FIRST AMERICAN FUNDS INC, DEFS14A, 1997-09-19

FIRST AMERICAN FUNDS INC
DEFS14A, 1997-09-19

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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the registrant [X]

Filed by a party other than the registrant [ ]

Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

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

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount previously paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing party:

(4) Date filed:

<PAGE>

FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN FUNDS, INC.
FIRST AMERICAN STRATEGY FUNDS, INC.

IMPORTANT SHAREHOLDER INFORMATION

The document you hold in your hands contains your proxy statement and
proxy card. A proxy card is, in essence, a ballot. When you vote your proxy, it
tells us how to vote on your behalf on important issues relating to your Fund.
Each proxy card may be completed by voting for or against the proposal relating
to your fund. If you simply sign the proxy without specifying a vote, your
shares will be voted in accordance with the recommendations of the Board of
Directors.

We urge you to spend a few minutes with the proxy statement, fill out
your proxy card, and return it to us. Voting your proxy, and doing so promptly,
ensures that your Fund will not need to conduct additional mailings. When
shareholders do not return their proxies in sufficient numbers, we have to make
follow-up solicitations, which may cost your Fund money.

Please take a few moments to exercise your right to vote.

Thank you.

<PAGE>

FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN FUNDS, INC.
FIRST AMERICAN STRATEGY FUNDS, INC.

OAKS, PENNSYLVANIA 19456

NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 31, 1997

NOTICE IS HEREBY GIVEN that a joint special meeting of shareholders of
First American Investment Funds, Inc. ("FAIF"), First American Funds, Inc.
("FAF"), and First American Strategy Funds, Inc. ("FASF"), will be held at 10:00
a.m. Eastern time, on Friday, October 31, 1997, in the Management Conference
Room of SEI Investments Management Corporation, Oaks, Pennsylvania 19456. Each
of FAIF, FAF and FASF is referred to herein individually as a "Company" and
collectively as the "Companies." Each series within each of FAIF, FAF and FASF
comprises a separate mutual fund and is referred to herein individually as a
"Fund" and collectively as the "Funds."

The purposes of the joint special meeting are as follows:

1. To establish the number of members of the Board of Directors of each
Company at seven and to elect each Company's Board of Directors.

2. To ratify the selection of KPMG Peat Marwick LLP as independent public
accountants for each Company for the fiscal year ended September 30,
1997.

3. To consider and vote on a proposal that would eliminate a fundamental
investment restriction of FAIF, which would allow an FAIF Fund to
mortgage, pledge or hypothecate its assets.

4. To consider and vote on a proposed amendment to FAIF's articles of
incorporation which would reduce the quorum required to conduct
business at shareholders meetings from 30% of all outstanding shares
to 10% of all outstanding shares of FAIF or, in the case of voting by
classes or series of shares, such percentages of the applicable
classes or series.

5. To transact such other business as may properly come before the joint
special meeting.

THE BOARD OF DIRECTORS OF EACH APPLICABLE COMPANY RECOMMENDS APPROVAL OF
PROPOSALS 1, 2, 3 AND 4 LISTED ABOVE.

Shareholders of record on September 2, 1997 are the only persons entitled
to receive notice of and to vote at the joint special meeting and any
adjournments thereof. Your attention is directed to the attached Proxy
Statement.

Shareholders should note that they will receive a proxy for each Fund in
which they own shares.

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE JOINT SPECIAL MEETING,
PLEASE FILL IN, SIGN, DATE AND MAIL THE ENCLOSED PROXY OR PROXIES IN THE
ENCLOSED PREPAID RETURN ENVELOPE AS PROMPTLY AS POSSIBLE IN ORDER TO SAVE ANY
FURTHER SOLICITATION EXPENSE.

BY ORDER OF THE BOARDS OF DIRECTORS

Michael J. Radmer, Secretary

Dated: September 19, 1997

FA-2

<PAGE>

FIRST AMERICAN INVESTMENT FUNDS, INC.
FIRST AMERICAN FUNDS, INC.
FIRST AMERICAN STRATEGY FUNDS, INC.

OAKS, PENNSYLVANIA 19456

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

PROXY STATEMENT

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

JOINT SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 31, 1997

The enclosed proxy is solicited by the Board of Directors of each of First
American Investment Funds, Inc. ("FAIF"), First American Funds, Inc. ("FAF"),
and First American Strategy Funds, Inc. ("FASF"), in connection with a joint
special meeting of shareholders (the "Meeting") to be held on October 31, 1997,
and any adjournments thereof. Each of FAIF, FAF and FASF is referred to herein
individually as a "Company" and collectively as the "Companies." Each series
within each of FAIF, FAF and FASF comprises a separate mutual fund and is
referred to herein individually as a "Fund" and collectively as the "Funds."

The costs of solicitation including the cost of preparing and mailing
the Notice of Joint Special Meeting and this Proxy Statement, will be allocated
among and paid by the Companies based on the total net assets of each Company.
Directors and officers of the Companies, employees of First Bank National
Association (the investment adviser for the Funds), and employees of SEI
Investments Management Corporation (the administrator for the Funds) may,
without cost to the Funds, solicit proxies for and on behalf of management of
the Companies by means of mail, telephone, or personal calls.

Shareholders may vote by marking, signing, dating and returning the
enclosed proxy in the enclosed postage-paid envelope.

A proxy may be revoked by giving written notice, in person or by mail, of
revocation before the Meeting to the Companies at their principal executive
offices at Oaks, Pennsylvania 19456, or by properly executing and submitting a
later-dated proxy, or by voting in person at the Meeting. Unless revoked,
properly executed proxies in which choices are not specified by the shareholder
will be voted "for" each item for which no choice is specified in accordance
with the recommendation of the applicable Boards of Directors. Where choices are
specified by shareholders in the proxy, the proxy will be voted or the vote will
be withheld in accordance with the shareholder's choice.

This proxy statement and the accompanying form of proxy are being sent or
given to shareholders beginning on or about September 19, 1997.

Abstentions will be counted as shares present at the Meeting for purposes
of determining whether a quorum is present and whether the requisite percentage
of votes present at the Meeting voted to approve a proposal. Broker "non-votes"
will not be counted as present at the Meeting for either such purpose.

