31/96.



STRATEGY GROWTH FUND


ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR1


[BAR CHART]

  16.36%    7.52%    19.13%
-----------------------------
   1997     1998      1999

Best Quarter:    Quarter ending     December 31, 1999        14.91%
Worst Quarter:   Quarter ending     September 30, 1998      (11.92)%


AVERAGE ANNUAL TOTAL RETURNS                Inception                      Since
AS OF 12/31/99                                   Date     One Year     Inception
--------------------------------------------------------------------------------
Strategy Growth Fund                          10/1/96       12.87%        12.55%
--------------------------------------------------------------------------------
Standard & Poor's Composite 500 Index(2)                    21.04%        28.06%
--------------------------------------------------------------------------------
Lehman Government/Credit Bond Index(3)                      (2.15)%        5.48%
--------------------------------------------------------------------------------

(1)Total return for the period from 1/1/00 to 9/30/00 was 4.13%.

(2)An unmanaged index of large capitalization stocks. The since inception
   performance of the index is calculated from 10/31/96.

(3)An unmanaged index of Treasury securities, other securities issued by the
   U.S. government or its agencies or instrumentalities, and investment grade
   corporate debt securities. The since inception performance of the index is
   calculated from 10/31/96.




                               4      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Fund Summaries
FUND PERFORMANCE CONTINUED


STRATEGY GROWTH AND INCOME FUND


ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)


[BAR CHART]

  13.96%    8.20%    13.51%
-----------------------------
   1997     1998      1999

Best Quarter:    Quarter ending     December 31, 1999       10.33%
Worst Quarter:   Quarter ending     September 30, 1998      (8.30)%


AVERAGE ANNUAL TOTAL RETURNS                Inception                      Since
AS OF 12/31/99                                   Date     One Year     Inception
--------------------------------------------------------------------------------
Strategy Growth and Income Fund               10/1/96        7.21%        10.67%
--------------------------------------------------------------------------------
Standard & Poor's Composite 500 Index(2)                    21.04%        28.06%
--------------------------------------------------------------------------------
Lehman Government/Credit Bond Index(3)                      (2.15)%        5.48%
--------------------------------------------------------------------------------

(1)Total return for the period from 1/1/00 to 9/30/00 was 4.13%.

(2)An unmanaged index of large capitalization stocks. The since inception
   performance of the index is calculated from 10/31/96.

(3)An unmanaged index of Treasury securities, other securities issued by the
   U.S. government or its agencies or instrumentalities, and investment grade
   corporate debt securities. The since inception performance of the index is
   calculated from 10/31/96.


STRATEGY INCOME FUND


ANNUAL TOTAL RETURNS AS OF 12/31 EACH YEAR(1)


[BAR CHART]

  12.72%    8.46%    -0.39%
-----------------------------
   1997     1998      1999

Best Quarter:    Quarter ending    June 30, 1997           4.87%
Worst Quarter:   Quarter ending    September 30, 1999     (2.43)%


AVERAGE ANNUAL TOTAL RETURNS                Inception                      Since
AS OF 12/31/99                                   Date      One Year    Inception
--------------------------------------------------------------------------------
Strategy Income Fund                          10/1/96       (5.62)%        5.46%
--------------------------------------------------------------------------------
Standard & Poor's Composite 500 Index(2)                    21.04%        28.06%
--------------------------------------------------------------------------------
Lehman Government/Credit Bond Index(3)                      (2.15)%        5.48%
--------------------------------------------------------------------------------

(1)Total return for the period from 1/1/00 to 9/30/00 was 5.74%.

(2)An unmanaged index of large capitalization stocks. The since inception
   performance of the index is calculated from 10/31/96.

(3)An unmanaged index of Treasury securities, other securities issued by the
   U.S. government or its agencies or instrumentalities, and investment grade
   corporate debt securities. The since inception performance of the index is
   calculated from 10/31/96.



                               5      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Fund Summaries
FEES AND EXPENSES


As an investor, you pay fees and expenses to buy and hold shares of the funds.
You pay shareholder fees directly when you buy or sell shares. You pay annual
operating expenses indirectly since they are deducted from fund assets. The
figures below are based on fund expenses during the fiscal year ended September
30, 2000.(1) As illustrated in other tables under this caption, fund
shareholders also indirectly bear a portion of the underlying funds' expenses.

<TABLE>
<CAPTION>
                                                                 Aggressive                      Growth and
                                                                Growth Fund     Growth Fund     Income Fund    Income Fund
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>             <C>            <C>
SHAREHOLDER FEES
(fees paid directly from your investment)
--------------------------------------------------------------------------------------------------------------------------
 MAXIMUM SALES CHARGE (LOAD)(2)                                       5.25%           5.25%           5.25%          5.25%

 MAXIMUM DEFERRED SALES CHARGE (LOAD)(3)                               None            None            None           None

 REDEMPTION FEE4 AS A % OF AMOUNT REDEEMED                             None            None            None           None

 ANNUAL MAINTENANCE FEE(5)
 ONLY CHARGED TO ACCOUNTS WITH BALANCES BELOW $500                    $ 25            $ 25         $    25           $ 25

ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
(expenses that are deducted from fund assets)
--------------------------------------------------------------------------------------------------------------------------
 Management Fees                                                      0.25%           0.25%           0.25%          0.25%
 Distribution and Service (12b-1) Fees                                 None            None            None           None
 Other Expenses
  Shareholder Servicing Fee                                           0.25%           0.25%           0.25%          0.25%
  Miscellaneous                                                       0.25%           0.24%           0.20%          0.27%
 TOTAL                                                                0.75%           0.74%           0.70%          0.77%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)Actual expenses for the fiscal year were lower than those shown in the table
   because of voluntary fee waivers and expense reimbursements by the advisor.
   The net expenses the fund actually paid after waivers for the fiscal year
   ended September 30, 2000, were:

<TABLE>
<S>                                                                   <C>             <C>             <C>            <C>
 Waiver of Fund Expenses                                             (0.41)%         (0.40)%         (0.36)%        (0.44)%
 TOTAL ACTUAL ANNUAL OPERATING EXPENSES (AFTER WAIVERS)               0.34%           0.34%           0.34%          0.33%
</TABLE>

THE ADVISOR INTENDS TO WAIVE FEES AND REIMBURSE EXPENSES DURING THE CURRENT
FISCAL YEAR SO THAT TOTAL OPERATING EXPENSES FOR EACH FUND DO NOT EXCEED 0.40%.
WAIVERS AND REIMBURSEMENTS MAY BE DISCONTINUED AT ANY TIME.

(2)Effective 12/31/00, the funds began charging a maximum sales load of 5.25%.
   Prior to 12/31/00, the funds charged no sales load. Certain investors may
   qualify for reduced sales charges. See "Buying Shares -- Calculating Your
   Share Price."

(3)Class A share investments of $1 million or more on which no front-end sales
   charge is paid may be subject to a contingent deferred sales charge. See
   "Buying Shares -- Calculating Your Share Price."

(4)Effective 12/31/00, the funds waived all redemption fees. Prior to 12/31/00,
   the funds charged a redemption fee of 1.00% if shares were redeemed within 12
   months of purchase.

(5)The fund reserves the right to charge your account an annual maintenance fee
   of $25 if your balance falls below $500 as a result of selling or exchanging
   shares. See "Policies & Services -- Selling Shares, Accounts with Low
   Balances."


RANGES OF COMBINED DIRECT AND INDIRECT EXPENSE RATIOS

As noted above, in addition to the funds' direct expenses, fund shareholders
also indirectly bear their proportionate share of the underlying funds'
expenses. The following table lists the ranges of combined direct and indirect
expense ratios borne by fund shareholders, taking into account underlying fund
expenses indirectly borne by fund shareholders. Ranges are presented because the
underlying funds' expense ratios differ from one another, so that the actual
combined direct and indirect expense ratios of the funds will depend on the
allocation of fund assets among the underlying funds. Information concerning the
underlying funds' expense ratios is listed under "Underlying Fund Expense
Ratios" below.


<TABLE>
<CAPTION>
RANGES OF COMBINED DIRECT
AND INDIRECT EXPENSE RATIOS           Aggressive                            Growth and
AS A % OF AVERAGE NET ASSETS1        Growth Fund        Growth Fund        Income Fund       Income Fund
--------------------------------------------------------------------------------------------------------
<S>                               <C>                <C>                <C>               <C>
                                  1.50% to 2.00%     1.49% to 1.96%     1.45% to 1.85%    1.54% to 1.82%
--------------------------------------------------------------------------------------------------------
</TABLE>

(1)The underlying funds' advisor intends to waive fees during the current fiscal
   year so that expense ratios do not exceed certain levels, as set forth in
   footnote 1 to the Underlying Fund Expense Ratios table below. In addition,
   the funds' advisor intends to waive fees and reimburse expenses during the
   current fiscal year so that total operating expenses for each fund do not
   exceed 0.40%. Taking these waivers and reimbursements into account, the
   ranges of combined direct and indirect expense ratios would be 0.75% to 1.47%
   for Aggressive Growth Fund, 0.78% to 1.45% for Growth Fund, 0.83% to 1.38%
   for Growth and Income Fund, and 0.88% to 1.26% for Income Fund. Waivers and
   reimbursements may be discontinued at any time.



                               6      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Fund Summaries
FEES AND EXPENSES CONTINUED

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


 EXAMPLE This example is intended to help you compare the cost of investing in
 the funds with the cost of investing in other mutual funds. It is based upon
 the midpoint of the expense ranges set forth above, and assumes that you invest
 $10,000 for the time periods indicated, that your investment has a 5% return
 each year, and that each fund's operating expenses remain the same. Although
 your actual costs and returns may differ, based on these assumptions your cost
 would be:

                  Aggressive                      Growth and
                 Growth Fund     Growth Fund     Income Fund    Income Fund
--------------------------------------------------------------------------------
   1 year             $  693          $  691          $  684         $  687
   3 years            $1,047          $1,039          $1,018         $1,027
   5 years            $1,424          $1,411          $1,374         $1,390
  10 years            $2,478          $2,452          $2,376         $2,408


UNDERLYING FUND EXPENSE RATIOS


The table below lists the expense ratios of the underlying funds. Information in
the table is for Class Y shares of the underlying funds, which is the only class
in which the funds will invest. The ratios presented are based on expenses
during the fiscal year ended September 30, 2000.(1)

  Underlying Fund                                             Expense Ratio
--------------------------------------------------------------------------------
  Equity Income Fund                                                  0.89%
  Equity Index Fund                                                   0.89%
  Large Cap Growth Fund                                               0.89%
  Large Cap Value Fund                                                0.88%
  Mid Cap Growth Fund                                                 0.92%
  Mid Cap Value Fund                                                  0.94%
  Small Cap Growth Fund                                               0.89%
  Small Cap Value Fund                                                0.91%
  Real Estate Securities Fund                                         0.99%
  International Fund                                                  1.51%
  Emerging Markets Fund                                               1.64%
  Fixed Income Fund                                                   0.89%
  Strategic Income Fund                                               0.91%
  Prime Obligations Fund                                              0.51%
--------------------------------------------------------------------------------

(1)Actual expense ratios for the fiscal year were lower than those shown in the
   table because of voluntary fee waivers by the advisor. The advisor intends to
   waive fees during the current fiscal year so that expense ratios do not
   exceed the following amounts: Equity Income Fund, 0.75%; Equity Index Fund,
   0.35%; Large Cap Growth Fund, 0.80%; Large Cap Value Fund, 0.80%; Mid Cap
   Growth Fund, 0.90%; Mid Cap Value Fund, 0.90%; Small Cap Growth Fund, 0.89%;
   Small Cap Value Fund, 0.89%; Real Estate Securities Fund, 0.80%;
   International Fund, 1.35%; Emerging Markets Fund, 1.45%; Fixed Income Fund,
   0.70%; Strategic Income Fund, 0.90%; and Prime Obligations Fund, 0.47%. Fee
   waivers may be discontinued at any time.



                               7      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Policies & Services
BUYING SHARES


You may become a shareholder in any of the funds with an initial investment of
$1,000 or more ($250 for a retirement plan or a Uniform Gifts to Minors
Act/Uniform Transfers to Minors Act (UGMA/UTMA) account). Additional investments
can be made for as little as $100 ($25 for a retirement plan or an UGMA/UTMA
account). The funds have the right to waive these minimum investment
requirements for employees of the funds' advisor and its affiliates. The funds
also have the right to reject any purchase order.

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

   CLASS A SHARES

   Effective December 31, 2000, Strategy Funds reclassified the existing share
   class as "Class A shares." As set forth in this prospectus, Class A shares
   have a sales charge, but are no longer subject to a redemption fee. See "Fund
   Summaries -- Fees and Expenses." Redemption fees will be waived for all
   Strategy Fund shares issued prior to December 31, 2000.


--------------------------------------------------------------------------------
CALCULATING YOUR SHARE PRICE


Your purchase price will be based on the fund's net asset value (NAV) per share,
which is generally calculated as of the close of regular trading on the New York
Stock Exchange (usually 3 p.m. Central time) every day the exchange is open.


A fund's NAV is equal to the value of its investments and other assets, less any
liabilities, divided by the number of fund shares. The assets of each fund
normally will consist primarily of shares of the underlying funds, which are
valued at their net asset values.

For the underlying funds, investments and other assets will be valued at their
market values. If market prices are not readily available for an investment or
if the advisor believes they are unreliable, fair value prices may be determined
in good faith using methods approved by the funds' board of directors.

Emerging Markets Fund, International Fund and Strategic Income Fund will hold
portfolio securities that trade on weekends or other days the funds do not price
their shares. Therefore, the net asset value of these underlying funds' shares
may change on days when you will not be able to purchase or redeem your fund
shares.


Your purchase price is typically the NAV of your shares, plus a front-end sales
charge. Sales charges vary depending on the amount of your purchase. The funds'
distributor receives the sales charge you pay and reallows a portion of the
sales charge to your investment professional or participating institution.

                                                                         Maximum
                                              Sales Charge           Reallowance
                                         as a % of      as a % of      as a % of
                                          Purchase     Net Amount       Purchase
                                             Price       Invested          Price
--------------------------------------------------------------------------------
Less than  $ 50,000                          5.25%          5.54%          5.00%
$ 50,000 - $ 99,999                          4.25%          4.44%          4.00%
$100,000 - $249,999                          3.25%          3.36%          3.00%
$250,000 - $499,999                          2.25%          2.30%          2.00%
$500,000 - $999,999                          1.75%          1.78%          1.00%
$1 million and over                          0.00%          0.00%          0.00%

REDUCING YOUR SALES CHARGE. As shown in the preceding tables, larger purchases
of Class A shares reduce the percentage sales charge you pay. You also may
reduce your sales charge in the following ways:

PRIOR PURCHASES. Prior purchases of Class A shares of any First American fund
(except a money market fund) will be factored into your sales charge
calculation. That is, you will receive credit for either the original purchase
price or the current net asset value of the other Class A shares you hold at the
time of your purchase, whichever is greater. For example, let's say you're
making a $10,000 investment and you already own other First American fund Class
A shares that you purchased for $25,000, but are now valued at $45,000. Since
the current net asset value of your shares is greater than their purchase price,
you will receive credit for their current value and your sales charge will be
based on a total purchase amount of $55,000. To receive a reduced sales charge,
you must notify the fund of your prior purchases. This must be done at the time
of purchase, either directly with the fund in writing or by notifying your
investment professional or financial institution.

PURCHASES BY RELATED ACCOUNTS. Concurrent and prior purchases of Class A shares
by certain other accounts also will be combined to determine your sales charge.
For example, purchases made by your spouse or children under age 21 will reduce
your sales charge. To receive a reduced sales charge, you must notify the funds
of purchases by any related accounts. This must be done at the time of purchase,
either directly with the funds in writing or by notifying your investment
professional or financial institution.

LETTER OF INTENT. If you plan to invest $50,000 or more over a 13-month period
in Class A shares of any First American fund except the money market funds, you
may reduce your sales charge by signing a non-binding letter of intent. (If you
do not fulfill the letter of intent, you must pay the applicable sales charge.)
In addition, if you reduce your sales charge to zero under a letter of intent
and then sell your Class A shares within 18 months of their purchase, you may be
charged a contingent deferred sales charge of 1%. (See "For Investments of Over
$1 Million.")

More information on these ways to reduce your sales charge appears in the
Statement of Additional Information (SAI). The SAI also contains information on
investors who are eligible to purchase Class A shares without a sales charge.



                               8      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Policies & Services
BUYING SHARES CONTINUED

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

   FOR INVESTMENTS OF OVER $1 MILLION

   There is no initial sales charge on Class A share purchases of $1 million or
   more. However, your investment professional or financial institution may
   receive a commission of up to 1% on your purchase. If such a commission is
   paid, you will be assessed a contingent deferred sales charge (CDSC) of 1% if
   you sell your shares within 18 months. To find out whether you will be
   assessed a CDSC, ask your investment professional or financial institution.
   The funds' distributor receives any CDSC imposed when you sell your Class A
   shares. The CDSC is based on the value of your shares at the time of purchase
   or at the time of sale, whichever is less. The charge does not apply to
   shares you acquired by reinvesting your dividend or capital gain
   distributions.

   To help lower your costs, shares that are not subject to a CDSC will be sold
   first. Other shares will then be sold in an order that minimizes your CDSC.
   The CDSC for Class A shares will be waived for:

   *  redemptions following the death or disability of a shareholder.

   *  redemptions that equal the minimum required distribution from an
      individual retirement account or other retirement plan to a shareholder
      who has reached the age of 70 1/2.

   *  redemptions through a systematic withdrawal plan, at a rate of up to 12% a
      year of your account's value. During the first year, the 12% annual limit
      will be based on the value of your account on the date the plan is
      established. Thereafter, it will be based on the value of your account on
      the preceding December 31.


--------------------------------------------------------------------------------
HOW TO BUY SHARES


You may buy shares on any day the New York Stock Exchange is open. However,
purchases of shares may be restricted in the event of an early or unscheduled
close of the New York Stock Exchange. Your shares will be priced at the next net
asset value calculated after your order is accepted by the fund. To make sure
that your order is accepted, follow the directions for purchasing shares given
below.

BY PHONE. You may purchase shares by calling your investment professional or
financial institution, if they have a sales agreement with the funds'
distributor. In many cases, your order will be effective that day if received by
your investment professional or financial institution by the close of regular
trading on the New York Stock Exchange. In some cases, however, you will have to
transmit your request by an earlier time in order for your purchase request to
be effective that day. This allows your investment professional or financial
institution time to process your request and transmit it to the fund. Some
financial institutions may charge a fee for helping you purchase shares. Contact
your investment professional or financial institution for more information.

If you are paying by wire, you may purchase shares by calling Investor Services
at 1-800-637-2548 before the close of regular trading on the New York Stock
Exchange (usually 3 p.m. Central time). All information will be taken over the
telephone, and your order will be placed when the funds' custodian receives
payment by wire. Wire federal funds as follows:

U.S. Bank National Association, Minneapolis, MN
ABA Number 091000022


For Credit to: DST Systems, Inc.:
Account Number 160234580266


For Further Credit to (investor name, account number and fund name)

You cannot purchase shares by wire on days when federally chartered banks are
closed.

BY MAIL. To purchase shares by mail, simply complete and sign a new account
form, enclose a check made payable to the fund you wish to invest in, and mail
both to:


First American Funds
c/o DST Systems, Inc.
P.O. Box 219382
Kansas City, Missouri 64121-9382


After you have established an account, you may continue to purchase shares by
mailing your check to First American Funds at the same address.


Please note the following:

*  all purchases must be made in U.S. dollars.


*  third-party checks, credit cards, credit card checks, and cash are not
   accepted.

*  if a check does not clear your bank, the funds reserve the right to cancel
   the purchase, and you could be liable for any losses or fees incurred.


--------------------------------------------------------------------------------
INVESTING AUTOMATICALLY


To purchase shares as part of a savings discipline, you may add to your
investment on a regular basis:

*  by having $100 or more ($25 for a retirement plan or a Uniform Gifts to
   Minors Act/Uniform Transfers to Minors Act account) automatically withdrawn
   from your bank account on a periodic basis and invested in fund shares.

*  through automatic monthly exchanges of your Class A shares of Prime
   Obligations Fund, a money market fund in the First American family of funds.

You may apply for participation in either of these programs through your
investment professional or financial institution or by calling 1-800-637-2548.


--------------------------------------------------------------------------------
COMPENSATION TO BROKERS AND FINANCIAL INSTITUTIONS


Each fund pays the funds' distributor an annual shareholder servicing fee equal
to 0.25% of the fund's average daily net assets to compensate the distributor
for providing services to shareholders. The distributor may use this fee to
compensate your investment professional or financial institution for providing
ongoing services to your account. The advisor, the administrator or the
distributor may pay additional fees to investment professionals and financial
institutions, using their own assets, in exchange for sales and/or
administrative services performed on behalf of the broker's or financial
institution's customers. The advisor may pay its affiliates, U.S. Bancorp
Investments, Inc. and U.S. Bancorp Piper Jaffray Inc., an amount of up to 3% of
the net asset value of fund shares sold through them.



                               9      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Policies & Services
SELLING SHARES

--------------------------------------------------------------------------------
HOW TO SELL SHARES


You may sell your shares on any day when the New York Stock Exchange (NYSE) is
open. However, redemption of shares may be restricted in the event of an early
or unscheduled close of the NYSE. Your shares will be sold at the next net asset
value calculated after your order is accepted by the fund, less any applicable
redemption fee. To make sure that your order is accepted, follow the directions
for selling shares given below.

The proceeds from your sale normally will be mailed or wired within three days,
but in no event more than seven days, after your request is received in proper
form.

BY PHONE. If you purchased shares through an investment professional or
financial institution, simply call them to sell your shares. In many cases, your
redemption will be effective that day if received by your investment
professional or financial institution by the close of regular trading on the New
York Stock Exchange. In some cases, however, you will have to call by an earlier
time in order for your redemption to be effective that day. This allows your
investment professional or financial institution time to process your request
and transmit it to the fund. Contact your investment professional or financial
institution directly for more information.

If you did not purchase shares through an investment professional or financial
institution, you may sell your shares by calling Investor Services at
1-800-637-2548. Proceeds can be wired to your bank account (if the proceeds are
at least $1,000 and you have previously supplied your bank account information
to the fund) or sent to you by check. The funds reserve the right to limit
telephone exchanges to $50,000 per day.

If you recently purchased your shares by check or through the Automated Clearing
House (ACH), proceeds from the sale of those shares may not be available until
your check or ACH payment has cleared, which may take up to 15 calendar days
from the date of purchase.

BY MAIL. To sell shares by mail, send a written request to your investment
professional or financial institution, or to the funds at the following address:


First American Funds
c/o DST Systems, Inc.
P.O. Box 219382
Kansas City, Missouri 64121-9382

Your request should include the following information:


*  name of the fund.

*  account number.

*  dollar amount or number of shares redeemed.

*  name on the account.

*  signatures of all registered account owners.


Signatures on a written request must be guaranteed if:

*  you would like the proceeds from the sale to be paid to anyone other than to
   the shareholder of record.

*  you would like the check mailed to an address other than the address on the
   funds' records.

*  your redemption request is for $50,000 or more.

A signature guarantee assures that a signature is genuine and protects
shareholders from unauthorized account transfers. Banks, savings and loan
associations, trust companies, credit unions, broker-dealers and member firms of
a national securities exchange may guarantee signatures. Call your financial
institution to determine if it has this capability.


Proceeds from a written redemption request will be sent to you by check unless
another form of payment is requested.

REDEMPTION FEE.  The redemption fee for Strategy Fund shares has been waived
effective December 31, 2000. See "Fund Summaries -- Fees and Expenses."


--------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS


If your account has a value of $5,000 or more, you may redeem a specific dollar
amount from your account on a regular basis. To set up systematic withdrawals,
contact your investment professional or financial institution.

You should not make systematic withdrawals if you plan to continue investing in
the fund, due to sales charges and tax liabilities.

--------------------------------------------------------------------------------
REINVESTING AFTER A SALE

If you sell Class A shares of a First American fund, you may reinvest in Class A
shares of that fund or another First American fund within 180 days without a
sales charge. To reinvest in Class A shares at net asset value (without paying a
sales charge), you must notify the fund directly in writing or notify your
investment professional or financial institution.

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

   ACCOUNTS WITH LOW BALANCES

   Except for retirement plans and Uniform Gifts to Minors Act/Uniform Transfers
   to Minors Act accounts, if your account balance falls below $500 as a result
   of selling or exchanging shares, the fund reserves the right to either:

   *  deduct a $25 annual account maintenance fee, or

   *  close your account and send you the proceeds, less any applicable
      contingent deferred sales charge.

   Before taking any action, however, the fund will send you written notice of
   the action it intends to take and give you 30 days to re-establish a minimum
   account balance of $500.



                              10      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Policies & Services
MANAGING YOUR INVESTMENT

--------------------------------------------------------------------------------
EXCHANGING SHARES


If your investment goals or your financial needs change, you may move from one
First American fund to another. There is no fee to exchange shares.

Generally, you may exchange your Class A shares only for Class A shares of
another fund. However, you may exchange your Class A shares for Class Y shares
of another First American fund if you are eligible to participate in that class.
Exchanges are made based on the net asset value per share of each fund at the
time of the exchange. You do not have to pay a sales charge. Before exchanging
into any fund, be sure to read its prospectus carefully. A fund may change or
cancel its exchange policies at any time. You will be notified of any changes.
The funds have the right to limit exchanges to four times per year.

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

   NEW FIRST AMERICAN FUNDS EXCHANGE PRIVILEGE

   Prior to December 31, 2000, Strategy Fund shareholders were only permitted to
   move from one Strategy Fund to another Strategy Fund at net asset value.
   Effective December 31, 2000 shareholders of the Strategy Funds Class A shares
   may exchange into Class A shares of any underlying fund or any other fund in
   the First American family of funds without paying a sales charge. If you
   would like copies of prospectuses for any fund in the First American family
   of funds, please contact Investor Services at 1-800-637-2548.

BY PHONE. If both funds have identical shareholder registrations, you may
exchange shares by calling your investment professional, your financial
institution, or by calling the funds directly. To request an exchange through
the funds, call Investor Services at 1-800-637-2548. Your instructions must be
received by the funds before 3 p.m. Central time, or by the time specified by
your investment professional or financial institution, in order for shares to be
exchanged the same day.

BY MAIL. To exchange shares by written request, please follow the procedures
under "Selling Shares." Be sure to include the names of both funds involved in
the exchange.


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

   TELEPHONE TRANSACTIONS

   You may buy, sell or exchange shares by telephone, unless you elected on your
   new account form to restrict this privilege. If you wish to reinstate this
   option on an existing account, please call Investor Services at
   1-800-637-2548 to request the appropriate form.

   The funds and their agents will not be responsible for any losses that may
   result from acting on wire or telephone instructions that they reasonably
   believe to be genuine. The funds and their agents will each follow reasonable
   procedures to confirm that instructions received by telephone are genuine,
   which may include taping telephone conversations.

   It may be difficult to reach the funds by telephone during periods of unusual
   market activity. If you are unable to reach the funds or their agents by
   telephone, please consider sending written instructions.

--------------------------------------------------------------------------------
STAYING INFORMED


SHAREHOLDER REPORTS. Shareholder reports are mailed twice a year, in November
and May. They include financial statements and performance information, and on
an annual basis, a message from your portfolio managers and the auditors'
report.


In an attempt to reduce shareholder costs and help eliminate duplication, the
funds will try to limit their mailings to one report for each address that lists
one or more shareholders with the same last name. If you would like additional
copies, please call 1-800-637-2548.


STATEMENTS AND CONFIRMATIONS. Statements summarizing activity in your account
are mailed quarterly. Confirmations are mailed following each purchase or sale
of fund shares.


--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS


Dividends from a fund's net investment income are declared and paid monthly. Any
capital gains are distributed at least once each year.

On the ex-dividend date for a distribution, a fund's share price is reduced by
the amount of the distribution. If you buy shares just before the ex-dividend
date, in effect, you "buy the dividend." You will pay the full price for the
shares and then receive a portion of that price back as a taxable distribution.

Dividend and capital gain distributions will be reinvested in additional shares
of the fund paying the distribution, unless you request that distributions be
reinvested in another First American fund or paid in cash. This request may be
made on your new account form, or by writing to the fund, your investment
professional or your financial institution. If you request that your
distributions be paid in cash but those distributions cannot be delivered
because of an incorrect mailing address, the undelivered distributions and all
future distributions will be reinvested in fund shares.


--------------------------------------------------------------------------------
TAXES


Some of the tax consequences of investing in the funds are discussed below. More
information about taxes is in the Statement of Additional Information. However,
because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

TAXES ON DISTRIBUTIONS. Each fund pays its shareholders dividends from its net
investment income and any net capital gains that it has realized. For most
investors, fund dividends and distributions are considered taxable whether they
are reinvested or taken in cash (unless your investment is in an IRA or other
tax-advantaged account).

Dividends from a fund's net investment income and short-term capital gains are
taxable as ordinary income. Distributions of a fund's long-term capital gains
are taxable as long-term gains, regardless of how long you have held your
shares.

TAXES ON TRANSACTIONS. The sale or exchange of fund shares will be a taxable
event and may result in a capital gain or loss. The gain or loss will be
considered long-term if you have held your shares for more than one year. A gain
or loss on shares held for one year or less is considered short-term and is
taxed at the same rates as ordinary income.



                              11      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
MANAGEMENT


U.S. Bank National Association (U.S. Bank), acting through its First American
Asset Management division, is the investment advisor to the Strategy Funds and
the underlying funds. First American Asset Management provides investment
management services to individuals and institutions, including corporations,
foundations, pensions and retirement plans. As of September 30, 2000, it had
more than $77 billion in assets under management, including investment company
assets of more than $33 billion. As investment advisor, First American Asset
Management manages the funds' business and investment activities, subject to the
authority of the board of directors.

Each fund pays the investment advisor a monthly fee for providing investment
advisory services equal to, on an annual basis, 0.25% of the fund's average
daily net assets. During the fiscal year ended September 30, 2000, however,
First American Asset Management waived the payment of all investment advisory
fees.

--------------------------------------------------------------------------------
DIRECT CORRESPONDENCE TO:

First American Funds
P.O. Box 1330
Minneapolis, Minnesota 55440-1330


INVESTMENT ADVISOR

First American Asset Management
601 Second Avenue South
Minneapolis, Minnesota 55402

UNDERLYING FUND SUB-ADVISORS

Federated Global Investment Management Corp.
175 Water Street
New York, New York 10038-4964


Federated Global Investment Management Corp., a subsidiary of Federated
Investors, Inc., is sub-advisor to Strategic Income Fund. The sub-advisor has
been retained by the fund's investment advisor and is paid a portion of the
advisory fee. Federated Global Investment Management Corp. manages the fund's
investments in investment grade and high-yield foreign government and foreign
corporate debt obligations. The sub-advisor and other subsidiaries of Federated
Investors, Inc. serve as investment advisors to a number of investment
companies and private accounts. As of September 30, 2000, Federated Investors,
Inc. managed approximately $125 billion in assets.

