<PAGE> PAGE 1
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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 14
SIGNATURE SUSAN J HAEDT
TITLE CONTROLLER
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> IAI INTERNATIONAL FUND
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 118402
<INVESTMENTS-AT-VALUE> 120285
<RECEIVABLES> 542
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120833
<PAYABLE-FOR-SECURITIES> 1
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<OTHER-ITEMS-LIABILITIES> 3175
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<SENIOR-EQUITY> 92
<PAID-IN-CAPITAL-COMMON> 107112
<SHARES-COMMON-STOCK> 9223
<SHARES-COMMON-PRIOR> 11459
<ACCUMULATED-NII-CURRENT> 1133
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7686
<OVERDISTRIBUTION-GAINS> 0
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<APPREC-INCREASE-CURRENT> (12076)
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<EQUALIZATION> 0
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<NUMBER-OF-SHARES-SOLD> 4958
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 02
<NAME> IAI DEVELOPING COUNTRIES FUND
<MULTIPLIER> 1,000
<S> <C>
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<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
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<INVESTMENTS-AT-VALUE> 9069
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<SENIOR-EQUITY> 9
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<SHARES-COMMON-PRIOR> 697
<ACCUMULATED-NII-CURRENT> 50
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (538)
<NET-ASSETS> 9601
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<EXPENSES-NET> 90
<NET-INVESTMENT-INCOME> 50
<REALIZED-GAINS-CURRENT> 547
<APPREC-INCREASE-CURRENT> (701)
<NET-CHANGE-FROM-OPS> (104)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6
<DISTRIBUTIONS-OF-GAINS> 52
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 542
<NUMBER-OF-SHARES-REDEEMED> 325
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> 2244
<ACCUMULATED-NII-PRIOR> 6
<ACCUMULATED-GAINS-PRIOR> 49
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 80
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<GROSS-EXPENSE> 108
<AVERAGE-NET-ASSETS> 9113
<PER-SHARE-NAV-BEGIN> 10.56
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> (.09)
<PER-SHARE-DIVIDEND> .01
<PER-SHARE-DISTRIBUTIONS> .06
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.45
<EXPENSE-RATIO> 2
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
EXHIBIT 99.77C
On March 21, 1996, a special meeting of the
shareholders of IAI Funds III, Inc., IAI International Fund
and IAI Developing Countries Fund (the "Funds") was held.
In addition to the approval of auditors, continuation of the
current advisory contract and the election of directors the
meeting also addressed the approval of a new Management
Agreement.
The Management Agreement provides that IAI will provide
or arrange for the provision of services needed by the
Funds. These services include investment advisory,
administrative and other miscellaneous shareholder services.
The Management Agreement does not compensate IAI for any
distribution services it may arrange for the Funds. The
Management Agreement further provides that IAI will pay all
of the Funds' expenses except brokerage commissions and
other expenditures in connection with the purchase and sale
of portfolio securities, interest expense and any taxes and
extraordinary expenses specifically approved by a majority
of the Fund's disinterested director's. Finally, the basis
for calculating the fees under the Management Agreement is
average daily net assets. The switch from average month-end
net assets to average daily net assets is expected to have a
negligible effect on the dollar amount of the total fees and
expenses the Funds pay. The new, all-inclusive fee, as a
percentage of the Funds' average daily net assets, that the
Funds will pay IAI under the Management Agreement is for the
IAI International Fund equal to 1.70% of the first $100
million in net assets, 1.45% o f the next $150 million in
net assets, 1.30% of the next $250 million in net assets,
and 1.30% of net assets in excess of $500 million and for
the IAI Developing Countries Fund is equal to 2.00% of the
first $100 million in net assets, 1.95% of the next $150
million in net assets, 1.75% of the next $250 million in net
assets, and 1.65% of net assets in excess of $500 million.
The result of the proxy ballot is as follows: IAI
International Fund had 7,972,139 shares voted for the new
Management Agreement and 42,773 shares voted against the new
Management Agreement and IAI Developing Countries Fund had
511,145 shares voted for the new Management Agreement and
11,308 shares voted against the new management Agreement.