<PAGE>

Only shareholders of record on September 2, 1997 may vote at the Meeting or
any adjournment thereof. As of that date, the following numbers of shares of
common stock of the respective classes of the Funds were issued and outstanding:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
FUND SHARES SHARES SHARES
------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
FAIF:
Stock Fund ................................. 1,753,765 1,812,000 37,915,893 N/A
Equity Index Fund ........................... 688,312 1,074,055 26,620,051 N/A
Balanced Fund .............................. 2,008,699 2,672,970 26,930,969 N/A
Asset Allocation Fund ..................... 177,103 380,313 8,364,393 N/A
Equity Income Fund ........................ 445,667 412,970 23,745,168 N/A
Diversified Growth Fund ..................... 645,649 534,361 38,810,320 N/A
Emerging Growth Fund ........................ 423,853 68,275 8,508,062 N/A
Regional Equity Fund ........................ 1,402,943 1,728,763 15,273,581 N/A
Special Equity Fund ........................ 1,385,043 1,451,076 20,780,076 N/A
Technology Fund ........................... 399,744 421,135 7,373,039 N/A
Health Sciences Fund ........................ 73,914 42,862 3,412,520 N/A
Real Estate Securities Fund ............... 128,313 211,387 2,623,172 N/A
International Fund ........................ 550,462 156,274 16,147,230 N/A
Micro Cap Value Fund ........................ 1,873 172 23,794,844 N/A
Limited Term Income Fund .................. 727,736 0 18,754,907 N/A
Intermediate Term Income Fund ............ 268,418 0 32,259,841 N/A
Fixed Income Fund ........................... 734,804 1,395,087 61,565,308 N/A
Intermediate Government Bond Fund ......... 382,834 0 19,570,432 N/A
Intermediate Tax Free Fund ............... 328,182 0 39,845,223 N/A
Minnesota Insured Intermediate
Tax Free Fund ........................... 764,571 0 29,609,136 N/A
Colorado Intermediate Tax Free Fund ...... 370,124 0 5,103,142 N/A
Oregon Intermediate Tax Free Fund ......... N/A N/A 18,021,952 N/A
California Intermediate Tax Free Fund ...... 97 N/A 3,229,819
FAF:
Prime Obligations Fund ..................... 204,937,824 2,029,263 3,652,676,689 114,948,633
Treasury Obligations Fund .................. N/A N/A 873,110,064 2,892,068,133
Government Obligations Fund ............... N/A N/A 924,709,691 326,239,001
FASF:
Strategy Income Fund ........................ 2,959,877 N/A N/A N/A
Strategy Growth and Income Fund ............ 1,005,395 N/A N/A N/A
Strategy Growth Fund ........................ 2,024,739 N/A N/A N/A
Strategy Aggressive Growth Fund ............ 794,333 N/A N/A N/A
</TABLE>

For additional share ownership information, see "Share Ownership" elsewhere
herein. Each shareholder is entitled to one vote for each share held. Voting for
the election of directors is not cumulative, which means that the holders of a
majority of a Company's outstanding shares have the power to elect that
Company's entire Board of Directors. None of the matters to be presented at the
Meeting will entitle any shareholder to appraisal rights.

If sufficient votes are not received for the adoption of a proposal by the
scheduled Meeting date, the persons named as proxies may propose one or more
adjournments of the Meeting, for a period of up to 120 days in the aggregate, to
permit further solicitation of proxies. Such adjournments with respect to a
Company will require the affirmative vote of a majority of the shares of such
Company present in person or by proxy at the Meeting. The persons named as
proxies will vote in favor of such adjournments if they are instructed by more
than a majority of the shares of the applicable Company represented in person or
by proxy to vote for the applicable proposal.

<PAGE>

The following table illustrates which Proposals are to be voted upon by
shareholders of a Fund:

PROPOSAL NUMBER
------------------------------------------------------------
1 2 3 4
----------- ------------ ------------- ---------------
APPROVE APPROVE
AMENDMENT AMENDMENT
ELECT TO TO ARTICLES
BOARD OF RATIFY INVESTMENT OF
FUND DIRECTORS ACCOUNTANT RESTRICTION INCORPORATION
- --------------------------------------------- ----------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
FAIF:
Stock Fund ................................. X X X X
Equity Index Fund ........................... X X X X
Balanced Fund .............................. X X X X
Asset Allocation Fund ..................... X X X X
Equity Income Fund ........................ X X X X
Diversified Growth Fund ..................... X X X X
Emerging Growth Fund ........................ X X X X
Regional Equity Fund ........................ X X X X
Special Equity Fund ........................ X X X X
Technology Fund ........................... X X X X
Health Sciences Fund ........................ X X X X
Real Estate Securities Fund ............... X X X X
International Fund ........................ X X X X
Micro Cap Value Fund ........................ X X X X
Limited Term Income Fund .................. X X X X
Intermediate Term Income Fund ............... X X X X
Fixed Income Fund ........................... X X X X
Intermediate Government Bond Fund ......... X X X X
Intermediate Tax Free Fund .................. X X X X
Minnesota Insured Intermediate Tax Free
Fund ....................................... X X X X
Colorado Intermediate Tax Free Fund ......... X X X X
Oregon Intermediate Tax Free Fund ......... X X X X
California Intermediate Tax Free Fund ...... X X X X
FAF:
Prime Obligations Fund ..................... X X
Treasury Obligations Fund .................. X X
Government Obligations Fund ............... X X
FASF:
Strategy Income Fund ........................ X X
Strategy Growth and Income Fund ............ X X
Strategy Growth Fund ........................ X X
Strategy Aggressive Growth Fund ............ X X
</TABLE>

The investment adviser for the Funds is First Bank National Association,
601 Second Avenue South, Minneapolis, Minnesota; the distributor (principal
underwriter) for the Funds is SEI Investments Distribution Co., Oaks,
Pennsylvania 19456; and the administrator for the Funds is SEI Investments
Management Corporation, Oaks, Pennsylvania 19456.

ANNUAL AND SEMI-ANNUAL REPORTS

Each Company will furnish, without charge, a copy of its most recent annual
report and succeeding semi-annual report, if any, to any shareholder of such
Company upon request. Such requests should be directed to SEI Investments
Management Corporation, Oaks, Pennsylvania 19456, or may be made by toll-free
telephone call at 1-800-637-2548 in the case of FAIF or FAF or at 1-888- 99STRAT
in the case

<PAGE>

of FASF. The Companies will provide copies of such reports to a requesting
shareholder by first class mail or other means designed to assure prompt
delivery within three business days of the request.

PROPOSAL ONE
ELECTION OF DIRECTORS

Management of each Company recommends that the number of directors to be
elected at the Meeting be set at seven and that the seven nominees named below
be elected as directors. The enclosed proxy will be voted for the election of
each nominee named below unless such authority is withheld in the proxy. The
term of office of the persons elected will be until the next meeting of
shareholders of the applicable Company or until their successors are elected and
shall qualify. In accordance with the articles of incorporation and bylaws of
the respective Companies and applicable state law, management of the respective
companies does not currently intend to hold annual or periodically scheduled
regular meetings of shareholders.

Pertinent information regarding the nominees and their principal
occupations during the past five years is set forth below. Information
concerning the nominees' share ownership is set forth elsewhere herein under
"Share Ownership."

ROBERT J. DAYTON: Director of FAIF since September 1994, of FAF since
December 1994 and of FASF since June 1996; Chairman (1989-1993) and Chief
Executive Officer (1993-present), Okabena Company (private family
investment office). Age: 54.