First American Asset Management manages Strategic Income Fund's investments in
U.S. government obligations, investment grade and high-yield domestic debt
obligations and U.S. dollar-denominated foreign corporate debt obligations and
determines how the fund's assets will be allocated among the three sectors in
which the fund invests.


Marvin & Palmer Associates, Inc.
1201 North Market Street, Suite 2300
Wilmington, Delaware 19801

Marvin & Palmer Associates (Marvin & Palmer) is the sub-advisor to Emerging
Markets Fund and International Fund, and is responsible for the investment and
reinvestment of those funds' assets and the placement of brokerage transactions
for those funds. Marvin & Palmer has been retained by the funds' investment
advisor and is paid a portion of the advisory fee.


A privately held company founded in 1986, Marvin & Palmer is engaged in the
management of global, non-United States, domestic and emerging markets equity
portfolios, principally for institutional accounts. As of September 30, 2000,
the sub-advisor managed a total of approximately $10.2 billion in investments.


DISTRIBUTOR


SEI Investments Distribution Co.
Oaks, Pennsylvania 19456

PENDING ACQUISITION

On October 4, 2000, U.S. Bancorp, the parent company of the funds' investment
advisor, announced that it had entered into an agreement to be acquired by
Firstar Corporation. It is anticipated that this acquisition will be completed
in the first quarter of 2001, subject to regulatory approval, the approval of
U.S. Bancorp shareholders and the satisfaction of customary closing conditions.


ADDITIONAL COMPENSATION

U.S. Bank and other affiliates of U.S. Bancorp may act as fiduciary with respect
to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA)
and other trust and agency accounts that invest in the funds. As described
above, U.S. Bank receives compensation for acting as the investment advisor to
the Strategy Funds and the underlying funds. U.S. Bank and its affiliates also
receive compensation in connection with the following:

CUSTODY SERVICES. U.S. Bank provides or compensates others to provide custody
services to the funds. U.S. Bank is paid monthly fees equal, on an annual
basis, to 0.03% of a fund's average daily net assets. In addition, U.S. Bank is
reimbursed for its out-of-pocket expenses incurred while providing custody
services to the funds. U.S. Bank also acts as custodian for the underlying
funds and is compensated for its services at the same rate (except that it
receives fees from Emerging Markets Fund and International Fund equal to 0.10%
of each fund's average daily net assets).


ADMINISTRATION SERVICES. U.S. Bank provides or compensates others to provide
administrative services to all open-end funds in the First American family of
funds. These services include general administrative and accounting services,
transfer agency and dividend disbursing services, and shareholder services. U.S.
Bank receives total fees equal, on an annual basis, to 0.12% of the aggregate
average daily net assets of all open-end mutual funds in the First American fund
family up to $8 billion and 0.105% of the aggregate average daily net assets of
all open-end mutual funds in the First American fund family in excess of $8
billion. These fees are allocated among the funds in the First American family
of funds on the basis of their relative net asset values. The funds also pay
U.S. Bank fees



                              12      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
MANAGEMENT CONTINUED


based upon the number of funds and accounts maintained. In addition, U.S. Bank
is reimbursed for its out-of-pocket expenses incurred while providing
administrative services to the funds.

SECURITIES LENDING SERVICES. In connection with lending their portfolio
securities, the underlying funds pay administrative and custodial fees to U.S.
Bank which are equal to 40% of the funds' income from these securities lending
transactions.


BROKERAGE TRANSACTIONS. When purchasing and selling portfolio securities for
the funds, the funds' investment advisor may place trades through its
affiliates, U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper Jaffray Inc.,
which will earn commissions on these transactions.

SHAREHOLDER SERVICING FEES. To the extent that fund shares are held through
U.S. Bank or its broker-dealer affiliates,
U.S. Bancorp Investments, Inc. and U.S. Bancorp Piper
Jaffray Inc., these entities may receive shareholder servicing
fees from the funds' distributor.

PORTFOLIO MANAGEMENT

Each fund's investments are managed by a team of persons associated with First
American Asset Management.


                              13      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
MORE ABOUT THE FUNDS

--------------------------------------------------------------------------------
OBJECTIVES

The funds' objectives, which are described in the "Fund Summaries" section, may
be changed without shareholder approval. If a fund's objectives change, you will
be notified at least 30 days in advance. Please remember: There is no guarantee
that any fund will achieve its objectives.

--------------------------------------------------------------------------------
INVESTMENT STRATEGIES

The funds' main investment strategies are discussed in the "Fund Summaries"
section. These are the strategies that the funds' investment advisor believes
are most likely to be important in trying to achieve the funds' objectives. You
should be aware that each fund may also use strategies and invest in securities
that are not described in this prospectus, but that are described in the
Statement of Additional Information (SAI). For a copy of the SAI, call Investor
Services at 1-800-637-2548.

--------------------------------------------------------------------------------
PORTFOLIO TURNOVER


The funds' investment advisor expects to make asset reallocation decisions on a
monthly basis, although it may make these decisions more frequently if warranted
by market conditions. Although the funds are expected to have low portfolio
turnover rates, the underlying funds may trade securities frequently, resulting,
from time to time, in an annual portfolio turnover rate of over 100%. Trading of
securities may produce capital gains, which are taxable to shareholders,
including the funds, when distributed. Active trading may also increase the
amount of commissions or mark-ups to broker-dealers that the underlying fund
pays when it buys and sells securities. The "Financial Highlights" section of
this prospectus shows each fund's historical portfolio turnover rate.



                              14      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
THE UNDERLYING FUNDS

The objectives, main investment strategies and main risks of the underlying
funds are summarized below. There is no assurance that any of the underlying
funds' investment objectives will be achieved. The investment objectives of the
underlying funds, except for Prime Obligations Fund, may be changed without
shareholder approval.

Additional information about the underlying funds is contained in their
prospectuses and statements of additional information. You can obtain copies of
these documents by writing to SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or by calling 1-800-637-2548.


--------------------------------------------------------------------------------
EQUITY INCOME FUND

OBJECTIVE

Equity Income Fund's objective is long-term growth of capital and income.

MAIN INVESTMENT STRATEGIES

Under normal market conditions, Equity Income Fund invests primarily (at least
65% of its total assets) in equity securities of companies which the fund's
investment advisor believes are characterized by:

*  the ability to pay above average dividends.

*  the ability to finance expected growth.

*  strong management.

The fund will attempt to maintain a dividend that will grow quickly enough to
keep pace with inflation. As a result, higher-yielding equity securities will
generally represent the core holdings of the fund. However, the fund also may
invest in lower-yielding, higher growth equity securities if the advisor
believes they will help balance the portfolio. The fund's equity securities
include common stocks and preferred stocks, and corporate debt securities which
are convertible into common stocks. All securities held by the fund will provide
current income at the time of purchase.

The fund invests in convertible debt securities in pursuit of both long-term
growth of capital and income. The securities' conversion features provide
long-term growth potential, while interest payments on the securities provide
income. The fund may invest in convertible debt securities without regard to
their ratings, and therefore may hold convertible debt securities which are
rated lower than investment grade.

Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.

To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.

MAIN RISKS

The main risks of investing in Equity Income Fund include:

RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or
extended periods of time. Price changes may occur in the market as a whole, or
they may occur in only a particular company, industry, or sector of the market.

INTEREST RATE RISK. Debt securities typically decrease in value when interest
rates rise. This risk is usually greater for longer-term debt securities.

CREDIT RISK. An issuer of debt securities may not make timely principal or
interest payments on its securities, or the other party to a contract (such as a
securities lending agreement) may default on its obligations.

RISKS OF NON-INVESTMENT GRADE SECURITIES. The fund may invest in securities
which are rated lower than investment grade. These securities, which are
commonly called "high-yield" securities or "junk bonds," generally have more
volatile prices and carry more risk to principal than investment grade
securities. High-yield securities may be more susceptible to real or perceived
adverse economic conditions than investment grade securities. In addition, the
secondary trading market may be less liquid.

FOREIGN SECURITY RISK. Securities of foreign issuers, even when
dollar-denominated and publicly traded in the United States, may involve risks
not associated with the securities of domestic issuers, including the risks of
adverse currency fluctuations and of political or social instability, or
diplomatic developments that could adversely affect the securities.


--------------------------------------------------------------------------------
EQUITY INDEX FUND

OBJECTIVE

Equity Index Fund's objective is to provide investment results that correspond
to the performance of the Standard & Poor's 500 Composite Index (S&P 500).

MAIN INVESTMENT STRATEGIES


Under normal market conditions, Equity Index Fund invests at least 90% of its
total assets in common stocks included in the S&P 500. The S&P 500 is a
market-value weighted index consisting of 500 stocks chosen for market size,
liquidity, and industry representation.


The fund's advisor believes that the fund's objective can best be achieved by
investing in common stocks of approximately 90% to 100% of the issues included
in the S&P 500, depending on the size of the fund. A computer program is used to
identify which stocks should be purchased or sold in order to replicate, as
closely as possible, the composition of the S&P 500.

Because the fund may not always hold all of the stocks included in the S&P 500,
and because the fund has expenses and the index does not, the fund will not
duplicate the index's performance precisely. However, the fund's advisor
believes


                              15      PROSPECTUS - First American Strategy Funds
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Additional Information
THE UNDERLYING FUNDS CONTINUED

there should be a close correlation between the fund's performance and that of
the S&P 500 in both rising and falling markets.

The fund will attempt to achieve a correlation between the performance of its
portfolio and that of the S&P 500 of at least 95%, without taking into account
expenses of the fund. A perfect correlation would be indicated by a figure of
100%, which would be achieved if the fund's net asset value, including the value
of its dividends and capital gains distributions, increased or decreased in
exact proportion to changes in the S&P 500. If the fund is unable to achieve a
correlation of 95% over time, the fund's board of directors will consider
alternative strategies for the fund.

The fund also may invest up to 10% of its total assets in stock index futures
contracts, options on stock indices, options on stock index futures and index
participation contracts based on the S&P 500. The fund makes these investments
to maintain the liquidity needed to meet redemption requests, to increase the
level of fund assets devoted to replicating the composition of the S&P 500 and
to reduce transaction costs.

To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.

MAIN RISKS


The main risks of investing in Equity Index Fund include:

RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or
extended periods of time. Price changes may affect the market as a whole, or
they may affect only a particular company, industry, or sector of the market.

FAILURE TO MATCH PERFORMANCE OF S&P 500. The fund's ability to replicate the
performance of the S&P 500 may be affected by, among other things, changes in
securities markets, the manner in which Standard & Poor's calculates the
performance of the S&P 500, the amount and timing of cash flows into and out of
the fund, commissions, sales charges (if any), and other expenses.

RISKS OF OPTIONS AND FUTURES. The fund will suffer a loss in connection with its
use of options, futures contracts and options on futures contracts if securities
prices do not move in the direction anticipated by the fund's advisor when
entering into the options or the futures contracts.

RISKS OF SECURITIES LENDING. The fund is subject to the risk that the other
party to a securities lending agreement will default on its obligations.


--------------------------------------------------------------------------------
LARGE CAP GROWTH FUND

OBJECTIVE

Large Cap Growth Fund's objective is long-term growth of capital.

MAIN INVESTMENT STRATEGIES

Under normal market conditions, Large Cap Growth Fund invests primarily (at
least 75% of its total assets) in common stocks of companies that have market
capitalizations of at least $5 billion at the time of purchase. The advisor will
select companies that it believes exhibit the potential for superior growth
based on factors such as:


*  above average growth in revenue and earnings.

*  strong competitive position.

*  strong management.

*  sound financial condition.


Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.

To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.

MAIN RISKS

The main risks of investing in Large Cap Growth Fund include:

RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or
extended periods of time. Price changes may occur in the market as a whole, or
they may occur in only a particular company, industry, or sector of the market.
In addition, growth stocks and/or large-capitalization stocks may underperform
the market as a whole.

FOREIGN SECURITY RISK. Securities of foreign issuers, even when
dollar-denominated and publicly traded in the United States, may involve risks
not associated with the securities of domestic issuers, including the risks of
adverse currency fluctuations and of political or social instability, or
diplomatic developments that could adversely affect the securities.

RISKS OF SECURITIES LENDING. The fund is subject to the risk that the other
party to a securities lending agreement will default on its obligations.


--------------------------------------------------------------------------------
LARGE CAP VALUE FUND

OBJECTIVE

Large Cap Value Fund's primary objective is capital appreciation. Current income
is a secondary objective of the fund.

MAIN INVESTMENT STRATEGIES

Under normal market conditions, Large Cap Value Fund invests primarily (at least
75% of its total assets) in common stocks


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Additional Information
THE UNDERLYING FUNDS CONTINUED

of companies that cover a broad range of industries and that have market
capitalizations of at least $5 billion at the time of purchase. In selecting
stocks, the fund's advisor invests in securities that it believes:

*  are undervalued relative to other securities in the same industry or market.

*  exhibit good or improving fundamentals.

*  exhibit an identifiable catalyst that could close the gap between market
   value and fair value over the next one to two years.

Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.


To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.


MAIN RISKS


The main risks of investing in Large Cap Value Fund include:

RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or
extended periods of time. Price changes may occur in the market as a whole, or
they may occur in only a particular company, industry, or sector of the market.
In addition, value stocks and/or large capitalization stocks may underperform
the market as a whole.

FOREIGN SECURITY RISK. Securities of foreign issuers, even when
dollar-denominated and publicly traded in the United States, may involve risks
not associated with the securities of domestic issuers, including the risks of
adverse currency fluctuations and of political or social instability, or
diplomatic developments that could adversely affect the securities.

RISKS OF SECURITIES LENDING. The fund is subject to the risk that the other
party to a securities lending agreement will default on its obligations.


--------------------------------------------------------------------------------
MID CAP GROWTH FUND

OBJECTIVE

Mid Cap Growth Fund has an objective of growth of capital.

MAIN INVESTMENT STRATEGIES


Under normal market conditions, Mid Cap Growth Fund invests primarily (at least
75% of total assets) in common stocks of mid-capitalization companies, defined
as companies that have market capitalizations at the time of purchase within the
range of market capitalizations of companies constituting the Russell Midcap
Index. This index measures the performance of the 800 smallest companies in the
Russell 1000 Index (which is made up of the 1,000 largest U.S. companies based
on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell Midcap Index ranged from
approximately $316 million to $37.9 billion.


The advisor will select companies that it believes exhibit the potential for
superior growth based on factors such as:


*  above average growth in revenue and earnings.

*  strong competitive position.

*  strong management.

*  sound financial condition.

Under certain market conditions, the fund may frequently invest in companies at
the time of their initial public offering (IPO). By virtue of its size and
institutional nature, the advisor may have greater access than individual
investors have to IPOs, including access to so-called "hot issues" which are
generally traded in the aftermarket at prices in excess of the IPO price. IPOs
will frequently be sold within 12 months of purchase which may result in
increased short-term capital gains.


Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.

To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.

MAIN RISKS


The main risks of investing in Mid Cap Growth Fund include:

RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or
extended periods of time. Price changes may occur in the market as a whole, or
they may occur in only a particular company, industry, or sector of the market.
In addition, growth stocks and/or mid-cap stocks may underperform the market as
a whole.

RISKS OF MID-CAP STOCKS. While stocks of mid-cap companies may be slightly less
volatile than those of small-cap companies, they still involve substantial risk
and their prices may be subject to more abrupt or erratic movements than those
of larger, more established companies or the market averages in general.

RISKS OF INITIAL PUBLIC OFFERINGS (IPOs). Companies involved in IPOs generally
have limited operating histories, and prospects for future profitability are
uncertain. Prices of IPOs may also be unstable due to the absence of a prior
public market, the small number of shares available for trading, and limited
investor information. IPOs will frequently be sold within 12 months of purchase.
This may result in increased short-term capital gains, which will be taxable to
shareholders as ordinary income.

FOREIGN SECURITY RISK. Securities of foreign issuers, even when
dollar-denominated and publicly traded in the United States, may involve risks
not associated with the securities of domestic issuers, including the risks of
adverse currency fluctuations and of political or social instability, or
diplomatic developments that could adversely affect the securities.

RISKS OF SECURITIES LENDING. The fund is subject to the risk that the other
party to a securities lending agreement will default on its obligations.



                              17      PROSPECTUS - First American Strategy Funds
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Additional Information
THE UNDERLYING FUNDS CONTINUED

--------------------------------------------------------------------------------
MID CAP VALUE FUND

OBJECTIVE

Mid Cap Value Fund has an objective of capital appreciation.

MAIN INVESTMENT STRATEGIES


Under normal market conditions, Mid Cap Value Fund invests primarily (at least
75% of total assets) in common stocks of mid-capitalization companies, defined
as companies that have market capitalizations at the time of purchase within the
range of market capitalizations of companies constituting the Russell Midcap
Index. This index measures the performance of the 800 smallest companies in the
Russell 1000 Index (which is made up of the 1,000 largest U.S. companies based
on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell Midcap Index ranged from
approximately $316 million to $37.9 billion.


In selecting stocks, the fund's advisor invests in securities it believes:

*  are undervalued relative to other securities in the same industry or market.

*  exhibit good or improving fundamentals.

*  exhibit an identifiable catalyst that could close the gap between market
   value and fair value over the next one to two years.

To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.

MAIN RISKS


The main risks of investing in Mid Cap Value Fund include:

RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or
extended periods of time. Price changes may occur in the market as a whole, or
they may occur in only a particular company, industry, or sector of the market.
In addition, value stocks and/or mid-cap stocks may underperform the market as a
whole.

RISKS OF MID-CAP STOCKS. While stocks of mid-cap companies may be slightly less
volatile than those of small-cap companies, they still involve substantial risk
and their prices may be subject to more abrupt or erratic movements than those
of larger, more established companies or the market averages in general.

RISKS OF SECURITIES LENDING. The fund is subject to the risk that the other
party to a securities lending agreement will default on its obligations.


--------------------------------------------------------------------------------
SMALL CAP GROWTH FUND

OBJECTIVE

Small Cap Growth Fund has an objective of growth of capital.

MAIN INVESTMENT STRATEGIES


Under normal market conditions, Small Cap Growth Fund invests primarily (at
least 75% of total assets) in common stocks of small-capitalization companies,
defined as companies that have market capitalizations at the time of purchase
within the range of market capitalizations of companies constituting the Russell
2000 Index. This index measures the performance of the 2,000 smallest companies
in the Russell 3000 Index (which is made up of the 3,000 largest U.S. companies
based on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell 2000 Index ranged from approximately
$25 million to $4.7 billion.


The advisor will select companies that it believes exhibit the potential for
superior growth based on factors such as:


*  above average growth in revenue and earnings.

*  strong competitive position.

*  strong management.

*  sound financial condition.

Under certain market conditions, the fund may frequently invest in companies at
the time of their initial public offering (IPO). By virtue of its size and
institutional nature, the advisor may have greater access than individual
investors have to IPOs, including access to so-called "hot issues" which are
generally traded in the aftermarket at prices in excess of the IPO price. IPOs
will frequently be sold within 12 months of purchase which may result in
increased short-term capital gains.


Up to 25% of the fund's total assets may be invested in securities of foreign
issuers which are either listed on a United States stock exchange or represented
by American Depositary Receipts.

To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.

MAIN RISKS

The main risks of investing in Small Cap Growth Fund include:


RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or
extended periods of time. Price changes may occur in the market as a whole, or
they may occur in only a particular company, industry, or sector of the market.
In addition, growth stocks and/or stocks of small-capitalization companies may
underperform the market as a whole.

RISKS OF SMALL-CAP STOCKS. Stocks of small-capitalization companies involve
substantial risk. These stocks historically have experienced greater price
volatility than stocks of larger-capitalization companies, and they may be
expected to do so in the future.

RISKS OF INITIAL PUBLIC OFFERINGS (IPOs). Companies involved in IPOs generally
have limited operating histories, and prospects for future profitability are
uncertain. Prices of IPOs may also be unstable due to the absence of a prior
public market, the small number of shares available for trading, and limited
investor



                              18      PROSPECTUS - First American Strategy Funds
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<PAGE>


Additional Information
THE UNDERLYING FUNDS CONTINUED


information. IPOs will frequently be sold within 12 months of purchase. This may
result in increased short-term capital gains, which will be taxable to
shareholders as ordinary income.

FOREIGN SECURITY RISK. Securities of foreign issuers, even when
dollar-denominated and publicly traded in the United States, may involve risks
not associated with the securities of domestic issuers, including the risks of
adverse currency fluctuations and of political or social instability, or
diplomatic developments that could adversely affect the securities.

RISKS OF SECURITIES LENDING. The fund is subject to the risk that the other
party to a securities lending agreement will default on its obligations.


--------------------------------------------------------------------------------
SMALL CAP VALUE FUND

OBJECTIVE

Small Cap Value Fund has an objective of capital appreciation.

MAIN INVESTMENT STRATEGIES


Under normal market conditions, Small Cap Value Fund invests primarily (at least
75% of total assets) in common stocks of small-capitalization companies, defined
as companies that have market capitalizations at the time of purchase within the
range of market capitalizations of companies constituting the Russell 2000
Index. This index measures the performance of the 2,000 smallest companies in
the Russell 3000 Index (which is made up of the 3,000 largest U.S. companies
based on total market capitalization). As of the date of this prospectus, market
capitalizations of companies in the Russell 2000 Index ranged from approximately
$25 million to $4.7 billion.


In selecting stocks, the fund's advisor invests in securities it believes:

*  are undervalued relative to other securities in the same industry or market.

*  exhibit good or improving fundamentals.

*  exhibit an identifiable catalyst that could close the gap between market
   value and fair value over the next one to two years.

To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.

MAIN RISKS


The main risks of investing in Small Cap Value Fund include:

RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or
extended periods of time. Price changes may occur in the market as a whole, or
they may occur in only a particular company, industry, or sector of the market.
In addition, value stocks and/or stocks of small-capitalization companies may
underperform the market as a whole.

RISKS OF SMALL-CAP STOCKS. Stocks of small-capitalization companies involve
substantial risk. These stocks historically have experienced greater price
volatility than stocks of larger-capitalization companies, and they may be
expected to do so in the future.

RISKS OF SECURITIES LENDING. The fund is subject to the risk that the other
party to a securities lending agreement will default on its obligations.


--------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND

OBJECTIVE

Real Estate Securities Fund's objective is to provide above average current
income and long-term capital appreciation.

MAIN INVESTMENT STRATEGIES


Under normal market conditions, Real Estate Securities Fund invests primarily
(at least 65% of its total assets) in income- producing common stocks of
publicly traded companies engaged in the real estate industry. These companies
derive at least 50% of their revenues or profits from the ownership,
construction, management, financing or sale of real estate, or have at least 50%
of the fair market value of their assets invested in real estate. The advisor
will select companies that it believes exhibit strong management teams, a strong
competitive position, above average growth in revenues and a sound balance
sheet.

A majority of the fund's total assets will be invested in real estate
investment trusts (REITs). REITs are publicly traded corporations or trusts
that acquire, hold and manage residential or commercial real estate. REITs
generally can be divided into the following three types:


*  equity REITs, which invest the majority of their assets directly in real
   property and derive their income primarily from rents and capital gains or
   real estate appreciation.

*  mortgage REITs, which invest the majority of their assets in real estate
   mortgage loans and derive their income primarily from interest payments.

*  hybrid REITs, which combine the characteristics of equity REITs and mortgage
   REITs.

The fund expects to emphasize investments in equity REITs, although it may
invest in all three kinds of REITs.

To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.

MAIN RISKS


The main risks of investing in Real Estate Securities Fund include:

RISKS OF COMMON STOCKS. Stocks may decline significantly in price over short or
extended periods of time. Price changes may occur in the market as a whole, or
they may occur in only a particular company, industry, or sector of the market.



                              19      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
THE UNDERLYING FUNDS CONTINUED


RISKS OF THE REAL ESTATE INDUSTRY. Because the fund invests primarily in the
real estate industry, it is particularly susceptible to risks associated with
that industry. The real estate industry has been subject to substantial
fluctuations and declines on a local, regional and national basis in the past
and may continue to be in the future.

RISK OF REAL ESTATE INVESTMENT TRUSTS (REITS). There are risks associated with
direct investments in REITs. Equity REITs will be affected by changes in the
values of and incomes from the properties they own, while mortgage REITs may be
affected by the credit quality of the mortgage loans they hold. REITs are
dependent on specialized management skills which may affect their ability to
generate cash flow for operating purposes and to make distributions to
shareholders or unitholders.

RISKS OF NON-DIVERSIFICATION. The fund is non-diversified. This means that it
may invest a larger portion of its assets in a limited number of companies than
a diversified fund. Because a relatively high percentage of the fund's assets
may be invested in the securities of a limited number of issuers, and because
those issuers generally will be in the real estate industry, the fund's
portfolio securities may be more susceptible to any single economic or
regulatory occurrence than the portfolio securities of a diversified fund.

RISKS OF SECURITIES LENDING. The fund is subject to the risk that the other
party to a securities lending agreement will default on its obligations.


--------------------------------------------------------------------------------
EMERGING MARKETS FUND

OBJECTIVE

Emerging Markets Fund has an objective of long-term growth of capital.

MAIN INVESTMENT STRATEGIES


Under normal market conditions, Emerging Markets Fund invests primarily (at
least 65% of its total assets) in equity securities of emerging markets issuers.
Normally, the fund will invest in securities of issuers from at least six
foreign countries.


A country is considered to have an "emerging market" if it has a relatively low
gross national product per capita compared to the world's major economies, and
the potential for rapid economic growth. Countries with emerging markets
include:

*  those that have an emerging stock market (as defined by the International
   Financial Corporation).

*  those with low- to middle-income economies (according to the World Bank).

*  those listed in World Bank publications as "developing."


A company is considered to be an emerging markets issuer if any of the following
apply:

*  its securities are principally traded in an emerging market (including Hong
   Kong and Singapore).

*  it derives at least 50% of its revenue from goods produced, sales made or
   services performed in emerging markets countries (including Hong Kong and
   Singapore).

*  it maintains 50% or more of its assets in one or more emerging markets
   countries (including Hong Kong and Singapore).

*  it is organized under the laws of, or has a principal office in, an emerging
   markets country (including Hong Kong and Singapore).


In choosing investments for the fund, the fund's sub-advisor generally places
primary emphasis on country selection. This is followed by the selection of
industries or sectors within or across countries and the selection of individual
stocks within those industries or sectors. The fund is not subject to any
restrictions on the size of the companies in which it invests and it may invest
in smaller capitalization companies.

Equity securities in which the fund invests include common and preferred stock.
In addition, the fund may invest in securities representing underlying
international securities, such as American Depositary Receipts and European
Depositary Receipts, and in securities of other investment companies.


In order to hedge against adverse movements in currency exchange rates, the fund
may enter into forward foreign currency exchange contracts.


MAIN RISKS


The main risks of investing in Emerging Markets Fund include:

RISKS OF EQUITY SECURITIES. Equity securities may decline significantly in price
over short or extended periods of time. Price changes may occur in the world
market as a whole, or they may occur in only a particular country, company,
industry, or sector of the world market.

RISKS OF INTERNATIONAL INVESTING. International investing involves risks not
typically associated with domestic investing. Because of these risks, and
because of the sub-advisor's ability to invest substantial portions of the
fund's assets in a small number of countries, the fund may be subject to greater
volatility than mutual funds that invest principally in domestic securities.
Risks of international investing include adverse currency fluctuations,
potential political and economic instability, limited liquidity and volatile
prices of non-U.S. securities, limited availability of information regarding
non-U.S. companies, investment and repatriation restrictions, and foreign
taxation.

RISKS OF EMERGING MARKETS. The risks of international investing are particularly
significant in emerging markets. Investing in emerging markets generally
involves exposure to economic structures that are less diverse and mature, and
to political systems that are less stable, than those of developed countries. In
addition, issuers in emerging markets typically are subject to a greater degree
of change in earnings and business prospects than are companies in developed
markets.

RISKS OF SMALLER CAPITALIZATION COMPANIES. Stocks of smaller capitalization
companies involve substantial risk and their prices



                             20       PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
THE UNDERLYING FUNDS CONTINUED

may be subject to more abrupt or erratic movements than those of larger, more
established companies or of market averages in general.


RISKS OF FOREIGN CURRENCY HEDGING TRANSACTIONS. If the sub-advisor's forecast of
exchange rate movements is incorrect, the fund may realize losses on its foreign
currency transactions. In addition, the fund's hedging transactions may prevent
the fund from realizing the benefits of a favorable change in the value of
foreign currencies.


--------------------------------------------------------------------------------
INTERNATIONAL FUND

OBJECTIVE

International Fund has an objective of long-term growth of capital.

MAIN INVESTMENT STRATEGIES

Under normal market conditions, International Fund invests primarily (at least
65% of its total assets) in equity securities that trade in markets other than
the United States. These securities generally are issued by companies:

*  that are domiciled in countries other than the United States, or

*  that derive at least 50% of either their revenues or their pre-tax income
   from activities outside of the United States.

Normally, the fund will invest in securities traded in at least three foreign
countries.

In choosing investments for the fund, the fund's sub-advisor generally places
primary emphasis on country selection. This is followed by the selection of
industries or sectors within or across countries and the selection of individual
stocks within those industries or sectors. Investments are expected to be made
primarily in developed markets and larger capitalization companies. However, the
fund also has the ability to invest in emerging markets and smaller
capitalization companies.

Equity securities in which the fund invests include common and preferred stock.
In addition, the fund may invest in securities representing underlying
international securities, such as American Depositary Receipts and European
Depositary Receipts, and in securities of other investment companies.

In order to hedge against adverse movements in currency exchange rates, the fund
may enter into forward foreign currency exchange contracts.

To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions.

MAIN RISKS


The main risks of investing in International Fund include:

RISKS OF EQUITY SECURITIES. Equity securities may decline significantly in price
over short or extended periods of time. Price changes may occur in the world
market as a whole, or they may occur in only a particular country, company,
industry, or sector of the world market.

RISKS OF INTERNATIONAL INVESTING. International investing involves risks not
typically associated with domestic investing. Because of these risks, and
because of the sub-advisor's ability to invest substantial portions of the
fund's assets in a small number of countries, the fund may be subject to greater
volatility than mutual funds that invest principally in domestic securities.
Risks of international investing include adverse currency fluctuations,
potential political and economic instability, limited liquidity and volatile
prices of non-U.S. securities, limited availability of information regarding
non-U.S. companies, investment and repatriation restrictions, and foreign
taxation.

RISKS OF EMERGING MARKETS. The risks of international investing are particularly
significant in emerging markets. Investing in emerging markets generally
involves exposure to economic structures that are less diverse and mature, and
to political systems that are less stable, than those of developed countries. In
addition, issuers in emerging markets typically are subject to a greater degree
of change in earnings and business prospects than are companies in developed
markets.

