FIRST AMERICAN INVESTMENT FUNDS INC, 485APOS, 1995-06-21

FIRST AMERICAN INVESTMENT FUNDS INC
485APOS, 1995-06-21

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1933 Act Registration No. 33-16905
1940 Act Registration No. 811-5309

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1995

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PX

Pre-effective Amendment No. [ ]

Post-effective Amendment No. 23 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]

Amendment No. 24

FIRST AMERICAN INVESTMENT FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

680 EAST SWEDESFORD ROAD, WAYNE, PENNSYLVANIA 19087
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(610) 254-1924
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

DAVID LEE
C/O SEI CORPORATION, 680 EAST SWEDESFORD ROAD, WAYNE, PENNSYLVANIA 19087
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPIES TO:
KATHRYN STANTON, ESQ. MICHAEL J. RADMER, ESQ.
SEI CORPORATION JAMES D. ALT, ESQ.
680 EAST SWEDESFORD ROAD DORSEY & WHITNEY
WAYNE, PENNSYLVANIA 19087 220 SOUTH SIXTH STREET
MINNEAPOLIS, MINNESOTA 55402

IT IS PROPOSED THAT THIS FILING SHALL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):

[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485
[ ] ON (DATE) PURSUANT TO PARAGRAPH (B) OF RULE 485
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(I) OF RULE 485
[ ] ON (DATE) PURSUANT TO PARAGRAPH (A)(I) OF RULE 485

[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(II) OF RULE 485
[X] WITH RESPECT TO REAL ESTATE SECURITIES FUND, ON JUNE 30, 1995
PURSUANT TO PARAGRAPH (A)(II) OF RULE 485

REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OR AMOUNT OF SECURITIES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. A RULE 24F-2 NOTICE WAS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON NOVEMBER 16, 1994.

FIRST AMERICAN INVESTMENT FUNDS, INC.

REAL ESTATE SECURITIES FUND

CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A

NOTE: PART A of this amendment to the Registration Statement consists
of two prospectuses, i.E., (1) Retail Class Prospectus relating to Class A and
Class B Shares of Real Estate Securities Fund, and (2) Institutional Class
Prospectus relating to Class C Shares of Real Estate Securities Fund. PART B of
this Registration Statement consists of one Statement of Additional Information,
which relates to both of the Prospectuses listed above.

ITEM NUMBER OF FORM N-1A

PART A CAPTION IN PROSPECTUS

RETAIL CLASSES PROSPECTUS

1 Cover Page
2 Summary; Fees And Expenses
3 Not Applicable
4 The Fund; Investment Objective And Policies; Special Investment
Methods
5 Management; Distributor
5A Not Applicable
6 Fund Shares; Investing In The Fund; Federal Income Taxes
7 Distributor; Investing In The Fund; Determining The Price Of
Shares
8 Redeeming Shares
9 Not Applicable

INSTITUTIONAL CLASS PROSPECTUS

1 Cover Page
2 Summary; Fees And Expenses
3 Not Applicable
4 The Fund; Investment Objectives And Policies; Special Investment
Methods
5A Not Applicable
5 Management; Distributor
6 Fund Shares; Purchases And Redemptions Of Shares; Federal Income
Taxes
7 Distributor; Purchases And Redemptions Of Shares
8 Purchases And Redemptions Of Shares
9 Not Applicable

CAPTION IN STATEMENT
PART B OF ADDITIONAL INFORMATION

10 Cover Page
11 Table Of Contents
12 General Information
13 Additional Information Concerning Fund Investments; Investment
Restrictions
14 Directors And Executive Officers
15 Capital Stock
16 Investment Advisory And Other Services
17 Portfolio Transactions And Allocation Of Brokerage
18 Not Applicable
19 Net Asset Value And Public Offering Price
20 Taxation
21 Investment Advisory And Other Services
22 Fund Performance
23 Financial Statements

FIRST AMERICAN INVESTMENT FUNDS, INC.
680 EAST SWEDESFORD ROAD, WAYNE, PENNSYLVANIA 19087

RETAIL CLASSES PROSPECTUS

The shares described in this Prospectus represent interests in First
American Investment Funds, Inc., which consists of mutual funds with
several different investment portfolios and objectives. This Prospectus
relates to the Class A and Class B Shares of the following fund (the
"Fund"):

* REAL ESTATE SECURITIES FUND

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING FIRST BANK NATIONAL ASSOCIATION AND
ANY OF ITS AFFILIATES, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUND INVOLVES INVESTMENT RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL, DUE TO FLUCTUATIONS IN THE FUND'S NET ASSET VALUE.

This Prospectus concisely sets forth information about the Fund that a
prospective investor should know before investing. It should be read
and retained for future reference.

A Statement of Additional Information dated June 30, 1995 for the Fund
has been filed with the Securities and Exchange Commission and is
incorporated in its entirety by reference in this Prospectus. To obtain
copies of the Statement of Additional Information at no charge, or to
obtain other information or make inquiries about the Fund, call (800)
637-2548 or write SEI Financial Services Company, 680 East Swedesford
Road, Wayne, Pennsylvania 19087.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this Prospectus is June 30, 1995.

TABLE OF CONTENTS

PAGE

SUMMARY ...................................... 3

FEES AND EXPENSES.............................. 5
Class A Share Fees and Expenses.......... 5
Class B Share Fees and Expenses.......... 6
Information Concerning Fees and
Expenses.............................. 7

THE FUND ...................................... 7

INVESTMENT OBJECTIVE AND POLICIES.............. 8
Real Estate Securities Fund.............. 8
Risks to Consider........................ 9

MANAGEMENT..................................... 10
Investment Adviser....................... 10
Portfolio Managers....................... 11
Custodian................................ 11
Administrator............................ 11
Transfer Agent........................... 11

DISTRIBUTOR.................................... 12

INVESTING IN THE FUND.......................... 13
Share Purchases.......................... 13
Minimum Investment Required.............. 13
Alternative Sales Charge Options......... 13
Systematic Investment Program............ 17
Exchanging Securities for Fund
Shares................................ 17
Certificates and Confirmations........... 17

Dividends and Distributions.............. 18
Exchange Privilege....................... 18

REDEEMING SHARES............................... 20
By Telephone............................. 20
By Mail.................................. 20
By Systematic Withdrawal Program......... 21
Redemption Before Purchase
Instruments Clear..................... 21
Accounts with Low Balances............... 21

DETERMINING THE PRICE OF SHARES................ 22
Determining Net Asset Value.............. 22

FEDERAL INCOME TAXES........................... 23

FUND SHARES.................................... 23

CALCULATION OF PERFORMANCE DATA................ 24

SPECIAL INVESTMENT METHODS..................... 25
Cash Items............................... 25
Repurchase Agreements.................... 25
When-Issued and Delayed-Delivery
Transactions.......................... 25
Lending of Portfolio Securities.......... 26
Options Transactions..................... 26
Fixed Income Securities.................. 27
Portfolio Transactions................... 27
Portfolio Turnover....................... 27
Investment Restrictions.................. 28

SUMMARY

First American Investment Funds, Inc. ("FAIF") is an open-end
investment company which offers shares in several different mutual
funds. This Prospectus provides information with respect to the Class A
and Class B Shares of Real Estate Securities Fund (the "Fund").

REAL ESTATE SECURITIES FUND has an objective of providing above average
current income and long-term capital appreciation by investing
primarily in equity securities of real estate companies. Under normal
market conditions, the Fund invests at least 65% of its total assets in
income producing equity securities of publicly traded companies
principally engaged in the real estate industry. A majority of the
Fund's total assets will be invested in securities of real estate
investment trusts ("REITs"), with an expected emphasis on Equity REITs.
See "Investment Objective and Policies."

INVESTMENT ADVISER First Bank National Association (the "Adviser")
serves as investment adviser to the Fund. See "Management."

DISTRIBUTOR; ADMINISTRATOR SEI Financial Services Company (the
"Distributor") serves as the distributor of the Fund's shares. SEI
Financial Management Corporation (the "Administrator") serves as the
administrator of the Fund. See "Management" and "Distributor."