ANDREW M. HUNTER III: Director of FAIF, FAF and FASF since January 1997;
Chairman of Hunter, Keith Industries, a diversified manufacturing and
services management company, since 1975. Age: 49.

LEONARD W. KEDROWSKI: Director of FAIF and FAF since November 1993 and of
FASF since June 1996; President and owner of Executive Management
Consulting, Inc., a management consulting firm; 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: 55.

*ROBERT L. SPIES: Director of FAIF, FAF and FASF since January 31, 1997;
employed by First Bank System, Inc. and subsidiaries from 1957 to January
31, 1997, most recently as Vice President, First Bank National Association.
Age: 62.

JOSEPH D. STRAUSS: Director of FAF since 1984, of FAIF since April 1991 and
of FASF since June 1996; Chair of FAF's and FAIF's Boards from 1993 to
September 1997 and of FASF's Board from 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: 56.

VIRGINIA L. STRINGER: Director of FAIF since August 1987, of FAF since
April 1991 and of FASF since June 1996; Chair of the Board of FAIF, FAF and
FASF since September 1997; 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: 52.

ROGER A. GIBSON: Vice President North America-Mountain Region for United
Airlines since June 1995; prior to his current position, served most
recently as Vice President-Mountain Region in Denver and Vice
President-Northwest Region in San Francisco; employee at United Airlines
since 1967. Age: 51.

- ------------------
*Denotes directors who are "interested persons" as defined in the Investment
Company Act of 1940. Mr. Spies is deemed to be an "interested person" due to
his ownership of shares of the parent company of the Funds' investment adviser.

The Board of Directors has established Audit and Board Development
(nominating) Committees. Each of the Companies does not have a compensation
committee.

<PAGE>

The functions performed by the Audit Committee are to recommend annually to
the Board a firm of independent certified public accountants to audit the books
and records of the Funds for the ensuing year; to monitor that firm's
performance; to review with the firm the scope and results of each audit and
determine the need, if any, to extend audit procedures; to confer with the firm
and representatives of the Funds on matters concerning the Funds' financial
statements and reports, including the appropriateness of their accounting
practices and of their internal controls and procedures; to evaluate the
independence of the firm; to review procedures to safeguard portfolio
securities; to review the purchase by the Funds from the firm of nonaudit
services; to review all fees paid to the firm; and to facilitate communications
between the firm and the Funds' officers, directors and service providers. The
current members of each Company's Audit Committee are Mr. Kedrowski and Mr.
Spies. The Audit Committee met four times during the fiscal year ended September
30, 1996.

The functions performed by the Board Development (nominating) Committee
are, among others, to recommend to the Board nominees for election as directors
consistent with the needs of the Board and the Funds; to recommend to the Board
a successor to the Chair when a vacancy occurs in that position; to recommend
to the board compensation plans and arrangements for directors; to review the
Board and Fund structures for their effectiveness in meeting the managerial
needs of the Funds. The Board Development Committee does not consider nominees
recommended by shareholders to fill vacancies on the Board. The current members
of each Company's Board Development Committee are Mr. Dayton, Mr. Hunter, Mr.
Strauss and Ms. Stringer. The Board Development Committee met five times during
the fiscal year ended September 30, 1996.

During the fiscal year ended September 30, 1996, the Board of each Company
held a total of seven meetings. During that fiscal year, with respect to each
Company, no incumbent director attended fewer than 75% of the aggregate of (i)
the total number of meetings of the Board held during the period for which he or
she was a director and (ii) the total number of meetings held by all committees
of the Board on which he or she served during the periods that he or she served.

The First American family of funds, which includes FAIF, FAF and FASF,
currently pays only to directors of the Funds who are not paid employees or
affiliates of the Funds a fee of $15,000 per year ($22,500 in the case of the
Chair) plus $2,500 ($3,750 in the case of the Chair) per meeting of the Board
attended and $800 per committee meeting attended ($1,600 in the case of a
committee chair) and reimburses travel expenses of directors and officers to
attend Board meetings. In addition, directors may receive a per diem fee of
$1,000 per day plus travel expenses when directors travel out of town on Fund
business. However, for an out of town meeting, directors do not receive both the
$1,000 per diem amount and the aforementioned Board or committee fee, but
instead receive the greater of the per diem fee or meeting fee. In the event of
telephonic Board or committee meetings which last less than one hour, each
director receives a fee of $500 per meeting ($750 in the case of the chair or a
committee chair). These fees are allocated among the Companies and Funds on the
basis of their relative net asset values. Legal fees and expenses are also paid
to Dorsey & Whitney LLP, the law firm of which Michael J. Radmer, Secretary of
FAIF, FAF and FASF, is a partner. No executive officer or affiliated person of
any of the Companies had aggregate compensation from a Company in excess of
$60,000 during such fiscal year. The following table sets forth the cash
compensation received by each incumbent director from each Company, and from all
Companies included in the First American family of funds, during the fiscal year
ended September 30, 1996:

COMPANY MR. DAYTON MR. HUNTER MR. KEDROWSKI MR. SPIES MR. STRAUSS MS. STRINGER
- ----------------------------- ------------ ------------ --------------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
FAIF ........................ $11,729 $ 0* $12,176 $ 0* $20,082 $12,620
FAF ......................... $21,121 $ 0* $21,974 $ 0* $36,293 $22,730
FASF** ...................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Total from all First American
fund companies (3 companies) $32,850 $ 0* $34,150 $ 0* $56,375 $33,350
</TABLE>

- ------------------
*Not a director during the fiscal year ended September 30, 1996.

**FASF first offered shares on October 1, 1996. Directors did not receive
compensation from FASF before that time.

THE BOARD OF DIRECTORS OF EACH COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" EACH OF THE BOARD NOMINEES NAMED ABOVE. The affirmative vote of a majority
of the shares of the applicable

<PAGE>

Company represented at the Meeting, voting together and not as separate series
or classes, is sufficient for the election of the above nominees to the Board of
Directors, provided that a quorum (30% of the outstanding shares in the case of
FAIF, 10% of the outstanding shares in the case of FAF, and 10% of the
outstanding shares in the case of FASF) is present at the Meeting in person or
by proxy. Shareholders do not have the right to cumulate their votes for
directors. Unless otherwise instructed, the proxies will vote for all nominees
named. All of the nominees have consented to serve as directors if elected. In
the event any of the nominees are not candidates for election at the Meeting,
the proxies will vote for such other persons as the Board of Directors may
designate. Nothing currently indicates that such a situation will arise.

PROPOSAL TWO
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS

The Investment Company Act of 1940 (the "1940 Act") provides that every
registered investment company shall be audited at least once each year by
independent public accountants selected by a majority of the directors of the
investment company who are not "interested persons" of the investment company or
its investment adviser. The Investment Company Act of 1940 also provides that
the selection shall be submitted for ratification or rejection by shareholders.