RISKS OF SMALLER CAPITALIZATION COMPANIES. Stocks of smaller capitalization
companies involve substantial risk and their prices may be subject to more
abrupt or erratic movements than those of larger, more established companies or
of market averages in general.

RISKS OF FOREIGN CURRENCY HEDGING TRANSACTIONS. If the sub-advisor's forecast of
exchange rate movements is incorrect, the fund may realize losses on its foreign
currency transactions. In addition, the fund's hedging transactions may prevent
the fund from realizing the benefits of a favorable change in the value of
foreign currencies.

RISKS OF SECURITIES LENDING. The fund is subject to the risk that the other
party to a securities lending agreement will default on its obligations.


--------------------------------------------------------------------------------
FIXED INCOME FUND

OBJECTIVE

Fixed Income Fund's objective is to provide investors with high current income
consistent with limited risk to capital.

MAIN INVESTMENT STRATEGIES

Under normal market conditions, Fixed Income Fund invests in investment grade
debt securities, such as:

*  U.S. government securities, (securities issued or guaranteed by the U.S.
   government or its agencies or instrumentalities), including zero coupon
   securities.

*  mortgage- and asset-backed securities.

*  corporate debt obligations.

Fund managers select securities using a "top-down" approach, which begins with
the formulation of their general economic


                              21      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
THE UNDERLYING FUNDS CONTINUED

outlook. Following this, various sectors and industries are analyzed and
selected for investment. Finally, fund managers select individual securities
within these sectors or industries.


Debt securities in the fund will be rated investment grade at the time of
purchase or, if unrated, determined to be of comparable quality by the fund's
advisor. If the rating of a security is reduced or the credit quality of an
unrated security declines after purchase, the fund is not required to sell the
security, but may consider doing so. At least 65% of the fund's debt securities
must be either U.S. government securities or securities that have received at
least an A or equivalent rating. Unrated securities will not exceed 25% of the
fund's total assets.


At least 65% of the fund's total assets will be invested in fixed rate
obligations.The fund may invest up to 15% of its total assets in foreign
securities payable in U.S. dollars.


Under normal market conditions the fund attempts to maintain a weighted average
effective maturity for its portfolio securities of 15 years or less and an
average effective duration of three to eight years. The funds' weighted average
effective maturity and average effective duration are measures of how the fund
may react to interest rate changes.

To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions. It also may invest up to 25% of total assets in dollar roll
transactions. In a dollar roll transaction, the fund sells mortgage-backed
securities for delivery in the current month while contracting with the same
party to repurchase similar securities at a future date.


MAIN RISKS


The main risks of investing in Fixed Income Fund include:

INTEREST RATE RISK. Debt securities typically decrease in value when interest
rates rise. This risk is usually greater for longer-term debt securities. One
measure of interest rate risk is effective duration which measures how much the
value of a security is expected to change with a given change in interest rates.
The longer a security's effective duration, the more sensitive its price to
changes in interest rates. For example, if interest rates were to increase by
one percentage point, the market value of a bond with an effective duration of
five years would decrease by 5%, with all other factors being constant. However,
all other facts are rarely constant. Effective duration is based on assumptions
and subject to a number of limitations. It is most useful when interest rate
changes are small, rapid and occur equally in short-term and long-term
securities. In addition, it is difficult to calculate precisely for bonds with
prepayment options, such as mortgage-related securities, because the calculation
requires assumptions about prepayment rates. For these reasons, the effective
durations of funds which invest a significant portion of their assets in
mortgage-related securities can be greatly affected by changes in interest
rates.

INCOME RISK. The fund's income could decline due to falling market interest
rates.

CREDIT RISK. An issuer of debt securities may not make timely principal or
interest payments on its securities, or the other party to a contract (such as a
securities lending agreement) may default on its obligations.

CALL RISK. During periods of falling interest rates, a bond issuer may "call" --
or repay -- its high-yielding bonds before their maturity date. The fund would
then be forced to invest the unanticipated proceeds at lower interest rates,
resulting in a decline in the fund's income.

RISKS OF MORTGAGE- AND ASSET-BACKED SECURITIES. Falling interest rates could
cause faster than expected prepayments of the obligations underlying mortgage-
and asset-backed securities, which the fund would have to invest at lower
interest rates. On the other hand, rising interest rates could cause prepayments
of the obligations to decrease, extending the life of mortgage- and asset-backed
securities with lower payment rates.

FOREIGN SECURITY RISK. Securities of foreign issuers, even when
dollar-denominated and publicly traded in the United States, may involve risks
not associated with the securities of domestic issuers, including the risks of
adverse currency fluctuations and of political or social instability or
diplomatic developments that could adversely affect the securities.

RISKS OF DOLLAR ROLL TRANSACTIONS. The use of mortgage dollar rolls could
increase the volatility of the fund's share price. It could also diminish the
fund's investment performance if the advisor does not predict mortgage
prepayments and interest rates correctly.


--------------------------------------------------------------------------------
STRATEGIC INCOME FUND

OBJECTIVE

Strategic Income Fund's objective is to provide investors with a high level of
current income.

MAIN INVESTMENT STRATEGIES

Under normal market conditions, Strategic Income Fund invests primarily (at
least 65% of its total assets) in a combination of:

*  securities issued or guaranteed by the U.S. government or its agencies or
   instrumentalities, including mortgage-backed securities, and investment grade
   debt obligations issued by domestic issuers.

*  high-yield (non-investment grade) debt obligations issued by domestic
   issuers.

*  investment grade and high-yield debt obligations issued by foreign
   governments and other foreign issuers.

Based upon historical returns, the fund's advisor expects these three categories
of investments to have different returns and risks under similar market
conditions. The advisor relies on the differences in the expected performance of
each category to manage risks by allocating the fund's portfolio among the three
categories above. The advisor also seeks to enhance the fund's performance by
allocating more of its portfolio to the category


                              22      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
THE UNDERLYING FUNDS CONTINUED

that the advisor expects to offer the best balance between risk and return.
Normally, the fund's assets will be invested in each of these three categories,
with no more than 50% invested in any one category. However, the fund may from
time to time invest up to 100% of its total assets in any one category if the
advisor believes it will help the fund achieve its objective without undue risk
to principal.

The fund's foreign investments may include investments in emerging markets.

The fund's investments may include securities which do not pay interest
currently, such as zero coupon securities and delayed interest securities. The
fund also may invest in payment-in-kind bonds, where interest is paid in other
securities rather than cash.


In addition to debt obligations, the fund may invest in preferred stock,
convertible securities and equity securities, including common stock and
warrants. These investments may be denominated in U.S. dollars or foreign
currencies.

There is no minimum rating requirement for securities in which the fund may
invest (which means that the fund may invest in lower-rated securities, or
unrated securities of comparable quality, commonly referred to as "junk bonds").
In addition, there is no limitation on the average maturity or average effective
duration of securities held by the fund.


To generate additional income, the fund may lend securities representing up to
one-third of the value of its total assets to broker-dealers, banks and other
institutions. It also may invest up to 25% of total assets in dollar roll
transactions. In a dollar roll transaction, the fund sells mortgage-backed
securities for delivery in the current month while contracting with the same
party to repurchase similar securities at a future date.

MAIN RISKS


The main risks of investing in Strategic Income Fund include:

INTEREST RATE RISK. Debt securities typically decrease in value when interest
rates rise. This risk is usually greater for longer-term debt securities. High
yield securities may be more susceptible to real or perceived adverse economic
conditions than investment grade securities. In addition, the secondary trading
market may be less liquid.

RISKS OF HIGH-YIELD SECURITIES. A significant portion of the fund's portfolio
may consist of lower-rated debt obligations, which are commonly called
"high-yield" securities or "junk bonds." High-yield securities generally have
more volatile prices and carry more risk to principal than investment grade
securities.

RISKS OF FOREIGN SECURITIES. Investing in foreign securities involves risks not
typically associated with U.S. investing. Risks of foreign investing include
adverse currency fluctuations, potential political and economic instability,
limited liquidity and volatile prices of non-U.S. securities, limited
availability of information regarding non-U.S. companies, investment and
repatriation restrictions and foreign taxation.

RISKS OF EMERGING MARKETS. The fund may invest in emerging markets, where the
risks of foreign investing are higher. Investing in emerging markets generally
involves exposure to economic structures that are less diverse and mature, and
to political systems that are less stable, than those of developed countries. In
addition, issuers in emerging markets typically are subject to a greater degree
of change in earnings and business prospects than are companies in developed
markets.

INCOME RISK. The fund's income could decline due to falling market interest
rates.

CREDIT RISK. An issuer of debt securities may not make timely principal or
interest payments on its securities, or the other party to a contract (such as a
securities lending agreement) may default on its obligations.

CALL RISK. During periods of falling interest rates, a bond issuer may "call" --
or repay -- its high-yielding bonds before their maturity date. The fund would
then be forced to invest the unanticipated proceeds at lower interest rates,
resulting in a decline in the fund's income.

RISKS OF MORTGAGE- AND ASSET-BACKED SECURITIES. Falling interest rates could
cause faster than expected prepayments of the obligations underlying mortgage-
and asset-backed securities, which the fund would have to invest at lower
interest rates. On the other hand, rising interest rates could cause prepayments
of the obligations to decrease, extending the life of mortgage- and asset-backed
securities with lower interest rates.

RISKS OF COMMON STOCKS. The fund's investments may include common stock and
warrants to purchase, or securities convertible into, common stocks. Stocks may
decline significantly in price over short or extended periods of time. Price
changes may occur in the market as a whole, or they may occur in only a
particular company, industry, or sector of the market.

RISKS OF DOLLAR ROLL TRANSACTIONS. The use of mortgage dollar rolls could
increase the volatility of the fund's share price. It could also diminish the
fund's investment performance if the advisor does not predict mortgage
prepayments and interest rates correctly.


--------------------------------------------------------------------------------
PRIME OBLIGATIONS FUND

OBJECTIVE

Prime Obligations Fund seeks maximum current income to the extent consistent
with preservation of capital and maintenance of liquidity.

MAIN INVESTMENT STRATEGIES

Prime Obligations Fund invests in high-quality short-term debt obligations,
including:

*  securities issued by the U.S. government or one of its agencies or
   instrumentalities.

*  U.S. dollar-denominated obligations of domestic and foreign banks with total
   assets of at least $500 million (including


                              23      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
THE UNDERLYING FUNDS CONTINUED

   fixed and variable rate certificates of deposit, time deposits and bankers'
   acceptances).

*  commercial paper.

*  non-convertible corporate debt securities.

*  loan participation interests.

*  repurchase agreements for the securities in which the fund may invest.

When selecting securities for the fund, the portfolio managers use a "top-down"
approach, looking first at general economic factors and market conditions, then
at individual securities.


Under normal market conditions, portfolio managers will only purchase (and hold)
securities in the fund if they are rated in the top short-term rating category,
for example, a rating of A-1 or a rating of Prime-1. If the rating of a security
is reduced below the top short-term rating category after purchase, portfolio
managers will make every attempt to sell the security.

The fund may invest up to 25% of its total assets in dollar-denominated
obligations of U.S. branches of foreign banks which are subject to the same
regulation as U.S. banks. The fund also may invest up to 25% of its total
assets, collectively, in dollar-denominated obligations of foreign branches of
domestic banks, foreign banks, and foreign corporations.


MAIN RISKS

The main risks of investing in Prime Obligations Fund include:


*  Although the fund seeks to preserve the value of an investment at $1.00 per
   share, it is possible to lose money by investing in the fund. A major change
   in interest rates or a default on a security or repurchase agreement held by
   the fund could cause the value of your investment to decline.

*  The level of income you receive from the fund will be affected by movements
   in short-term interest rates.

*  Foreign securities in which the fund invests, although dollar- denominated,
   may present some additional risk. Political or social instability, or
   diplomatic developments could adversely affect the securities. There is also
   the risk of possible withholding taxes, seizure of foreign deposits, currency
   controls, interest limitations, or other governmental restrictions which
   might affect the payment of principal or interest on securities owned by the
   fund. In addition, there may be less public information available about
   foreign corporations and foreign banks and their branches.



                              24      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
FINANCIAL HIGHLIGHTS

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS


The tables that follow present performance information about the shares of each
fund. This information is intended to help you understand each fund's financial
performance for the past five years or, if shorter, the period of the fund's
operations. Some of this information reflects financial results for a single
fund share. Total returns in the tables represent the rate that you would have
earned or lost on an investment in the fund, assuming you reinvested all of your
dividends and distributions.

The information for the fiscal years ended September 30, 2000 and September
30,1999, has been derived from the financial statements audited by Ernst & Young
LLP, independent auditors, whose report, along with the funds' financial
statements, is included in the funds' annual report, which is available upon
request. The information for the fiscal years ended on or before September 30,
1998, has been audited by other auditors.


AGGRESSIVE GROWTH FUND


<TABLE>
<CAPTION>
                                                                          Fiscal year ended September 30,
                                                                    2000         1999         1998       1997(2)
----------------------------------------------------------------------------------------------------------------
<S>                                                              <C>           <C>           <C>           <C>
PER SHARE DATA
Net Asset Value, Beginning of Period                              $ 12.36      $ 11.11      $ 12.58      $ 10.00
                                                                  -------      -------      -------      -------
Investment Operations:
 Net Investment Income                                               0.14         0.14         0.20         0.11
 Net Gains (Losses) on Investments
   (both realized and unrealized)                                    2.62         2.05        (1.42)        2.58
                                                                  -------      -------      -------      -------
 Total From Investment Operations                                    2.76         2.19        (1.22)        2.69
                                                                  -------      -------      -------      -------
Less Distributions:
 Dividends (from net investment income)                             (0.14)       (0.14)       (0.20)       (0.11)
 Distributions (from capital gains)                                 (1.05)       (0.80)       (0.05)          --
                                                                  -------      -------      -------      -------
 Total Distributions                                                (1.19)       (0.94)       (0.25)       (0.11)
                                                                  -------      -------      -------      -------
Net Asset Value, End of Period                                    $ 13.93      $ 12.36      $ 11.11      $ 12.58
                                                                  =======      =======      =======      =======
Total Return                                                        23.38%       20.54%       (9.85)%      27.06%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000)                                   $88,837      $67,013      $62,635      $13,725
Ratio of Expenses to Average Net Assets(1)                           0.34%        0.28%        0.25%        0.60%(3)
Ratio of Net Income to Average Net Assets                            1.00%        1.20%        1.66%        0.76%(3)
Ratio of Expenses to Average Net Assets (excluding waivers)(1)       0.75%        0.86%        0.87%        2.85%(3)
Ratio of Net Income (Loss) to Average Net Assets
 (excluding waivers)                                                 0.59%        0.62%        1.04%       (1.49)%(3)
Portfolio Turnover Rate                                                43%          39%         152%           7%
----------------------------------------------------------------------------------------------------------------
</TABLE>


(1)Expense ratios do not include expenses of the underlying funds.

(2)Commenced operations on October 1, 1996.

(3)Annualized.


                              25      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
FINANCIAL HIGHLIGHTS CONTINUED

GROWTH FUND


<TABLE>
<CAPTION>
                                                                             Fiscal year ended September 30,
                                                                     2000          1999          1998         1997(2)
---------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>           <C>           <C>
PER SHARE DATA
Net Asset Value, Beginning of Period                               $  11.85      $  11.05      $  12.12      $  10.00
                                                                   --------      --------      --------      --------
Investment Operations:
 Net Investment Income                                                 0.25          0.25          0.28          0.18
 Net Gains (Losses) on Investments
   (both realized and unrealized)                                      2.00          1.49         (0.98)         2.12
                                                                   --------      --------      --------      --------
 Total From Investment Operations                                      2.25          1.74         (0.70)         2.30
                                                                   --------      --------      --------      --------
Less Distributions:
 Dividends (from net investment income)                               (0.25)        (0.25)        (0.28)        (0.18)
 Distributions (from capital gains)                                   (0.64)        (0.69)        (0.09)           --
                                                                   --------      --------      --------      --------
 Total Distributions                                                  (0.89)        (0.94)        (0.37)        (0.18)
                                                                   --------      --------      --------      --------
Net Asset Value, End of Period                                     $  13.21      $  11.85      $  11.05      $  12.12
                                                                   ========      ========      ========      ========
Total Return                                                          19.66%        16.31%        (5.95)%       23.23%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000)                                    $109,004      $ 88,213      $ 65,656      $ 15,676
Ratio of Expenses to Average Net Assets(1)                             0.34%         0.28%         0.25%         0.60%(3)
Ratio of Net Income to Average Net Assets                              1.93%         2.05%         2.33%         1.61%(3)
Ratio of Expenses to Average Net Assets (excluding waivers)(*1)        0.74%         0.85%         0.89%         2.62%(3)
Ratio of Net Income (Loss) to Average Net Assets
 (excluding waivers)                                                   1.53%         1.48%         1.69%        (0.41)%(3)
Portfolio Turnover Rate                                                  42%           34%          143%            6%
---------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)Expense ratios do not include expenses of the underlying funds.
(2)Commenced operations on October 1, 1996.
(3)Annualized.

GROWTH AND INCOME FUND


<TABLE>
<CAPTION>
                                                                             Fiscal year ended September 30,
                                                                     2000          1999          1998         1997(2)
---------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>            <C>             <C>
PER SHARE DATA
Net Asset Value, Beginning of Period                               $  11.51      $  11.08      $  11.76      $  10.00
                                                                   --------      --------      --------      --------
Investment Operations:
 Net Investment Income                                                 0.33          0.32          0.35          0.26
 Net Gains (Losses) on Investments
   (both realized and unrealized)                                      1.31          1.05         (0.59)         1.76
                                                                   --------      --------      --------      --------
 Total From Investment Operations                                      1.64          1.37         (0.24)         2.02
                                                                   --------      --------      --------      --------
Less Distributions:
 Dividends (from net investment income)                               (0.34)        (0.32)        (0.35)        (0.26)
 Distributions (from capital gains)                                   (0.79)        (0.62)        (0.09)           --
                                                                   --------      --------      --------      --------
 Total Distributions                                                  (1.13)        (0.94)        (0.44)        (0.26)
                                                                   --------      --------      --------      --------
Net Asset Value, End of Period                                     $  12.02      $  11.51      $  11.08      $  11.76
                                                                   ========      ========      ========      ========
Total Return                                                          14.88%        12.81%        (2.18)%       20.47%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000)                                    $233,427      $209,229      $207,907      $ 27,565
Ratio of Expenses to Average Net Assets(1)                             0.34%         0.28%         0.25%         0.60%(3)
Ratio of Net Income to Average Net Assets                              2.83%         2.83%         3.05%         2.59%(3)
Ratio of Expenses to Average Net Assets (excluding waivers)(1)         0.70%         0.79%         0.82%         2.10%(3)
Ratio of Net Income to Average Net Assets
 (excluding waivers)                                                   2.47%         2.32%         2.48%         1.09%(3)
Portfolio Turnover Rate                                                  46%           41%          158%           37%
---------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)Expense ratios do not include expenses of the underlying funds.
(2)Commenced operations on October 1, 1996.
(3)Annualized.


                              26      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


Additional Information
FINANCIAL HIGHLIGHTS CONTINUED

INCOME FUND


<TABLE>
<CAPTION>
                                                                         Fiscal year ended September 30,
                                                                    2000         1999         1998       1997(2)
----------------------------------------------------------------------------------------------------------------
<S>                                                              <C>           <C>           <C>            <C>
PER SHARE DATA
Net Asset Value, Beginning of Period                              $ 10.48      $ 11.23      $ 10.82      $ 10.00
                                                                  -------      -------      -------      -------
Investment Operations:
 Net Investment Income                                               0.50         0.53         0.50         0.41
 Net Gains (Losses) on Investments
   (both realized and unrealized)                                    0.22        (0.40)        0.43         0.82
                                                                  -------      -------      -------      -------
 Total From Investment Operations                                    0.72         0.13         0.93         1.23
                                                                  -------      -------      -------      -------
Less Distributions:
 Dividends (from net investment income)                             (0.49)       (0.53)       (0.50)       (0.41)
 Distributions (from capital gains)                                 (0.23)       (0.35)       (0.02)          --
                                                                  -------      -------      -------      -------
 Total Distributions                                                (0.72)       (0.88)       (0.52)       (0.41)
                                                                  -------      -------      -------      -------
Net Asset Value, End of Period                                    $ 10.48      $ 10.48      $ 11.23      $ 10.82
                                                                  =======      =======      =======      =======
Total Return                                                         7.18%        1.13%        8.72%       12.51%

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000)                                   $54,138      $83,302     $116,779      $36,119
Ratio of Expenses to Average Net Assets(1)                           0.33%        0.28%        0.25%        0.60%(3)
Ratio of Net Income to Average Net Assets                            4.81%        4.83%        4.63%        4.39%(3)
Ratio of Expenses to Average Net Assets (excluding waivers)(1)       0.77%        0.83%        0.84%        2.00%(3)
Ratio of Net Income to Average Net Assets
 (excluding waivers)                                                 4.37%        4.28%        4.04%        2.99%(3)
Portfolio Turnover Rate                                                69%          21%         106%          29%
----------------------------------------------------------------------------------------------------------------
</TABLE>


(1)Expense ratios do not include expenses of the underlying funds.

(2)Commenced operations on October 1, 1996.

(3)Annualized.


                              27      PROSPECTUS - First American Strategy Funds
                                                   Class A Shares
<PAGE>


--------------------------------------------------------------------------------
FOR MORE INFORMATION


More information about the funds is available in the funds' Statement of
Additional Information, and annual and semiannual reports, and on the First
American funds' Internet Web site.

--------------------------------------------------------------------------------
FIRST AMERICAN FUNDS WEB SITE

Information about the First American funds may be viewed on the funds' Internet
Web site at http://www.firstamericanfunds.com.


--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI provides more details about the funds and their policies. A current SAI
is on file with the Securities and Exchange Commission (SEC) and is incorporated
into this prospectus by reference (which means that it is legally considered
part of this prospectus).

--------------------------------------------------------------------------------
ANNUAL AND SEMIANNUAL REPORTS

Additional information about the funds' investments is available in the funds'
annual and semiannual reports to shareholders. In the funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the funds' performance during their last fiscal year.

You can obtain a free copy of the funds' SAI and/or free copies of the funds'
most recent annual or semiannual reports by calling Investor Services at
1-800-637-2548. The material you request will be sent by first-class mail or
other means designed to ensure equally prompt delivery, within three business
days of receipt of the request.

You can also obtain copies of this information, after paying a duplicating fee,
by electronic request at the following email address: [email protected], or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. For
more information, call 1-202-942-8090.

Information about the funds is also available on the Internet. Text-only
versions of fund documents can be viewed online or downloaded from the EDGAR
Database on the SEC's Internet site at http://www.sec.gov.



FIRST AMERICAN FUNDS P.O. Box 1330, Minneapolis, MN 55440-1330

First American Asset Management, a division of U.S. Bank National Association,
serves as the investment advisor to the First American Funds.

First American Funds are distributed by SEI Investments Distribution Co. which
is located in Oaks, PA 19456 and is not an affiliate of U.S. Bank.


12/2000  PROSTRAT-00

SEC file number: 811-07687



[LOGO] FIRST AMERICAN FUNDS(R)
       THE POWER OF DISCIPLINED INVESTING(R)

<PAGE>

                       FIRST AMERICAN STRATEGY FUNDS, INC.

                       STATEMENT OF ADDITIONAL INFORMATION

                             DATED DECEMBER 30, 2000

                                   INCOME FUND
                                   GROWTH FUND
                             GROWTH AND INCOME FUND
                             AGGRESSIVE GROWTH FUND


         This Statement of Additional Information relates to the funds named
above (the "Funds"), each of which is a series of First American Strategy Funds,
Inc. ("FASF"). This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the Funds' current Prospectus dated December
30, 2000. The financial statements included as part of the Funds' Annual Report
to shareholders for the fiscal year ended September 30, 2000 are incorporated by
reference into this Statement of Additional Information. This Statement of
Additional Information is incorporated into the Funds' Prospectus by reference.
To obtain copies of Prospectus or the Funds' Annual Report(s) at no charge,
write the Funds' distributor, SEI Investments Distribution Co., Oaks,
Pennsylvania 19456, or call Investor Services at 1-800-637-2548. Please retain
this Statement of Additional Information for future reference.

<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                  PAGE
                                                                                                  ----
<S>                                                                                                 <C>
GENERAL INFORMATION .............................................................................    1

INVESTMENT RESTRICTIONS OF THE FUNDS ............................................................    1

ADDITIONAL INFORMATION CONCERNING INVESTMENTS
BY THE FUNDS AND THE UNDERLYING FUNDS ...........................................................    3
         Short-Term Investments .................................................................    3
         Repurchase Agreements ..................................................................    4
         When-Issued and Delayed Delivery Transactions ..........................................    4
         Lending of Portfolio Securities ........................................................    5
         Options Transactions ...................................................................    5
         Futures and Options on Futures .........................................................    7
         Securities of Foreign Banks and Branches ...............................................    8
         Foreign Securities .....................................................................    8
         Foreign Securities Exchanges ...........................................................   10
         Foreign Currency Transactions ..........................................................   10
         Real Estate Investment Trust ("REIT") Securities .......................................   12
         Mortgage-Backed Securities .............................................................   13
         Asset-Backed Securities ................................................................   15
         Debt Obligations - Strategic Income Fund ...............................................   15
         Debt Obligations Rated Less Than Investment Grade ......................................   16
         U.S. Government Securities .............................................................   16
         Zero Coupon Securities .................................................................   16
         Floating Rate Corporate Debt Obligations ...............................................   17
         Fixed Rate Corporate Debt Obligations ..................................................   17
         Participation Interests ................................................................   17
         Fixed Income Securities-- Equity Funds .................................................   17
         Payment-In-Kind Debentures and Delayed Interest Securities .............................   18
         Preferred Stock ........................................................................   18
         Loan Participations; Section 4(2) and Rule 144A Securities .............................   18
         Credit Enhancement Agreements ..........................................................   18
         Money Market Funds .....................................................................   19

INVESTMENT RESTRICTIONS OF THE UNDERLYING FUNDS .................................................   19
         Restrictions Applicable to the Equity Funds, Strategic Income Fund and Fixed Income Fund   19
         Restrictions Applicable to Prime Obligations Fund ......................................   20

DIRECTORS AND EXECUTIVE OFFICERS ................................................................   22
         Directors ..............................................................................   22
         Executive Officers .....................................................................   23
         Compensation ...........................................................................   24

CODE OF ETHICS ..................................................................................   24

INVESTMENT ADVISORY AND OTHER SERVICES FOR THE FUNDS ............................................   25
         Investment Advisory Agreement ..........................................................   25
         Administration Agreement ...............................................................   26
         Distributor and Shareholder Service Plan and Agreement .................................   26
         Custodian; Counsel; Auditors ...........................................................   27

INVESTMENT ADVISORY SERVICES FOR THE UNDERLYING FUNDS ...........................................   27
         Investment Advisory Agreements of the Underlying Funds .................................   27


                                       i
<PAGE>


         Sub-Advisory Agreements for Emerging Markets Fund,
         International Fund and Strategic Income Fund ...........................................   28

PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE ..............................................   29

CAPITAL STOCK ...................................................................................   31

NET ASSET VALUE AND PUBLIC OFFERING PRICE .......................................................   33

FUND PERFORMANCE ................................................................................   33
         SEC Standardized Performance Figures ...................................................   33
         Non-Standard Distribution Rates ........................................................   35
         Certain Performance Comparisons ........................................................   35

TAXATION ........................................................................................   35

REDUCING SALES CHARGES ..........................................................................   36
         Class A Sales Charge ...................................................................   36
         Sales of Class A Shares at Net Asset Value .............................................   37

ADDITIONAL INFORMATION ABOUT SELLING SHARES .....................................................   37
         By Telephone ...........................................................................   37
         By Mail ................................................................................   38
         Redemption Before Purchase Instruments Clear ...........................................   38

RATINGS .........................................................................................   39
         Ratings of Corporate Debt Obligations and Municipal Bonds ..............................   39
         Ratings of Preferred Stock .............................................................   40
         Ratings of Commercial Paper ............................................................   41

FINANCIAL STATEMENTS ............................................................................   41

</TABLE>


                                       ii
<PAGE>


                               GENERAL INFORMATION

         First American Strategy Funds, Inc. ("FASF") was incorporated in the
State of Minnesota on June 19, 1996. FASF is organized as a series fund and
currently issues Class A shares in four series. Each series of shares represents
a separate investment portfolio with its own investment objectives and policies
(in essence, a separate mutual fund). The series of FASF to which this Statement
of Additional Information relates are named on the cover hereof. These series
are referred to in this Statement of Additional Information as the "Funds." Each
of the Funds are open-end diversified investment companies.

         As described in the Funds' Prospectus, each Fund seeks to achieve its
investment objectives by investing primarily in a variety of other mutual funds
which are also advised by the Funds' investment advisor. These other mutual
funds include Equity Income Fund, Equity Index Fund, Large Cap Growth Fund,
Large Cap Value Fund, Mid Cap Growth Fund, Mid Cap Value Fund, Small Cap Growth
Fund, Small Cap Value Fund, Real Estate Securities Fund, Emerging Markets Fund,
International Fund, Fixed Income Fund and Strategic Income Fund, each of which
is a series of First American Investment Funds, Inc., and Prime Obligations
Fund, which is a series of First American Funds, Inc. These other funds are
referred to herein and in the Prospectus collectively as the "Underlying Funds."
The first eleven funds named above are referred to herein and in the Prospectus
collectively as the "Equity Funds."

         Shareholders may purchase Class A shares of each Fund. Effective
December 31, 2000, the Funds began charging a maximum front end sales charge of
5.25% and waived all redemption fees associated with shares purchased prior to
that date. Prior to December 31, 2000, the Funds did not impose a front end
sales charge and there was a 1.00% redemption fee on shares sold within 12
months of the date of purchase.

         The Bylaws of FASF provide that annual shareholders meetings are not
required and that meetings of shareholders need only be held with such frequency
as required under Minnesota law and the Investment Company Act of 1940 (the
"1940 Act"). Minnesota law provides that if a regular meeting of shareholders
has not been held during the immediately preceding 15 months, a shareholder or
shareholders holding 3% or more of the voting power of all shares entitled to
vote may demand a regular meeting of shareholders. Minnesota law further
provides that a special meeting of shareholders may be called by a shareholder
or shareholders holding 10% or more of the voting power of all shares entitled
to vote, except that a special meeting for the purpose of considering any action
to facilitate or effect a business combination, including any action to change
or otherwise affect the composition of the board of directors for that purpose,
must be called by 25% or more of the voting power of all shares entitled to
vote. The 1940 Act requires a shareholder vote for all amendments to fundamental
investment policies and restrictions, for approval of all investment advisory
agreements, and for the adoption of, and material increases in amounts payable
under, Rule 12b-1 distribution plans. To date, FASF had not adopted a
distribution plan under Rule 12b-1.