OFFERING PRICES Class A Shares of the Fund are sold at net asset value
plus a maximum sales charge of 4.50%. These sales charges are reduced
on purchases of $50,000 or more. Purchases of $1 million or more of
Class A Shares are not subject to an initial sales charge, but a
contingent deferred sales charge of 1.00% will be imposed on such
purchases in the event of redemption within 24 months following the
purchase. Class A Shares of the Fund otherwise are redeemed at net
asset value without any additional charge. Class A Shares of the Fund
are subject to a Rule 12b-1 distribution and service fee computed at an
annual rate of 0.25% of the average daily net assets of that class.
See "Investing in the Fund -- Alternative Sales Charge Options."

Class B Shares of the Fund are sold at net asset value without an
initial sales charge. Class B Shares of the Fund are subject to Rule
12b-1 distribution and service fees computed at an annual rate totaling
1.00% of the average daily net assets of that class. If Class B Shares
are redeemed within six years after purchase, they are subject to a
contingent deferred sales charge declining from 5.00% in the first year
to zero after six years. Class B Shares automatically convert into
Class A Shares approximately eight years after purchase. See "Investing
in the Fund -- Alternative Sales Charge Options."

MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS The minimum initial
investment is $1,000 ($250 for IRAs) for the Fund. Subsequent
investments must be $100 or more. Regular investment in the Fund is
simplified through the Systematic Investment Program through which
monthly purchases of $100 or more are possible. See "Investing in the
Fund -- Minimum Investment Required" and "-- Systematic Investment
Program."

EXCHANGES Shares of the Fund may be exchanged for the same class of
shares of other FAIF funds at the shares' respective net asset values
with no additional charge. See "Investing in the Fund -Exchange
Privilege."

REDEMPTIONS Shares of the Fund may be redeemed at any time at their net
asset value next determined after receipt of a redemption request by
the Fund's transfer agent, less any applicable contingent deferred
sales charge. The Fund may, upon 60 days written notice, redeem an
account if the account's net asset value falls below $500. See
"Investing in the Fund" and "Redeeming Shares."

RISKS TO CONSIDER Because the 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. In addition, because the
Fund may invest a substantial portion of its assets in REITs, it also
is subject to the risks associated with direct investments in REITs
which are discussed under "Risks to Consider -- Investments in REITs."
Investors also should note that the Fund will operate as a
"non-diversified" investment company under the Investment Company Act
of 1940, which means that it may invest a greater proportion of its
assets in the securities of one or a limited number of issuers than may
a "diversified" investment company.

The Fund also is subject to the risk of generally adverse equity
markets. Investors should recognize that market prices of equity
securities generally, and of particular companies' equity securities,
frequently are subject to greater volatility than prices of fixed
income securities.

The performance of the Fund will reflect in part the ability of the
Adviser to select securities which are suited to achieving its
investment objective. Due to its active management, the Fund could
underperform other mutual funds with similar investment objectives or
the market generally.

The Fund may enter into repurchase agreements, purchase put and call
options and write covered call options, purchase securities on a
when-issued or delayed-delivery basis, and engage in securities lending
transactions to the extent described under "Investment Objective and
Policies -- Real Estate Securities Fund -- Investment Policies" and
"Special Investment Methods."

SHAREHOLDER INQUIRIES Any questions or communications regarding the
Fund or a shareholder account should be directed to the Distributor by
calling (800) 637-2548, or to the financial institution which holds
shares on an investor's behalf.

FEES AND EXPENSES RETAIL CLASSES

CLASS A SHARE FEES AND EXPENSES

<TABLE>
<CAPTION>
REAL
ESTATE
SECURITIES
FUND
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases (as a percentage of offering
price)(1).......................................................................... 4.50%
Maximum sales load imposed on reinvested dividends....................................... None
Deferred sales load(1)................................................................... None
Redemption fees.......................................................................... None
Exchange fees............................................................................ None

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment advisory fees (after voluntary fee waivers and reimbursements(2).............. 0.44%
Rule 12b-1 fees (after voluntary waivers)(2)............................................. 0.00%
Other expenses(2)........................................................................ 0.36%
Total fund operating expenses (after voluntary fee waivers and
reimbursements)(2)................................................................. 0.80%

EXAMPLE(3)
You would pay the following expenses on a $1,000 investment, assuming
(i) the maximum applicable sales charge for the Fund; (ii) a 5% annual
return; and (iii) redemption at the end of each time period:

1 year................................................................................... $53
3 years.................................................................................. $69

</TABLE>

(1) The rules of the Securities and Exchange Commission require that the
maximum sales charge be reflected in the above table. However, certain
investors may qualify for reduced sales charges. Purchases of $1 million or
more of Class A Shares are not subject to an initial sales charge, but a
contingent deferred sales charge of 1.00% will be imposed in the case of
redemption within 24 months following the purchase. See "Investing in the
Fund -- Alternative Sales Charge Options."

(2) The Adviser and the Distributor intend to waive a portion of their fees
and/or reimburse expenses on a voluntary basis, and the amounts shown
reflect these waivers and reimbursements as of the date of this Prospectus.
Each of these persons intends to maintain such waivers and reimbursements
in effect for the current fiscal year but reserves the right to discontinue
such waivers and reimbursements at any time in its sole discretion. Absent
any fee waivers, investment advisory fees as an annualized percentage of
average daily net assets would be 0.70%; Rule 12b-1 fees would be 0.25%;
and total fund operating expenses would be 1.31%. Other expenses includes
an administration fee and is based on estimated amounts for the current
fiscal year.

(3) Absent the fee waivers and reimbursements referred to in (2) above, the
dollar amounts for the 1 and 3-year periods would be $58 and $85,
respectively.

CLASS B SHARE FEES AND EXPENSES

<TABLE>
<CAPTION>
REAL
ESTATE
SECURITIES
FUND
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases (as a percentage of offering price).............. None
Maximum sales load imposed on reinvested dividends....................................... None
Maximum contingent deferred sales charge (as a percentage of original
purchase price or redemption proceeds, as applicable).............................. 5.00%
Redemption fees.......................................................................... None
Exchange fees............................................................................ None

ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment advisory fees (after voluntary fee waivers and reimbursements(1).............. 0.44%
Rule 12b-1 fees.......................................................................... 1.00%

Other expenses(1)........................................................................ 0.36%

Total fund operating expenses (after voluntary fee waivers and
reimbursements)(1)................................................................. 1.80%

EXAMPLE:

ASSUMING REDEMPTION(2)

You would pay the following expenses on a $1,000 investment, assuming
(i) a 5% annual return; (ii) redemption at the end of each time period;
and (iii) payment of the maximum applicable contingent deferred sales
charge of 5% in year 1 and 4% in year 3:

1 year................................................................................... $68
3 years.................................................................................. $97

ASSUMING NO REDEMPTION(3)
You would pay the following expenses on the same investment, assuming
no redemption:

1 year................................................................................... $18
3 years.................................................................................. $57

</TABLE>

(1) The Adviser intends to waive a portion of its fees and/or reimburse
expenses on a voluntary basis, and the amounts shown reflect this waiver
and reimbursement as of the date of this Prospectus. The Adviser intends to
maintain such waiver and reimbursement in effect for the current fiscal
year but reserves the right to discontinue such waiver and reimbursement at
any time in its sole discretion. Absent any fee waivers, investment
advisory fees as an annualized percentage of average daily net assets would
be 0.70%; and total fund operating expenses would be 2.06%. Other expenses
includes an administration fee and is based on estimated amounts for the
current fiscal year.

(2) Absent the fee waiver and reimbursement referred to in (1) above, the
dollar amounts for the 1 and 3-year periods would be $71 and $105,
respectively.

(3) Absent the fee waiver and reimbursement referred to in (1) above and
assuming no redemptions, the dollar amounts for the 1 and 3-year periods
would be $21 and $65, respectively.

INFORMATION CONCERNING FEES AND EXPENSES

The purpose of the preceding tables is to assist the investor in
understanding the various costs and expenses that an investor in the
Fund may bear directly or indirectly. THE EXAMPLES CONTAINED IN THE
TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
information set forth in the foregoing tables and examples relates only
to the Class A and Class B Shares of the Fund. The Fund also offers
Class C Shares which are subject to the same expenses except that they
bear no sales loads and distribution fees.