The Board of Directors of each Company, including a majority of the
directors who are not "interested persons" of the Company or its investment
adviser, First Bank National Association, selected KPMG Peat Marwick LLP to
serve as each Company's independent public accountants for the fiscal year ended
September 30, 1997. KPMG Peat Marwick LLP has served as each Company's
independent public accountants since such Company's inception. KPMG Peat Marwick
LLP has no direct or material indirect financial interest in any of the
Companies or in First Bank National Association, other than receipt of fees for
services to the Companies.

Representatives of KPMG Peat Marwick LLP are expected to be present at the
Meeting. Such representatives will be given the opportunity to make a statement
to shareholders if they choose to do so and are expected to be available to
respond to appropriate questions.

THE BOARD OF DIRECTORS OF EACH COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP. The affirmative
vote of a majority of the shares of the applicable Company represented at the
Meeting, voting together and not as separate series or classes, is sufficient
for the ratification of the appointment of KPMG Peat Marwick LLP, provided that
a quorum is present at the Meeting with respect to the applicable Company in
person or by proxy. Unless otherwise instructed, the proxies will vote for the
ratification of the appointment of KPMG Peat Marwick LLP.

PROPOSAL THREE
APPROVAL OR DISAPPROVAL OF MODIFICATION TO
FUNDAMENTAL POLICY OF FAIF RELATING TO PLEDGE OF ASSETS

Each FAIF Fund is subject to a fundamental investment restriction (No. 4 in
FAIF's Statement of Additional Information) to the effect that no such Fund
shall:

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.

The Board of Directors of FAIF proposes to eliminate this investment
restriction. The limitation on pledging the Funds' assets as collateral reflects
regulatory, business or industry conditions, practices or requirements and
policies that are no longer in effect.

Various of the FAIF Funds may, under the investment policies and
restrictions set forth in their prospectuses, engage in a variety of options
transactions, including the writing of call options on stock indices, interest
rate indices and currency indices. In addition, certain of the FAIF Funds may
enter into a variety of futures transactions, including the purchase of stock
index futures, options on stock index

<PAGE>

futures, interest rate futures, options on interest rate futures and other
contracts or futures contracts based on or involving the future delivery of
securities or foreign currencies. Options and futures transactions generally
involve the purchase by one party of a right to receive at a future date
securities or cash based on the difference between the value of the applicable
stock index, interest rate index or foreign currency as set forth in the
contract and the actual value of such index or currency at the time of the
expiration date set forth in the contract.

The Funds have found that when they wish to enter into certain options and
futures contracts which are permitted under their investment policies and
restrictions, the counterparty or the applicable options or futures clearing
organization may require them to pledge collateral to secure their delivery or
payment obligation under such contracts. If a counterparty requires collateral,
the Fund would pledge collateral with a value which approximately equals the
dollar amount of the obligation undertaken by the Fund in the applicable
transaction. Because the collateral is pledged simply to secure an obligation
which the Fund already is permitted to undertake, the Funds believe that
pledging collateral in connection with options and futures transactions would
not expose the Funds to additional risk. Pledging assets is not without risk,
however. Because assets that have been pledged to other parties may not be
readily available to a Fund, the Fund may have less flexibility in liquidating
such assets if needed. In addition, if the value of the collateral or the
secured obligation is required to be "marked to market," a Fund may be called
upon to post additional collateral or have the transaction closed out. On the
other hand, this potential risk should be considered together with the potential
benefits, such as the increased ability of the Funds to pursue their respective
investment objectives in a manner already permitted to them.

THE BOARD OF DIRECTORS OF FAIF RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELIMINATION OF THIS FUNDAMENTAL INVESTMENT RESTRICTION. The adoption of this
proposal requires the favorable vote of a "majority of the outstanding voting
securities," as defined in the 1940 Act, of each FAIF Fund, voting as separate
series. Under the 1940 Act, the term "majority of the outstanding voting
securities" with respect to a given Fund means the lesser of (a) the vote of 67%
or more of the shares of such Fund present at the Meeting, if the holders of
more than 50% of the Fund's outstanding shares are present or represented by
proxy, or (b) the vote of more than 50% of the outstanding shares of the Fund.
Unless otherwise instructed, the proxies will vote to approve the proposed
modification to this fundamental investment restriction.

PROPOSAL FOUR
AMENDMENT OF ARTICLES TO REDUCE QUORUM
REQUIRED FOR SHAREHOLDERS MEETING

Article IV, Section 3 of the Amended and Restated Articles of Incorporation
of FAIF (the "Articles") currently provides as follows with respect to the
quorum required in order to take action at a meeting of shareholders:

"The presence in person or by proxy of the holders of record of 30% of
the Shares of all Classes issued and outstanding and entitled to vote
thereat shall constitute a quorum for the transaction of business at all
meetings of the stockholders except as otherwise provided by law or in
these Articles of Incorporation and except that where the holders of Shares
of any Class or Series thereof are entitled to a separate vote as a Class
or Series (for purposes of this Section 3, such Series or Class, being
referred to as a "Separate Class") or where the holders of Shares of two or
more (but not all) Classes or series thereof are required to vote as a
single Class or Series for the purposes of this Section 3 (such Series or
Classes being referred to as a "Combined Class"), the presence in person or
by proxy of the holders of 30% of the Shares of that Separate Class or
Combined Class, as the case may be, issued and outstanding and entitled to
vote thereat shall constitute a quorum for such vote."

The Board of Directors of FAIF has approved an amendment to the Articles
reducing the foregoing quorum requirement from 30% to 10% and recommends
adoption of this amendment by shareholders.

The Board believes that a reduction in the quorum requirement is desirable
because it may reduce the time and expense associated with soliciting and
obtaining sufficient proxies from shareholders to

<PAGE>

conduct shareholders' meetings concerning relatively routine matters, such as
the election of directors and the ratification of independent auditors. FAIF has
experienced low shareholder voting in connection with past shareholders meetings
and, as a result, its administrator and investment adviser have devoted
substantial resources to soliciting proxies in connection with such meetings. In
addition, shareholders meetings have had to be adjourned on occasion in order to
obtain sufficient proxies to take corporate action. The Board believes that the
decreased quorum requirement may mitigate these difficulties in connection with
future shareholders meetings. It also notes that the other members of the First
American family of funds, First American Funds, Inc., and First American
Strategy Funds, Inc. each have a 10% quorum requirement for shareholders
meetings.