         This Statement of Additional Information may also refer to affiliated
investment companies, including: First American Funds, Inc. ("FAF"); First
American Investment Funds, Inc. ("FAIF"); First American Insurance Portfolios,
Inc. ("FAIP"); and twelve separate closed-end funds (American Strategic Income
Portfolio Inc., American Strategic Income Portfolio Inc.-II, American Strategic
Income Portfolio Inc.-III, American Municipal Income Portfolio Inc., Minnesota
Municipal Income Portfolio Inc., American Select Portfolio Inc., American
Municipal Term Trust Inc., American Municipal Term Trust Inc.-II, American
Municipal Term Trust Inc.-III, Minnesota Municipal Term Trust Inc., Minnesota
Municipal Term Trust Inc.-II, and Mentor Income Fund, Inc.) collectively
referred to as the First American Closed-End Funds ("FACEF").

                      INVESTMENT RESTRICTIONS OF THE FUNDS

         In addition to the investment objectives and policies set forth in the
Prospectus and under the caption "Additional Information Concerning Investments
by the Funds and the Underlying Funds," each of the Funds is subject to the
investment restrictions set forth below. The investment restrictions set forth
in paragraphs 1 through 10 below are fundamental and cannot be changed with
respect to a Fund without approval by the holders of a majority of the
outstanding shares of that Fund as defined in the 1940 Act, i.e., by the lesser
of the vote of (a) 67% of the shares of the Fund present at a meeting where more
than 50% of the outstanding shares are present in person or by proxy, or (b)
more than 50% of the outstanding shares of the Fund.


                                       1
<PAGE>


         None of the investment restrictions set forth below shall be deemed to
restrict any Fund from holding securities of investment companies which engage
in the activities described in such investment restrictions. None of the
investment restrictions set forth below shall be deemed to restrict any Fund
from receiving, holding, and disposing of any securities received as a result of
an in-kind redemption by an investment company whose shares are held by such
Fund.

         None of the Funds will:

         1.       Invest more than 25% of its total assets in any one industry,
                  except for investment companies which are part of the "same
                  group of investment companies" (as defined in Rule 11a-3 under
                  the 1940 Act) as the Funds.

         2.       Issue any senior securities (as defined in the 1940 Act),
                  other than as set forth in restriction number 3 below and
                  except to the extent that using options may be deemed to
                  constitute issuing a senior security.

         3.       Borrow money, except from banks for temporary or emergency
                  purposes. The amount of such borrowing may not exceed 10% of
                  the borrowing Fund's total assets. None of the Funds will
                  borrow money for leverage purposes. For the purpose of this
                  investment restriction, the use of options and futures
                  transactions shall not be deemed the borrowing of money. (As a
                  non-fundamental policy, no Fund will make additional
                  investments while its borrowings exceed 5% of total assets.)

         4.       Mortgage, pledge or hypothecate its assets, except in an
                  amount not exceeding 15% of the value of its total assets to
                  secure temporary or emergency borrowing.

         5.       Make short sales of securities.

         6.       Purchase any securities on margin except to obtain such
                  short-term credits as may be necessary for the clearance of
                  transactions.

         7.       Purchase or sell physical commodities (including, by way of
                  example and not by way of limitation, grains, oilseeds,
                  livestock, meat, food, fiber, metals, petroleum,
                  petroleum-based products or natural gas) or futures or options
                  contracts with respect to physical commodities. This
                  restriction shall not restrict any Fund from purchasing or
                  selling any financial contracts or instruments which may be
                  deemed commodities (including, by way of example and not by
                  way of limitation, options, futures and options on futures
                  with respect, in each case, to interest rates, currencies,
                  stock indices, bond indices or interest rate indices) or any
                  security which is collateralized or otherwise backed by
                  physical commodities.

         8.       Purchase or sell real estate or real estate mortgage loans,
                  except that the Funds may invest in securities secured by real
                  estate or interests therein or issued by companies that invest
                  in or hold real estate or interests therein, and in
                  mortgage-backed securities.

         9.       Act as an underwriter of securities of other issuers, except
                  to the extent a Fund may be deemed to be an underwriter, under
                  Federal securities laws, in connection with the disposition of
                  portfolio securities.

         10.      Lend any of its assets, except portfolio securities
                  representing up to one-third of the value of its total assets.

         The following restriction is non-fundamental and may be changed by
FASF's Board of Directors without shareholder vote. None of the Funds will
invest more than 15% of its net assets in all forms of illiquid investments.


                                       2
<PAGE>


                  ADDITIONAL INFORMATION CONCERNING INVESTMENTS
                      BY THE FUNDS AND THE UNDERLYING FUNDS

         The main investment strategies of the Funds and the Underlying Funds
are set forth in such Funds' Prospectus. Additional information concerning such
main investment strategies and other investment strategies which may be made by
the Funds and the Underlying Funds is set forth under this caption. Additional
information concerning the Funds' investment restrictions is set forth above
under the caption "Investment Restrictions of the Funds," and additional
information concerning the Underlying Funds' investment restrictions is set
forth below under the caption "Investment Restrictions of the Underlying Funds."

         A percentage limitation on investments by an Underlying Fund stated in
this section or in "Investment Restrictions of the Underlying Funds" is adhered
to at the time of an investment, a later increase or decrease in percentage
resulting from changes in asset value will not be deemed to violate the
limitation except in the case of the limitations on illiquid investments and
borrowing. An Underlying Fund (except Strategic Income Fund and Equity Income
Fund to the extent it can buy convertibles) which is limited to investing in
securities with specified ratings or of a certain credit quality is not required
to sell a security if its rating is reduced or its credit quality declines after
purchase, but the Underlying Fund may consider doing so. However, in no event
will more than 5% of any Underlying Fund's net assets be invested in
non-investment grade securities or unrated securities determined to be of
comparable quality by the Advisor or Sub-Advisor of the Underlying Fund.
Descriptions of the rating categories of Standard & Poor's Rating Services, a
division of The McGraw-Hill Companies, Inc. and Moody's Investors Services, Inc.
are contained in "Ratings" below.

SHORT-TERM INVESTMENTS

         The Funds and the Underlying Funds can invest in a variety of
short-term instruments which are specified in their respective Prospectuses and
Statement of Additional Information. Short-term investments may be entered into
on a joint basis by the Funds, the Underlying Funds, and other funds advised by
the U.S. Bank National Association, the Fund's investment advisor ("U.S. Bank"
or the "Advisor"). These short-term investments include short-term obligations
such as rated commercial paper and variable amount master demand notes; United
States dollar-denominated time and savings deposits (including certificates of
deposit); bankers' acceptances; obligations of the United States government or
its agencies or instrumentalities; repurchase agreements collateralized by
eligible investments of an Underlying Fund; securities of other mutual funds
which invest primarily in debt obligations with remaining maturities of 13
months or less (which investments also are subject to the advisory fee); and
other similar high-quality short-term United States dollar-denominated
obligations. The other mutual funds in which the Funds and the Underlying Funds
may so invest include money market funds advised by the Advisor, subject to
certain restrictions contained in an exemptive order issued by the Securities
and Exchange Commission ("SEC") with respect thereto.

         The bank instruments in which Fixed Income Fund and Strategic Income
Fund invests may also include Eurodollar Certificates of Deposit issued by
foreign branches of United States or foreign banks; Eurodollar Time Deposits,
which are United States dollar-denominated deposits in foreign branches of
United States or foreign banks; and Yankee Certificates of Deposit, which are
United States dollar-denominated certificates of deposit issued by United States
branches of foreign banks and held in the United States. In each instance, Fixed
Income Fund and Strategic Income Fund may only invest in bank instruments issued
by an institution which has capital, surplus and undivided profits of more than
$100 million or the deposits of which are insured by the Bank Insurance Fund or
the Savings Association Insurance Fund.

         COMMERCIAL PAPER. Commercial paper consists of unsecured promissory
notes issued by corporations. Issues of commercial paper normally have
maturities of less than nine months and fixed rates of return. Subject to the
limitations described in their respective Prospectus and Statement of Additional
Information, the Funds and the Underlying Funds may purchase commercial paper
consisting of issues rated at the time of purchase within the two highest rating
categories by Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's") or Moody's Investors Service, Inc.
("Moody's"), or which have been assigned an equivalent rating by another
nationally recognized statistical rating organization. The Funds and the
Underlying Funds also may invest in commercial paper that is not rated but that
is determined by the Advisor to be of comparable quality to instruments that are
so rated. For a description of the rating categories of Standard & Poor's and
Moody's, see "Ratings" herein.


                                       3
<PAGE>


         BANKERS' ACCEPTANCES. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligation both of the bank and of the drawer to
pay the full amount of the instrument upon maturity.

         VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand
notes are unsecured demand notes that permit the indebtedness thereunder to vary
and provide for periodic adjustments in the interest rate according to the terms
of the instrument. Because master demand notes are direct lending arrangements
between a Fund or an Underlying Fund and the issuer, they are not normally
traded. Although there is no secondary market in the notes, a Fund or an
Underlying Fund may demand payment of principal and accrued interest at any
time. While the notes are not typically rated by credit rating agencies, issuers
of variable amount master demand notes (which are normally manufacturing,
retail, financial, and other business concerns) must satisfy the same criteria
as set forth above for commercial paper. The Advisor or, in the case of Emerging
Markets Fund, International Fund and Strategic Income Fund, their respective
sub-advisor will consider the earning power, cash flow, and other liquidity
ratios of the issuers of such notes and will continuously monitor their
financial status and ability to meet payment on demand.

REPURCHASE AGREEMENTS

         Each of the Underlying Funds may enter into repurchase agreements. A
repurchase agreement involves the purchase by an Underlying Fund of securities
with the agreement that after a stated period of time, the original seller will
buy back the same securities ("collateral") at a predetermined price or yield.
Repurchase agreements involve certain risks not associated with direct
investments in securities. If the original seller defaults on its obligation to
repurchase as a result of its bankruptcy or otherwise, the purchasing Underlying
Fund will seek to sell the collateral, which could involve costs or delays.
Although collateral (which may consist of any fixed income security which is an
eligible investment for the Underlying Fund entering into the repurchase
agreement) will at all times be maintained in an amount equal to the repurchase
price under the agreement (including accrued interest), an Underlying Fund would
suffer a loss if the proceeds from the sale of the collateral were less than the
agreed-upon repurchase price. The Advisor or, in the case of Emerging Markets
Fund and International Fund, their respective sub-advisor will monitor the
creditworthiness of the firms with which the Underlying Funds enter into
repurchase agreements. In the case of Strategic Income Fund, the Advisor and the
Fund's investment sub-advisor will monitor the creditworthiness of the firms
with which such Underlying Fund enters into repurchase agreements.

         The Underlying Funds' custodian will hold the securities underlying any
repurchase agreement, or the securities will be part of the Federal
Reserve/Treasury Book Entry System. The market value of the collateral
underlying the repurchase agreement will be determined on each business day. If
at any time the market value of the collateral falls below the repurchase price
under the repurchase agreement (including any accrued interest), the appropriate
Underlying Fund will promptly receive additional collateral (so the total
collateral is an amount at least equal to the repurchase price plus accrued
interest).

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

         Each of the Underlying Funds (excluding Equity Index Fund) may purchase
securities on a when-issued or delayed delivery basis. When such a transaction
is negotiated, the purchase price is fixed at the time the purchase commitment
is entered, but delivery of and payment for the securities take place at a later
date. An Underlying Fund will not accrue income with respect to securities
purchased on a when-issued or delayed delivery basis prior to their stated
delivery date.

         The purchase of securities on a when-issued or delayed delivery basis
exposes an Underlying Fund to risk because the securities may decrease in value
prior to delivery. In addition, an Underlying Fund's purchase of securities on a
when-issued or delayed delivery basis while remaining substantially fully
invested could increase the amount of the Underlying Fund's total assets that
are subject to market risk, resulting in increased sensitivity of net asset
value to changes in market prices. A seller's failure to deliver securities to
an Underlying Fund could prevent the Underlying Fund from realizing a price or
yield considered to be advantageous. Prime Obligations Fund will not purchase
securities on a when-issued or delayed delivery basis if, as a result thereof,
more than 15% of its net assets would be so invested.


                                       4
<PAGE>


         In connection with their ability to purchase securities on a
when-issued or delayed delivery basis, Fixed Income Fund and Strategic Income
Fund may enter into mortgage "dollar rolls" in which such Underlying Fund sells
securities and simultaneously contracts with the same counterparty to repurchase
similar (same type, coupon and maturity) but not identical securities on a
future date. In a mortgage dollar roll, Fixed Income Fund and Strategic Income
Fund give up the right to receive principal and interest paid on the securities
sold. However, these Underlying Funds would benefit to the extent of any
difference between the price received for the securities sold and the lower
forward price for the future purchase plus any fee income received. Unless such
benefits exceed the income, capital appreciation and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as
part of the mortgage dollar roll, the use of this technique will diminish the
investment performance of Fixed Income Fund and Strategic Income Fund compared
with what such performance would have been without the use of mortgage dollar
rolls. Fixed Income Fund and Strategic Income Fund will hold and maintain in
segregated accounts until the settlement date cash or liquid securities in an
amount equal to the forward purchase price.

         When an Underlying Fund agrees to purchase securities on a when-issued
or delayed delivery basis, its custodian will maintain in a segregated account
cash or liquid securities in an amount sufficient to meet its purchase
commitments. It may be expected that an Underlying Fund's net assets will
fluctuate to a greater degree when it sets aside securities to cover such
purchase commitments than when it sets aside cash. In addition, because an
Underlying Fund will set aside cash or liquid securities to satisfy its purchase
commitments in the manner described above, its liquidity and the ability of its
investment advisor or sub-advisor to manage it might be affected in the event
its commitments to purchase when-issued or delayed delivery securities ever
exceeded 25% of the value of its total assets. Under normal market conditions,
however, an Underlying Fund's commitments to purchase when-issued or delayed
delivery securities will not exceed 25% of the value of its total assets.

LENDING OF PORTFOLIO SECURITIES

         In order to generate additional income, each of the Underlying Funds
may lend portfolio securities representing up to one-third of the value of its
total assets to broker-dealers, banks or other institutional borrowers of
securities. As with other extensions of credit, there may be risks of delay in
recovery of the securities or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the Underlying Funds will
only enter into loan arrangements with broker-dealers, banks or other
institutions which its advisor or, in the case of Emerging Markets Fund,
International Fund and Strategic Income Fund, their respective investment
sub-advisor has determined are creditworthy under guidelines established by the
Board of Directors. In these loan arrangements, the Underlying Funds will
receive collateral in the form of cash, United States Government securities or
other high-grade debt obligations equal to at least 100% of the value of the
securities loaned. Collateral is marked to market daily. If the market value of
the loaned securities increases, the borrower must furnish additional collateral
to the lending Underlying Fund. During the time portfolio securities are on
loan, the borrower pays the lending Underlying Fund any dividends or interest
paid on the securities. Loans are subject to termination by the lending
Underlying Fund or the borrower at any time. While an Underlying Fund does not
have the right to vote securities on loan, it would terminate the loan and
regain the right to vote if that were considered important with respect to the
investment. The Underlying Funds will pay a portion of the income earned on the
lending transaction to the placing broker and may pay administrative and
custodial fees (including fees paid to an affiliate of the Advisor) in
connection with these loans which, in the case of U.S. Bank are 40% of the
Funds' income from such securities lending transactions.

OPTIONS TRANSACTIONS

         PURCHASES OF PUT AND CALL OPTIONS. The Underlying Funds, other than
Prime Obligations Fund and Equity Index Fund, may purchase put and call options.
Each of the Underlying Funds, other than Prime Obligations Fund and Equity Index
Fund, may purchase put and call options on securities and stock indices.
Strategic Income Fund may purchase options on interest rate indices. Emerging
Markets Fund, International Fund and Strategic Income Fund may purchase options
on foreign currencies. Options on futures contracts are discussed below under
"-- Futures and Options on Futures."

         OPTIONS ON SECURITIES. A put option on a security gives the purchaser
of the option the right (but not the obligation) to sell, and the writer of the
option the obligation to buy, the underlying security at a stated price (the
"exercise price") at any time before the option expires. A call option on a
security gives the purchaser the right (but not the obligation) to buy, and the
writer the obligation to sell, the underlying security at the exercise price at
any time


                                       5
<PAGE>


before the option expires. The purchase price for a put or call option is the
"premium" paid by the purchaser for the right to sell or buy.

         An Underlying Fund may purchase put options to hedge against a decline
in the value of its portfolio. By using put options in this way, an Underlying
Fund would reduce any profit it might otherwise have realized in the underlying
security by the amount of the premium paid for the put option and by transaction
costs. In similar fashion, an Underlying Fund may purchase call options to hedge
against an increase in the price of securities that the Underlying Fund
anticipates purchasing in the future. The premium paid for the call option plus
any transaction costs will reduce the benefit, if any, realized by the
Underlying Fund upon exercise of the option, and, unless the price of the
underlying security rises sufficiently, the option may expire unexercised.

         OPTIONS ON STOCK INDICES. Options on stock indices are similar to
options on securities except that, rather than the right to take or make
delivery of a specific security at a stated price, an option on a stock index
gives the holder the right to receive, upon exercise of the option, a defined
amount of cash if the closing value of the index upon which the option is based
is greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. In particular, this amount of cash is equal to the
difference between the closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple (the "multiplier"). The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike stock options, all settlements for stock index
options are in cash, and gain or loss depends on price movements in the stock
market generally (or in a particular industry or segment of the market) rather
than price movements in individual stocks. The multiplier for an index option
performs a function similar to the unit of trading for a stock option. It
determines the total dollar value per contract of each point in the difference
between the underlying stock index. A multiplier of 100 means that a one-point
difference will yield $100. Options on different stock indices may have
different multipliers.

         OPTIONS ON INTEREST RATE INDICES. An option on an interest rate index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing value of the interest rate index upon which the option is
based is greater than, in the case of a call, or lesser than, in the case of a
put, the exercise price of the option. This amount of cash is equal to the
difference between the closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple (the "multiplier"). The
writer of the option is obligated, for the premium received, to make delivery of
this amount. Unlike interest rate futures options contracts, settlements for
interest rate index options are always in cash. Gain or loss depends on price
movements in the interest rate movements with respect to specific financial
instruments. As with stock index options, the multiplier for interest rate index
options determines the total dollar value per contract of each point in the
difference between the exercise price of an option and the current value of the
underlying interest rate index. Options on different interest rate indices may
have different multipliers.

         WRITING OF CALL OPTIONS. The Underlying Funds, other than Prime
Obligations Fund and Equity Index Fund, may write (sell) covered call options to
the extent specified with respect to particular Underlying Funds as set forth
herein. These transactions would be undertaken principally to produce additional
income. Depending on the Underlying Fund, these transactions may include the
writing of covered call options on equity securities or (only in the case of
Emerging Markets Fund, International Fund and Strategic Income Fund) on foreign
currencies which an Underlying Fund owns or has the right to acquire or on
interest rate indices. These Underlying Funds (other than Emerging Markets Fund
and International Fund) may write (sell) covered call options covering up to 25%
of the equity securities owned by such Underlying Funds and, in the case of
Emerging Markets Fund and International Fund, covering up to 50% of the equity
securities owned by such Underlying Funds. Strategic Income Fund may write
(sell) covered call options on equity securities covering up to 25% of its net
assets.

         When an Underlying Fund sells a covered call option, it is paid a
premium by the purchaser. If the market price of the security covered by the
option does not increase above the exercise price before the option expires, the
option generally will expire without being exercised, and the Underlying Fund
will retain both the premium paid for the option and the security. If the market
price of the security covered by the option does increase above the exercise
price before the option expires, however, the option is likely to be exercised
by the purchaser. In that case the Underlying Fund will be required to sell the
security at the exercise price, and it will not realize the benefit of increases
in the market price of the security above the exercise price of the option.

         The writer (seller) of a call option has no control over when the
underlying securities must be sold; the writer may be assigned an exercise
notice at any time prior to the termination of the option. If a call option is
exercised, the


                                       6
<PAGE>


writer experiences a profit or loss from the sale of the underlying security.
The writer of a call option that wishes to terminate its obligation may effect a
"closing purchase transaction." This is accomplished by buying an option on the
same security as the option previously written. If an Underlying Fund was unable
to effect a closing purchase transaction in a secondary market, it would not be
able to sell the underlying security until the option expires or it delivers the
underlying security upon exercise.

         The Equity Funds and Strategic Income Fund also may write call options
on indices, the movements of which generally correlate with those of such
respective Underlying Funds' portfolio holdings. These transactions, which would
be undertaken principally to produce additional income, entail the risk of an
imperfect correlation between movements of the index covered by the option and
movements in the price of the applicable Underlying Fund's portfolio securities.

         LIMITATIONS. None of the Underlying Funds other than Mid Cap Growth
Fund, Emerging Markets Fund and International Fund will invest more than 5% of
the value of its total assets in purchased options, provided that options which
are "in the money" at the time of purchase may be excluded from this 5%
limitation. A call option is "in the money" if the exercise price is lower than
the current market price of the underlying security or index, and a put option
is "in the money" if the exercise price is higher than the current market price.
An Underlying Fund's loss exposure in purchasing an option is limited to the sum
of the premium paid and the commission or other transaction expenses associated
with acquiring the option.

         The use of purchased put and call options involves certain risks. These
include the risk of an imperfect correlation between market prices of securities
held by an Underlying Fund and the prices of options, and the risk of limited
liquidity in the event that an Underlying Fund seeks to close out an options
position before expiration by entering into an offsetting transaction.

FUTURES AND OPTIONS ON FUTURES

         Equity Index Fund, Fixed Income Fund, Emerging Markets Fund,
International Fund and Strategic Income Fund, may engage in futures transactions
and purchase options on futures. The Funds may purchase futures and options on
futures contracts on securities. Emerging Markets Fund, International Fund and
Strategic Income Fund may purchase futures and options on futures contracts on
securities, stock indices or foreign currencies.

         A futures contract on a security obligates one party to purchase, and
the other to sell, a specified security at a specified price on a date certain
in the future. A futures contract on an index obligates the seller to deliver,
and entitles the purchaser to receive, an amount of cash equal to a specific
dollar amount times the difference between the value of the index at the
expiration date of the contract and the index value specified in the contract.
The acquisition of put and call options on futures contracts will, respectively,
give a fund the right (but not the obligation), for a specified exercise price,
to sell or to purchase the underlying futures contract at any time during the
option period.

         At the same time a futures contract is purchased or sold, a Fund or
Underlying Fund generally must allocate cash or securities as a deposit payment
("initial deposit"). It is expected that the initial deposit would be
approximately 1 1/2% to 5% of a contract's face value. Daily thereafter, the
futures contract is valued and the payment of "variation margin" may be
required, since each day the Fund or Underlying Fund would provide or receive
cash that reflects any decline or increase in the contract's value. Futures
transactions also involve brokerage costs and require a Fund or Underlying Fund
to segregate liquid assets, such as cash, United States Government securities or
other liquid high grade debt obligations, to cover its performance under such
contracts.

         The Funds may use futures contracts and options or futures in order to
remain effectively fully invested. These investment techniques may be used in
order to re-allocate assets among asset categories while minimizing transaction
costs; to maintain sufficient liquidity to meet redemption requests; to maintain
cash reserves while simulating full investment; to facilitate trading; or to
seek higher investment returns when a futures contract is priced more
attractively than the underlying security or index. In addition, Equity Index
Fund may use stock index futures and options on futures to increase the level of
Fund assets devoted to replicating the composition of the S&P 500 Composite
Index. In the case of the Underlying Funds, these investment techniques are
designed primarily to hedge against anticipated future changes in market
conditions or foreign exchange rates which otherwise might adversely affect the
value of securities which an Underlying Fund holds or intends to purchase.


                                       7
<PAGE>


         Aggregate initial margin deposits for futures contracts, and premiums
paid for related options, may not exceed 5% of a Fund's or Underlying Fund's
total assets, and the value of securities that are the subject of such futures
and options (both for receipt and delivery) may not exceed of the market value
of Emerging Market Fund's and International Fund's total assets. Futures
transactions will be limited to the extent necessary to maintain each Fund's and
Underlying Fund's qualification as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code").

         Where a Fund or an Underlying Fund is permitted to purchase options on
futures, its potential loss is limited to the amount of the premiums paid for
the options. As stated above, this amount may not exceed 5% of a Fund's or
Underlying Fund's total assets. Where a Fund or an Underlying Fund is permitted
to enter into futures contracts obligating it to purchase securities, currency
or an index in the future at a specified price, such Fund or Underlying Fund
could lose 100% of its net assets in connection therewith if it engaged
extensively in such transactions and if the market value or index value of the
subject securities, currency or index at the delivery or settlement date fell to
zero for all contracts into which a Fund or Underlying Fund was permitted to
enter. Where an Underlying Fund is permitted to enter into futures contracts
obligating it to sell securities or currencies (as is the case with respect only
to Emerging Markets Fund, International Fund and Strategic Income Fund), its
potential losses are unlimited if it does not own the securities or currencies
covered by the contracts and it is unable to close out the contracts prior to
the settlement date.

         A Fund or Underlying Fund may lose the expected benefit of futures
transactions if interest rates, securities prices or foreign exchange rates move
in an unanticipated manner. Such unanticipated changes may also result in poorer
overall performance than if the Fund or Underlying Fund had not entered into any
futures transactions. In addition, the value of an Underlying Fund's futures
positions may not prove to be perfectly or even highly correlated with the value
of its portfolio securities and foreign currencies, limiting the Fund's or
Underlying Fund's ability to hedge effectively against interest rate, foreign
exchange rate and/or market risk and giving rise to additional risks. Because of
the low margin requirements in the futures markets, they may be subject to
market forces, including speculative activity, which do not affect the cash
markets. There also is no assurance of liquidity in the secondary market for
purposes of closing out futures positions.

SECURITIES OF FOREIGN BANKS AND BRANCHES

         Prime Obligations Fund may invest in obligations of foreign branches of
United States banks and United States branches of foreign banks. Various
provisions of federal law governing the establishment and operation of domestic
branches do not apply to foreign branches of domestic banks. Obligations of
United States branches of foreign banks may be general obligations of the parent
bank in addition to the issuing branch, or may be limited by the terms of a
specific obligation and by federal and state regulation as well as by
governmental action in the country in which the foreign bank has its head
office.

         Because the portfolio of Prime Obligations Fund's investments in
taxable money market securities may contain securities of foreign branches of
domestic banks, foreign banks, and United States branches of foreign banks, such
Underlying Fund may be subject to additional investment risks that are different
in some respects from those incurred by a fund that invests only in debt
obligations of United States banks. These risks may include future unfavorable
political and economic developments and possible withholding taxes, seizure of
foreign deposits, currency controls, interest limitations, or other governmental
restrictions which might affect the payment of principal or interest on
securities owned by such Underlying Fund. Additionally, there may be less public
information available about foreign banks and their branches. The Advisor
carefully considers these factors when making investments. Prime Obligation Fund
has agreed that, in connection with investment in securities issued by foreign
banks, United States branches of foreign banks, and foreign branches of domestic
banks, consideration will be given to the domestic marketability of such
securities in light of these factors.

FOREIGN SECURITIES

         GENERAL. Under normal market conditions Emerging Markets Fund and
International Fund each invests at least 65% of its total assets in equity
securities which trade in markets other than the United States. Strategic Income
Fund normally invests a significant portion of its assets in foreign government
and foreign corporate debt obligations, and from time to time may invest up to
100% of its total assets in such obligations. In addition, the other Equity
Funds may


                                       8
<PAGE>


invest lesser proportions of their assets in securities of foreign issuers which
are either listed on a United States securities exchange or represented by
American Depositary Receipts.

         Fixed Income Fund may invest up to 15% of its total assets in foreign
securities payable in United States dollars. These securities may include
securities issued or guaranteed by (i) the government of Canada, any Canadian
province, or any instrumentality or political subdivision thereof; (ii) any
other foreign government, agency or instrumentality; (iii) foreign subsidiaries
of United States corporations; and (iv) foreign banks having total capital and
surplus at the time of investment of at least $1 billion. Such foreign bank or
corporate securities must be rated by at least one major United States rating
agency as having a quality not less than that which would be required for
comparable domestic securities. In addition, Fixed Income Fund and Strategic
Income Fund also may invest in Eurodollar Certificates of Deposit, Eurodollar
Time Deposits and Yankee Certificates of Deposit as described under "--
Short-Term Instruments" above.

         Prime Obligations Fund may invest in United States dollar-denominated
obligations of foreign banks, United States branches of foreign banks and
foreign branches of United States banks.

         Investment in foreign securities is subject to special investment risks
that differ in some respects from those related to investments in securities of
United States domestic issuers. These risks include political, social or
economic instability in the country of the issuer, the difficulty of predicting
international trade patterns, the possibility of the imposition of exchange
controls, expropriation, limits on removal of currency or other assets,
nationalization of assets, foreign withholding and income taxation, and foreign
trading practices (including higher trading commissions, custodial charges and
delayed settlements). Foreign securities also may be subject to greater
fluctuations in price than securities issued by United States corporations. The
principal markets on which these securities trade may have less volume and
liquidity, and may be more volatile, than securities markets in the United
States.

         In addition, there may be less publicly available information about a
foreign company than about a United States domiciled company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to United States domestic
companies. There is also generally less government regulation of securities
exchanges, brokers and listed companies abroad than in the United States.
Confiscatory taxation or diplomatic developments could also affect investment in
those countries. In addition, foreign branches of United States banks, foreign
banks and foreign issuers may be subject to less stringent reserve requirements
and to different accounting, auditing, reporting, and recordkeeping standards
than those applicable to domestic branches of United States banks and United
States domestic issuers.

         EMERGING MARKETS. Emerging Markets Fund, International Fund and
Strategic Income Fund may invest in securities issued by the governmental and
corporate issuers that are located in emerging market countries. Investments in
securities of issuers in emerging market countries may be subject to potentially
higher risks than investments in developed countries. These risks include (i)
less social, political and economic stability; (ii) the small current size of
the markets for such securities and the currently low or nonexistent volume of
trading, which may result in a lack of liquidity and in greater price
volatility; (iii) certain national policies which may restrict the Fund's
investment opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property; (vi) the limited
development and recent emergence, in certain countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent
favorable economic developments in certain countries may be slowed or reversed
by unanticipated political or social events in such countries.

         Despite the dissolution of the Soviet Union, the Communist Party may
continue to exercise a significant role in certain (particularly Eastern
European) countries. To the extent of the Communist Party's influence,
investments in such countries will involve risks of nationalization,
expropriation and confiscatory taxation. The communist governments of a number
of such countries expropriated large amounts of private property in the past, in
many cases without adequate compensation, and there can be no assurance that
such expropriation will not occur in the future. In the event of such
expropriation, a Fund could lose a substantial portion of any investments it has
made in the affected countries. Further, no accounting standards exist in many
developing countries. Finally, even though certain currencies may be convertible
into U.S. dollars, the conversion rates may be artificial to the actual market
values and may be adverse to Fund shareholders.