The examples in the above tables are based on projected annual Fund
operating expenses after voluntary fee waivers and expense
reimbursements by the Adviser and the Distributor. Although these
persons intend to maintain such waivers in effect for the current
fiscal year, any such waivers are voluntary and may be discontinued at
any time. Prior to fee waivers, investment advisory fees accrue at the
annual rate as a percentage of average daily net assets of 0.70%.

The Class A Shares of the Fund may pay distribution and service fees to
the Distributor in an amount equaling 0.25% per year of such class's
average daily net assets, and the Class B Shares of the Fund bear
distribution and servicing fees totaling 1.00% per year of such class's
average daily net assets. The Distributor also receives the sales
charge for distributing the Fund's Class A Shares. Due to the
distribution fees paid by these classes of shares, long-term
shareholders may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by NASD rules. For additional
information, see "Distributor."

Other expenses include fees paid by the Fund to the Administrator for
providing various services necessary to operate the Fund. These include
shareholder servicing and certain accounting and other services. The
Administrator provides these services for a fee calculated at an annual
rate of 0.12% of average daily net assets of the Fund subject to a
minimum of $50,000 per fiscal year; provided, that to the extent that
the aggregate net assets of all First American funds exceed $8 billion,
the percentage stated above is reduced to 0.105%. Other expenses of the
Fund also includes the cost of maintaining shareholder records,
furnishing shareholder statements and reports, and other services.
Investment advisory fees, administrative fees and other expenses are
reflected in the Fund's daily dividends and are not charged to
individual shareholder accounts.

THE FUND

FAIF is an open-end management investment company which offers shares
in several different mutual funds (collectively, the "FAIF Funds"),
each of which evidences an interest in a separate and distinct
investment portfolio. Shareholders may purchase shares in each FAIF
Fund through three separate classes (Class A, Class B and Class C)
which provide for variations in distribution costs, voting rights and
dividends. Except for these differences among classes, each share of
each FAIF Fund represents an undivided proportionate interest in that
fund. FAIF is incorporated under the laws of the State of Maryland, and
its principal offices are located at 680 East Swedesford Road, Wayne,
Pennsylvania 19087.

This Prospectus relates only to the Class A and Class B Shares of the
Fund named on the cover hereof. Information regarding the Class C
Shares of this Fund and regarding the Class A, Class B and Class C
Shares of the other FAIF Funds is contained in separate prospectuses
that may be obtained from FAIF's Distributor, SEI Financial Services
Company, 680 East Swedesford Road, Wayne, Pennsylvania 19087, or by
calling (800) 637-2548. The Board of Directors of FAIF may authorize
additional series or classes of common stock in the future.

INVESTMENT OBJECTIVE AND POLICIES

This section describes the investment objective and policies of the
Fund. There is no assurance that the Fund's investment objective will
be achieved. The Fund's investment objective is not fundamental and
therefore may be changed without a vote of shareholders. Such a change
could result in the Fund having an investment objective different from
that which shareholders considered appropriate at the time of their
investment in the Fund. Shareholders will receive written notification
at least 30 days prior to any change in the Fund's investment
objective. The Fund is a non-diversified investment company, as defined
in the Investment Company Act of 1940 (the "1940 Act").

If a percentage limitation on investments by the Fund stated below or
in the Statement of Additional Information is adhered to at the time of
an investment, a later increase or decrease in percentage resulting
from changes in asset values will not be deemed to violate the
limitation. Where the Fund is limited to investing in securities with
specified ratings, it is not required to sell a security if its rating
is reduced or discontinued after purchase, but it may consider doing
so. However, in no event will more than 5% of the Fund's net assets be
invested in non-investment grade securities. Descriptions of the rating
categories of Standard & Poor's Corporation ("Standard & Poor's") and
Moody's Investors Service, Inc. ("Moody's") are contained in the
Statement of Additional Information.

When the term "equity securities" is used in this Prospectus, it refers
to common stock (including, with respect to real estate investment
trusts, shares or units of beneficial interest therein) and securities
which are convertible into or exchangeable for, or which carry warrants
or other rights to acquire, common stock.

This section also contains information concerning certain investment
risks borne by Fund shareholders under the heading "-- Risks to
Consider." Further information concerning the securities in which the
Fund may invest and related matters is set forth under "Special
Investment Methods."

REAL ESTATE SECURITIES FUND

OBJECTIVE. Real Estate Securities Fund has an objective of providing
above average current income and long-term capital appreciation by
investing primarily in equity securities of real estate companies.

INVESTMENT POLICIES. Under normal market conditions, Real Estate
Securities Fund invests at least 65% of its total assets in income
producing equity securities of publicly traded companies principally
engaged in the real estate industry. For this purpose, a company is
deemed to be "principally engaged" in the real estate industry if (i)
it derives at least 50% of its revenues or profits from the ownership,
construction, management, financing or sale of residential, commercial
or industrial real estate, or (ii) has at least 50% of the fair market
value of its assets invested in such real estate. The Fund seeks to
invest in equity securities that provide a dividend yield that exceeds
the composite dividend yield of the securities included in the Standard
& Poor's 500 Composite Stock Price Index.

A majority of the 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 the Fund can invest in all
three kinds of REITs, its emphasis is expected to be on investments in
Equity REITs.

The Fund also may invest up to 35% of its total assets in fixed income
securities of the kinds described under "Special Investment Methods --
Fixed Income Securities."

In addition, the Fund may (i) enter into repurchase agreements; (ii) in
order to attempt to reduce risk, purchase put and call options on
equity securities and on stock indices; (iii) write covered call
options covering up to 25% of the equity securities owned by the Fund;
(iv) purchase securities on a when-issued or delayed-delivery basis;
and (v) engage in the lending of portfolio securities. For information
about these investment methods and certain associated risks, see the
related headings under "Special Investment Methods."

For temporary defensive purposes during times of unusual market
conditions, the Fund may without limitation hold cash or invest in cash
items of the kinds described under "Special Investment Methods -- Cash
Items." The Fund also may invest not more than 35% of its total assets
in cash and cash items in order to utilize assets awaiting normal
investment.

RISKS TO CONSIDER

An investment the Fund involves certain risks. These include the
following:

CONCENTRATION IN REAL ESTATE INDUSTRY; NON-DIVERSIFICATION. Because the
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 the 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").

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

EQUITY SECURITIES GENERALLY. Market prices of equity securities
generally, and of particular companies' equity securities, frequently
are subject to greater volatility than prices of fixed income
securities. Market prices of equity securities as a group have dropped
dramatically in a short period of time on several occasions in the
past, and they may do so again in the future. The Fund is subject to
the risk of generally adverse equity markets.

ACTIVE MANAGEMENT. The performance of the Fund will reflect in part the
ability of the Adviser to select securities which are suited to
achieving the Fund's investment objective. Due to its active
management, the Fund could underperform other mutual funds with similar
investment objectives or the market generally.

OTHER. Investors also should review "Special Investment Methods" for
information concerning risks associated with certain investment
techniques which may be utilized by the Fund.

MANAGEMENT

The Board of Directors of FAIF has the primary responsibility for
overseeing the overall management and electing the officers of FAIF.
Subject to the overall direction and supervision of the Board of
Directors, the Adviser acts as investment adviser for and manages the
investment portfolios of FAIF.

INVESTMENT ADVISER

First Bank National Association, 601 Second Avenue South, Minneapolis,
Minnesota 55480, is the Fund's investment adviser. The Adviser has
acted as an investment adviser to FAIF since its inception in 1987 and
has acted as investment adviser to First American Funds, Inc. since
1982. As of December 31, 1994, the Adviser was managing accounts with
an aggregate value of over $23 billion. First Bank System, Inc., 601
Second Avenue South, Minneapolis, Minnesota 55480, is the holding
company for the Adviser.