The proposed reduction in the quorum for shareholders meetings would not
affect voting requirements imposed on FAIF by the 1940 Act or Maryland law with
respect to certain issues. Under the 1940 Act, specified kinds of actions must
be approved by shareholders by vote of a "majority of the outstanding voting
securities," as defined in the 1940 Act, of FAIF or of each affected Fund.
Examples of such actions include approval of new Rule 12b-1 distribution plans,
of material increases in amounts payable under existing Rule 12b-1 distribution
plans, of new investment advisory agreements, and of changes to a Fund's
fundamental investment policies. Under the 1940 Act, the term "majority of the
outstanding voting securities" is defined to mean the lesser of (a) the vote of
67% or more of the shares of such Fund present at the special meeting, if the
holders of more than 50% of a Fund's outstanding shares are present or
represented by proxy, or (b) the vote of more than 50% of the outstanding shares
of the Fund. Thus, these actions cannot be taken unless at least 50% of the
outstanding shares are present or represented by proxy at a shareholders
meeting. The proposed amendment would not have the effect of changing these 1940
Act voting requirements.

Similarly, under Maryland law, amendments to a corporation's articles of
incorporation and certain extraordinary corporate transactions, such as
consolidations and mergers, must be approved by at least two-thirds of all votes
entitled to be cast with respect to the issue. Thus, these actions cannot be
taken unless at least two-thirds of the outstanding shares are present or
represented by proxy at a shareholders meeting. The proposed amendment to FAIF's
Articles would not have the effect of changing these Maryland state law voting
requirements.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS
PROPOSAL. Approval of this proposal requires the favorable vote of at least
two-thirds of the outstanding shares of FAIF. Unless otherwise instructed, the
proxies will vote to approve this proposal.

EXECUTIVE OFFICERS

Pertinent information regarding the executive officers of the Companies and
their principal occupations during the past five years is set forth below:

DAVID LEE: President of FAIF and FAF since April 1994 and of FASF since
June 1996; Senior Vice President and Assistant Secretary of FAF and FAIF
beginning June 1, 1993; Senior Vice President of SEI Investment
Distribution Co. (the "Distributor") since 1991; President, GW Sierra Trust
Funds prior to 1991. Age: 44.

CARMEN V. ROMEO: Treasurer and Assistant Secretary of FAIF and FAF since
November 1992 and of FASF since June 1996; Director, Executive Vice
President, Chief Financial Officer and Treasurer of SEI Corporation
("SEI"), SEI Financial Management Corporation (the "Administrator") and the
Distributor since 1981. Age: 52.

KEVIN P. ROBINS: Vice President and Assistant Secretary of FAIF and FAF
since April 1994 and of FASF since June 1996; Vice President, Assistant
Secretary and General Counsel of the Administrator and the Distributor.
Age: 36.

KATHRYN STANTON: Vice President and Assistant Secretary of FAIF and FAF
since April 1994 and of FASF since June 1996; Vice President and Assistant
Secretary of the Administrator and the Distributor since April 1994;
Associate, Morgan, Lewis & Bockius, from 1989 to 1994. Age: 37.

<PAGE>

SANDRA K. ORLOW: Vice President and Assistant Secretary of FAIF and FAF
since 1992 and of FASF since June 1996; Vice President and Assistant
Secretary of SEI, the Administrator and the Distributor since 1983. Age:
40.

MARC CAHN: Vice President and Assistant Secretary of FAIF, FAF and FASF
since June 1996; Vice President and Assistant Secretary of the
Administrator and Distributor since May 1996; Associate General Counsel,
Barclays Bank PLC, from 1994 to 1996; ERISA Counsel, First Fidelity
Bancorporation, prior to 1994. Age: 39.

BARBARA A. NUGENT: Vice President and Assistant Secretary of FAIF, FAF and
FASF since June 1996; Vice President and Assistant Secretary of the
Administrator and Distributor since April 1996; Associate, Drinker, Biddle
& Reath, from 1994 to 1996; Assistant Vice President/Administration (1992
to 1993) and Operations (1988 to 1992), Delaware Service Company, Inc. Age:
39.

STEPHEN G. MEYER: Controller of FAIF and FAF since March 1995 and of FASF
since June 1996; Director of Internal Audit and Risk Management of SEI from
1992 to 1995; Senior Associate, Coopers & Lybrand, from 1990 to 1992. Age:
31.

MICHAEL J. RADMER: Secretary of FAIF since April 1991, of FAF since 1981
and of FASF since June 1996; Partner, Dorsey & Whitney LLP, a
Minneapolis-based law firm and general counsel of FAIF, FAF and FASF. Age:
52.

SHAREHOLDER PROPOSALS

The Companies do not hold annual shareholder meetings. Shareholders of a
Company wishing to submit proposals for inclusion in a subsequent proxy
statement of such Company should send their written proposals to such Company
c/o SEI Investments Management Corporation, Oaks, Pennsylvania 19456.

<PAGE>

SHARE OWNERSHIP

As of September 2, 1997, no individual director of any Company beneficially
owned more than 1% of the outstanding shares of any class of any Fund and at
such date the officers and directors of the Companies as a group did not
beneficially own more than 1% of the outstanding shares of any class of any
Fund.

The following table sets forth information concerning those persons known
by the Companies to own, of record, as of September 2, 1997, more than 5% of the
outstanding shares of any class of any Fund:

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
FUND NAME AND ADDRESSES OWNED OF CLASS
- ---------------------------- -------------------------------------- ----------- ----------
<S> <C> <C> <C>
FAF:

Government Obligations Fund
Class C VAR & Co. 443,151,300 47.92%
First Trust N.A.
P. O. Box 64010
St. Paul, MN 55164-0010

Special Custody Account for the 474,439,728 51.31%
Exclusive Benefit of Customers of FBS
Investment Services, Inc.
100 South Fifth Street Suite 1400
Minneapolis, MN 55402-1217

Class D VAR & Co. 326,238,973 100%
First Trust N.A.
P. O. Box 64010
St. Paul, MN 55164-0010

Prime Obligations Fund
Class A National Financial Services Corp. 179,788,683 87.73%
For the Exclusive Benefit of Our
Customers
P. O. Box 3752
Church Street Station
New York, NY 10008-3752

Class B Colorado National Bank 185,494 9.14%
Custodian of IRA of
Bill L. Falder
12072 East Iowa Avenue
Aurora, CO 80012-5236

First Bank N.A. 125,040 6.16%
Custodian of IRA of
Russell C. Eidal
320 Bluff Drive
Lowell, AR 72745-9117

Class D VAR & Co. 114,948,582 100%
First Trust N.A.
P. O.Box 64010
St. Paul, MN 55164-0010

Treasury Obligations Fund

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
FUND NAME AND ADDRESSES OWNED OF CLASS
- ------------------------ -------------------------------------- ------------ ----------
<S> <C> <C> <C>
Class C VAR & Co. 775,600,236 88.83%
First Trust N.A.
P. O. Box 64010
St. Paul, MN 55164-0010