                                        9
<PAGE>


         Certain countries, which do not have market economies, are
characterized by an absence of developed legal structures governing private and
foreign investments and private property. Certain countries require governmental
approval prior to investments by foreign persons, or limit the amount of
investment by foreign persons in a particular company, or limit the investment
of foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals.

         Authoritarian governments in certain countries may require that a
governmental or quasi-governmental authority act as custodian of a Fund's assets
invested in such country. To the extent such governmental or quasi-governmental
authorities do not satisfy the requirements of the 1940 Act to act as foreign
custodians of the Fund's cash and securities, the Fund's investment in such
countries may be limited or may be required to be effected through
intermediaries. The risk of loss through governmental confiscation may be
increased in such countries.

         AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS. For many
foreign securities, United States dollar-denominated American Depositary
Receipts, which are traded in the United States on exchanges or
over-the-counter, are issued by domestic banks. American Depositary Receipts
represent the right to receive securities of foreign issuers deposited in a
domestic bank or a correspondent bank. American Depositary Receipts do not
eliminate all the risk inherent in investing in the securities of foreign
issuers. However, by investing in American Depositary Receipts rather than
directly in foreign securities, the Equity Funds or Strategic Income Fund can
avoid currency risks during the settlement period for either purchases or sales.
In general, there is a large, liquid market in the United states for many
American Depositary Receipts. The information available for American Depositary
Receipts is subject to the accounting, auditing and financial reporting
standards of the domestic market or exchange on which they are traded, which
standards are more uniform and more exacting than those to which many foreign
issuers may be subject. Emerging Markets Fund, International Fund and Strategic
Income Fund also may invest in European Depositary Receipts, which are receipts
evidencing an arrangement with a European bank similar to that for American
Depositary Receipts and which are designed for use in the European securities
markets. European Depositary Receipts are not necessarily denominated in the
currency of the underlying security.

         Certain American Depositary Receipts and European Depositary Receipts,
typically those denominated as unsponsored, require the holders thereof to bear
most of the costs of the facilities while issuers of sponsored facilities
normally pay more of the costs thereof. The depository of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited securities or to pass
through the voting rights to facility holders in respect to the deposited
securities, whereas the depository of a sponsored facility typically distributes
shareholder communications and passes through voting rights.

FOREIGN SECURITIES EXCHANGES

         Fixed commissions on foreign securities exchanges are generally higher
than negotiated commissions on United States exchanges. Foreign markets also
have different clearance and settlement procedures, and in some markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when a portion of the
assets of Emerging Markets Fund, International Fund and Strategic Income Fund
may be uninvested. In addition, settlement problems could cause Emerging Markets
Fund, International Fund or Strategic Income Fund to miss attractive investment
opportunities or to incur losses due to an inability to sell or deliver
securities in a timely fashion. In the event of a default by an issuer of
foreign securities, it may be more difficult for an Underlying Fund to obtain or
to enforce a judgment against the issuer.

FOREIGN CURRENCY TRANSACTIONS

         Emerging Markets Fund, International Fund and Strategic Income Fund
invest in securities which are purchased and sold in foreign currencies. The
value of their assets as measured in United States dollars therefore may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations. Emerging Markets Fund, International Fund and
Strategic Income Fund also will incur costs in converting United States dollars
to local currencies, and vice versa.


                                       10
<PAGE>


         Emerging Markets Fund, International Fund and Strategic Income Fund
will conduct their foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through forward contracts to purchase or sell foreign currencies. A
forward foreign currency exchange contract involves an obligation to purchase or
sell an amount of a specific currency at a specified price on a future date
agreed upon by the parties. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers.

         Emerging Markets Fund, International Fund and Strategic Income Fund may
enter into forward currency contracts in order to hedge against adverse
movements in exchange rates between currencies. These Underlying Funds may
engage in "transaction hedging" to protect against a change in the foreign
currency exchange rate between the date the Underlying Fund contracts to
purchase or sell a security and the settlement date, or to "lock in" the United
States dollar equivalent of a dividend or interest payment made in a foreign
currency. They also may engage in "portfolio hedging" to protect against a
decline in the value of its portfolio securities as measured in United States
dollars which could result from changes in exchange rates between the United
States dollar and the foreign currencies in which the portfolio securities are
purchased and sold. Emerging Markets fund, International Fund and Strategic
Income Fund also may hedge foreign currency exchange rate risk by engaging in
currency futures and options transactions.

         Although a foreign currency hedge may be effective in protecting the
Underlying Fund from losses resulting from unfavorable changes in exchange rates
between the United States dollar and foreign currencies, it also would limit the
gains which might be realized by the Underlying Fund from favorable changes in
exchange rates. The applicable Underlying Fund's investment sub-advisor's
decision whether to enter into currency hedging transactions will depend in part
on its view regarding the direction and amount in which exchange rates are
likely to move. The forecasting of movements in exchange rates is extremely
difficult, so that it is highly uncertain whether a hedging strategy, if
undertaken, would be successful. To the extent that their respective investment
sub-advisor's view regarding future exchange rates proves to have been
incorrect, Emerging Markets Fund, International Fund and Strategic Income Fund
may realize losses on their foreign currency transactions.

         As stated above, Emerging Markets Fund, International Fund and
Strategic Income Fund may engage in a variety of foreign currency transactions
in connection with their investment activities. These include forward foreign
currency exchange contracts, foreign currency futures, and foreign currency
options.

         FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers. These Underlying Funds will not enter
into such forward contracts or maintain a net exposure in such contracts where
the Underlying Funds would be obligated to deliver an amount of foreign currency
in excess of the value of the Underlying Fund's securities or other assets
denominated in that currency. The Underlying Funds will comply with applicable
SEC announcements requiring them to segregate assets to cover the Underlying
Fund's commitments with respect to such contracts. At the present time, these
announcements generally require a fund with a long position in a forward foreign
currency contract to establish with its custodian a segregated account
containing cash or liquid high grade debt securities equal to the purchase price
of the contract, and require a fund with a short position in a forward foreign
currency contract to establish with its custodian a segregated account
containing cash or liquid high grade debt securities that, when added to any
margin deposit, equal the market value of the currency underlying the forward
contract. These requirements will not apply where a forward contract is used in
connection with the settlement of investment purchases or sales or where the
position has been "covered" by entering into an offsetting position. The
Underlying Funds generally will not enter into a forward contract with a term
longer than one year except that Strategic Income Fund will not enter into a
forward contract with a term longer than six months.

         FOREIGN CURRENCY FUTURES TRANSACTIONS. Unlike forward foreign currency
exchange contracts, foreign currency futures contracts and options on foreign
currency futures contracts are standardized as to amount and delivery period and
may be traded on boards of trade and commodities exchanges or directly with a
dealer which makes a market in such contracts and options. It is anticipated
that such contracts may provide greater liquidity and lower cost than forward
foreign currency exchange contracts. As part of their financial futures
transactions, Emerging Markets Fund, International Fund and Strategic Income
Fund may use foreign currency futures contracts and options on such futures


                                       11
<PAGE>


contracts. Through the purchase or sale of such contracts, these Underlying
Funds may be able to achieve many of the same objectives as through investing in
forward foreign currency exchange contracts.

         FOREIGN CURRENCY OPTIONS. A foreign currency option provides the option
buyer with the right to buy or sell a stated amount of foreign currency at the
exercise price at a specified date or during the option period. A call option
gives its owner the right, but not the obligation, to buy the currency, while a
put option gives its owner the right, but not the obligation, to sell the
currency. The option seller (writer) is obligated to fulfill the terms of the
option sold if it is exercised. However, either seller or buy may close its
position during the option period in the secondary market for such options at
any time prior to expiration.

         A foreign currency call option rises in value if the underlying
currency appreciates. Conversely, a foreign currency put option rises in value
if the underlying currency depreciates. While purchasing a foreign currency
option may protect Emerging Markets Fund, International Fund or Strategic Income
Fund against an adverse movement in the value of a foreign currency, it would
not limit the gain which might result from a favorable movement in the value of
the currency. For example, if an Underlying Fund were holding securities
denominated in an appreciating foreign currency and had purchased a foreign
currency put to hedge against a decline in the value of the currency, it would
not have to exercise its put. In such an event, however, the amount of the
Underlying Fund's gain would be offset in part by the premium paid for the
option. Similarly, if an Underlying Fund entered into a contract to purchase a
security denominated in a foreign currency and purchased a foreign currency call
to hedge against a rise in the value of the currency between the date of
purchase and the settlement date, the Underlying Fund would not need to exercise
its call if the currency instead depreciated in value. In such a case, the
Underlying Fund could acquire the amount of foreign currency needed for
settlement in the spot market at a lower price than the exercise price of the
option.

REAL ESTATE INVESTMENT TRUST ("REIT") SECURITIES

         A majority of Real Estate Securities Fund's total assets will be
invested in securities of real estate investment trusts ("REITs"). REITs are
publicly traded corporations or trusts that specialize in acquiring, holding,
and managing residential, commercial or industrial real estate. A REIT is not
taxed at the entity level on income distributed to its shareholders or
unitholders if it distributes to shareholders or unitholders at least 95% of its
taxable income for each taxable year and complies with regulatory requirements
relating to its organization, ownership, assets and income.

         REITs generally can be classified as Equity REITs, Mortgage REITs and
Hybrid REITs. An Equity REIT invests the majority of its assets directly in real
property and derives its income primarily from rents and from capital gains on
real estate appreciation which are realized through property sales. A Mortgage
REIT invests the majority of its assets in real estate mortgage loans and
derives its income primarily from interest payments. A Hybrid REIT combines the
characteristics of an Equity REIT and a Mortgage REIT. Although Real Estate
Securities Fund can invest in all three kinds of REITs, its emphasis is expected
to be on investments in Equity REITs.

         Because Real Estate Securities Fund invests primarily in the real
estate industry, it is particularly subject to risks associated with that
industry. The real estate industry has been subject to substantial fluctuations
and declines on a local, regional and national basis in the past and may
continue to be in the future. Real property values and incomes from real
property may decline due to general and local economic conditions, overbuilding
and increased competition, increases in property taxes and operating expenses,
changes in zoning laws, casualty or condemnation losses, regulatory limitations
on rents, changes in neighborhoods and in demographics, increases in market
interest rates, or other factors. Factors such as these may adversely affect
companies which own and operate real estate directly, companies which lend to
such companies, and companies which service the real estate industry. Although
Real Estate Securities Fund will operate as a non-diversified investment company
under the 1940 Act, it intends to conduct its operations so as to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code").

         Because Real Estate Securities Fund may invest a substantial portion of
its assets in REITs, it also is subject to risks associated with direct
investments in REITs. Equity REITs will be affected by changes in the values of
and incomes from the properties they own, while Mortgage REITs may be affected
by the credit quality of the mortgage loans they hold. In addition, REITs are
dependent on specialized management skills and on their ability to generate cash
flow for operating purposes and to make distributions to shareholders or
unitholders. REITs may have limited diversification and are subject to risks
associated with obtaining financing for real property, as well as to the risk of
self-liquidation. REITs also can be adversely affected by their failure to
qualify for tax-free pass-through treatment of their


                                       12
<PAGE>


income under the Code, by their failure to maintain an exemption from
registration under the 1940 Act. By investing in REITs indirectly through Real
Estate Securities Fund, a shareholder of Real Estate Securities Fund bears not
only a proportionate share of the expenses of Real Estate Securities Fund, but
also may indirectly bear similar expenses of some of the REITs in which it
invests.

MORTGAGE-BACKED SECURITIES

         Fixed Income Fund and Strategic Income Fund may invest in
mortgage-backed securities which are Agency Pass-Through Certificates or
collateralized mortgage obligations ("CMOs"), as described below. In addition,
Strategic Income Fund may invest in private mortgage pass-through securities and
in Real Estate Mortgage Investment Conduits ("REMICs").

         Agency Pass-Through Certificates are mortgage pass-through certificates
representing undivided interests in pools of residential mortgage loans.
Distribution of principal and interest on the mortgage loans underlying an
Agency Pass-Through Certificate is an obligation of or guaranteed by GNMA, FNMA
or FHLMC. GNMA is a wholly-owned corporate instrumentality of the United States
within the Department of Housing and Urban Development. The guarantee of GNM
with respect to GNMA certificates is backed by the full faith and credit of the
United States, and GNMA is authorized to borrow from the United States Treasury
in an amount which is at any time sufficient to enable GNMA, with no limitation
as to amount, to perform its guarantee.

         FNMA is a federally chartered and privately owned corporation organized
and existing under federal law. Although the Secretary of the Treasury of the
United States has discretionary authority to lend funds to FNMA, neither the
United States nor any agency thereof is obligated to finance FNMA's operations
or to assist FNMA in any other manner.

         FHLMC is a federally chartered corporation organized and existing under
federal law, the common stock of which is owned by the Federal Home Loan Banks.
Neither the United States nor any agency thereof is obligated to finance FHLMC's
operations or to assist FHLMC in any other manner.

         The mortgage loans underlying GNMA certificates are partially or fully
guaranteed by the Federal Housing Administration or the Veterans Administration,
while the mortgage loans underlying FNMA certificates and FHLMC certificates are
conventional mortgage loans which are, in some cases, insured by private
mortgage insurance companies. Agency Pass-Through Certificates may be issued in
a single class with respect to a given pool of mortgage loans or in multiple
classes.

         The residential mortgage loans evidenced by Agency Pass-Through
Certificates and upon which CMOs are based generally are secured by first
mortgages on one- to four-family residential dwellings. Such mortgage loans
generally have final maturities ranging from 15 to 30 years and provide for
monthly payments in amounts sufficient to amortize their original principal
amounts by the maturity dates. Each monthly payment on such mortgage loans
generally includes both an interest component and a principal component, so that
the holder of the mortgage loans receives both interest and a partial return of
principal in each monthly payment. In general, such mortgage loans can be
prepaid by the borrowers at any time without any prepayment penalty. In
addition, many such mortgage loans contain a "due-on-sale" clause requiring the
loans to be repaid in full upon the sale of the property securing the loans.
Because residential mortgage loans generally provide for monthly amortization
and may be prepaid in full at any time, the weighted average maturity of a pool
of residential mortgage loans is likely to be substantially shorter than its
stated final maturity date. The rate at which a pool of residential mortgage
loans is prepaid may be influenced by many factors and is not predictable with
precision.

         Private mortgage pass-through securities ("Private Pass-Throughs") are
structured similarly to GNMA, FNMA and FHLMC mortgage pass-through securities
and are issued by originators of and investors in mortgage loans, including
savings and loan associations, mortgage bankers, commercial banks, investment
banks and special purpose subsidiaries of the foregoing. These securities
usually are backed by a pool of conventional fixed rate or adjustable loans.
Since Private Pass-Throughs typically are not guaranteed by an entity having the
credit status of GNMA, FNMA or FHLMC, such securities generally are structured
with one or more types of credit enhancement. Such credit support falls into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provisions of advances, generally by the
entity


                                       13
<PAGE>


administering the pool of assets, to ensure that the pass-through of payments
due on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default enhances the likelihood of ultimate payment of
the obligations on at least a portion of the assets in the pool. Such protection
may be provided through guarantees, insurance policies or letters of credit
obtained by the issuer or sponsor from third parties, through various means of
structuring the transaction or through a combination of such approaches. The
Funds will not pay any additional fees for such credit support, although the
existence of credit support may increase the price of a security.

         The ratings of securities for which third-party credit enhancement
provides liquidity protection or protection against losses from default are
generally dependent upon the continued creditworthiness of the enhancement
provider. The ratings of such securities could be subject to reduction in the
event of deterioration in the creditworthiness of the credit enhancement
provider even in cases where the delinquency and loss experience on the
underlying pool of assets is better than expected.

         CMOs are debt obligations typically issued by a private special-purpose
entity and collateralized by residential or commercial mortgage loans or Agency
Pass-Through Certificates. The applicable Underlying Funds will invest only in
CMOs which are rated in one of the four highest rating categories by a
nationally recognized statistical rating organization or which are of comparable
quality in the judgment of the Advisor or applicable investment sub-advisor.
Because CMOs are debt obligations of private entities, payments on CMOs
generally are not obligations of or guaranteed by any governmental entity, and
their ratings and creditworthiness typically depend, among other factors, on the
legal insulation of the issuer and transaction from the consequences of a
sponsoring entity's bankruptcy.

         CMOs generally are issued in multiple classes, with holders of each
class entitled to receive specified portions of the principal payments and
prepayments and/or of the interest payments on the underlying mortgage loans.
These entitlements can be specified in a wide variety of ways, so that the
payment characteristics of various classes may differ greatly from one another.
For instance, holders may hold interests in CMO tranches called Z-tranches which
defer interest and principal payments until one or other classes of the CMO have
been paid in full. In addition, for example:

         o        In a sequential-pay CMO structure, one class is entitled to
                  receive all principal payments and prepayments on the
                  underlying mortgage loans (and interest on unpaid principal)
                  until the principal of the class is repaid in full, while the
                  remaining classes receive only interest; when the first class
                  is repaid in full, a second class becomes entitled to receive
                  all principal payments and prepayments on the underlying
                  mortgage loans until the class is repaid in full, and so
                  forth.

         o        A planned amortization class ("PAC") of CMOs is entitled to
                  receive principal on a stated schedule to the extent that it
                  is available from the underlying mortgage loans, thus
                  providing a greater (but not absolute) degree of certainty as
                  to the schedule upon which principal will be repaid.

         o        An accrual class of CMOs provides for interest to accrue and
                  be added to principal (but not be paid currently) until
                  specified payments have been made on prior classes, at which
                  time the principal of the accrual class (including the accrued
                  interest which was added to principal) and interest thereon
                  begins to be paid from payments on the underlying mortgage
                  loans.

         o        As discussed above with respect to Agency Pass-Through
                  Certificates, an interest-only class of CMOs entitles the
                  holder to receive all of the interest and none of the
                  principal on the underlying mortgage loans, while a
                  principal-only class of CMOs entitles the holder to receive
                  all of the principal payments and prepayments and none of the
                  interest on the underlying mortgage loans.

         o        A floating rate class of CMOs entitles the holder to receive
                  interest at a rate which changes in the same direction and
                  magnitude as changes in a specified index rate. An inverse
                  floating rate class of CMOs entitles the holder to receive
                  interest at a rate which changes in the opposite direction
                  from, and in the same magnitude as or in a multiple of,
                  changes in a specified index rate. Floating rate and inverse
                  floating rate classes also may be subject to "caps" and
                  "floors" on adjustments to the interest rates which they bear.

         o        A subordinated class of CMOs is subordinated in right of
                  payment to one or more other classes. Such a subordinated
                  class provides some or all of the credit support for the
                  classes that are senior to it by


                                       14
<PAGE>


                  absorbing losses on the underlying mortgage loans before the
                  senior classes absorb any losses. A subordinated class which
                  is subordinated to one or more classes but senior to one or
                  more other classes is sometimes referred to as a "mezzanine"
                  class. A subordinated class generally carries a lower rating
                  than the classes that are senior to it, but may still carry an
                  investment grade rating.

         REMICs are offerings of multiple class real estate mortgage-backed
securities which qualify and elect treatment as such under provisions of the
Internal Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations, or segregated pools of mortgages. Once
REMIC status is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interests," some of which may offer
adjustable rates of interest (the type in which Strategic Income Fund primarily
invests), and a single class of "residual interests." To qualify as a REMIC,
substantially all the assets of the entity must be in assets directly or
indirectly secured principally by real property.

         It generally is more difficult to predict the effect of changes in
market interest rates on the return on mortgage-backed securities than to
predict the effect of such changes on the return of a conventional fixed-rate
debt instrument, and the magnitude of such effects may be greater in some cases.
The return on interest-only and principal-only mortgage-backed securities is
particularly sensitive to changes in interest rates and prepayment speeds. When
interest rates decline and prepayment speeds increase, the holder of an
interest-only mortgage-backed security may not even recover its initial
investment. Similarly, the return on an inverse floating rate CMO is likely to
decline more sharply in periods of increasing interest rates than that of a
fixed-rate security. For these reasons, interest-only, principal-only and
inverse floating rate mortgage-backed securities generally have greater risk
than more conventional classes of mortgage-backed securities. None of the
applicable Underlying Funds will invest more than 10% of their total fixed
income assets in interest-only, principal-only, inverse interest only or inverse
floating rate mortgage-backed securities.

ASSET-BACKED SECURITIES

         Fixed Income Fund and Strategic Income Fund may invest in asset-backed
securities. Asset-backed securities generally constitute interests in, or
obligations secured by, a pool of receivables other than mortgage loans, such as
automobile loans and leases, credit card receivables, home equity loans and
trade receivables. Asset-backed securities generally are issued by a private
special-purpose entity. Their ratings and creditworthiness typically depend on
the legal insulation of the issuer and transaction from the consequences of a
sponsoring entity's bankruptcy, as well as on the credit quality of the
underlying receivables and the amount and credit quality of any third-party
credit enhancement supporting the underlying receivables or the asset-backed
securities. Asset-backed securities and their underlying receivables generally
are not issued or guaranteed by any governmental entity.

DEBT OBLIGATIONS -- STRATEGIC INCOME FUND

         Strategic Income Fund may invest in both investment grade and
non-investment grade (lower-rated) bonds (which may be denominated in U.S.
dollars or non-U.S. currencies) and other debt obligations issued by domestic
and foreign corporations and other private issuers. There are no minimum rating
requirements for these investments by the Fund. Strategic Income Fund's
investments may include U.S. dollar denominated debt obligations known as "Brady
Bonds," which are issued for the exchange of existing commercial bank loans to
foreign entities for new obligations that are generally collateralized by zero
coupon Treasury securities having the same maturity. From time to time,
Strategic Income Fund's portfolio may consist primarily of lower-rated (i.e.,
rated Ba or lower by Moody's, or BB or lower by Standard & Poor's) corporate
debt obligations, which are commonly referred to as "junk bonds." Certain debt
obligations in which the Fund invests may involve equity characteristics. The
Funds may, for example, invest in unit offerings that combine debt securities
and common stock equivalents such as warrants, rights and options. It is
anticipated that the majority of the value attributable to the unit will relate
to its debt component.

         The prices and yields of non-investment grade securities generally
fluctuate more than investment grade securities, and such prices may decline
significantly.


                                       15
<PAGE>


DEBT OBLIGATIONS RATED LESS THAN INVESTMENT GRADE

         The "equity securities" in which certain Underlying Funds may invest
include corporate debt obligations which are convertible into common stock.
These convertible debt obligations may include obligations rated as low as CCC
by Standard & Poor's or Caa by Moody's or which have been assigned an equivalent
rating by another nationally recognized statistical rating organization. Debt
obligations rated BB, B or CCC by Standard & Poor's or Ba, B or Caa by Moody's
are considered to be less than "investment grade" and are sometimes referred to
as "junk bonds."

         Yields on non-investment grade debt obligations will fluctuate over
time. The prices of such obligations have been found to be less sensitive to
interest rate changes than higher rated obligations, but more sensitive to
adverse economic changes or individual corporate developments. Also, during an
economic downturn or period of rising interest rates, highly leveraged issuers
may experience financial stress which could adversely affect their ability to
service principal and interest payment obligations, to meet projected business
goals, and to obtain additional financing. In addition, periods of economic
uncertainty and changes can be expected to result in increased volatility of
market prices of non-investment grade debt obligations.

         In addition, the secondary trading market for less than investment
grade debt obligations may be less developed than the market for investment
grade obligations. This may make it more difficult for an Underlying Fund to
value and dispose of such obligations. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of non-investment grade obligations, especially in a thin
secondary trading market.

         Certain risks also are associated with the use of credit ratings as a
method for evaluating non-investment grade debt obligations. For example, credit
ratings evaluate the safety of principal and interest payments, not the market
value risk of such obligations. In addition, credit rating agencies may not
timely change credit ratings to reflect current events. Thus, the success of a
Fund's use of non-investment grade convertible debt obligations may be more
dependent on its Advisor's own credit analysis than is the case with investment
grade obligations.

U.S. GOVERNMENT SECURITIES

         The U.S. government securities in which Fixed Income Fund and Strategic
Income Fund may invest are either issued or guaranteed by the U.S. government,
its agencies or instrumentalities. The U.S. government securities in which such
Underlying Funds invest principally are:

         o        direct obligations of the U.S. Treasury, such as U.S. Treasury
                  bills, notes, and bonds;

         o        notes, bonds, and discount notes issued and guaranteed by U.S.
                  government agencies and instrumentalities supported by the
                  full faith and credit of the United States;

         o        notes, bonds, and discount notes of U.S. government agencies
                  or instrumentalities which receive or have access to federal
                  funding; and

         o        notes, bonds, and discount notes of other U.S. government
                  instrumentalities supported only by the credit of the
                  instrumentalities.

         The government securities in which Fixed Income Fund and Strategic
Income Fund may invest are backed in a variety of ways by the U.S. government or
its agencies or instrumentalities. Some of these securities such as GNMA
mortgage-backed securities are backed by the full faith and credit of the U.S.
government. Other securities, such as obligations of the FNMA or FHLMC are
backed by the credit of the agency or instrumentality issuing the obligations
but not the full faith and credit of the U.S. government.

ZERO COUPON SECURITIES

         Fixed Income Fund and Strategic Income Fund may invest in zero coupon,
fixed income securities. Zero coupon securities pay no cash income to their
holders until they mature and are issued at substantial discounts from their
value at maturity. When held to maturity, their entire return comes from the
difference between their purchase price and


                                       16
<PAGE>


their maturity value. Because interest on zero coupon securities is not paid on
a current basis, the values of securities of this type are subject to greater
fluctuations than are the value of securities that distribute income regularly
and may be more speculative than such securities. Accordingly, the values of
these securities may be highly volatile as interest rates rise or fall.

FLOATING RATE CORPORATE DEBT OBLIGATIONS

         Strategic Income Fund expects to invest in floating rate corporate debt
obligations, including increasing rate securities. Floating rate securities are
generally offered at an initial interest rate which is at or above prevailing
market rates. The interest rate paid on these securities is then reset
periodically (commonly every 90 days) to an increment over some predetermined
interest rate index. Common utilized indices include the three-month Treasury
bill rate, the 180-day Treasury bill rate, the one-month or three-month London
Interbank Offered Rate (LIBOR), the prime rate of a bank, the commercial paper
rates, or the longer-term rates on U.S. Treasury securities.

FIXED RATE CORPORATE DEBT OBLIGATIONS

         Fixed Income Fund and Strategic Income Fund will also invest in fixed
rate securities. Fixed Income Fund invests at least 65% of its total assets in
fixed rate obligations. Fixed rate securities tend to exhibit more price
volatility during times of rising or falling interest rates than securities with
floating rates of interest. This is because floating rate securities, as
described above, behave like short-term instruments in that the rate of interest
they pay is subject to periodic adjustments based on a designated interest rate
index. Fixed rate securities pay a fixed rate of interest and are more sensitive
to fluctuating interest rates. In periods of rising interest rates the value of
a fixed rate security is likely to fall. Fixed rate securities with short-term
characteristics are not subject to the same price volatility as fixed rate
securities without such characteristics. Therefore, they behave more like
floating rate securities with respect to price volatility.

PARTICIPATION INTERESTS

         Strategic Income Fund may acquire participation interests in senior,
fully secured floating rate loans that are made primarily to U.S. companies.
Strategic Income Fund's investments in participation interests are subject to
its limitation on investments in illiquid securities. Strategic Income Fund may
purchase only those participation interests that mature in one year or less, or,
if maturing in more than one year, have a floating rate that is automatically
adjusted at least once each year according to a specified rate for such
investments, such as a published interest rate of interest rate index.
Participation interests are primarily dependent upon the creditworthiness of the
borrower for payment of interest and principal. Such borrowers may have
difficulty making payments and may have senior securities rated as low as C by
Moody's, or D by Standard & Poor's.

FIXED INCOME SECURITIES -- EQUITY FUNDS

         The fixed income securities in which the Equity Funds may invest
include securities issued or guaranteed by the United States Government or its
agencies or instrumentalities, nonconvertible preferred stocks, nonconvertible
corporate debt securities, and short-term obligations of the kinds described
above under "-- Short-Term Investments." Investments in nonconvertible preferred
stocks and nonconvertible corporate debt securities will be limited to
securities which are rated at the time of purchase not less than BBB by Standard
& Poor's or Baa by Moody's (or equivalent short-term ratings), or which have
been assigned an equivalent rating by another nationally recognized statistical
rating organization, or which are of comparable quality in the judgment of the
Equity Funds' investment advisor. Obligations rated BBB, Baa or their
equivalent, although investment grade, have speculative characteristics and
carry a somewhat higher risk of default than obligations rated in the higher
investment grade categories.

         In addition, Equity Income Fund may invest up to 25% of its total
assets, and each of the other Equity Funds may invest up to 5% of its net
assets, in less than investment grade convertible debt obligations.

         The fixed income securities specified above are subject to (i) interest
rate risk (the risk that increases in market interest rates will cause declines
in the value of debt securities held by an Underlying Fund); (ii) credit risk
(the risk that the issuers of debt securities held by an Underlying Fund default
in making required payments); and (iii) call or


                                       17
<PAGE>


prepayment risk (the risk that a borrower may exercise the right to prepay a
debt obligation before its stated maturity, requiring an Underlying Fund to
reinvest the prepayment at a lower interest rate).

PAYMENT-IN-KIND DEBENTURES AND DELAYED INTEREST SECURITIES

         Strategic Income Fund may invest in debentures the interest on which
may be paid in other securities rather than cash ("PIKs"). Typically, during a
specified term prior to the debenture's maturity, the issuer of a PIK may
provide for the option or the obligation to make interest payments in
debentures, common stock or other instruments (i.e., "in kind" rather than in
cash). The type of instrument in which interest may or will be paid would be
known by Strategic Income Fund at the time of investment. While PIKs generate
income for purposes of generally accepted accounting standards, they do not
generate cash flow and thus could cause Strategic Income Fund to be forced to
liquidate securities at an inopportune time in order to distribute cash, as
required by the Code.

         Unlike PIKs, delayed interest securities do not pay interest for a
specified period. Because values of securities of this type are subject to
greater fluctuations than are the values of securities that distribute income
regularly, they may be more speculative than such securities. Accordingly, the
values of these securities may be highly volatile as interest rates rise or
fall.

PREFERRED STOCK

         The Equity Funds and Strategic Income Fund may invest in preferred
stock. Preferred stock, unlike common stock, offers a stated dividend rate
payable from the issuer's earnings. Preferred stock dividends may be cumulative
or non-cumulative, participating, or auction rate. If interest rates rise, the
fixed dividend on preferred stocks may be less attractive, causing the price of
preferred stocks to decline. Preferred stock may have mandatory sinking fund
provisions, as well as call/redemption provisions prior to maturity, a negative
feature when interest rates decline.