The Fund has agreed to pay the Adviser monthly fees calculated on an
annual basis equal to 0.70% of its average daily net assets. The
Adviser may, at its option, waive any or all of its fees, or reimburse
expenses, with respect to the Fund from time to time. Any such waiver
or reimbursement is voluntary and may be discontinued at any time. The
Adviser also may absorb or reimburse expenses of the Fund from time to
time, in its discretion, while retaining the ability to be reimbursed
by the Fund for such amounts prior to the end of the fiscal year. This
practice would have the effect of lowering the 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 Glass-Steagall Act generally prohibits banks from engaging in the
business of underwriting, selling or distributing securities and from
being affiliated with companies principally engaged in those
activities. In addition, administrative and judicial interpretations of
the Glass-Steagall Act prohibit bank holding companies and their bank
and nonbank subsidiaries from organizing, sponsoring or controlling
registered open-end investment companies that are continuously engaged
in distributing their shares. Bank holding companies and their bank and
nonbank subsidiaries may serve, however, as investment advisers to
registered investment companies, subject to a number of terms and
conditions.

Although the scope of the prohibitions and limitations imposed by the
Glass-Steagall Act has not been fully defined by the courts or the
appropriate regulatory agencies, the Fund has received an opinion from
their counsel that the Adviser is not prohibited from performing the
investment advisory services described above, and that FBS Investment
Services, Inc. ("ISI"), a wholly owned broker-dealer subsidiary of the
Adviser, is not prohibited from serving as a Participating Institution
as described herein. In the event of changes in federal or state
statutes or regulations or judicial and administrative interpretations
or decisions pertaining to permissible activities of bank holding
companies and their bank and nonbank subsidiaries, the Adviser and ISI
might be prohibited from continuing these arrangements. In that event,
it is expected that the Board of Directors would make other
arrangements and that shareholders would not suffer adverse financial
consequences.

PORTFOLIO MANAGERS

CHARLES S. INGWALSON is portfolio co-manager for Real Estate Securities
Fund. Charles joined the Adviser in 1984 as president of First Asset
Realty Advisers, where he managed the Adviser's collective real estate
investment vehicle for pension funds. Charles has over 30 years
experience in the real estate industry and is past president of the
Minnesota Mortgage Bankers Association and present treasurer of the
Minnesota Shopping Center Association. He received his bachelor's
degree from the University of North Dakota.

MARY M. HOYME is portfolio co-manager for Real Estate Securities Fund.
Mary joined the Adviser in 1989 as a research analyst, prior to which
she was employed for seven years as an equity and economic analyst with
IDS Financial Services. She received her bachelor's degree from the
University of Wisconsin -- Eau Claire and her master's degree in
business administration from the College of St.
Thomas. She is a Chartered Financial Analyst.

CUSTODIAN

The custodian of the Fund's assets is First Trust National Association
(the "Custodian"), First Trust Center, 180 East Fifth Street, St. Paul,
Minnesota 55101. The Custodian is a subsidiary of First Bank System,
Inc., which also controls the Adviser.

As compensation for its services, the Custodian is paid monthly fees
equal to 0.03% of the average daily net assets of the Fund.

ADMINISTRATOR

The administrator for the Fund is SEI Financial Management Corporation
(the "Administrator"), 680 East Swedesford Road, Wayne, Pennsylvania
19087. The Administrator, a wholly-owned subsidiary of SEI Corporation,
provides the Fund with certain administrative services necessary to
operate the Fund. These services include shareholder servicing and
certain accounting and other services. The Administrator provides these
services for a fee calculated at an annual rate of 0.12% of the Fund's
average daily net assets, subject to a minimum administrative fee
during each fiscal year of $50,000; provided, that to the extent that
the aggregate net assets of all First American funds exceed $8 billion,
the percentage stated above is reduced to 0.105%. From time to time,
the Administrator may voluntarily waive its fees or reimburse expenses
with respect to the Fund. Any such waivers or reimbursements may be
made at the Administrator's discretion and may be terminated at any
time.

TRANSFER AGENT

Supervised Service Company (the "Transfer Agent") serves as the
transfer agent and dividend disbursing agent for the Fund. The address
of the Transfer Agent is 811 Main Street, Kansas City, Missouri 64105.
The Transfer Agent is not affiliated with the Distributor, the
Administrator or the Adviser.

DISTRIBUTOR

SEI Financial Services Company is the principal distributor for shares
of the Fund and of the other FAIF Funds. The Distributor is a
Pennsylvania corporation and is the principal distributor for a number
of investment companies. The Distributor is a wholly-owned subsidiary
of SEI Corporation and is located at 680 East Swedesford Road, Wayne,
Pennsylvania 19087. The Distributor is not affiliated with the Adviser,
First Bank System, Inc., the Custodian or their respective affiliates.

Shares of the Fund are distributed through the Distributor and
securities firms, financial institutions (including, without
limitation, banks) and other industry professionals (the "Participating
Institutions") which enter into sales agreements with the Distributor
to perform share distribution or shareholder support services.

FAIF has adopted a Plan of Distribution for the Class A Shares pursuant
to Rule 12b-1 under the 1940 Act (the "Class A Distribution Plan"). The
Class A Distribution Plan authorizes the Distributor to retain the
sales charge paid upon purchase of Class A Shares, except that portion
which is reallowed to Participating Institutions. See "Investing in the
Fund -- Alternative Sales Charge Options." Under the Class A
Distribution Plan, the Fund also pays the Distributor a distribution
fee monthly at an annual rate of 0.25% of the Fund's Class A Shares'
average daily net assets, which fee may be used by the Distributor to
provide compensation for sales support and distribution activities with
respect to Class A Shares of the Fund. From time to time, the
Distributor may voluntarily waive its distribution fees with respect to
the Class A Shares of the Fund. Any such waivers may be made at the
Distributor's discretion and may be terminated at any time.

Under another distribution plan (the "Class B Distribution Plan")
adopted in accordance with Rule 12b-1 under the 1940 Act, the Fund may
pay to the Distributor a sales support fee at an annual rate of up to
0.75% of the average daily net assets of the Class B Shares of the
Fund, which fee may be used by the Distributor to provide compensation
for sales support and distribution activities with respect to Class B
Shares of the Fund. This fee is calculated and paid each month based on
the average daily net assets for that month. In addition to this fee,
the Distributor may be paid a shareholder servicing fee of 0.25% of the
average daily net assets of the Class B Shares pursuant to a service
plan (the "Class B Service Plan"), which fee may be used by the
Distributor to provide compensation for personal, ongoing servicing
and/or maintenance of shareholder accounts with respect to Class B
Shares of the Fund. Although Class B Shares are sold without an initial
sales charge, the Distributor pays a total of 4.25% of the amount
invested (including a prepaid service fee of 0.25% of the amount
invested) to dealers who sell Class B Shares (excluding exchanges from
other Class B Shares in the First American family). The service fee
payable under the Class B Service Plan is prepaid for the first year as
described above.

The Class A and Class B Distribution Plans recognize that the Adviser,
the Administrator, the Distributor, and any Participating Institution
may in their discretion use their own assets to pay for certain
additional costs of distributing Fund shares. Any arrangement to pay
such additional costs may be commenced or discontinued by any of these
persons at any time. In addition, while there is no sales charge on
purchases of Class A Shares of $1 million and more, the Adviser may pay
amounts to broker-dealers from its own assets with respect to such
sales. ISI, a subsidiary of the Adviser, is a Participating
Institution.

INVESTING IN THE FUND

SHARE PURCHASES

Shares of the Fund are sold at their net asset value, next determined
after an order is received, plus any applicable sales charge, on days
on which the New York Stock Exchange is open for business. Shares may
be purchased as described below. The Fund reserves the right to reject
any purchase request.

THROUGH A FINANCIAL INSTITUTION. Shares may be purchased through a
financial institution which as a sales agreement with the Distributor.
An investor may call his or her financial institution to place an
order. Purchase orders must be received by the financial institution by
the time specified by the institution to be assured same day
processing, and purchase orders must be transmitted to and received by
the Fund by 3:00 p.m. Central time in order for shares to be purchased
at that day's price. It is the financial institution's responsibility
to transmit orders promptly.

BY MAIL. An investor may place an order to purchase shares of the Fund
directly through the Transfer Agent. Orders by mail are considered
received after payment by check is converted by the Fund into federal
funds. In order to purchase shares by mail, an investor must:

* complete and sign the new account form;

* enclose a check made payable to (Fund name); and

* mail both to Supervised Service Company, P.O. Box 419382,
Kansas City, Missouri 64141-6382.