Special Custody Account for the 90,198,888 10.3 %
Exclusive Benefit of Customers of FBS
Investment Services, Inc.
100 South Fifth Street
Suite 1400
Minneapolis, MN 55402-1217

Class D VAR & Co. 2,892,068,105 100%
First Trust N.A.
P. O. Box 64010
St. Paul, MN 55164-0010

FAIF:

Asset Allocation Fund
Class A David A. Baumgarten 13,436 7.59%
1660 North Prospect Avenue
Apt. 2806
Milwaukee, WI 53202-2487

Miller Fashions, Inc. 12,038 6.80%
601 Shoreacres Dr. Apt. 208
Fairmont, MN 56031-2244

Class C VAR & Co. 4,118,479 49.24%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 2,808,373 33.58%
P.O. Box 64482
St. Paul, MN 55164-0482

First Trust N.A. 1,424,805 17.03%
as Fiduciary for First Retirement
180 East 5th Street
St. Paul, MN 55101-1631

Balanced Fund
Class C VAR & Co. 15,822,440 58.75%
P.O. Box 64482
St. Paul, MN 55164-0482

First Trust N.A. 10,812,952 40.15%
as Fiduciary for First Retirement
180 East 5th Street
St. Paul, MN 55101-1631

California Intermediate
Tax Free Fund
Class A SEI Corporation 97 100%
One Freedom Valley Dr.
Oaks, PA 19456

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
FUND NAME AND ADDRESSES OWNED OF CLASS
- ------------------------ -------------------------------- ----------- ----------
<S> <C> <C> <C>
Class C VAR & Co. 2,135,869 66.13%
P.O. Box 64482
St. Paul, MN 55164-0482

TELCO 857,301 26.54%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

Colorado Intermediate
Tax-Free Fund
Class A William G. Spahr 19,919 5.36%
P.O. Box 226
Clinton, MO 64735-0226

Richard E. Butler 20,326 5.47%
T/O/D Jamie L. Butler
1260 South Foothill Drive
Lakewood, CO 80228-3426

Class C VAR & Co. 4,970,808 97.41%
P.O. Box 64482
St. Paul, MN 55164-0482

Diversified Growth Fund
Class A Paul T. Green Agency #31081500 45,514 7.04%
Norwest Bank SD N.A. as Agent
P.O. Box 1450 NW8477
Minneapolis, MN 55480-8477

Class C VAR & Co. 29,005,973 74.74%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 3,982,158 10.26%
P.O. Box 64482
St. Paul, MN 55164-0482

TELCO 2,973,735 7.66%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

Emerging Growth Fund
Class A Appel Aggressive Investors 33,841 7.98%
Limited Partnership
150 Great Neck Road
Great Neck, NY 11201-3309

G. Appel Emerging Markets 67,212 15.86%
Limited Partnership
150 Great Neck Road
Great Neck, NY 11021-3309

Blackcomb Associates LP 38,756 9.14%
P.O. Box 5430
Incline Village, NV 89450-5430

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
FUND NAME AND ADDRESSES OWNED OF CLASS
- ------------------- ---------------------------------- ----------- -----------
<S> <C> <C> <C>
J.C. Bradford & Co. 85,649 19.73%
Custodian FBO
DCIP Limited Partners I
330 Commerce Street
Nashville, TN 37201-1805

Class C VAR & Co. 6,517,999 76.61%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 835,731 9.82%
P.O. Box 64482
St. Paul, MN 55164-0482

First Trust N.A. 772,863 9.08%
as Fiduciary for First Retirement
180 East 5th Street
St. Paul, MN 55101-1631

Equity Income Fund
Class A Douglas Spedding TTEE 28,321 6.35%
R. Douglas Spedding Trust
4380 E. Alameda Avenue
Glendale, CO 80222

Clark & Co. 78,741 17.66%
A/C of Calvin & Patricia Fisher
P.O. Box 0039
Westerville, OH 43086-0039

Class C VAR & Co. 15,010,520 63.22%
P.O. Box 64482
St. Paul, MN 55164-0482

TELCO 6,063,580 25.54%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

Equity Index Fund
Class C VAR & Co. 2,064,187 7.76%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 13,644,879 51.27%
P.O. Box 64482
St. Paul, MN 55164-0482

First Trust N.A. 2,704,475 10.16%
as Fiduciary for First Retirement
180 East 5th Street
St. Paul, MN 55101-1631

First Trust N.A. 2,604,471 9.79%
FBO Waldorf Corporation
P.O. Box 64010
St. Paul, MN 55164-0010

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
FUND NAME AND ADDRESSES OWNED OF CLASS
- --------------------- -------------------------------------- ----------- ----------
<S> <C> <C> <C>
First Trust N.A. 5,359,434 20.11%
Trustee FBO
United Healthcare Corporation 401(K)
180 East First Street
P.O. Box 64488
St. Paul, MN 55164-0488

Metlife Defined Contribution Group 5,359,434 20.14%
as Agent for First Trust N.A.
Trustee FBO
United Healthcare Corporation 401(K)
180 E. Fifth Street
P.O. Box 64488
St. Paul, MN 55164-0488

Fixed Income Fund
Class A Swanson & Youngdale Inc. ESOP 44,288 6.04%
Trustee C.B. Anderson
c/o Clark B. Anderson
6565 West 23rd Street
Minneapolis, MN 55426-2853

Class C VAR & Co. 38,395,450 62.37%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 13,982,311 22.71%
P.O. Box 64482
St. Paul, MN 55164-0482

First Trust N.A. 5,161,044 8.38%
as Fiduciary for First Retirement
180 East 5th Street
St. Paul, MN 55101-1631

Health Sciences Fund
Class A The LSI Corp of America 5,061 6.84%
2100 Xenium Lane
Plymouth, MN 55441-3629

Brian E. Palmer & Virginia B. Palmer 4,082 5.52%
Co-Trustees
Eugene P. Palmer Credit TR 6-1-94
c/o Dorsey & Whitney
Pillsbury Center South
220 South Sixth Street
Minneapolis, MN 55402

Walter Goldberg & 6,634 8.97%
Anne Steinberg Trustees
Marjorie Goldberg Family Trust
P.O. Box 31170
Aurora, CO 80041-0170

Marvin H. Fisk 3,884 5.25%
1077 Overlood Road
Mendota Heights, MN 55118-3652
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
FUND NAME AND ADDRESSES OWNED OF CLASS
- ------------------------- --------------------------------- ----------- ----------
<S> <C> <C> <C>
Jean Marie Grouard 4,994 6.75%
710 Marquette Avenue
Minneapolis, MN 55402-2305

First Bank N.A. 6,760 9.14%
Custodian for IRA of
Marvin F. Moes Rollover
10758 E. Pinewood Drive
Parker, CO 80134-7820

Class C VAR & Co. 3,203,240 93.87%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 171,179 5.02%
P.O. Box 64482
St. Paul, MN 55164-0482