         Although Fixed Income Fund will not make direct purchases of common or
preferred stocks or rights to acquire common or preferred stocks, it may invest
in debt securities which are convertible into or exchangeable for, or which
carry warrants or other rights to acquire, such stocks. Equity interest acquired
through conversion, exchange or exercise of rights to acquire stock will be
disposed of by Fixed Income Fund as soon as practicable in an orderly manner.

LOAN PARTICIPATIONS; SECTION 4(2) AND RULE 144A SECURITIES

         The loan participation interests in which Prime Obligations Fund may
invest represent pro rata undivided interests in an underlying bank loan.
Participation interests, like the underlying loans, may have fixed, floating, or
variable rates of interest. The bank selling a participation interest generally
acts as a mere conduit between its borrower and the purchasers of interests in
the loan. The purchaser of an interest generally does not have recourse against
the bank in the event of a default on the underlying loan. Therefore, the credit
risk associated with such instruments is governed by the creditworthiness of the
underlying borrowers and not by the banks selling the interests. Loan
participation interests that can be sold within a seven-day period are deemed by
the Underlying Fund's investment advisor to be liquid investments. If a loan
participation interest is restricted from being sold within a seven-day period,
then it, as a fundamental policy, will be limited, together with other illiquid
investments, to not more than 10% of Prime Obligations Fund's net assets.
Commercial paper issued in reliance on the exemption from registration afforded
by Section 4(2) of the Securities Act of 1933 and corporate obligations
qualifying for resale to certain "qualified institutional buyers" pursuant to
Rule 144A under the Securities Act of 1933 meet the criteria for liquidity
established by the Board of Directors are deemed to be liquid. Consequently,
Prime Obligations Fund does not intend to subject such securities to the
limitation applicable to restricted securities.

CREDIT ENHANCEMENT AGREEMENTS

         Prime Obligations Fund may arrange for guarantees, letters of credit,
or other forms of credit enhancement agreements (collectively, "Guarantees") for
the purpose of further securing the payment of principal and/or interest on
Prime Obligation Fund's investment securities. Although each investment
security, at the time it is purchased, must meet Prime Obligations Fund's
creditworthiness criteria, Guarantees sometimes are purchased from banks and
other institutions (collectively, "Guarantors") when Prime Obligations Fund's
investment advisor, through yield and credit


                                       18
<PAGE>


analysis, deems that credit enhancement of certain of Prime Obligations Fund's
securities is advisable. As a non-fundamental policy, Prime Obligations Fund
will limit the value of all investment securities issued or guaranteed by each
Guarantor to not more than 10% of the value of Prime Obligations Fund's total
assets.

MONEY MARKET FUNDS

         When an Underlying Fund is permitted to invest a portion of its assets
in securities of other mutual funds which invest primarily in debt obligations
with remaining maturities of 13 months or less (i.e., in money market funds),
the other funds in which it is permitted to invest include money market funds
advised by the Underlying Fund's investment advisor. Investments by the
Underlying Funds in money market funds advised by such advisor are subject to
certain restrictions contained in an exemptive order issued by the SEC with
respect thereto. Where Prime Obligations Fund invests in other money market
funds, the permitted investments of such other money market funds must
constitute permitted investments of Prime Obligations Fund.

                 INVESTMENT RESTRICTIONS OF THE UNDERLYING FUNDS

RESTRICTIONS APPLICABLE TO THE EQUITY FUNDS, STRATEGIC INCOME FUND AND FIXED
INCOME FUND

         In addition to the investment objectives and policies set forth in the
Prospectus and under the caption "Additional Information Concerning Investments
by the Funds and the Underlying Funds" above, the Equity Funds, Strategic Income
Fund and Fixed Income Fund are subject to the investment restrictions set forth
below. The investment restrictions set forth in paragraphs 1 through 9 below are
fundamental and cannot be changed with respect to any of these Underlying Funds
without approval by the holders of a majority of the outstanding shares of the
applicable Underlying Fund as defined in the 1940 Act.

         None of the Equity Funds, Strategic Income Fund or Fixed Income Fund
will:

         1.       Invest in any securities if, as a result, 25% or more of the
                  value of its total assets would be invested in the securities
                  of issuers conducting their principal business activities in
                  any one industry, except that Real Estate Securities Fund will
                  invest without restriction in issuers principally engaged in
                  the real estate industry. This restriction does not apply to
                  securities of the United States Government or its agencies and
                  instrumentalities or repurchase agreements relating thereto.

         2.       Issue any senior securities (as defined in the 1940 Act),
                  other than as set forth in restriction number 3 below and
                  except to the extent that using options or purchasing
                  securities on a when-issued basis may be deemed to constitute
                  issuing a senior security.

         3.       Borrow money, except from banks for temporary or emergency
                  purposes. The amount of such borrowing may not exceed 10% of
                  the borrowing Fund's total assets except that Strategic Income
                  Fund may borrow up to one-third of its total assets and pledge
                  up to 15% of its total assets to secure such borrowings. None
                  of these Underlying Funds will borrow money for leverage
                  purposes. For the purpose of this investment restriction, the
                  use of options and futures transactions and the purchase of
                  securities on a when-issued or delayed-delivery basis shall
                  not be deemed the borrowing of money. (As a non-fundamental
                  policy, no such Underlying Fund will make additional
                  investments while its borrowings exceed 5% of total assets.)

         4.       Make short sales of securities.

         5.       Purchase any securities on margin except to obtain such
                  short-term credits as may be necessary for the clearance of
                  transactions and except, in the case of Small Cap Growth Fund,
                  Emerging Markets Fund, International Fund and Strategic Income
                  Fund, as may be necessary to make margin payments in
                  connection with foreign currency futures and other derivative
                  transactions.

         6.       Purchase or sell physical commodities (including, by way of
                  example and not by way of limitation, grains, oilseeds,
                  livestock, meat, food, fiber, metals, petroleum,
                  petroleum-based products or natural gas) or futures or options
                  contracts with respect to physical commodities. This
                  restriction shall not


                                       19
<PAGE>


                  restrict any of these Underlying Funds from purchasing or
                  selling any financial contracts or instruments which may be
                  deemed commodities (including, by way of example and not by
                  way of limitation, options, futures and options on futures
                  with respect, in each case, to interest rates, currencies,
                  stock indices, bond indices or interest rate indices) or any
                  security which is collateralized or otherwise backed by
                  physical commodities.

         7.       Purchase or sell real estate or real estate mortgage loans,
                  except that these Underlying Funds may invest in securities
                  secured by real estate or interests therein or issued by
                  companies that invest in or hold real estate or interests
                  therein, and except that Fixed Income Fund, Real Estate
                  Securities Fund, Small Cap Growth Fund, International Fund and
                  Strategic Income Fund may invest in mortgage-backed
                  securities.

         8.       Act as an underwriter of securities of other issuers, except
                  to the extent such an Underlying Fund may be deemed to be an
                  underwriter, under Federal securities laws, in connection with
                  the disposition of portfolio securities.

         9.       Lend any of its assets, except portfolio securities
                  representing up to one-third of the value of their total
                  assets.

         The following restriction is non-fundamental and may be changed by
FAIF's Board of Directors without shareholder vote. None of the Equity Funds,
Strategic Income Fund or Fixed Income Fund will invest more than 15% of its net
assets in all forms of illiquid investments.

         The Board of Directors has adopted guidelines and procedures under
which the Funds' investment advisor is to determine whether the following types
of securities which may be held by certain Funds are "liquid" and to report to
the Board concerning its determinations: (i) securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933; (ii) commercial paper
issued in reliance on the "private placement" exemption from registration under
Section 4(2) of the Securities Act of 1933, whether or not it is eligible for
resale pursuant to Rule 144A; (iii) interest-only and principal-only securities,
inverse floaters, and inverse interest-only securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities; and (iv) municipal
leases and securities that represent interests in municipal leases.

         For determining compliance with its investment restriction relating to
industry concentration, each Fund classifies asset-backed securities in its
portfolio in separate industries based upon a combination of the industry of the
issuer or sponsor and the type of collateral. The industry of the issuer or
sponsor and the type of collateral will be determined by the Advisor. For
example, an asset-backed security known as "Money Store 94-D A2" would be
classified as follows: the issuer or sponsor of the security is The Money Store,
a personal finance company, and the collateral underlying the security is
automobile receivables. Therefore, the industry classification would be Personal
Finance Companies -- Automobile. Similarly, an asset-backed security known as
"Midlantic Automobile Grantor Trust 1992-1 B" would be classified as follows:
the issuer or sponsor of the security is Midlantic National Bank, a banking
organization, and the collateral underlying the security is automobile
receivables. Therefore, the industry classification would be Banks --
Automobile. Thus, an issuer or sponsor may be included in more than one
"industry" classification, as may a particular type of collateral.

RESTRICTIONS APPLICABLE TO PRIME OBLIGATIONS FUND

         In addition to the investment objectives and policies set forth in the
Prospectus and under the caption "Additional Information Concerning Investments
by the Funds and the Underlying Funds" above, Prime Obligations Fund is subject
to the investment restrictions set forth below. The investment restrictions set
forth in paragraphs 1 through 12 below are fundamental and cannot be changed
without approval by the holders of a majority of the outstanding shares of Prime
Obligations Fund as defined in the 1940 Act. See "Investment Restrictions of the
Underlying Funds" above.

         Prime Obligations Fund may not:


                                       20
<PAGE>

         1.       Purchase common stocks, preferred stocks, warrants, other
                  equity securities, corporate bonds or debentures, state bonds,
                  municipal bonds, or industrial revenue bonds (except through
                  the purchase of obligations referred to under "Fund Summaries"
                  in Prime Obligations Fund's Prospectus).

         2.       Borrow money except from banks for temporary or emergency
                  purposes for the purpose of meeting redemption requests which
                  might otherwise require the untimely disposition of
                  securities. Borrowing in the aggregate may not exceed 10% of
                  the value of Prime Obligations Fund's total assets (including
                  the amount borrowed) valued at the lesser of cost or market
                  less liabilities (not including the amount borrowed) at the
                  time the borrowing is made. The borrowings will be repaid
                  before any additional investments are made. However, even with
                  such authority to borrow money, there is no assurance that
                  Prime Obligations Fund will not have to dispose of securities
                  on an untimely basis to meet redemption requests.

         3.       Pledge, hypothecate, mortgage or otherwise encumber its
                  assets, except in an amount up to 15% of the value of its
                  total assets but only to secure borrowings for temporary or
                  emergency purposes.

         4.       Sell securities short or purchase securities on margin.

         5.       Write or purchase put or call options, except that Prime
                  Obligations Fund may write or purchase put or call options in
                  connection with the purchase of variable rate certificates of
                  deposit described below.

         6.       Underwrite the securities of other issuers except to the
                  extent Prime Obligations Fund may be deemed to be an
                  underwriter, under federal securities laws, in connection with
                  the disposition of portfolio securities, or purchase
                  securities with contractual or other restrictions on resale.

         7.       Invest more than 10% of its net assets in illiquid assets,
                  including, without limitation, time deposits and repurchase
                  agreements maturing in more than seven days.

         8.       Purchase or sell real estate, real estate investment trust
                  securities, commodities or commodity contracts, or oil and gas
                  interests.

         9.       Lend money to others except through the purchase of debt
                  obligations of the type which Prime Obligations Fund is
                  permitted to purchase (see "Additional Information Concerning
                  Investments by the Funds and the Underlying Funds" above and
                  "Fund Summaries" in the Fund's Prospectus).

         10.      Invest 25% or more of its assets in the securities of issuers
                  in any single industry; provided that there shall be no
                  limitation on the purchase of obligations issued or guaranteed
                  by the United States, its agencies or instrumentalities, or
                  obligations of domestic commercial banks, excluding for this
                  purpose, foreign branches of domestic commercial banks. As to
                  utility companies, gas, electric, water, and telephone
                  companies are considered as separate industries. As to finance
                  companies, the following two categories are each considered a
                  separate industry: (A) business credit institutions, such as
                  Honeywell Finance Corporation and General Electric Credit
                  Corp., and (B) personal credit institutions, such as Sears
                  Roebuck Acceptance Corp. and Household Finance Corporation.

         11.      Invest in companies for the purpose of exercising control.

         12.      Purchase or retain the securities of any issuer if any of the
                  officers or directors of Prime Obligations Fund or its
                  investment advisor owns beneficially more than 1/2 of 1% of
                  the securities of such issuer and together own more than 5% of
                  the securities of such issuer.

         In connection with Prime Obligations Fund's purchase of variable rate
certificates of deposit ("CDs"), it may enter into agreements with banks or
dealers allowing Prime Obligations Fund to resell the certificates to the bank
or dealer, at Prime Obligations Fund's option. Time deposits which may be
purchased by Prime Obligations Fund are deposits held in foreign branches of
United States banks which have a specified term or maturity. Prime Obligations
Fund purchases CDs from only those domestic savings and loan institutions which
are regulated by the Office of Thrift Supervision and the Federal Deposit
Insurance Corporation ("FDIC"), and whose deposits are insured by either the


                                       21
<PAGE>


Savings Association Insurance Fund or the Bank Insurance Fund, each of which is
administered by the FDIC. However, because Prime Obligations Fund purchases
large denomination CDs, it does not expect to benefit materially from such
insurance. The policies described in this paragraph are non-fundamental and may
be changed by FAF's Board of Directors.

         In addition, Prime Obligations Fund is subject to the provisions of
Rule 2a-7 under the 1940 Act, which require, among other things, that the Fund
invest exclusively in securities that mature within 397 days from the date of
purchase as determined pursuant to Rule 2a-7, that it maintains an average
weighted maturity of not more than 90 days, and that it invests only in United
States dollar-denominated investments that meet specified credit quality
standards.

                        DIRECTORS AND EXECUTIVE OFFICERS

         The directors and executive officers of FASF are listed below, together
with their business addresses and their principal occupations during the past
five years. Under Minnesota law, FASF's Board of Directors is generally
resopnsible for the overall operation and management of FASF. Directors who are
"interested persons" (as that term is defined in the 1940 Act) of FASF are
identified with an asterisk.

DIRECTORS

         Robert J. Dayton, 5140 Norwest Center, Minneapolis, Minnesota 55402:
Director of FAF since December 1994, of FAIF since September 1994, of FASF since
June 1996 and of FAIP since August 1999; Chairman (1989-1993) and Chief
Executive Officer (1993-present), Okabena Company (private family investment
office). Age: 58.

         Roger A. Gibson, 1020 15th Street, Ste. 41A, Denver, Colorado 80202:
Director of FAF, FAIF and FASF since October 1997, and of FAIP since August
1999; Vice President North America-Mountain Region for United Airlines since
June 1995; prior to his current position, served most recently as Vice President
Customer Service for United Airlines in the West Region in San Francisco and the
Mountain Region in Denver, Colorado; employee at United Airlines since 1967.
Age: 54.

         Andrew M. Hunter III, 537 Harrington Road, Wayzata, Minnesota 55391:
Director of FAIF, FAF and FASF since January 1997, and of FAIP since August
1999; Chairman of Hunter, Keith Industries, a diversified manufacturing and
services management company, since 1975. Age: 53.

         Leonard W. Kedrowski, 16 Dellwood Avenue, Dellwood, Minnesota 55110;
Director of FAF and FAIF since November 1993, of FASF since July 1996, and of
FAIP since August 1999; Owner of Executive Management Consulting, Inc., a
management consulting firm; Chief Executive Officer of Creative Promotions
International LLC, promotional award programs and products; Vice President,
Chief Financial Officer, Treasurer, Secretary and Director of Anderson
Corporation, a large privately-held manufacturer of wood windows, from 1983 to
October 1992. Age: 59.

         * John M. Murphy, Jr., 601 Second Avenue South, Minneapolis, Minnesota
55402; Director of FAIF, FAF and FASF since June 1999, and of FAIP since August
1999; Chairman and Chief Investment Officer of First American Asset Management
and U.S. Bank Trust, N.A., and Executive Vice President of U.S. Bancorp, from
1991 to 1999; Executive Vice President of U.S. Bancorp since January 1999;
Chairman Minnesota - U.S. Bancorp since 2000. Age 59.

         * Robert L. Spies, 4715 Twin Lakes Avenue, Brooklyn Center, Minnesota
55429: Director of FAIF, FAF and FASF since January 31, 1997, and of FAIP since
August 1999; employed by U.S. Bancorp (fka First Bank System, Inc.) and
subsidiaries from 1957 to January 31, 1997, most recently as Vice President,
U.S. Bank National Association (fka First Bank National Association). Age: 66.

         Joseph D. Strauss, 8617 Edenbrook Crossing, # 443, Brooklyn Park,
Minnesota 55443: Director of FAF since 1984 and of FAIF since April 1991, of
FASF since June 1996, and of FAIP since August 1999; Chairman of FAF's and
FAIF's Boards from 1993 to September 1997 and of FASF's Board from June 1996 to
September 1997; President of FAF and FAIF from June 1989 to November 1989; Owner
and President, Strauss Management Company, since 1993; Owner and President,
Community Resource Partnerships, Inc., a community business retention survey
company, since 1992; attorney-at-law. Age: 60.


                                       22
<PAGE>


         Virginia L. Stringer, 712 Linwood Avenue, St. Paul, Minnesota 55105:
Director of FAIF since August 1987, of FAF since April 1991, of FASF since June
1996, and of FAIP since August 1999; Chair of FAIF's, FAF's and FASF's Boards
since September 1997, and of FAIP's Board since 1999; Owner and President,
Strategic Management Resources, Inc. since 1993; formerly President and Director
of The Inventure Group, a management consulting and training company, President
of Scott's, Inc., a transportation company, and Vice President of Human
Resources of The Pillsbury Company. Age: 56.

EXECUTIVE OFFICERS

         Thomas Plumb, First American Asset Management, 22 South 9th Street,
16th floor , Minneapolis, Minnesota 55402; President of FAIF, FAF, FASF, and
FAIP since March 11, 2000; Chief Executive Officer of First American Asset
Management since 1999; Executive Vice President of First American Asset
Management from 1997-1999; Senior Vice President of First American Asset
Management from 1992-1997. Age: 41.

         Paul A. Dow, First American Asset Management, 601 Second Avenue South,
Minneapolis, Minnesota 55402, Vice President Investments of FAIF, FAF, FASF and
FAIP since March 11, 2000; Chief Investment Officer and President of First
American Asset Management since 1999; Senior Vice President of First American
Asset Management from 1998-1999; Chief Executive Officer of Piper Jaffray from
1997-1998; Chief Investment Officer of Piper Jaffray from 1989-1997. Age : 49.

         Peter O. Torvik, First American Asset Management, 601 Second Avenue
South, Minneapolis, Minnesota 55402, Vice President Marketing of FAIF, FAF, FASF
and FAIP since September 20, 2000; Executive Vice President of First American
Asset Management; President and partner of DPG Group, a Florida-based
partnership engaged in affinity marketing from 1995 -2000. Age: 46.

         Jeffery M. Wilson, First American Asset Management, 601 Second Avenue
South, Minneapolis, Minnesota 55402; Vice President Administration of FAIF, FAF,
FASF and FAIP since March 11, 2000; Senior Vice President of First American
Asset Management. Age: 44.

         Robert H. Nelson, First American Asset Management, 601 Second Avenue
South, Minneapolis, Minnesota 55402; Treasurer of FAIF, FAF, FASF and FAIP since
March 11, 2000; Senior Vice President of First American Asset Management since
1998; Senior Vice President of Piper Capital Management Inc. from 1994-1998.
Age: 37.

         Christopher J. Smith, First American Asset Management, 601 Second
Avenue South, Minneapolis, Minnesota 55402; Secretary of FAIF, FAF, FASF and
FAIP since March 11, 2000; Executive Vice President of First American Asset
Management since 1998; General Counsel of Investment Advisors Inc. from
1991-1998. Age: 38.

         Michael J. Radmer, 220 South Sixth Street, Minneapolis, Minnesota
55402; Assistant Secretary of FAIF, FAF, FASF and FAIP since March 2000;
Partner, Dorsey & Whitney LLP, a Minneapolis-based law firm and general counsel
of FAIF, FAF and FASF. Age: 55.

         James D. Alt, 220 South Sixth Street, Minneapolis, Minnesota 55402;
Assistant Secretary of FAF, FAIF and FASF since September 1998, and of FAIP
since September 1999; Partner, Dorsey & Whitney LLP, a Minneapolis- based law
firm. Age: 49.

         Kathleen L. Prudhomme, 220 South Sixth Street, Minneapolis, Minnesota
55402; Assistant Secretary of FAF, FAIF and FASF since September 1998, and of
FAIP since September 1999; Partner, Dorsey & Whitney LLP, a Minneapolis- based
law firm. Age: 47.

         Alaina Metz, Bysis Fund Services, 3435 Stelzer Road, Suite 1000,
Columbus, Ohio 43219; Assistant Secretary for FAIF, FAF, FASF and FAIP since
March 11, 2000; Chief Administrative Officer of Bysis Fund Services. Age: 33.


                                       23
<PAGE>


COMPENSATION

         The First American Family of Funds, which includes FASF, FAIF, FAIP,
FAF and FACEF, currently pays only to directors of the funds who are not paid
employees or affiliates of the funds a fee of $27,000 per year ($40,500 in the
case of the Chair) plus $4,000 ($6,000 in the case of the Chair) per meeting of
the Board attended and $1,200 per committee meeting attended ($1,800 in the case
of a committee chair) and reimburses travel expenses of directors and officers
to attend Board meetings. In the event of telephonic Board or committee meetings
(other than Pricing Committee meetings for which the regular meeting schedule
applies), each director receives a fee of $500 per Board or committee meeting
($750 in the case of the Chair or a committee chair). In addition, directors may
receive a per diem fee of $1,500 per day plus travel expenses when directors
travel out of town on Fund business. However, directors do not receive the
$1,500 per diem amount plus the foregoing Board or committee fee for an out of
town committee or Board meeting but instead receive the greater of the total per
diem fee or meeting fee. Legal fees and expenses are also paid to Dorsey &
Whitney LLP, the law firm of which Michael J. Radmer, James D. Alt and Kathleen
L. Prudhomme, assistant secretaries of FAIF, FAF, FASF, FAIP and FACEF, are
partners. The following table sets forth information concerning aggregate
compensation paid to each director of FASF (i) by FASF (column 2), and (ii) by
FAIF, FAF, FASF, FAIP and FACEF collectively (column 5) during the fiscal year
ended September 30, 2000. No executive officer or affiliated person of FASF
received any compensation from FASF in excess of $60,000 during such fiscal
year:

<TABLE>
<CAPTION>
          (1)                              (2)               (3)                 (4)                   (5)
NAME OF PERSON, POSITION                AGGREGATE        PENSION OR       ESTIMATED ANNUAL     TOTAL COMPENSATION
                                      COMPENSATION       RETIREMENT         BENEFITS UPON      FROM REGISTRANT AND
                                    FROM REGISTRANT*  BENEFITS ACCRUED       RETIREMENT         FUND COMPLEX PAID
                                                       AS PART OF FUND                           TO DIRECTORS**
                                                          EXPENSES
<S>                                    <C>                  <C>                 <C>                 <C>
Robert J. Dayton, Director             $    804             -0-                 -0-                 $ 57,200
Roger A. Gibson, Director                 1,638             -0-                 -0-                   54,800
Andrew M. Hunter III, Director            2,573             -0-                 -0-                   56,000
Leonard W. Kedrowski, Director            1,740             -0-                 -0-                   58,400
Robert L. Spies, Director                 2,751             -0-                 -0-                   59,600
John M. Murphy, Jr., Director               -0-             -0-                 -0-                      -0-
Joseph D. Strauss, Director               1,351             -0-                 -0-                   65,600
Virginia L. Stringer, Director            1,047             -0-                 -0-                   74,500
</TABLE>

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

* Included in the Aggregate Compensation under column 2 are amounts deferred by
the directors pursuant to the Deferred Compensation plan discussed below.
Pursuant to this plan, compensation was deferred for the following directors:
Roger A. Gibson, $1,156; Andrew M. Hunter III, $2,380; Leonard W. Kedrowski,
$1,224; Robert L. Spies, $2,549; and Joseph D. Strauss, $571.

** Deferred compensation is included in the Total Compensation under column 5
for the following directors: Roger A. Gibson, $20,525; Andrew M. Hunter III,
$42,250; Leonard W. Kedrowski, $21,725; Robert L. Spies, $45,250; and Joseph D.
Strauss, $10,130.

         The directors may elect to defer payment of up to 100% of the fees they
receive in accordance with a Deferred Compensation Plan (the "Plan"). Under the
Plan, a director may elect to have his or her deferred fees treated as if they
had been invested in the shares of one or more funds and the amount paid to the
director under the Plan will be determined based on the performance of such
investments. Distributions may be taken in a lump sum or over a period years.
The Plan will remain unfunded for federal income tax purposes under the Internal
Revenue Code of 1986, as amended. Deferral of director fees in accordance with
the Plan will have a negligible impact on fund assets and liabilities and will
not obligate the funds to retain any director or pay any particular level of
compensation.

                                 CODE OF ETHICS

         First American Strategy Funds, First American Asset Management, Marvin
& Palmer, Federated Global and SEI Investments Distribution Co. have each
adopted a Code of Ethics pursuant to Rule 17j-1 of the 1940 Act. Each of these
Codes of Ethics permits personnel to invest in securities for their own
accounts, including securities that may be purchase or held by the Funds. These
Codes of Ethics are on public file with, and are available from, the Securities
and Exchange Commission.


                                       24
<PAGE>


              INVESTMENT ADVISORY AND OTHER SERVICES FOR THE FUNDS

INVESTMENT ADVISORY AGREEMENT

         U.S. Bank National Association (the "Advisor"), 601 Second Avenue
South, Minneapolis, Minnesota 55402, serves as the investment Advisor and
manager of the Funds through its First American Asset Management group. The
Advisor is a national banking association that has professionally managed
accounts for individuals, insurance companies, foundations, commingled accounts,
trust funds, and others for over 75 years. The Advisor is a subsidiary of U.S.
Bancorp ("USB"), 601 Second Avenue South, Minneapolis, Minnesota 55402, which is
a regional multi-state bank holding company headquartered in Minneapolis,
Minnesota that primarily serves the Midwestern, Rocky Mountain and Northwestern
states. USB operates four banks and eleven trust companies with banking offices
in 16 contiguous states. USB also has various other subsidiaries engaged in
financial services. At September 30, 2000, USB and its consolidated subsidiaries
had consolidated assets of approximately $86 billion, consolidated deposits of
$51 billion and shareholders' equity of $8 billion.

         Pursuant to an Investment Advisory Agreement dated as of October 1,
1996 (the "Advisory Agreement"), the Funds engage the Advisor to act as
investment advisor for and to manage the investment of the assets of the Funds.
Each Fund pays the Advisor monthly fees calculated on an annual basis equal to
0.25% of its average daily net assets.

         The Advisory Agreement requires the Advisor to provide FASF with all
necessary office space, personnel and facilities necessary and incident to the
Advisor's performance of its services thereunder. The Advisor is responsible for
the payment of all compensation to personnel of FASF and the officers and
directors of FASF, if any, who are affiliated with the Advisor or any of its
affiliates. The Advisory Agreement provides that each Fund will be reimbursed by
the Advisor, in an amount not in excess of the advisory fees payable by such
Fund, for excess fund expenses as may be required by the laws of certain states
in which the Fund's shares may be offered for sale. As of the date of this
Statement of Additional Information, the most restrictive state limitation in
effect requires that "aggregate annual expenses" (which include the investment
advisory fee and other operating expenses but exclude interest, taxes, brokerage
commissions, Rule 12b-1 fees and certain other expenses) shall not exceed 2-1/2%
of the first $30 million of average net assets, 2% of the next $70 million of
average net assets and 1-1/2% of the remaining average net assets of a Fund for
any fiscal year.

         In addition to the investment advisory fee, each Fund pays all its
expenses that are not expressly assumed by the Advisor or any other organization
with which the Fund may enter into an agreement for the performance of services.
Each Fund is liable for such nonrecurring expenses as may arise, including
litigation to which the Fund may be a party, and it may have an obligation to
indemnify its directors and officers with respect to such litigation.

         The Advisor may, at its option, waive any or all of its fees, or
reimburse expenses, with respect to any Fund from time to time. Any such waiver
or reimbursement is voluntary and may be discontinued at any time unless as
otherwise set forth in the Funds' Prospectus. The Advisor also may absorb or
reimburse expenses of the Funds from time to time, in its discretion, while
retaining the ability to be reimbursed by the Funds for such amounts prior to
the end of the fiscal year. This practice would have the effect of lowering a
Fund's overall expense ratio and of increasing yield to investors, or the
converse, at the time such amounts are absorbed or reimbursed, as the case may
be.

         The following table sets forth total advisory fees before waivers and
after waivers for each of the Funds for the fiscal years ended September 30,
1998, September 30, 1999 and September 30, 2000:

<TABLE>
<CAPTION>
                                 YEAR ENDED                       YEAR ENDED                       YEAR ENDED
                             SEPTEMBER 30, 1998               SEPTEMBER 30, 1999               SEPTEMBER 30, 2000

                        ADVISORY FEE    ADVISORY FEE     ADVISORY FEE    ADVISORY FEE     ADVISORY FEE    ADVISORY FEE
                       BEFORE WAIVERS  AFTER WAIVERS*   BEFORE WAIVERS  AFTER WAIVERS*   BEFORE WAIVERS  AFTER WAIVERS*
<S>                      <C>              <C>             <C>              <C>             <C>              <C>
Income Fund              $ 213,285        $     0         $ 269,050        $     0         $ 177,758        $     0
Growth and Income Fund     479,289              0           515,752              0           558,475              0
Growth Fund                135,724              0           209,013              0           247,435              0
Aggressive Growth Fund     140,018              0           171,202              0           207,589              0
</TABLE>


                                       25
<PAGE>


*        Advisory fees for the period were voluntarily waived by the Advisor. In
         addition, the Advisor reimbursed the Funds additional amounts during
         this period to comply with total fund operating expense limitations as
         previously agreed upon by the Funds and the Advisor.

ADMINISTRATION AGREEMENT

         U.S. Bank National Association (the "Administrator"), 601 Second Avenue
South, Minneapolis, Minnesota 55402, serves as the Administrator for the Funds
pursuant to an Administration Agreement between it and the Funds. The
Administrator is a subsidiary of USB. Under the Administration Agreement, the
Administrator is compensated to provide, or compensates other entities to
provide services to the Funds. These services include, various legal, oversight
and administrative services, accounting services, transfer agency and dividend
disbursing services and shareholder services. The Funds pay U.S. Bank fees which
are calculated daily and paid monthly, equal to each fund's pro rata share of an
amount equal, on an annual basis, to 0.12% of the aggregate average daily assets
of all open-end mutual funds in the First American fund family up to $8 billion,
and 0.105% of the aggregate average daily net assets of all open-end mutual
funds in the First American fund family in excess of $8 billion. (For the
purposes of this Agreement, the First American fund family includes all series
of FAF, FAIF, FASF and FAIP.) In addition, the funds pay U.S. Bank annual fees
of $18,500 per CUSIP, shareholder account fees of $15 per account, closed
account fees of $3.50 per account, and Individual Retirement Account Fees of $15
per account.