After an account is established, an investor can purchase shares by
mail by enclosing a check and mailing it to Supervised Service Company
at the above address.

BY WIRE. To purchase shares of the Fund by wire, call (800) 637-2548
before 3:00 p.m. Central time to place an order. All information needed
will be taken over the telephone, and the order will be considered
received when the Custodian receives payment by wire. Federal funds
should be wired as follows: First Bank National Association,
Minneapolis, Minnesota: ABA Number 091000022; For Credit to: Supervised
Service Company: Account Number 6023458026; For Further Credit To:
(Investor Name and Fund Name). Shares cannot be purchased by Federal
Reserve wire on days on which the New York Stock Exchange is closed and
on federal holidays upon which wire transfers are restricted.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment for the Fund is $1,000 unless the
investment is in a retirement plan, in which case the minimum
investment is $250. The minimum subsequent investment is $100. The Fund
reserves the right to waive the minimum investment requirement for
employees of First Bank National Association, First Trust National
Association and First Bank System, Inc. and their respective
affiliates.

ALTERNATIVE SALES CHARGE OPTIONS

THE TWO ALTERNATIVES: OVERVIEW. An investor may purchase shares of the
Fund at a price equal to its net asset value per share plus a sales
charge which, at the investor's election, may be imposed either (i) at
the time of the purchase (the Class A "initial sales charge
alternative"), or (ii) on a contingent deferred basis (the Class B
"deferred sales charge alternative"). Each of Class A and Class B
represents the Fund's interest in its portfolio of investments. The
classes have the same rights and are identical in all respects except
that (i) Class B Shares bear the expenses of the contingent deferred
sales charge arrangement and distribution and service fees resulting
from such sales arrangement; (ii) each class has exclusive voting
rights with respect to approvals of any Rule 12b-1 distribution plan
related to that specific class (although Class B shareholders may vote
on any distribution fees imposed on Class A Shares as long as Class B
Shares convert into Class A Shares); (iii) only Class B Shares carry a
conversion feature; and (iv) each class has different exchange
privileges. Sales personnel of financial institutions distributing the
Fund's shares, and other persons entitled to receive compensation for
selling shares, may receive differing compensation for selling Class A
and Class B Shares.

These alternative purchase arrangements permit an investor to choose
the method of purchasing shares that is more beneficial to that
investor. The amount of a purchase, the length of time an investor
expects to hold the shares, and whether the investor wishes to receive
dividends in cash or in additional shares, will all be factors in
determining which sales charge option is best for a particular
investor. An investor should consider whether, over the time he or she
expects to maintain the investment, the accumulated sales charges on
Class B Shares prior to conversion would be less than the initial sales
charge on Class A Shares, and to what extent the differential may be
offset by the expected higher yield of Class A Shares. Class A Shares
will normally be more beneficial to an investor if he or she qualifies
for reduced sales charges as described below. Accordingly, orders for
Class B Shares for $250,000 or more ordinarily will be treated as
orders for Class A Shares or declined.

The Directors of FAIF have determined that no conflict of interest
currently exists between the Class A and Class B Shares. On an ongoing
basis, the Directors, pursuant to their fiduciary duties under the 1940
Act and state laws, will seek to ensure that no such conflict arises.

CLASS A SHARES.

What Class A Shares Cost. Class A Shares of the Fund are offered on a
continuous basis at their next determined offering price, which is net
asset value, plus a sales charge as set forth below:

MAXIMUM AMOUNT
SALES CHARGE SALES CHARGE OF SALES CHARGE
AS PERCENTAGE AS PERCENTAGE REALLOWED TO
OF OFFERING OF NET ASSET PARTICIPATING
PRICE VALUE INSTITUTIONS

<S> <C> <C> <C>
Less than $50,000....................... 4.50% 4.75% 4.05%
$50,000 but less than $100,000.......... 4.00% 4.17% 3.60%
$100,000 but less than $250,000......... 3.50% 3.63% 3.15%
$250,000 but less than $500,000......... 2.75% 2.83% 2.47%
$500,000 but less than $1,000,000....... 2.00% 2.04% 1.80%
$1,000,000 and over..................... 0.00% 0.00% 0.00%

</TABLE>

There is no initial sales charge on purchases of Class A Shares of $1
million or more. However, Participating Institutions will receive a
commission of 1.00% on such sales. Redemptions of Class A Shares
purchased at net asset value within 24 months of purchase will be
subject to a contingent deferred sales charge of 1.00%. However, Class
A Shares that are redeemed will not be subject to this contingent
deferred sales charge to the extent that the value of the shares
represents capital appreciation of Fund assets or reinvestment of
dividends or capital gain distributions.

Net asset value is determined at 3:00 p.m. Central time Monday through
Friday except on (i) days on which there are not sufficient changes in
the value of the Fund's portfolio securities that its net asset value
might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received;
and (iii) on the following federal holidays: New Year's Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. In addition, net asset value will
not be calculated on Good Friday.

Dealer Concession. A dealer will normally receive up to 90% of the
applicable sales charge. Any portion of the sales charge which is not
paid to a dealer will be retained by the Distributor. In addition, the
Distributor may, from time to time in its sole discretion, institute
one or more promotional incentive programs which will be paid by the
Distributor from the sales charge it receives or from any other source
available to it. Under any such program, the Distributor will provide
promotional incentives, in the form of cash or other compensation
including merchandise, airline vouchers, trips and vacation packages,
to all dealers selling shares of the Fund. Promotional incentives of
these kinds will be offered uniformly to all dealers and predicated
upon the amount of shares of the Fund sold by the dealer. Whenever 90%
or more of a sales charge is paid to a dealer, that dealer may be
deemed to be an underwriter as defined in the Securities Act of 1933.

The sales charge for shares sold other than through registered
broker/dealers will be retained by the Distributor. The Distributor may
pay fees to financial institutions out of the sales charge in exchange
for sales and/or administrative services performed on behalf of the
institution's customers in connection with the initiation of customer
accounts and purchases of Fund shares.

Reducing the 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: As
shown in the table above, larger purchases of Class A
Shares reduce the percentage sales charge paid. The
Fund will combine purchases made on the same day 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.

The sales charge discount applies to the total
current market value of the Fund, plus the current
market value of any other FAIF Fund and any other
mutual funds having a sales charge and distributed as
part of the First American family of funds. Prior
purchases and concurrent purchases of Class A Shares
of any FAIF Fund will be considered in determining
the sales charge reduction. In order for an investor
to receive the sales charge reduction on Class A
Shares, the Transfer Agent 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
at least $50,000 of Class A Shares in the Fund and
other FAIF 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 Custodian to hold a
percentage equal to the particular FAIF Fund's
maximum sales charge rate of the total amount
intended to be purchased in escrow (in shares) for
all FAIF Funds until the purchase is completed.

The amount held in escrow for all FAIF 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 the Fund's
Class A Shares by the Adviser or any of its affiliates, or any of their
or FAIF's officers, directors, employees, retirees, sales
representatives, partners 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.

If Class A Shares of the Fund have been redeemed, the shareholder has a
one-time right, within 30 days, to reinvest the redemption proceeds in
Class A Shares of any FAIF Fund at the next-determined net asset value
without any sales charge. The Transfer Agent 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 the Fund, there may be tax consequences.

In addition, purchases of Class A Shares of the Fund that are funded by
proceeds received upon the redemption (within 60 days of the purchase
of Fund shares) of shares of any unrelated open-end investment company
that charges a sales load may be made at net asset value. To make such
a purchase at net asset value, an investor or the investor's broker
must, at the time of purchase, submit a written request to the Transfer
Agent that the purchase be processed at net asset value pursuant to
this privilege, accompanied by a photocopy of the confirmation (or
similar evidence) showing the redemption from the unrelated fund. The
redemption of the shares of the non-related fund is, for federal income
tax purposes, a sale upon which a gain or loss my be realized.

CLASS B SHARES.