Intermediate Government
Bond Fund
Class A The Janice Gardner Foundation 52,694 13.41%
11580 K-Tel Drive
Minnetonka, MN 55343-8855

Gail B. Cox and Wilma M. Cox 22,154 5.64%
JTWROS
17417 Hwy M
Lawson, MO 64062

Ethel A. Spector Trustee 37,867 9.64%
Ethel A. Spector Revocable Trust
7400 River Drive #20A
St. Paul, MN 55116-1036

Class C VAR & Co. 18,011,134 92.03%
P.O. Box 64482
St. Paul, MN 55164-0482

Intermediate Term
Income Fund
Class A Amwill Investors 16,548 6.17%
P.O. Box 1446
Williston, ND 58802-1446

Charles Schwab & Co. 25,556 9.52%
FBO Gladys Sitter Krueger
101 Montgomery Street
San Francisco, CA 94104-4122

Class C VAR & Co. 10,000,610 31.00%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 4,034,072 12.50%
P.O. Box 64482
St. Paul, MN 55164-0482
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
FUND NAME AND ADDRESSES OWNED OF CLASS
- -------------------- -------------------------- ------------ ----------
<S> <C> <C> <C>

TELCO 14,442,976 44.77%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

ZEREB 1,903,238 5.90%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

Intermediate Term
Tax-Free Fund
Class A Mary McCaulley 19,665 5.99%
63343 150th Avenue NE
Spicer, MN 56288-9689

Brian L. Johnson 114,329 34.84%
Joan M. Johnson
P.O. Box 400
Spooner, WI 54801-0400

Class C VAR & Co. 22,074,522 55.40%
P.O. Box 64482
St. Paul, MN 55164-0482

UNIT & Co. 3,902,838 9.79%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

TELCO 7,437,946 18.67%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

ZEREB 5,583,846 14.01%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

International Fund
Class A Marin Associates LTD PA 170,483 30.94%
150 Great Neck Road
Great Neck, NY 11021-3309

Marin Sector LTD PA 67,834 12.31%
150 Great Neck Road
Great Neck, NY 11021-3309

Class B Guenther Patzeiberger 10,287 6.48%
Cristobal Colon #98
Colon Echegaray Naucaipan
Edo De Mexico 53310

Class C VAR & Co. 7,371,599 45.65%
P.O. Box 64482
St. Paul, MN 55164-0482
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
FUND NAME AND ADDRESSES OWNED OF CLASS
- -------------------------- ------------------------------------- ---------- ----------
<S> <C> <C> <C>
VAR & Co. 6,714,806 41.58%
P.O. Box 64482
St. Paul, MN 55164-0482

First Trust N.A. 1,372,507 8.50%
as Fiduciary for First Retirement
180 East 5th Street
St. Paul, MN 55101-1631

Limited Term Income Fund
Class A Planned Parenthood of Minnesota 79,529 10.93%
Operating Reserve Fund
Thomas Webber, Executive Director
1965 Ford Parkway
St. Paul, MN 55116-1923

Fleet Wholesale Supply Co., et. al. 245,782 33.77%
Retirement Plans
c/o Tom Green
P.O. Box 5055
Brainerd, MN 56401-5055

Class C VAR & Co. 3,554,454 18.95%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 6,472,856 34.51%
P.O. Box 64482
St. Paul, MN 55164-0482

First Trust N.A. 1,339,571 7.14%
as Fiduciary for First Retirement
180 East 5th Street
St. Paul, MN 55101-1631

TELCO 6,503,467 34.68%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

Micro Cap Value Fund
Class A SEI Corporation 96 5.10%
One Freedom Valley Drive
Oaks, PA 19456

First Bank N.A. 475 25.37%
Custodian FBO Jean Gegner IRA
2725 42nd Street
DesMoines, IA 50310-3404

Colorado National Bank 299 15.98%
Custodian FBO
Cheryl L. Austermiller IRA
13650 Rankin Road
Elbert, CO 80106-8823

Daniel W. Yohannes 953 50.89%
18 Cherry Hills Farm Drive
Englewood, CO 80110-7165
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
FUND NAME AND ADDRESSES OWNED OF CLASS
- -------------------- --------------------------------- ----------- ----------
<S> <C> <C> <C>
Class B SEI Corporation 100 58.23%
One Freedom Valley Drive
Oaks, PA 19456

Colorado National Bank 72 41.77%
Custodian FBO Ipsita Mitra IRA
1641 E. Woodmen Road #179
Colorado Springs, CO 80920-3345

Class C UNIT & Co. 4,456,874 18.73%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

TELCO 13,686,843 57.52%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

ZEREB 5,301,425 22.28%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

Oregon Intermediate
Tax Free Fund
Class C UNIT & Co. 1,078,554 5.98%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

TELCO 14,516,284 80.55%
Attn: Trust Mutal Funds
P.O. Box 3168
Portland, OR 97208-3168

ZEREB 2,379,025 13.20%
Attn: Trust Mutual Funds
P.O. Box 3168
Portland, OR 97208-3168

Minnesota Insured
Intermediate Fund
Class C Norwest Bank Minnesota North NA 61,065 7.94%
Trustee for Clarence Holden
c/o Trust Mutual Fund Processing
P.O. Box 1450 NW 8477
Minneapolis, MN 55480-1450

Alfred P. Gale 119,624 15.55%
2350 Highland Road
Maple Plain, MN 55359-9570

Trachsel Dental Studio 100,715 13.09%
Fred & Ramona Trachsel
P.O. Box 6598
Rochester, MN 55903-6598
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
FUND NAME AND ADDRESSES OWNED OF CLASS
- ---------------------------- ---------------------------------- ----------- ----------
<S> <C> <C> <C>
Class C VAR & Co. 28,828,568 97.36%
P.O. Box 64482
St. Paul, MN 55164-0482

Real Estate Securities Fund
Class B Kendall M. Anderson 10,879 5.15%
Susan A. Anderson
10487 Dupont Road
Bloomington, MN 55431

Class C VAR & Co. 2,417,443 92.16%
P.O. Box 64482
St. Paul, MN 55164-0482

Regional Equity Fund
Class C VAR & Co. 2,967,532 19.43%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 7,187,415 47.05%
P.O. Box 64482
St. Paul, MN 55164-0482

First Trust N.A. 3,597,501 23.55%
as Fiduciary for First Retirement
180 East 5th Street
St. Paul, MN 55101-1631

Special Equity Fund
Class C VAR & Co. 6,881,910 33.12%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 10,765,241 51.81%
P.O. Box 64482
St. Paul, MN 55164-0482

First Trust N.A. 2,699,160 12.99%
as Fiduciary for First Retirement
180 East 5th Street
St. Paul, MN 55101-1631

