<PAGE> PAGE 1
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001 A000000 IAI INVESTMENT FUND III, INC.
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002 B000000 MILWAUKEE
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<PAGE> PAGE 2
011 A00AA01 RAFERTY CAPITAL MARKETS, INC.
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011 C01AA01 WHITE PLAINS
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<PAGE> PAGE 3
015 A00AA18 NATIONAL NOMINEES LIMITED
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015 D01AA18 NEW ZEALAND
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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SIGNATURE CHRISTINE GRAY
TITLE ASSISTANT SECRETARY
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806128
<NAME> IAI INVESTMENT FUNDS III, Inc.
<SERIES>
<NUMBER> 1
<NAME> IAI International Fund
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<INVESTMENTS-AT-COST> 18,971,101
<INVESTMENTS-AT-VALUE> 17,699,792
<RECEIVABLES> 1,579,501
<ASSETS-OTHER> 10,696
<OTHER-ITEMS-ASSETS> 0
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<SENIOR-EQUITY> 0
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</TABLE>
Independent Auditors' Report on Internal
Accounting Control
The Board of Directors and Shareholders
IAI Investment Funds III, Inc.:
In planning and performing our audit of the financial statements of IAI
International Fund (a portfolio within IAI Investment Funds III, Inc.) for
the year ended October 31, 1999, we considered its internal control,
including control activities for safeguarding securities, in order to
determine our auditing procedures for the purpose of expressing our opinion
on the financial statements and to comply with the requirements of Form
N-SAR, not to provide assurance on the internal control.
The management of IAI Investment Funds III, Inc. is responsible for
establishing and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of controls. Generally,
controls that are relevant to an audit pertain to the entity's objective of
preparing financial statements for external purposes that are fairly
presented in conformity with generally accepted accounting principles.
Those controls include the safeguarding of assets against unauthorized
acquisition, use, or disposition.
Because of inherent limitations in internal control, errors or
irregularities may occur and not be detected. Also, projection of any
evaluation of internal control to future periods is subject to the risk
that it may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control would not necessarily disclose
all matters in the internal control that might be material weaknesses under
standards established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which the design or
operation of one or more of the internal control components does not reduce
to a relatively low level the risk that errors or irregularities in amounts
that would be material in relation to the financial statements being
audited may occur and not be detected within a timely period by employees
in the normal course of performing their assigned functions. However, we
noted no matters involving the internal control and its operation,
including controls for safeguarding securities, that we consider to be
material weaknesses as defined above.
This report is intended solely for the information and use of management,
the Board of Directors, and the Securities and Exchange Commission, and is
not intended to be and should not be used by anyone other than these
specified parties.
KPMG LLP
Minneapolis, Minnesota
December 17, 1999