Contingent Deferred Sales Charge. Class B Shares are sold at net asset
value without any initial sales charge. If an investor redeems Class B
Shares within eight years of purchase, he or she will pay a contingent
deferred sales charge at the rates set forth below. This charge is
assessed on an amount equal to the lesser of the then-current market
value or the cost of the shares being redeemed. Accordingly, no sales
charge is imposed on increases in net asset value above the initial
purchase price or on shares derived from reinvestment of dividends or
capital gain distributions.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
YEAR SINCE AS A PERCENTAGE OF DOLLAR
PURCHASE AMOUNT SUBJECT TO CHARGE

<S> <C>
First............................................ 5.00%
Second........................................... 5.00%
Third ........................................... 4.00%
Fourth........................................... 3.00%
Fifth ........................................... 2.00%
Sixth .......................................... 1.00%
Seventh.......................................... None
Eighth ......................................... None

</TABLE>

In determining whether a particular redemption is subject to a
contingent deferred sales charge, it is assumed that the redemption is
first of any Class A Shares in the shareholder's Fund account; second,
of any Class B Shares held for more than eight years and Class B Shares
acquired pursuant to reinvestment of dividends or other distributions;
and third, of Class B Shares held longest during the eight-year period.
This method should result in the lowest possible sales charge.

The contingent deferred sales charge is waived on redemption of Class B
Shares (i) within one year following the death or disability (as
defined in the Internal Revenue Code) of a shareholder, and (ii) to the
extent that the redemption represents a minimum required distribution
from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2. A shareholder or his or
her representative must notify the Transfer Agent prior to the time of
redemption if such circumstances exist and the shareholder is eligible
for this waiver.

Conversion Feature. At the end of the period ending eight years after
the beginning of the month in which the shares were issued, Class B
Shares will automatically convert to Class A Shares and will no longer
be subject to the Class B distribution and service fees. This
conversion will be on the basis of the relative net asset values of the
two classes.

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their
investment on a regular basis in a minimum amount of $100. Under this
program, funds may be automatically withdrawn periodically from the
shareholder's checking account and invested in Fund shares at the net
asset value next determined after an order is received, plus any
applicable sales charge. A shareholder may apply for participation in
this program through his or her financial institution or call (800)
637-2548.

EXCHANGING SECURITIES FOR FUND SHARES

The Fund may accept securities in exchange for Fund shares. The Fund
will allow such exchanges only upon the prior approval by the Fund and
a determination by the Fund and the Adviser that the securities to be
exchanged are acceptable. Securities accepted by the Fund will be
valued in the same manner that the Fund values its assets. The basis of
the exchange will depend upon the net asset value of Fund shares on the
day the securities are valued.

CERTIFICATES AND CONFIRMATIONS

The Transfer Agent maintains a share account for each shareholder.
Share certificates will not be issued by the Fund.

Confirmations of each purchase and redemption are sent to each
shareholder. In addition, monthly confirmations are sent to report all
transactions and dividends paid during that month for the Fund.

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared and paid quarterly. Distributions of any net
realized long-term capital gains will be made at least once every 12
months. Dividends and distributions are automatically reinvested in
additional shares of the Fund on payment dates at the ex-dividend date
net asset value without a sales charge, unless shareholders request
cash payments on the new account form or by writing to the Fund.

All shareholders on the record date are entitled to the dividend. If
shares are purchased before a record date for a dividend or a
distribution of capital gains, a shareholder will pay the full price
for the shares and will receive some portion of the purchase price back
as a taxable dividend or distribution (to the extent, if any, that the
dividend or distribution is otherwise taxable to holders of Fund
shares). If shares are redeemed or exchanged before the record date for
a dividend or distribution or are purchased after the record date,
those shares are not entitled to the dividend or distribution.

The amount of dividends payable on Class A and Class B Shares generally
will be less than the dividends payable on Class C Shares because of
the distribution expenses charged to Class A and Class B Shares. The
amount of dividends payable on Class A Shares generally will be more
than the dividends payable on the Class B Shares because of the
distribution and service fees paid by Class B Shares.

EXCHANGE PRIVILEGE

Shareholders may exchange Class A or Class B Shares of the Fund for
currently available Class A or Class B Shares, respectively, of the
other FAIF Funds or of other funds in the First American family. Class
A Shares of the Fund, whether acquired by direct purchase, reinvestment
of dividends on such shares, or otherwise, may be exchanged for Class A
Shares of other funds without the payment of any sales charge (i.e., at
net asset value). Exchanges of shares among the FAIF Funds must meet
any applicable minimum investment of the fund for which shares are
being exchanged.

For purposes of calculating the Class B Shares' eight-year conversion
period or contingent deferred sales charges payable upon redemption,
the holding period of Class B Shares of the "old" fund and the holding
period of Class B Shares of the "new" fund are aggregated.

Written exchange requests must be signed exactly as shown on the
authorization form, and the signatures may be required to be guaranteed
as for a redemption of shares by an entity described below under
"Redeeming Shares -- Directly From the Fund -- Signatures." Neither the
Fund, the Distributor, the Transfer Agent, any shareholder servicing
agent, or any financial institution will be responsible for further
verification of the authenticity of the exchange instructions.

Telephone exchange instructions made by an investor may be carried out
only if a telephone authorization form completed by the investor is on
file with the Transfer Agent, shareholder servicing agent, or financial
institution. Shares may be exchanged between two FAIF Funds by
telephone only if both FAIF Funds have identical shareholder
registrations.

Telephone exchange instructions may be recorded and will be binding
upon the shareholder. Telephone instructions must be received by the
Transfer Agent before 3:00 p.m. Central time, or by a shareholder's
shareholder servicing agent or financial institution by the time
specified by it, in order to for shares to be exchanged the same day.
Neither the Transfer Agent nor the Fund will be responsible for the
authenticity of exchange instructions received by telephone if it
reasonably believes those instructions to be genuine. The Fund and the
Transfer Agent will each employ reasonable procedures to confirm that
telephone instructions are genuine, and they may be liable for losses
resulting from unauthorized or fraudulent telephone instructions if
they do not employ these procedures.

Shareholders of the Fund may have difficulty in making exchanges by
telephone through brokers and other financial institutions during times
of drastic economic or market changes. If a shareholder cannot contact
his or her broker or financial institution by telephone, it is
recommended that an exchange request be made in writing and sent by
overnight mail to Supervised Service Company, 811 Main Street, Kansas
City, Missouri 64105.

Shareholders who become eligible to purchase Class C Shares may
exchange Class A Shares for Class C Shares. An example of such an
exchange would be a situation in which an individual holder of Class A
Shares subsequently opens a custody or agency account with a financial
institution which invests in Class C Shares.

The terms of any exchange privilege may be modified or terminated by
the Fund at any time. There are currently no additional fees or charges
for the exchange service. The Fund does not contemplate establishing
such fees or charges, but it reserves the right to do so. Shareholders
will be notified of any modification or termination of the exchange
privilege and of the imposition of any additional fees or changes.

REDEEMING SHARES

The Fund redeems shares at their net asset value next determined after
the Transfer Agent receives the redemption request, reduced by any
applicable contingent deferred sales charge. Redemptions will be made
on days on which the Fund computes its net asset value. Redemption
requests can be made as described below and must be received in proper
form.

BY TELEPHONE

A shareholder may redeem shares of the Fund 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 Fund 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 the Fund through a
financial institution may redeem their shares by telephoning (800)
637-2548. At the shareholder's request, redemption proceeds will be
paid 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 one
business day, but in no event more than seven days after the request.
The minimum amount for a wire transfer is $1,000. If at any time the
Fund determines 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
Transfer Agent nor the Fund will be responsible for the authenticity of
redemption instructions received by telephone if it reasonably believes
those instructions to be genuine. The Fund and the Transfer Agent will
each employ reasonable procedures to confirm that telephone
instructions are genuine, and they may be liable for losses resulting
from unauthorized or fraudulent telephone instructions if they do not
employ these procedures. These procedures may include taping of
telephone conversations.

BY MAIL

Any shareholder may redeem Fund shares by sending a written request to
the Transfer Agent, shareholder servicing agent, or financial
institution. The written request should include the shareholder's name,
the Fund name, the account number, 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, 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 $5,000 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:

* 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");

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

* 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

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

The Fund does not accept signatures guaranteed by a notary public.