         Prior to January 1, 2000, SEI Investments Management Corporation served
as the administrator for the Funds. SEI Investments Management Corporation is a
wholly-owned subsidiary of SEI Investments Company, which also owns the Funds'
Distributor. See "- Distributor and Distribution Plans" below. The Funds paid to
SEI Investment Management a fee equal to (i) 0.070% of each Fund's average daily
net assets until aggregate net assets of all Funds exceeded $8 billion and (ii)
0.055% to the extent aggregate net assets of all Funds exceeded $8 billion.

         The following table sets forth total administrative fees, after
waivers, paid by each of the Funds for the fiscal years ended September 30,
1998, September 30, 1999 and September 30, 2000:

<TABLE>
<CAPTION>
                                    YEAR ENDED                       YEAR ENDED                        YEAR ENDED
                                SEPTEMBER 30, 1998               SEPTEMBER 30, 1999                SEPTEMBER 30, 2000

                         ADMINISTRATIVE  ADMINISTRATIVE    ADMINISTRATIVE  ADMINISTRATIVE    ADMINISTRATIVE  ADMINISTRATIVE
                               FEE             FEE               FEE             FEE             FEE              FEE
                         BEFORE WAIVERS   AFTER WAIVERS    BEFORE WAIVERS   AFTER WAIVERS    BEFORE WAIVERS   AFTER WAIVERS
<S>                         <C>             <C>               <C>             <C>              <C>              <C>
Income Fund                 $  93,890       $  93,890         $ 117,044       $ 117,044        $  77,332        $  77,332
Growth and Income Fund        210,977         210,977           224,315         224,315          242,838          242,838
Growth Fund                    59,748          59,748            90,930          90,930          107,618          107,618
Aggressive Growth Fund         61,662          61,662            74,491          74,491           90,295           90,295
</TABLE>

DISTRIBUTOR AND SHAREHOLDER SERVICE PLAN AND AGREEMENT

         SEI Investments Distribution Co. (the "Distributor") serves as the
distributor for the shares of each Fund. The Distributor is a wholly-owned
subsidiary of SEI Investments Company.

         The Distributor serves as distributor for the shares of the Funds
pursuant to a Distribution Agreement dated as of October 1, 1996 (the
"Distribution Agreement") between itself and the Funds. Under the Distribution
Agreement, the Distributor has agreed to perform all distribution services and
functions of the Funds. The Distributor may enter into sub-distribution
agreements with securities firms, financial institutions (including, without
limitation, banks) and other industry professionals. The Distributor receives no
separate compensation for distribution of the Funds' Shares.

         The Funds also have entered into a Shareholder Service Plan and
Agreement with the Distributor pursuant to which the Distributor agrees to
provide, or to enter into written agreements with service providers to provide,
one or more specified shareholder services to beneficial owners of shares of the
Funds. The Distributor has agreed that the services provided pursuant to the
Shareholder Service Plan and Agreement will in no event be primarily intended to
result in the sale of Fund shares. Pursuant to the Shareholder Service Plan and
Agreement, the Funds have agreed to pay the Distributor a fee at an annual rate
of 0.25% of the average net asset value of the shares of the Funds, computed
daily


                                       26
<PAGE>


and paid monthly. The Distributor is to pay any shareholder service providers
with which it enters into written agreements out of this amount.

         The following table sets forth shareholder servicing fees paid by each
of the Funds for the fiscal years ended September 30, 1998, September 30, 1999
and September 30, 2000:

                           SHAREHOLDER SERVICING FEES
                                                 YEAR ENDED SEPTEMBER 30,

                                             1998         1999          2000

         Income Fund                       $213,285     $269,050      $177,758
         Growth and Income Fund             479,289      515,752       558,475
         Growth Fund                        135,724      209,013       247,435
         Aggressive Growth Fund             140,052      171,202       207,589

         The Distributor received no compensation from the Funds during the last
fiscal year other than shareholder servicing fees as set forth in the above
table. The Distributor also serves as distributor for the shares of the
Underlying Funds and receives compensation (but not with respect to the class of
shares purchased by the Funds) for such services.

CUSTODIAN; COUNSEL; AUDITORS

         CUSTODIAN. The custodian of the Funds' assets is U.S. Bank National
Association (the "Custodian"), U.S. Bank Center, 180 East Fifth Street, St.
Paul, Minnesota 55101. The Custodian is a subsidiary of USB. The Custodian takes
no part in determining the investment policies of the Funds or in deciding which
securities are purchased or sold by the Funds. All of the instruments
representing the investments of the Funds and all cash are held by the Custodian
or, for Emerging Markets Fund and International Fund, by a sub-custodian with
respect to such Fund. The Custodian or such sub-custodian delivers securities
against payment upon sale and pays for securities against delivery upon
purchase. The Custodian also remits Fund assets in payment of Fund expenses,
pursuant to instructions of FASF's officers or resolutions of the Board of
Directors.

         As compensation for its services to the Funds, the Custodian is paid a
monthly fee calculated on an annual basis equal to 0.03% (0.10% in the case of
Emerging Markets Fund and International Fund) of such Fund's average daily net
assets. Sub-custodian fees with respect to Emerging Markets Fund and
International Fund are paid by the Custodian out of its fees from such Fund. In
addition, the Custodian is reimbursed for its out-of-pocket expenses incurred
while providing its services to the Funds. The Custodian continues to serve so
long as its appointment is approved at least annually by the Board of Directors
including a majority of the directors who are not interested persons (as defined
under the 1940 Act) of FASF.

         COUNSEL. Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis,
Minnesota 55402, is independent counsel for the Funds.

         AUDITORS. Ernst & Young LLP, 1400 Pillsbury Center, Minneapolis,
Minnesota 55402, serves as the Funds' independent auditors, providing audit
services, including audits of the annual financial statements and assistance and
consultation in connection with SEC filings for the years ended September 30,
1999 and September 30, 2000.

         KPMG LLP, 90 South Seventh Street, Minneapolis, Minnesota 55402, acted
as the Funds' independent auditors, providing audit services including audits of
the annual financial statements and assistance and consultation in connection
with SEC filings for the fiscal periods ended as of September 30, 1998.

              INVESTMENT ADVISORY SERVICES FOR THE UNDERLYING FUNDS

INVESTMENT ADVISORY AGREEMENTS OF THE UNDERLYING FUNDS

         U.S. Bank National Association, the investment advisor of the Funds,
also serves as investment advisor and manager of each of the Underlying Funds
through its First American Asset Management group. For information concerning
U.S. Bank, see "Investment Advisory and Other Services for the Funds --
Investment Advisory Agreement" above.


                                       27
<PAGE>


         Pursuant to an Investment Advisory Agreement dated April 2, 1991 (the
"FAIF Advisory Agreement") as amended, the Equity Funds, Strategic Income Fund
and Fixed Income Fund, engaged the Advisor to act as investment advisor for and
to manage the investment of the assets of each such Underlying Funds. Each such
Underlying Fund other than Emerging Markets Fund and International Fund pays the
Advisor monthly fees calculated on an annual basis equal to 0.70% of its average
daily net assets. Emerging Markets Fund and International Fund pays the Advisor
monthly fees calculated on an annual basis equal to 1.25% of their respective
average daily net assets.

         Pursuant to an Investment Advisory Agreement effective as of January
20, 1995 (the "FAF Advisory Agreement"), Prime Obligations Fund engaged the
Advisor to act as investment advisor for and to manage the investment of the
assets of Prime Obligations Fund. Prime Obligations Fund pays the Advisor
monthly fees calculated on an annual basis equal to 0.40% of its average daily
net assets.

         The FAIF Advisory Agreement and the FAF Advisory Agreement require the
Advisor to provide FAIF and FAF with all necessary office space, personnel and
facilities necessary and incident to the Advisor's performance of its services
thereunder. The Advisor is responsible for the payment of all compensation to
personnel of FAIF and FAF and the officers and directors of FAIF and FAF, if
any, who are affiliated with the Advisor or any of its affiliates. The FAIF
Advisory Agreement and the FAF Advisory Agreement provide that each Underlying
Fund will be reimbursed by the Advisor, in an amount not in excess of the
advisory fees payable by such Underlying Fund, for excess fund expenses as may
be required by the laws of certain states in which the Underlying Fund's shares
may be offered for sale. As of the date of this Statement of Additional
Information, the most restrictive state limitation in effect requires that
"aggregate annual expenses" (which include the investment advisory fee and other
operating expenses but exclude interest, taxes, brokerage commissions, Rule
12b-1 fees and certain other expenses) shall not exceed 2-1/2% of the first $30
million of average net assets, 2% of the next $70 million of average net assets
and 1-1/2% of the remaining average net assets of an Underlying Fund for any
fiscal year.

         In addition to the investment advisory fee, each Underlying Fund pays
all its expenses that are not expressly assumed by the Advisor or any other
organization with which the Underlying Fund may enter into an agreement for the
performance of services. Each Underlying Fund is liable for such nonrecurring
expenses as may arise, including litigation to which the Underlying Fund may be
a party, and it may have an obligation to indemnify its directors and officers
with respect to such litigation.

         Information concerning advisory fees paid by the Underlying Funds
during their three most recent fiscal years is set forth in their Statements of
Additional Information, which may be obtained by writing SEI Investments
Distribution Co., Oaks, Pennsylvania 19456, or calling Investor Services at
1-800-637-2548.


SUB-ADVISORY AGREEMENTS FOR EMERGING MARKETS FUND, INTERNATIONAL FUND AND
STRATEGIC INCOME FUND

         Marvin & Palmer Associates, Inc., 1201 North Market Street, Suite 2300,
Wilmington, Delaware 19801 ("Marvin & Palmer") is sub-advisor for Emerging
Markets Fund and International Fund under agreements with the Advisor (the
"Marvin & Palmer Sub-Advisory Agreements"). Marvin & Palmer, a privately-held
company, was founded in 1986 by David F. Marvin and Stanley Palmer. Marvin &
Palmer is engaged in the management of global, non-United States, United States
and emerging markets equity portfolios principally for institutional accounts.
As of September 30, 2000, Marvin & Palmer managed a total of approximately,
$10.2 billion in investments. Pursuant to Marvin & Palmer Sub-Advisory
Agreements, Marvin & Palmer is responsible for the investment and reinvestment
of Emerging Markets Fund's and International Fund's assets and the placement of
brokerage transactions in connection therewith. Under the Marvin & Palmer
Sub-Advisory Agreements, Marvin & Palmer is required, among other things, to
report to the Advisor or the Board regularly at such times and in such detail as
the Advisor or the Board may from time to time request in order to permit the
Advisor and the Board to determine the adherence of Emerging Markets Fund and
International Fund to their respective investment objectives, policies and
restrictions. The Marvin & Palmer Sub-Advisory Agreements also requires Marvin &
Palmer to provide all office space, personnel and facilities necessary and
incident to Marvin & Palmer's performance of its services under the Marvin &
Palmer Sub-Advisory Agreements.

         For its services to International Fund under the Marvin & Palmer
Sub-Advisory Agreements, Marvin & Palmer is paid a monthly fee by the Advisor
calculated on an annual basis equal to 0.75% of the first $100 million of


                                       28
<PAGE>


International Fund's average daily net assets, 0.50% of International Fund's
average daily net assets in excess of $100 million up to $300 million, 0.45% of
International Fund's average daily net assets in excess of $300 million up to
$500 million and 0.40% of International Fund's average daily net assets in
excess of $500 million.

         For its services to Emerging Markets Fund under the Marvin & Palmer
Sub-Advisory Agreements, Marvin & Palmer is paid a monthly fee by the Advisor
calculated on an annual basis equal to 0.85% of the first $100 million of
Emerging Markets Fund's average daily net assets, 0.60% of Emerging Markets
Fund's average daily net assets in excess of $100 million up to $300 million,
0.55% of Emerging Markets Fund's average daily net assets in excess of $300
million up to $500 million, and 0.50% of Emerging Markets Fund's average daily
net assets in excess of $500 million.

         Federated Global Investment Management Corp., 175 Water Street, New
York, New York 10038-4965 ("Federated Global"), a subsidiary of Federated
Investors, Inc. ("Federated"), is a sub-advisor for Strategic Income Fund under
an agreement with the Advisor (the "Federated Sub-Advisory Agreement").
Federated Global, which is a Delaware corporation, is a registered investment
advisor under the Investment Adviser's Act of 1940. As of September 30, 2000,
Federated Global. and such other subsidiaries of Federated rendered investment
advice regarding over $125 billion of assets. Pursuant to the Federated
Sub-Advisory Agreement, Federated Global is responsible for the investment of
the international portion of Strategic Income Fund's assets. Under the Federated
Sub-Advisory Agreement, Federated Global is required, among other things, to
report to the Advisor or the Board regularly at such times and in such detail as
the Advisor or the Board may from time to time request in order to permit the
Advisor and the board to determine the adherence of Strategic Income Fund to its
investment objectives, policies and restrictions.

         The Federated Sub-Advisory Agreement also requires the Federated Global
to provide all office space, personnel and facilities necessary and incident to
Federated Global's performance of its services under the Federated Sub-Advisory
Agreement.

         For its services under the Sub-Advisory Agreement, Federated Global is
paid a monthly fee by the Advisor calculated on an annual basis equal to 0.40%
of the first $25 million of Strategic Income Fund's average daily net assets,
0.33% of Strategic Income Fund's average daily net assets in excess of $25
million up to $50 million, 0.26% of Strategic Income Fund's average daily net
assets in excess of $50 million up to $100 million and 0.21% of Strategic Income
Fund's average daily net assets in excess of $100 million.

               PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE

         It anticipated that the majority of the Funds' portfolio transactions
will consist of purchases and sales of shares of the Underlying Funds. These
purchases and sales will be made directly with the Underlying Funds. The class
of shares of the Underlying Funds in which the Funds will invest is not subject
to any front-end or deferred sales charges, any Rule 12b-1 distribution fees or
any shareholder servicing fees.

         To the extent that the Funds may purchase or sell securities other than
shares of the Underlying Funds, decisions with respect to placement of the
Funds' portfolio transactions are made by the Advisor. The Funds' policy is to
seek to place portfolio transactions with brokers or dealers who will execute
transactions as efficiently as possible and at the most favorable price. The
Advisor may, however, select a broker or dealer to effect a particular
transaction without communicating with all brokers or dealers who might be able
to effect such transaction because of the volatility of the market and the
desire of the Advisor to accept a particular price for a security because the
price offered by the broker or dealer meets guidelines for profit, yield or
both. Some portfolio transactions may involve payment of a brokerage commission
by the appropriate Fund. In some cases, transactions may be with dealers or
issuers who act as principal for their own accounts and not as brokers.
Transactions effected on a principal basis are made without the payment of
brokerage commissions but at net prices, which usually include a spread or
markup. In effecting transactions in over-the-counter securities, the Funds
expect to deal with market makers unless it appears that better price and
execution are available elsewhere.

         While the Advisor does not deem it practicable and in the Funds' best
interest to solicit competitive bids for commission rates on each transaction,
consideration will regularly be given by the Advisor to posted commission rates
as well as to other information concerning the level of commissions charged on
comparable transactions by other qualified brokers.


                                       29
<PAGE>


         Subject to the policy of seeking favorable price and execution for the
transaction size and risk involved, in selecting brokers and dealers other than
the Distributor and determining commissions paid to them, the Advisor may
consider the ability to provide supplemental performance, statistical and other
research information as well as computer hardware and software for research
purpose for consideration, analysis and evaluation by the staff of the Advisor.
In accordance with this policy, the Funds do not execute brokerage transactions
solely on the basis of the lowest commission rate available for a particular
transaction. Subject to the requirements of favorable price and efficient
execution, placement of orders by securities firms for the purchase of shares of
the Funds may be taken into account as a factor in the allocation of portfolio
transactions.

         Research services that may be received by the Advisor would include
advice, both directly and in writing, as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of securities, as well as
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy, and the performance of accounts. The
research services may allow the Advisor to supplement its own investment
research activities and enable the Advisor to obtain the views and information
of individuals and research staffs of many different securities firms prior to
making investment decisions for the Funds. To the extent portfolio transactions
are effected with brokers and dealers who furnish research services, the Advisor
would receive a benefit, which is not capable of evaluation in dollar amounts,
without providing any direct monetary benefit to the Funds from these
transactions. Research services furnished by brokers and dealers used by the
Funds for portfolio transactions may be utilized by the Advisor in connection
with investment services for other accounts and, likewise, research services
provided by brokers and dealers used for transactions of other accounts may be
utilized by the Advisor in performing services for the Funds. The Advisor
determines the reasonableness of the commissions paid in relation to their view
of the value of the brokerage and research services provided, considered in
terms of the particular transactions and their overall responsibilities with
respect to all accounts as to which they exercise investment discretion.

         The Advisor has not entered into any formal or informal agreements with
any broker or dealer, and does not maintain any "formula" that must be followed
in connection with the placement of Fund portfolio transactions in exchange for
research services provided to the Advisor, except as noted below. The Advisor
may, from time to time, maintain an informal list of brokers and dealers that
will be used as a general guide in the placement of Fund business in order to
encourage certain brokers and dealers to provide the Advisor with research
services, which the Advisor anticipates will be useful to it. Any list, if
maintained, would be merely a general guide, which would be used only after the
primary criteria for the selection of brokers and dealers (discussed above) had
been met, and, accordingly, substantial deviations from the list could occur.
The Advisor would authorize the Funds to pay an amount of commission for
effecting a securities transaction in excess of the amount of commission another
broker or dealer would have charged only if the Advisor determined in good faith
that the amount of such commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the overall responsibilities of
the Advisor with respect to the Funds.

         The Funds do not effect any brokerage transactions in their portfolio
securities with any broker or dealer affiliated directly or indirectly with the
Advisor or the Distributor unless such transactions, including the frequency
thereof, the receipt of commissions payable in connection therewith, and the
selection of the affiliated broker or dealer effecting such transactions are not
unfair or unreasonable to the shareholders of the Funds, as determined by the
Board of Directors. Any transactions with an affiliated broker or dealer must be
on terms that are both at least as favorable to the Funds as the Funds can
obtain elsewhere and at least as favorable as such affiliated broker or dealer
normally gives to others.

         When two or more clients of the Advisor are simultaneously engaged in
the purchase or sale of the same security, the prices and amounts are allocated
in accordance with a formula considered by the Advisor to be equitable to each
client. In some cases, this system could have a detrimental effect on the price
or volume of the security as far as each client is concerned. In other cases,
however, the ability of the clients to participate in volume transactions may
produce better executions for each client.

         The policies of the Underlying Funds with respect to portfolio
transactions and the allocation of brokerage, and the brokerage commissions paid
by them during their three most recent fiscal years, are set forth in their
Statements of


                                       30
<PAGE>


Additional Information, which may be obtained by writing SEI Investments
Distribution Co., Oaks, Pennsylvania 19456, or calling Investor Services at
1-800-637-2548.

                                  CAPITAL STOCK

         Each share of each Fund's $.01 par value common stock is fully paid,
nonassessable, and transferable. Shares may be issued as either full or
fractional shares. Fractional shares have pro rata the same rights and
privileges as full shares. Shares of the Funds have no preemptive or conversion
rights.

         Each share of a Fund has one vote. On some issues, such as the election
of directors, all shares of all FASF Funds vote together as one series. The
shares do not have cumulative voting rights. Consequently, the holders of more
than 50% of the shares voting for the election of directors are able to elect
all of the directors if they choose to do so. On issues affecting only a
particular Fund, the shares of that Fund will vote as a separate series.
Examples of such issues would be proposals to alter a fundamental investment
restriction pertaining to a Fund or to approve, disapprove or alter a
distribution plan.

         The Bylaws of FASF provide that annual shareholders meetings are not
required and that meetings of shareholders need only be held with such frequency
as required under Minnesota law and the 1940 Act.

         As of November 13, 2000, the directors of FASF owned shares of FASF,
FAF and FAIF with an aggregate net asset value of approximately $9 million. As
of December 1, 2000, the directors and officers of FASF as a group owned less
than one percent of each Fund's outstanding shares. As of December 1, 2000, the
Funds were aware that the following persons owned of record five percent or more
of the outstanding shares of each class of stock of the Funds.

                                                      PERCENTAGE OF SHARES OWNED
STRATEGY GROWTH & INCOME

Wachovia Bank NA
TRST US Bancorp Deferred Comp TR
DTD 8/1/97
PO Box 3073
Winston Salem, NC  27150-0001                                       19.00%

US Bank National Association Cust
Daily Valued Retirement Programs
Attn: Reconciliation SPFT0401
180 East 5th St.
St. Paul, MN 55101-2667                                             39.70%

US Bank TR
US Bancorp CAP
U/A 01-01-1984
180 5th St. E SPEN0502
Saint Paul, MN 55101-2667                                           15.51%

Var & Co
P.O. Box 64482
St. Paul, MN 55164-0482                                              6.69%

Strategy Growth & Income Omnibus Account
USBANCORP Piper Jaffray for the Exclusive
Benefit of it's Customers
Attn: TA Services MPFP1922
601 2nd Ave S.
Minneapolis, MN 55402-4303                                           5.83%

STRATEGY AGGRESSIVE GROWTH


                                       31
<PAGE>


                                                      PERCENTAGE OF SHARES OWNED
US Bank National Association Cust
Daily Valued Retirement Programs
Attn: Reconciliation SPFT0401
180 East 5th St.
St. Paul, MN 55101-2667                                             52.76%

US Bank TR
US Bancorp CAP
U/A 01-01-1984
180 5th St. E SPEN0502
Saint Paul, MN 55101-2667                                           12.83%

Strategy Aggrs Gro Omnibus Account
USBANCORP Piper Jaffray for the Exclusive
Benefit of it's Customers
Attn: TA Services MPFP1922
601 2nd Ave S.
Minneapolis, MN 55402-4303                                           5.80%

Var & Co
P.O. Box 64482
St. Paul, MN 55164-0482                                              9.44%

STRATEGY INCOME

US Bank National Association Cust
Daily Valued Retirement Programs
Attn: Reconciliation SPFT0401
180 East 5th St.
St. Paul, MN 55101-2667                                             19.45%

US Bank TR
US Bancorp CAP
U/A 01-01-1984
180 5th St. E SPEN0502
Saint Paul, MN 55101-2667                                            5.79%

Var & Co
P.O. Box 64482
St. Paul, MN 55164-0482                                              5.55%

Strategy Income Omnibus Account
USBANCORP Piper Jaffray for the Exclusive
Benefit of it's Customers
Attn: TA Services MPFP1922
601 2nd Ave S.
Minneapolis, MN 55402-4303                                          19.94%

STRATEGY GROWTH

US Bank National Association Cust
Daily Valued Retirement Programs
Attn: Reconciliation SPFT0401
180 East 5th St.
St. Paul, MN 55101-2667                                             55.89%

Strategy Growth Omnibus Account
USBANCORP Piper Jaffray for the Exclusive
Benefit of it's Customers
Attn: TA Services MPFP1922
601 2nd Ave S.
Minneapolis, MN 55402-4303                                           8.29%


                                       32
<PAGE>

                    NET ASSET VALUE AND PUBLIC OFFERING PRICE

         The public offering price of the shares of a Fund generally equals the
Fund's net asset value plus any applicable sales charge. A summary of any
applicable sales charge assessed on Fund share purchases is set forth in the
Fund's Prospectuses. The following sets forth the public offering price of the
Funds as of September 30, 2000.

                                                 PUBLIC OFFERING PRICE
                                                       PER SHARE
                                                     (IN DOLLARS)*

Income Fund                                            $  11.06
Growth and Income Fund                                    12.69
Growth Fund                                               13.94
Aggressive Growth Fund                                    14.70
---------------------------------

* Effective December 31, 2000, the Funds will charge a maximum front end sales
charge of 5.25%. Although this sales load was not charged to Fund investors
prior to December 31, 2000, the "Public Offering Price" as of September 30,
2000, has been adjusted to reflect what the public offering price would have
been had the sales load been charged at that time. The actual public offering
price on September 30, 2000, before the Funds began charging a sales load, was
equal to the net asset value, which is set forth below.

         The net asset value of each Fund's shares is determined on each day
during which the New York Stock Exchange (the "NYSE") is open for business. The
NYSE is not open for business on the following holidays (or on the nearest
Monday or Friday if the holiday falls on a weekend): New Year's Day, Martin
Luther King, Jr. Day, Washington's Birthday (observed), Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each year the NYSE may designate different dates for the observance of these
holidays as well as designate other holidays for closing in the future. The
following sets forth the net asset value of the Funds as of September 30, 2000.

                               NET ASSETS    /     SHARES      =       NET
                              (IN DOLLARS)       OUTSTANDING       ASSET VALUE
                                                                    PER SHARE
                                                                  (IN DOLLARS)

Income Fund                 $  54,137,932      $   5,165,065         $ 10.48
Growth and Income Fund        233,427,123         19,423,592           12.02
Growth Fund                   109,003,693          8,249,583           13.21
Aggressive Growth Fund         88,836,923          6,379,018           13.93

                             FUND PERFORMANCE

SEC STANDARDIZED PERFORMANCE FIGURES

         YIELD FOR THE FUNDS. Yield is computed by dividing the net investment
income per share (as defined under Securities and Exchange Commission rules and
regulations) earned during the advertised period by the offering price per share
(including the maximum sales charge) on the last day of the period. The result
will then be "annualized" using a formula that provides for semi-annual
compounding of income. Yield is computed according to the following formula:

         Based upon the 30-day period ended September 30, 2000, the yields for
the shares of the Funds were as follows:

                                                     YIELD
                                                     -----
         Income Fund                                 4.54%
         Growth and Income Fund                      3.00%
         Growth Fund                                 2.14%
         Aggressive Growth Fund                      1.24%


                                       33
<PAGE>

         Such yield figures are determined by dividing the net investment income
per share earned during the specified 30-day period by the maximum offering
price per share on the last day of the period, according to the following
formula:

         Yield = 2 [((a - b) + cd) + 1)6 - 1]

         Where:  a  =   dividends and interest earned during the period
                 b  =   expenses accrued for the period (net of reimbursements)
                 c  =   average daily number of shares outstanding during the
                        period that were entitled to receive dividends
                 d  =   maximum offering price per share on the last day of
                        the period

         TOTAL RETURN. Total return measures both the net investment income
generated by, and the effect of any realized or unrealized appreciation or
depreciation of, the underlying investments in a Fund's portfolio. The Funds'
average annual and cumulative total return figures are computed in accordance
with the standardized methods prescribed by the Securities and Exchange
Commission.

         AVERAGE ANNUAL TOTAL RETURN. Average annual total return figures are
computed by determining the average annual compounded rates of return over the
periods indicated in the advertisement, sales literature or shareholders'
report, that would equate the initial amount invested to the ending redeemable
value, according to the following formula:

         P(1 + T)n = ERV

         Where:  P    =   a hypothetical initial payment of $1,000
                 T    =   average annual total return
                 N    =   number of years
                 ERV  =   ending redeemable value at the end of the period of a
                          hypothetical $1,000 payment made at the beginning of
                          such period

This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the applicable Prospectus, and includes all recurring fees, such as
investment advisory and management fees, charged to all shareholder accounts.

         CUMULATIVE TOTAL RETURN. Cumulative total return is computed by finding
the cumulative compounded rate of return over the period indicated in the
advertisement that would equate the initial amount invested to the ending
redeemable value, according to the following formula:

         CTR = ((ERV - P) / P) 10

         Where:  CTR  =   cumulative total return
                 ERV  =   ending redeemable value at the end of, the period of a
                          hypothetical $1,000 payment made at the beginning of
                          such period; and
                 P    =   initial payment of $1,000

This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the applicable Prospectus, and includes all recurring fees, such as
investment advisory and management fees, charged to all shareholder accounts.


                                       34
<PAGE>


         Based on the foregoing, the average annual and cumulative total returns
for the shares of the Funds as of September 30, 2000 were as follows:

<TABLE>
<CAPTION>
                                                     AVERAGE ANNUAL RETURN
                                                  AS OF SEPTEMBER 30, 2000***

                                CUMULATIVE             SINCE                 ONE         FIVE
                             SINCE INCEPTION*        INCEPTION              YEAR         YEARS
                              WITHOUT   WITH       WITHOUT   WITH      WITHOUT   WITH
                                SALES CHARGE        SALES CHARGE        SALES CHARGE
<S>                            <C>     <C>         <C>      <C>        <C>      <C>        <C>
Income Fund                    32.59%  25.67%       7.31%    5.88%      7.18%    1.56%     **
Growth and Income Fund         52.74   44.77       11.17     9.69      14.88     8.83      **
Growth Fund                    61.30   52.89       12.70    11.20      19.66    13.35      **
Aggressive Growth Fund         70.36   61.48       14.25    12.73      23.38    16.94      **
</TABLE>

*   Inception date of October 1, 1996.
**  Not in operation for the entire period.
*** Although a sales load was not imposed by the Funds until December 31, 2000,
performance is also presented as the maximum 5.25% sales charge were imposed.

NON-STANDARD DISTRIBUTION RATES

         HISTORICAL DISTRIBUTION RATES. The Funds' historical annualized
distribution rates are computed by dividing the income dividends of a Fund for a
stated period by the maximum offering price on the last day of such period. For
the one year period ended September 30, 2000, the historical distribution rates
of the shares of the Funds were as follows:

                                               WITHOUT             WITH
                                            SALES CHARGE       SALES CHARGE
         Income Fund                            4.73%              4.48%
         Growth and Income Fund                 2.79%              2.64%
         Growth Fund                            1.89%              1.79%
         Aggressive Growth Fund                 0.98%              0.93%

         ANNUALIZED CURRENT DISTRIBUTION RATES. The Funds' annualized current
distribution rates are computed by dividing a Fund's income dividends for a
specified month by the number of days in that month and multiplying by 365, and
dividing the resulting figure by the maximum offering price on the last day of
the specified period. The annualized current distribution rates for the one
month period ended September 30, 2000 for the funds were as follows:

                                               WITHOUT             WITH
                                            SALES CHARGE       SALES CHARGE
         Income Fund                            4.83%              4.58%
         Growth and Income Fund                 2.83%              2.68%
         Growth Fund                            1.93%              1.83%
         Aggressive Growth Fund                 0.98%              0.93%

CERTAIN PERFORMANCE COMPARISONS

         In addition to advertising total return and yield, comparative
performance information may be used from time to time in advertising the Funds'
shares, including data from Lipper, Inc. ("Lipper"), Morningstar, other industry
publications and other entities or organizations which track the performance of
investment companies. The performance of each Fund may be compared to that of
its unmanaged benchmark index and to the performance of similar funds as
reported by Lipper and such other data services.