Stock Fund
Class A Wells Fargo Bank Trustee 101,886 6.26%
FBO AMD 401(K) Plan
P. O. Box 9800
Calabasas, CA 91372-0800

Class C VAR & Co. 14,691,939 38.75%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 15,243,093 40.21%
P.O. Box 64482
St. Paul, MN 55164-0482

First Trust N.A. 7,115,051 18.77%
as Fiduciary for First Retirement
180 East 5th Street
St. Paul, MN 55101-1631
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
FUND NAME AND ADDRESSES OWNED OF CLASS
- ---------------------- ---------------------------------- ---------- ----------
<S> <C> <C> <C>
Technology Fund
Class A Trident Arbitrage Partners LP 26,482 6.64%
45 Pine Street Ste. 3A
New Canaan, CT 06840-5409

Blackcomb Associates LP 33,505 8.40%
P. O. Box 5430
Incline Village, NV 89450-5430

J. C. Bradford & Co. 66,647 16.71%
Custodian FBO
RCIP Limited Partners I
330 Commerce Street
Nashville, TN 37201-1805

Class C VAR & Co. 6,102,830 82.77%
P.O. Box 64482
St. Paul, MN 55164-0482

VAR & Co. 703,006 9.53%
P.O. Box 64482
St. Paul, MN 55164-0482

First Trust N.A. 484,578 6.57%
as Fiduciary for First Retirement
180 East 5th Street
St. Paul, MN 55101-1631

FASF:

Strategy Income Fund VAR & Co. 318,024 10.71%
P.O. Box 64482
St. Paul, MN 55164-0482

Service 145 Corp. 510,572 17.19%
50 Green Meadow Blvd.
Eagan, MN 55121

Strategy Growth Fund Video Professor 60,445 5.93%
1310 Wadsworth Blvd.
Suite 100
Lakewood, CO 80215-5169

Douglas Spedding, Trustee 86,040 8.44%
R. Douglas Spedding Trust
c/o 4380 E. Alameda Ave.
Glendale, CO 80222

Strategy Growth & Commerical Contractors Eqp. Inc. 143,219 6.99%
Income Fund P.O. Box 80136
Lincoln, NE 68501-1036

Strategy Aggressive Douglas Spedding, Trustee 83,345 10.34%
Growth Fund R. Douglas Spedding Trust
c/o 4380 E. Alameda Ave.
Glendale, CO 80222
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PROXY

FIRST AMERICAN FUNDS, INC.
FIRST AMERICAN STRATEGY FUNDS, INC.

OAKS, PENNSYLVANIA 19456

THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST
AMERICAN FUNDS, INC. AND FIRST AMERICAN STRATEGY FUNDS, INC.

The undersigned hereby appoints Kathryn L. Stanton, Michael J. Radmer,
and Donna Rafa, and each of them, with power to act without the other and with
the right of substitution in each, as proxies of the undersigned and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of each series of First American Funds, Inc. ("FAF") and First American
Strategy Funds, Inc. ("FASF") held of record by the undersigned on September 2,
1997, at the joint Special Meeting of shareholders of FASF, FAF and First
American Investment Funds, Inc. (each referred to individually as a "Company")
to be held on Friday, October 31, 1997, or any adjournments or postponements
thereof, with all powers the undersigned would possess if present in person. All
previous proxies given with respect to the joint Special Meeting hereby are
revoked.

THE PROXIES ARE INSTRUCTED TO VOTE AS FOLLOWS:

Vote on Directors

1. Election of Directors. The nominees are: 1) Robert J. Dayton, 2) Andrew
M. Hunter III, 3) Leonard W. Kedrowski, 4) Robert L. Spies, 5) Joseph
D. Strauss, 6) Virginia L. Stringer and Roger A. Gibson.

If you wish to withhold authority for any nominee, please mark the box
entitled "For all except" and write the nominee's number(s) on the
line below.

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[ ] FOR ALL [ ] WITHHOLD ALL [ ] FOR ALL EXCEPT

Vote on Proposals

2. To ratify the selection of KPMG Peat Marwick LLP as independent public
accountants for each Company for the current fiscal year.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED "FOR" PROPOSALS 1 AND 2 ABOVE. RECEIPT OF THE NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS AND THE PROXY STATEMENT RELATING TO THE MEETING
IS ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY.

PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS BELOW. WHEN SHARES
ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY PARTNER OR OTHER
AUTHORIZED PERSON.

DATED: __________________________, 1997

____________________________________
Signature

[SHAREHOLDER INFORMATION]

____________________________________
Signature if held jointly

TO SAVE FURTHER SOLICITATION EXPENSE, PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED POSTAGE-PREPAID ENVELOPE.

<PAGE>

PROXY

FIRST AMERICAN INVESTMENTS FUNDS, INC.,
OAKS, PENNSYLVANIA 19456

THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST
AMERICAN INVESTMENT FUNDS, INC.

The undersigned hereby appoints Kathryn L. Stanton, Michael J. Radmer,
and Donna Rafa, and each of them, with power to act without the other and with
the right of substitution in each, as proxies of the undersigned and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of [name of portfolio], held of record by the undersigned on September 2,
1997, at the joint Special Meeting of shareholders of First American Investment
Funds, Inc., First American Funds, Inc. and First American Strategy Funds, Inc.
(each referred to individually as a "Company") to be held on Friday, October 31,
1997, or any adjournments or postponements thereof, with all powers the
undersigned would possess if present in person. All previous proxies given with
respect to the joint Special Meeting hereby are revoked.

THE PROXIES ARE INSTRUCTED TO VOTE AS FOLLOWS:

Vote on Directors

If you wish to withhold authority for any nominee, please mark the box
entitled "For all except" and write the nominee's number(s) on the
line below.

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

[ ] FOR ALL [ ] WITHHOLD ALL [ ] FOR ALL EXCEPT

Vote on Proposals

2. To ratify the selection of KPMG Peat Marwick LLP as independent public
accountants for each Company for the current fiscal year.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. To consider and vote on a proposal that would eliminate a fundamental
investment restriction of FAIF, which would allow an FAIF Fund to
mortgage, pledge or hypothecate its assets.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. To consider and vote on a proposed amendment to FAIF's articles of
incorporation which would reduce the quorum required to conduct
business at shareholders meetings from 30% of all outstanding shares to
10% of all outstanding shares of FAIF or, in the case of voting by
classes or series of shares, such percentages of the applicable classes
or series.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4 ABOVE. RECEIPT OF THE NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS AND THE PROXY STATEMENT RELATING TO THE
MEETING IS ACKNOWLEDGED BY YOUR EXECUTION OF THIS PROXY.

DATED: __________________________, 1997

____________________________________
Signature

[SHAREHOLDER INFORMATION]

____________________________________
Signature if held jointly

TO SAVE FURTHER SOLICITATION EXPENSE, PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED POSTAGE-PREPAID ENVELOPE.