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

BY SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders whose account value is at least $5,000 may elect to
participate in the Systematic Withdrawal Program. Under this program,
Fund shares are redeemed to provide for periodic withdrawal payments in
an amount directed by the shareholder. A shareholder may apply to
participate in this program through his or her financial institution.
It is generally not in a shareholder's best interest to participate in
the Systematic Withdrawal Program at the same time that the shareholder
is purchasing additional shares if a sales charge must be paid in
connection with such purchases. Because automatic withdrawals with
respect to Class B Shares are subject to the contingent deferred sales
charge, it may not be in the best interest of a Class B shareholder to
participate in the Systematic Withdrawal Program.

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 Transfer Agent is reasonably certain
that the purchase payment has cleared, which could take up to ten
calendar days from the purchase date.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the
Fund may redeem shares in any account, except retirement plans, and pay
the proceeds, less any applicable contingent deferred sales charge, to
the shareholder if the account balance falls below the required minimum
value of $500. Shares will not be redeemed in this manner, however, if
the balance falls below $500 because of changes in the Fund's net asset
value. Before shares are redeemed to close an account, the shareholder
will be notified in writing and allowed 60 days to purchase additional
shares to meet the minimum account requirement.

DETERMINING THE PRICE OF SHARES

Class A Shares of the Fund are sold at net asset value plus a sales
charge, while Class B Shares are sold without a front-end sales charge.
Shares are redeemed at net asset value less any applicable contingent
deferred sales charge. See "Investing in the Fund -- Alternative Sales
Charge Options."

The net asset value per share is determined as of the earlier of the
close of the New York Stock Exchange or 3:00 p.m. Central time on each
day the New York Stock Exchange is open for business, provided that net
asset value need not be determined on days when no Fund shares are
tendered for redemption and no order for the Fund's shares is received
and on days on which changes in the value of portfolio securities will
not materially affect the current net asset value of the Fund's shares.
The price per share for purchases or redemptions is such value next
computed after the Transfer Agent receives the purchase order or
redemption request.

It is the responsibility of Participating Institutions promptly to
forward purchase and redemption orders to the Transfer Agent. In the
case of redemptions and repurchases of shares owned by corporations,
trusts or estates, the Transfer Agent or Fund may require additional
documents to evidence appropriate authority in order to effect the
redemption, and the applicable price will be that next determined
following the receipt of the required documentation.

DETERMINING NET ASSET VALUE

The net asset value per share for the Fund is determined by dividing
the value of the securities owned by the Fund plus any cash and other
assets (including interest accrued and dividends declared but not
collected), less all liabilities, by the number of Fund shares
outstanding. For the purpose of determining the aggregate net assets of
the Fund, cash and receivables will be valued at their face amounts.
Interest will be recorded as accrued and dividends will be recorded on
the ex-dividend date. Securities traded on a national securities
exchange or on the NASDAQ National Market System are valued at the last
reported sale price that day. Securities traded on a national
securities exchange or on the NASDAQ National Market System for which
there were no sales on that day, and securities traded on other
over-the-counter markets for which market quotations are readily
available, are valued at the mean between the bid and asked prices.

Portfolio securities underlying actively traded options are valued at
their market price as determined above. The current market value of any
exchange traded option held or written by the Fund is its last sales
price on the exchange prior to the time when assets are valued, unless
the bid price is higher or the asked price is lower, in which event the
bid or asked price is used. In the absence of any sales that day,
options will be valued at the mean between the current closing bid and
asked prices.

Short-term securities with maturities of less than 60 days when
acquired, or which subsequently are within 60 days of maturity, are
valued at amortized cost. Securities and other assets for which market
prices are not readily available are valued at fair value as determined
in good faith by or under the direction of the Board of Directors.
Subject to the use of reliable market quotations for actively traded
securities, fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to
reflect the fair market value of the securities. Pricing services
generally take into account institutional size trading in similar
groups of securities. The pricing service and valuation procedures are
reviewed and subject to approval by the Board of Directors.

Although the methodology and procedures for determining net asset value
are identical for all classes of shares, the net asset value per share
of different classes of shares of the Fund may differ because of the
distribution expenses charged to Class A and Class B Shares.

FEDERAL INCOME TAXES

The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), during its current taxable year in order to be relieved of
payment of federal income taxes on amounts of taxable income it
distributes to shareholders.

Dividends paid from the net capital gains of the Fund and designated as
capital gain dividends will be taxable to shareholders as long-term
capital gains, regardless of the length of time for which they have
held their shares in the Fund. Long-term capital gains of individuals
are currently subject to a maximum tax rate of 28%.

Gain or loss realized upon the sale of shares in the Fund will be
treated as capital gain or loss, provided that the shares represented a
capital asset in the hands of the shareholder. Such gain or loss will
be long-term gain or loss if the shares were held for more than one
year.

The Fund is required by federal law to withhold 31% of reportable
payments (including dividends, capital gain distributions, and
redemptions) paid to certain accounts whose owners have not complied
with IRS regulations. In order to avoid this withholding requirement,
each shareholder will be asked to certify on the shareholder's account
application that the social security or taxpayer identification number
provided is correct and that the shareholder is not subject to backup
withholding for previous underreporting to the IRS.

This is a general summary of the federal tax laws applicable to the
Fund and its shareholders as of the date of this Prospectus. See the
Statement of Additional Information for further details. Before
investing in the Fund, an investor should consult his or her tax
adviser about the consequences of state and local tax laws.

FUND SHARES

Each share of the Fund 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 Fund have no preemptive or conversion rights.

Each share of the Fund has one vote. On some issues, such as the
election of directors, all shares of all FAIF 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 or Class,
the shares of that Fund or Class 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 pertaining to a Class.

Under the laws of the State of Maryland and FAIF's Articles of
Incorporation, FAIF is not required to hold shareholder meetings unless
they (i) are required by the 1940 Act, or (ii) are requested in writing
by the holders of 25% or more of the outstanding shares of FAIF.

CALCULATION OF PERFORMANCE DATA

From time to time, the Fund may advertise information regarding its
performance. The Fund may publish its "yield, " its "cumulative total
return," its "average annual total return" and its "distribution rate."
Distribution rates may only be used in connection with sales literature
and shareholder communications preceded or accompanied by a Prospectus.
Each of these performance figures is based upon historical results and
is not intended to indicate future performance, and, except for
"distribution rate," is standardized in accordance with Securities and
Exchange Commission ("SEC") regulations.

"Yield" for the Fund is computed by dividing the net investment income
per share (as defined in applicable SEC regulations) earned during a
30-day period (which period will be stated in the advertisement) by the
maximum offering price per share on the last day of the period. Yield
is an annualized figure, in that it assumes that the same level of net
investment income is generated over a one year period. The yield
formula annualizes net investment income by providing for semi-annual
compounding.

"Total return" is based on the overall dollar or percentage change in
value of a hypothetical investment in the Fund assuming reinvestment of
dividend distributions and deduction of all charges and expenses,
including, as applicable, the maximum sales charge imposed on Class A
Shares or the contingent deferred sales charge imposed on Class B
Shares redeemed at the end of the specified period covered by the total
return figure. "Cumulative total return" reflects the Fund's
performance over a stated period of time. "Average annual total return"
reflects the hypothetical annually compounded rate that would have
produced the same cumulative total return if performance had been
constant over the entire period. Because average annual returns tend to
smooth out variations in the Fund's performance, they are not the same
as actual year-by-year results. As a supplement to total return
computations, the Fund may also publish "total investment return"
computations which do not assume deduction of the maximum sales charge
imposed on Class A Shares or the contingent deferred sales charge
imposed on Class B Shares.

"Distribution rate" is determined by dividing the income dividends per
share for a stated period by the maximum offering price per share on
the last day of the period. All distribution rates published for the
Fund are measures of the level of income dividends distributed during a
specified period. Thus, these rates differ from yield (which measures
income actually earned by the Fund) and total return (which measures
actual income, plus realized and unrealized gains or losses of the
Fund's investments). Consequently, distribution rates alone should not
be considered complete measures of performance.