                                    TAXATION

         Each Fund intends to fulfill the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company. If so qualified, each Fund will not be liable for federal
income taxes to the extent it distributes its taxable income to its
shareholders.

         Any loss on the sale or exchange of shares of a Fund generally will be
disallowed to the extent that a shareholder acquires or contracts to acquire
shares of the same Fund within 30 days before or after such sale or exchange.
Furthermore, if Fund shares with respect to which a long-term capital gain
distribution has been made are


                                       35
<PAGE>

held for less than six months, any loss on the sale or exchange of such shares
will be treated as a long-term capital loss to the extent of such long-term
capital gain distribution.

         For federal tax purposes, if a shareholder exchanges shares of a Fund
for shares of any other Fund pursuant to the exchange privilege (see "Managing
Your Investment -- Exchanging Shares" in the Prospectus), such exchange will be
considered a taxable sale of the shares being exchanged.

         For federal tax purposes, if a Shareholder exchanges shares of a Fund
for shares of any other Fund pursuant to the exchange privilege (see "Managing
Your Investment -- Exchanging Your Shares" in the Prospectuses), such exchange
will be considered a taxable sale of the shares being exchanged. Furthermore, if
a shareholder carries out the exchange within 90 days of purchasing shares in a
fund on which he or she has incurred a sales charge, the sales charge cannot be
taken into account in determining the shareholder's gain or loss on the sale of
those shares to the extent that the sales charge that would have been applicable
to the purchase of the later-acquired shares in the other fund is reduced
because of the exchange privilege. However, the amount of any sales charge that
may not be taken into account in determining the shareholder's gain or loss on
the sale of the first-acquired shares may be taken into account in determining
gain or loss on the eventual sale or exchange of the later-acquired shares.

         Pursuant to the Code, distributions of net investment income by a Fund
to a shareholder who, as to the United States, is a nonresident alien
individual, nonresident alien fiduciary of a trust or estate, foreign
corporation, or foreign partnership (a "foreign shareholder") will be subject to
U.S. withholding tax (at a rate of 30% or lower treaty rate). Withholding will
not apply if a dividend paid by a Fund to a foreign shareholder is "effectively
connected" with a U.S. trade or business of such shareholder, in which case the
reporting and withholding requirements applicable to U.S. citizens or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding but, in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year. Each Fund will report
annually to its shareholders the amount of any withholding.

         The foregoing relates only to federal income taxation and is a general
summary of the federal tax law in effect as of the date of this Statement of
Additional Information.

                             REDUCING SALES CHARGES

CLASS A SALES CHARGE

         The sales charge can be reduced on the purchase of Class A Shares
through (i) quantity discounts and accumulated purchases, or (ii) signing a
13-month letter of intent.

         QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES: Each Fund will combine
purchases made by an investor, the investor's spouse, and the investor's
children under age 21 when it calculates the sales charge. In addition, the
sales charge, if applicable, is reduced for purchases made at one time by a
trustee or fiduciary for a single trust estate or a single fiduciary account.

         For each Fund, the sales charge discount will be determined by adding
(i) the purchase price (including sales charge) of the Fund shares that are
being purchased, plus (ii) the purchase price of the Class A shares of any other
Fund or any First American fund (other than a money market fund) that you are
concurrently purchasing, plus (iii) the higher of the current net asset value or
the original purchase price of Class A shares of the Fund, any other Fund, or
any First American fund (other than a money market fund) that your already own.
In order for an investor to receive the sales charge reduction on Class A
Shares, the Fund must be notified by the investor in writing or by his or her
financial institution at the time the purchase is made that Fund shares are
already owned or that purchases are being combined.

         LETTER OF INTENT: If an investor intends to purchase, in the aggregate,
at least $50,000 of Class A shares in the Funds and other First American funds
(other than money market funds), over the next 13 months, the sales charge may
be reduced by signing a letter of intent to that effect. This letter of intent
includes a provision for a sales charge adjustment depending on the amount
actually purchased within the 13-month period and a provision for the Funds'
custodian to hold a percentage equal to the Funds' maximum sales charge rate of
the total amount intended to be purchased in escrow (in shares) until the
purchase is completed.


                                       36
<PAGE>

         The amount held in escrow for all Funds will be applied to the
investor's account at the end of the 13-month period after deduction of the
sales load applicable to the dollar value of shares actually purchased. In this
event, an appropriate number of escrowed shares may be redeemed in order to
realize the difference in the sales charge.

         A letter of intent will not obligate the investor to purchase shares,
but if he or she does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. This letter may
be dated as of a prior date to include any purchases made within the past 90
days.

SALES OF CLASS A SHARES AT NET ASSET VALUE

         Purchases of a Fund's Class A Shares by the Advisor, Marvin & Palmer,
Federated Global, or any of their affiliates, or any of their or FAIF's
officers, directors, employees, retirees, sales representatives and partners,
registered representatives of any broker-dealer authorized to sell Fund shares,
and full-time employees of FAIF's general counsel, and members of their
immediate families (i.e., parent, child, spouse, sibling, step or adopted
relationships, and UTMA accounts naming qualifying persons), may be made at net
asset value without a sales charge. A Fund's Class A Shares also may be
purchased at net asset value without a sales charge by fee-based registered
investment advisors, financial planners and registered broker-dealers who are
purchasing shares on behalf of their customers and by purchasers through
"one-stop" mutual fund networks through which the Funds are made available. In
addition, Class A Shares may be purchased at net asset value without a sales
charge by investors participating in asset allocation "wrap" accounts offered by
the Advisor or any of its affiliates, and by retirement and deferred
compensation plans and the trusts used to fund such plans (including, but not
limited to, those defined in Sections 401(k), 403(b) and 457 of the Internal
Revenue Code and "rabbi trusts"), which plans and trusts purchase through
"one-stop" mutual fund networks. No commission is paid in connection with net
asset value purchases of Class A Shares made pursuant to this paragraph.

         Class A Shares may also be purchased without a sales charge by 401(k),
403(b) and 457 plans, and Profit sharing and Pension plans, which have 200 or
more eligible participants. Your representative must notify the Fund if your
retirement/deferred compensation plan is eligible for the sales load waiver.
Securities firms, financial institutions and other industry professionals that
enter into sales agreements with the Funds' distributor to perform share
distribution services may receive a commission on such sales equal to 1.00% of
the first $3 million, 0.75% of shares purchased in excess of $3 million up to $5
million, and 0.50% of shares purchased in excess of $5 million.

         In addition, Class A Shares may be purchased without a sales charge by
bundled retirement plans and Simple IRA plans sponsored by U.S. Bank and sold by
an affiliate, and SEP IRA plans sold by an affiliate.

         If Class A Shares of a Fund have been redeemed, the shareholder has a
one-time right, within 180 days, to reinvest the redemption proceeds in Class A
Shares of any First American fund at the next-determined net asset value without
any sales charge. The Fund must be notified by the shareholder in writing or by
his or her financial institution of the reinvestment in order to eliminate a
sales charge. If the shareholder redeems his or her shares of a Fund, there may
be tax consequences.

                   ADDITIONAL INFORMATION ABOUT SELLING SHARES

BY TELEPHONE

         A shareholder may redeem shares of a Fund, if he or she elects the
privilege on the initial shareholder application, by calling his or her
financial institution to request the redemption. Shares will be redeemed at the
net asset value next determined after the Fund receives the redemption request
from the financial institution. Redemption requests must be received by the
financial institution by the time specified by the institution in order for
shares to be redeemed at that day's net asset value, and redemption requests
must be transmitted to and received by the Funds by 3:00 p.m. Central Time in
order for shares to be redeemed at that day's net asset value. Pursuant to
instructions received from the financial institution, redemptions will be made
by check or by wire transfer. It is the financial institution's responsibility
to transmit redemption requests promptly.

         Shareholders who did not purchase their shares of a Fund through a
financial institution may redeem their shares by calling Investor Services at
1-800-637-2548. At the shareholder's request, redemption proceeds will be paid


                                       37
<PAGE>


by check mailed to the shareholder's address of record or wire transferred to
the shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System, normally within three days, but in no event more than
seven days after the request. Wire instructions must be previously established
on the account or provided in writing. The minimum amount for a wire transfer is
$1,000. If at any time the Funds determine it necessary to terminate or modify
this method of redemption, shareholders will be promptly notified.

         In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming shares by telephone. If this should occur,
another method of redemption should be considered. Neither the Administrator nor
the Funds will be responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone instructions that it reasonably
believes to be genuine. The Administrator and the Funds will each employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures may include the taping of telephone conversations. To
ensure authenticity of redemption or exchange instructions received by
telephone, the Administrator examines each shareholder request by verifying the
account number and/or tax identification number at the time such request is
made. The Administrator subsequently sends confirmations of both exchange sales
and exchange purchases to the shareholder for verification. If reasonable
procedures are not employed, the Administrator and the Funds may be liable for
any losses due to unauthorized or fraudulent telephone transactions.

BY MAIL

         Any shareholder may redeem Fund shares by sending a written request to
the Fund, to the shareholder's servicing agent or financial institution. The
written request should include the shareholder's name, the account number, the
Fund name, and the share or dollar amount requested to be redeemed, and should
be signed exactly as the shares are registered. Shareholders should call the
Fund, the shareholder servicing agent or financial institution for assistance in
redeeming by mail. A check for redemption proceeds normally is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.

         Shareholders requesting a redemption of $50,000 or more, a redemption
of any amount to be sent to an address other than that on record with the Fund,
or a redemption payable other than to the shareholder of record, must have
signatures on written redemption requests guaranteed by:

         o    a trust company or commercial bank the deposits of which are
              insured by the Bank Insurance Fund, which is administered by the
              Federal Deposit Insurance Corporation ("FDIC");

         o    a member firm of the New York, American, Boston, Midwest, or
              Pacific Stock Exchanges or of the National Association of
              Securities Dealers;

         o    a savings bank or savings and loan association the deposits of
              which are insured by the Savings Association Insurance Fund, which
              is administered by the FDIC; or

         o    any other "eligible guarantor institution," as defined in the
              Securities Exchange Act of 1934.

         The Funds do not accept signatures guaranteed by a notary public.

         The Funds and the Administrator have adopted standards for accepting
signature guarantees from the above institutions. The Funds may elect in the
future to limit eligible signature guarantees to institutions that are members
of a signature guarantee program. The Funds and the Administrator reserve the
right to amend these standards at any time without notice.

REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR

         When shares are purchased by check or with funds transmitted through
the Automated Clearing House, the proceeds of redemptions of those shares are
not available until the Administrator is reasonably certain that the purchase
payment has cleared, which could take up to ten calendar days from the purchase
date.


                                       38
<PAGE>


                                     RATINGS

         A rating of a rating service represents that service's opinion as to
the credit quality of the rated security. However, such ratings are general and
cannot be considered absolute standards of quality or guarantees as to the
creditworthiness of an issuer. A rating is not a recommendation to purchase,
sell or hold a security, because it does not take into account market value or
suitability for a particular investor. Markets values of debt securities may
change as a result of a variety of factors unrelated to credit quality,
including changes in market interest rates.

         When a security has been rated by more than one service, the ratings
may not coincide, and each rating should be evaluated independently. Ratings are
based on current information furnished by the issuer or obtained by the rating
services from other sources which they consider reliable. Ratings may be
changed, suspended or withdrawn as a result of changes in or unavailability of
such information, or for other reasons. In general, the Underlying Funds are not
required to dispose of a security if its rating declines after it is purchased,
although they may consider doing so.

RATINGS OF CORPORATE DEBT OBLIGATIONS AND MUNICIPAL BONDS

         STANDARD & POOR'S

         AAA: Securities rated AAA have the highest rating assigned by Standard
         & Poor's to a debt obligation. Capacity to pay interest and repay
         principal is extremely strong.

         AA: Securities rated AA have a very strong capacity to pay interest and
         repay principal and differ from the highest rated issues only to a
         small degree.

         A: Securities rated A have a strong capacity to pay interest and repay
         principal, although they are somewhat more susceptible to adverse
         effects of changes in circumstances and economic conditions than bonds
         in higher rated categories.

         BBB: Securities rated BBB are regarded as having an adequate capacity
         to pay interest and repay principal. Although such securities normally
         exhibit adequate protection standards, adverse economic conditions or
         changing circumstances are more likely to lead to a weakened capacity
         to pay interest and repay principal for securities in this category
         than for those in higher rated categories.

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

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

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

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

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


                                       39
<PAGE>

         MOODY'S

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

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

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

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

         Ba: An issue which is rated Ba is judged to have speculative elements;
         its future cannot be considered as well assured. Often the protection
         of interest and principal payments may be very moderate and thereby not
         well safeguarded during both good and bad times over the future.
         Uncertainty of position characterizes issues in this class.

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

         Caa: An issue which is rated Caa is of poor standing. Such an issue may
         be in default or there may be present elements of danger with respect
         to principal or interest.

Those securities in the Aa, A and Baa groups which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa-1, A-1 and
Baa-1. Other Aa, A and Baa securities comprise the balance of their respective
groups. These rankings (1) designate the securities which offer the maximum in
security within their quality groups, (2) designate securities which can be
bought for possible upgrading in quality, and (3) additionally afford the
investor an opportunity to gauge more precisely the relative attractiveness of
offerings in the marketplace.

RATINGS OF PREFERRED STOCK

         STANDARD & POOR'S. Standard & Poor's ratings for preferred stock have
         the following definitions:

         AAA: An issue rated "AAA" has the highest rating that may be assigned
         by Standard & Poor's to a preferred stock issue and indicates an
         extremely strong capacity to pay the preferred stock obligations.

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

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

         BBB: An issue rated "BBB" is regarded as backed by an adequate capacity
         to pay the preferred stock obligations. Whereas it normally exhibits
         adequate protection parameters, adverse economic conditions or


                                       40
<PAGE>


         changing circumstances are more likely to lead to a weakened capacity
         to make payments for a preferred stock in this category than for issues
         in the category.

         MOODY'S.  Moody's ratings for preferred stock include the following:

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

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

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

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

RATINGS OF COMMERCIAL PAPER

         STANDARD & POOR'S. Commercial paper ratings are graded into four
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Issues assigned the A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designation 1, 2 and 3 to indicate the relative degree of safety. The "A-1"
designation indicates that the degree of safety regarding timely payment is very
strong. Those issues determined to possess overwhelming safety characteristics
will be denoted with a plus (+) symbol designation.

         MOODY'S. Moody's commercial paper ratings are opinions as to the
ability of the issuers to timely repay promissory obligations not having an
original maturity in excess of nine months. Moody's makes no representation that
such obligations are exempt from registration under the Securities Act of 1933,
and it does not represent that any specific instrument is a valid obligation of
a rated issuer or issued in conformity with any applicable law. Moody's employs
the following three designations, all judged to be investment grade, to indicate
the relative repayment capacity of rated issuers:

         PRIME-1:  Superior capacity for repayment.

         PRIME-2:  Strong capacity for repayment.

         PRIME-3:  Acceptable capacity for repayment.

                              FINANCIAL STATEMENTS

         The financial statements of FASF included in its annual report to
shareholders dated September 30, 2000 is incorporated herein by reference.


                                       41

<PAGE>


                       FIRST AMERICAN STRATEGY FUNDS, INC.
                           PART C -- OTHER INFORMATION

ITEM 23. EXHIBITS

         (a)      Amended and Restated Articles of Incorporation, as filed June
                  19, 1996 (Incorporated by reference to Exhibit (1) to initial
                  filing).

*        (b)      Bylaws of Registrant, as amended through December 6, 2000.

         (c)      Not applicable.

         (d)      Investment Advisory Agreement between the Registrant and First
                  Bank National Association dated October 1, 1996 (Incorporated
                  by reference to Exhibit (5) of the initial filing, Filed on
                  July 2, 1996 (File Nos. 333-7463 and 811-7687)).

         (e)(1)   Distribution Agreement between the Registrant and SEI
                  Financial Services Company dated October 1, 1996 (Incorporated
                  by reference to Exhibit (6) of the initial filing, Filed on
                  July 2, 1996 (File Nos. 333-7463 and 811-7687)).

*        (e)(2)   Amendment No. 1 to the Distribution Agreement between the
                  Registrant and SEI Financial Services Company dated October
                  16, 1998.

*        (e)(3)   Amendment No. 2 to the Distribution Agreement between the
                  Registrant and SEI Financial Services Company dated December
                  6, 2000.

*        (e)(4)   Form of Dealer Agreement.

*        (f)      Deferred Compensation Plan for Directors Trust Agreement dated
                  January 1, 2000.

         (g)(1)   Custodian Agreement between the Registrant and First Trust
                  National Association dated October 1, 1996 (Incorporated by
                  reference to Exhibit (8) of the initial filing, Filed on July
                  2, 1996 (File Nos. 333-7463 and 811-7687)).

         (g)(2)   Assignment of Custodian Agreements and Security Lending Agency
                  Agreement to U.S. Bank National Association, dated May 1, 1998
                  (Incorporated by reference to Exhibit (g)(2) to Post-Effective
                  Amendment No. 4, Filed December 2, 1998 (File Nos. 333-07463,
                  811-7687)).

         (g)(3)   Supplement to Custodian Agreement between Registrant and First
                  Trust National Association dated December 8, 1999
                  (Incorporated by reference to Exhibit (g)(3) of Post-Effective
                  Amendment No. 7, Filed on January 28, 2000 (File Nos. 333-7463
                  and 811-7687)).

*        (g)(4)   Compensation Agreement dated October 1, 1996, pursuant to the
                  Custodian Agreement dated October 1, 1996, as amended .

         (h)(1)   Administration Agreement dated January 1, 2000, by and between
                  U.S. Bank National Association and First American Investment
                  Funds, Inc. (Incorporated by reference to Exhibit (h)(1)) of
                  Post-Effective Amendment No. 7, Filed on January 28, 2000
                  (File Nos. 333-7463 and 811-7687)).

         (i)(1)   Opinion and Consent of Dorsey & Whitney, dated January 26,
                  [superseded] (Incorporated by reference to Exhibit (10) to
                  initial filing).

*        (j)(1)   Consent of Ernst & Young LLP.

<PAGE>


         (j)(2)   Consent of KPMG LLP (Incorporated by reference to exhibit
                  (j)(2) to Post-Effective Amendment No. 7, Filed on January 28,
                  2000 (File Nos. 333-7463, 811-76871).

         (k)      Not applicable.

         (l)      Investment Letter for Initial Shares of the respective Series
                  (Incorporated by reference to Exhibit (13) to initial filing).

*        (m)      Shareholder Service Plan and Agreement.

         (n)      Not applicable.

         (o)      Reserved.

*        (p)(1)   First American Funds Code of Ethics.

*        (p)(2)   First American Asset Management Code of Ethics.

*        (p)(3)   Marvin & Palmer Associates, Inc. Code of Ethics.

*        (p)(4)   Federated Investors, Inc. Code of Ethics.

*        (p)(5)   SEI Investments Company Code of Ethics.

         *        Filed herewith.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

                  Not applicable.

ITEM 25. INDEMNIFICATION

         The Registrant's Articles of Incorporation and Bylaws provide that the
Registrant shall indemnify such persons for such expenses and liabilities, in
such manner, under such circumstances, and to the full extent as permitted by
Section 302A.521 of the Minnesota Statutes, as now enacted or hereafter amended;
provided, however, that no such indemnification may be made if it would be in
violation of Section 17(h) of the Investment Company Act of 1940, as now enacted
or hereafter amended, and any rules, regulations, or releases promulgated
thereunder.

         Section 302A.521 of the Minnesota Statutes, as now enacted, provides
that a corporation shall indemnify a person made or threatened to be made a
party to a proceeding by reason of the former or present official capacity of
the person against judgments, penalties, fines, settlements and reasonable
expenses, including attorneys' fees and disbursements, incurred by the person in
connection with the proceeding if, with respect to the acts or omissions of the
person complained of in the proceeding, the person has not been indemnified by
another organization for the same judgments, penalties, fines, settlements, and
reasonable expenses incurred by the person in connection with the proceeding
with respect to the same acts or omissions; acted in good faith, received no
improper personal benefit, and the Minnesota Statutes dealing with directors'
conflicts of interest, if applicable, have been satisfied; in the case of a
criminal proceeding, had no reasonable cause to believe that the conduct was
unlawful; and reasonably believed that the conduct was in the best interests of
the corporation or, in certain

<PAGE>


circumstances, reasonably believed that the conduct was not opposed to the best
interests of the corporation.

         The Registrant undertakes that no indemnification or advance will be
made unless it is consistent with Sections 17(h) or 17(i) of the Investment
Company Act of 1940, as now enacted or hereafter amended, and Securities and
Exchange Commission rules, regulations, and releases (including, without
limitation, Investment Company Act of 1940 Release No. 11330, September 2,
1980).

         Insofar as the indemnification for liability arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

         Information on the business of the Registrant's investment adviser,
U.S. Bank National Association (the "Manager"), is described in the section of
each series' Statement of Additional Information, filed as part of this
Registration Statement, entitled "Investment Advisory and Other Services." The
directors and officers of the Manager are listed below, together with their
principal occupation or other positions of a substantial nature during the past
two fiscal years. This information is as of September 30, 2000.

<TABLE>
<CAPTION>
                                                                     OTHER POSITIONS AND OFFICES
NAME                     POSITIONS AND OFFICES WITH U.S. BANK        AND PRINCIPAL BUSINESS ADDRESS
----                     ------------------------------------        ------------------------------
<S>                      <C>                                         <C>
John F. Grundhofer       Chairman and                                Chairman and
                         Chief Executive Officer                     Chief Executive Officer of
                                                                     U.S. Bancorp(1)

Philip G. Heasley        Director, President and Chief Operating     President and Chief Operating
                         Officer                                     Officer of U.S. Bancorp(1)

Andrew J. Cecere         Director and Vice Chairman of U.S. Bank     Chief Financial Officer of
                                                                     U.S. Bancorp
                                                                     Commercial Services(1)

Andrew S. Duff           Vice Chairman of U.S. Bank                  Wealth Management and Capital
                                                                     Markets(2)

Daniel J. Frate          Vice Chairman of U.S. Bank                  President of Payment Systems(1)

J. Robert Hoffmann       Director, Executive Vice President          Executive Vice President
                         and Chief Credit Officer                    and Chief Credit Officer of
                                                                     U.S. Bancorp(1)

<PAGE>


Peter G. Michielutti     Executive Vice President of U.S. Bank       Information Services(3)

Lee R. Mitau             Director, Executive Vice President -        Executive Vice President -
                         Corporate Development,                      Corporate Development,
                         General Counsel and Secretary               General Counsel and Secretary
                                                                     of U.S. Bancorp(1)

Daniel M. Quinn          Vice Chairman of U.S. Bank                  Commercial Banking(4)

Peter E. Raskind         Director and Vice Chairman of U.S. Bank     Branch and Telephone Banking(1)


Daniel C. Rohr           Vice Chairman of U.S. Bank                  Corporate Banking(1)

Robert H. Sayre          Executive Vice President                    Executive Vice President of
                         Human Resources                             U.S. Bancorp
                                                                     Human Resources(1)

Daniel W. Yohannes       Vice Chairman of U.S. Bank                  Consumer Banking(5)
</TABLE>

---------------------------
(1)      601 Second Avenue South, Minneapolis, MN 55402
(2)      800 Nicollet Mall, Minneapolis, MN 55402
(3)      2751 Shepard Road, St. Paul, MN 55116
(4)      918 17th Street, Denver, CO 80202
(5)      950 17th Street, Denver, CO 80202

ITEM 27. PRINCIPAL UNDERWRITERS:

         (a) State the name of each investment company (other than the
Registrant) for which each principal underwriter currently distributing the
Registrant's securities also acts as a principal underwriter, distributor or
investment adviser:

                  Registrant's distributor, SEI Investments Distribution Co.
(the "Distributor") acts as distributor for SEI Daily Income Trust, SEI Liquid
Asset Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI Institutional Managed
Trust, SEI Institutional International Trust, The Advisors' Inner Circle Fund,
The Pillar Funds, CUFUND, STI Classic Funds, First American Funds, Inc., First
American Investment Funds, Inc., The Arbor Fund, The PBHG Funds, Inc., The
Achievement Funds Trust, Bishop Street Funds, STI Classic Variable Trust, ARK
Funds, Huntington Funds, SEI Asset Allocation Trust, TIP Funds, SEI
Institutional Investments Trust, First American Strategy Funds, Inc., HighMark
Funds, Armada Funds, PBHG Insurance Series Fund, Inc., Expedition Funds, Alpha
Select Funds, Oak Associates Funds, The Nevis Funds, Inc., CNI Charter Funds,
The Armada Advantage Funds, Amerindo Funds Inc., Huntington VA Funds, Friends
Ivory Funds, iShares Inc., SEI Insurance Products Trust, iShares Trust, Pitcairn
Funds, and First Omaha Funds, Inc. pursuant to distribution agreements dated
July 15, 1982, November 29, 1982, December 3, 1982, July 10, 1985, January 22,
1987, August 30, 1988, November 14, 1991, February 28, 1992, May 1, 1992, May
29, 1992, November 1, 1992, November 1, 1992, January 28, 1993, July 16, 1993,
December 27, 1994, January 27, 1995, August 18, 1995, November 1, 1995, January
11, 1996, April 1, 1996, April 28, 1996, June 14, 1996, October 1, 1996,
February 15, 1997, March 8, 1997, April 1, 1997, June 9, 1997, January 1, 1998,
February 27, 1998, June 29, 1998, April 1, 1999, May 1, 1999, July 13, 1999,
October 15, 1999, December 16, 1999, January 28, 2000, March 29, 2000, April 25,
2000, August 1, 2000 and October 1, 2000, respectively.

<PAGE>


                  The Distributor provides numerous financial services to
investment managers, pension plan sponsors, and bank trust departments. These
services include portfolio evaluation, performance measurement, and consulting
services ("Funds Evaluation") and automated execution, clearing and settlement
of securities transactions ("MarketLink").

                  (b) Provide the information required by the following table
for each director, officer, or partner of each principal underwriter named in
the response to Item 20. Unless otherwise noted, the business address of each
director or officer is One Freedom Valley Drive, Oaks, Pennsylvania 19456.

<TABLE>
<CAPTION>
                              POSITIONS AND OFFICES                      POSITIONS AND OFFICES
NAME                          WITH THE UNDERWRITER                       WITH REGISTRANT
----                          --------------------                       ---------------
<S>                           <C>                                        <C>
Alfred P. West, Jr.           Director, Chairman                                --
                              of the Board of Directors
Richard B. Lieb               Director, Executive Vice President                --
Carmen V. Romeo               Director                                          --
Mark J. Held                  President & Chief Operating Officer               --
Dennis J. McGonigle           Executive Vice President                          --
Robert M. Silvestri           Chief Financial Officer & Treasurer               --
Todd Cipperman                Senior Vice President                             --
                              & General Counsel
Leo J. Dolan, Jr.             Senior Vice President                             --
Carl A. Guarino               Senior Vice President                             --
Jack May                      Senior Vice President                             --
Hartland J. McKeown           Senior Vice President                             --
Kevin P. Robins               Senior Vice President                             --
Patrick K. Walsh              Senior Vice President                             --
Wayne M. Withrow              Senior Vice President                             --
Robert Aller                  Vice President                                    --
John D. Anderson              Vice President & Managing Director                --
Timothy D. Barto              Vice President & Assistant Secretary              --
Robert Crudup                 Vice President & Managing Director                --
Richard A. Deak               Vice President & Assistant Secretary              --
Scott W. Dellorfano           Vice President & Managing Director                --
Barbara Doyne                 Vice President                                    --
Jeff Drennen                  Vice President                                    --
Scott C. Fanatico             Vice President & Managing Director                --
Vic Galef                     Vice President & Managing Director                --
Steven A. Gardner             Vice President & Managing Director                --
Lydia A. Gavalis              Vice President & Assistant Secretary              --
Greg Gettinger                Vice President & Assistant Secretary              --
Kathy Heilig                  Vice President                                    --
Jeff Jacobs                   Vice President                                    --
Samuel King                   Vice President                                    --
John Kirk                     Vice President & Managing Director                --
Kim Kirk                      Vice President & Managing Director                --
John Krzeminski               Vice President & Managing Director                --
Alan H. Lauder                Vice President                                    --

<PAGE>


Paul Lonergan                 Vice President & Managing Director                --
Ellen Marquis                 Vice President                                    --
Christine M. McCullough       Vice President & Assistant Secretary              --
Carolyn McLaurin              Vice President & Managing Director                --
Mark Nagle                    Vice President                                    --
Joanne Nelson                 Vice President                                    --
Cynthia M. Parrish            Vice President & Secretary                        --
Rob Redican                   Vice President                                    --
Maria Rinehart                Vice President                                    --
Steve Smith                   Vice President                                    --
Daniel Spaventa               Vice President                                    --
Kathryn L. Stanton            Vice President                                    --
Lori L. White                 Vice President & Assistant Secretary              --
William E. Zitelli, Jr.       Vice President & Assistant Secretary              --
</TABLE>

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

         All accounts, books, and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained by SEI Investments Distribution Co., Oaks,
Pennsylvania 19456.

ITEM 29. MANAGEMENT SERVICES

         Not applicable.

ITEM 30. UNDERTAKINGS

         Not applicable.


                                   SIGNATURES

         As required by the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
under Rule 485(b) of the Securities Act of 1933, as amended, and has duly caused
this Post-Effective Amendment to its Registration Statement Nos. 333-07463 and
811-7687 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis, State of Minnesota, on the 28th day of
December, 2000.

                       FIRST AMERICAN STRATEGY FUNDS, INC.

ATTEST:      /s/ Jeffery M. Wilson         By:     /s/ Christopher J. Smith
        --------------------------------       --------------------------------
               Jeffery M. Wilson                     Christopher J. Smith
             Senior Vice President                        Secretary

          Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement has been signed below by
the following persons in the capacity and on the dates indicated.

<PAGE>


      SIGNATURE                       TITLE                       DATE
      ---------                       -----                       ----

 /s/ Jeffery M. Wilson                Senior Vice President        **
----------------------------
   Jeffery M. Wilson

          *                           Director                     **
----------------------------
   John M. Murphy, Jr.

          *                           Director                     **
----------------------------
   Robert J. Dayton

          *                           Director                     **
----------------------------
 Andrew M. Hunter III

          *                           Director                     **
----------------------------
 Leonard W. Kedrowski

          *                           Director                     **
----------------------------
    Robert L. Spies

          *                           Director                     **
----------------------------
   Joseph D. Strauss

          *                           Director                     **
----------------------------
 Virginia L. Stringer

          *                           Director                     **
----------------------------
    Roger A. Gibson

* By:  /s/ Christopher J. Smith
      --------------------------
       Christopher J. Smith
       Attorney-in-Fact

** December 28, 2000



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