The performance of the Class A and Class B Shares of the Fund will
normally be lower than for the Class C Shares because Class C Shares
are not subject to the sales charges and distribution expenses
applicable to Class A and Class B Shares. In addition, the performance
of Class A and Class B Shares of the Fund will differ because of the
different sales charge structures of the classes and because of the
higher distribution and service fees charged to Class B Shares.

In reports or other communications to shareholders and in advertising
material, the performance of the Fund may be compared to recognized
unmanaged indices or averages of the performance of similar securities.
Also, the performance of the Fund may be compared to that of other
funds of similar size and objectives as listed in the rankings prepared
by Lipper Analytical Services, Inc. or similar independent mutual fund
rating services, and the Fund may include in such reports,
communications and advertising material evaluations published by
nationally recognized independent ranking services and publications.
For further information regarding the Fund's performance, see "Fund
Performance" in the Statement of Additional Information.

SPECIAL INVESTMENT METHODS

This section provides additional information concerning the securities
in which the Fund may invest and related topics. Further information
concerning these matters is contained in the Statement of Additional
Information.

CASH ITEMS

The "cash items" in which the Fund may invest, as described under
"Investment Objective and Policies," include short-term obligations
such as rated commercial paper and variable amount master demand notes;
United States dollar-denominated time and savings and time 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 the
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.

REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements. A repurchase agreement
involves the purchase by the 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 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 Fund)
will at all times be maintained in an amount equal to the repurchase
price under the agreement (including accrued interest), the Fund would
suffer a loss if the proceeds from the sale of the collateral were less
than the agreed-upon repurchase price. The Adviser will monitor the
creditworthiness of the firms with which the Fund enters into
repurchase agreements.

WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS

The 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. The Fund
will not accrue income with respect to securities purchased on a
when-issued or delayed-delivery basis prior to their stated delivery
date. Pending delivery of the securities, the Fund will maintain in a
segregated account cash or liquid high-grade securities in an amount
sufficient to meet its purchase commitments.

The purchase of securities on a when-issued or delayed-delivery basis
exposes the Fund to risk because the securities may decrease in value
prior to delivery. In addition, the Fund's purchase of securities on a
when-issued or delayed-delivery basis while remaining substantially
fully invested could increase the amount of the Fund's total assets
that are subject to market risk, resulting in increased sensitivity of
net asset value to changes in market prices. However, the Fund will
engage in when-issued and delayed-delivery transactions only for the
purpose of acquiring portfolio securities consistent with its
investment objective, and not for the purpose of investment leverage. A
seller's failure to deliver securities to the Fund could prevent the
Fund from realizing a price or yield considered to be advantageous.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund 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 Fund will only enter into loan arrangements with
broker-dealers, banks, or other institutions which the Adviser has
determined are creditworthy under guidelines established by the Board
of Directors. In these loan arrangements, the Fund 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. The
Fund will pay a portion of the income earned on the lending transaction
to the placing broker and may pay administrative and custodial fees in
connection with these loans.

OPTIONS TRANSACTIONS

PURCHASES OF PUT AND CALL OPTIONS. The Fund may purchase put and call
options to the extent specified under "Investment Objective and
Policies." These transactions will be undertaken only for the purpose
of reducing risk to the Fund; that is, for "hedging" purposes. These
transactions may include the purchase of put and call options on equity
securities and on stock indices.

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 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.

Options on 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 an 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.

The Fund will not 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. The 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 the Fund and the prices of options, and the risk of
limited liquidity in the event that the Fund seeks to close out an
options position before expiration by entering into an offsetting
transaction.

WRITING OF COVERED CALL OPTIONS. The Fund may write (sell) covered call
options to the extent specified under "Investment Objective and
Policies." These transactions would be undertaken principally to
produce additional income. These transactions may include the writing
of covered call options on equity securities which the Fund owns or has
the right to acquire.

When the 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 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 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.

FIXED INCOME SECURITIES

The fixed income securities in which the Fund 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 "-- Cash Items." 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
Adviser. 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.

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 the Fund); (ii) credit
risk (the risk that the issuers of debt securities held by the Fund
default in making required payments); and (iii) call or prepayment risk
(the risk that a borrower may exercise the right to prepay a debt
obligation before its stated maturity, requiring the Fund to reinvest
the prepayment at a lower interest rate).

PORTFOLIO TRANSACTIONS

Portfolio transactions in the over-the-counter market will be effected
with market makers or issuers, unless better overall price and
execution are available through a brokerage transaction. It is
anticipated that most portfolio transactions involving debt securities
will be executed on a principal basis. Also, with respect to the
placement of portfolio transactions with securities firms, subject to
the overall policy to seek to place portfolio transactions as
efficiently as possible and at the best price, research services and
placement of orders by securities firms for the Fund's shares may be
taken into account as a factor in placing portfolio transactions for
the Fund.

PORTFOLIO TURNOVER

Although the Fund does not intend generally to trade for short-term
profits, it may dispose of a security without regard to the time it has
been held when such action appears advisable to the Adviser. The
portfolio turnover rate for the Fund may vary from year to year and may
be affected by cash requirements for redemptions of shares. High
portfolio turnover rates generally would result in higher transaction
costs and could result in additional tax consequences to the Fund's
shareholders.

INVESTMENT RESTRICTIONS

The fundamental and nonfundamental investment restrictions of the Fund
are set forth in full in the Statement of Additional Information. The
fundamental restrictions include the following:

* The Fund will not borrow money, except from banks for
temporary or emergency purposes. The amount of such
borrowing may not exceed 10% of the Fund's total
assets. The Fund will not 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.

* The Fund will not 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 Fund will not make short sales of securities.

* The Fund will not purchase any securities on margin
except to obtain such short-term credits as may be
necessary for the clearance of transactions.

A fundamental policy or restriction, including those stated above,
cannot be changed without an affirmative vote of the holders of a
"majority" of the outstanding shares of the Fund, as defined in the
1940 Act.

As a nonfundamental policy, the Fund will not invest more than 15% of
its net assets in all forms of illiquid investments, as determined
pursuant to applicable Securities and Exchange Commission rules and
interpretations. Section 4(2) commercial paper may be determined to be
"liquid" under guidelines adopted by the Board of Directors. Rule 144A
securities may in the future be determined to be "liquid" under
guidelines adopted by the Board of Directors if the current position of
certain state securities regulators regarding such securities is
modified. Investing in Rule 144A securities could have the effect of
increasing the level of illiquidity in the Fund to the extent that
qualified institutional buyers become, for a time, uninterested in
purchasing these securities.

FIRST AMERICAN INVESTMENT FUNDS, INC.
680 East Swedesford Road
Wayne, Pennsylvania 19087

INVESTMENT ADVISER
FIRST BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402

CUSTODIAN
FIRST TRUST NATIONAL ASSOCIATION
180 East Fifth Street
St. Paul, Minnesota 55101

DISTRIBUTOR
SEI FINANCIAL SERVICES COMPANY
680 East Swedesford Road
Wayne, Pennsylvania 19087

ADMINISTRATOR
SEI FINANCIAL MANAGEMENT
CORPORATION
680 East Swedesford Road
Wayne, Pennsylvania 19087

TRANSFER AGENT
SUPERVISED SERVICE COMPANY
811 Main Street
Kansas City, Missouri 64105

INDEPENDENT AUDITORS
KPMG PEAT MARWICK LLP
90 South Seventh Street
Minneapolis, Minnesota 55402

COUNSEL
DORSEY & WHITNEY P.L.L.P.
220 South Sixth Street
Minneapolis, Minnesota 55402

FIRST AMERICAN INVESTMENT FUNDS, INC.
680 EAST SWEDESFORD ROAD, WAYNE, PENNSYLVANIA 19087

INSTITUTIONAL CLASS PROSPECTUS

* REAL ESTATE SECURITIES FUND

Class C Shares of the Fund are offered through banks and certain other
institutions for the investment of their own funds and funds for which
they act in a fiduciary, agency or custodial capacity.

This Prospectus concisely sets forth information about the Fund that a
prospective investor should know before investing. It should be read
and retained for future reference.

The date of this Prospectus is June 30, 1995.

TABLE OF CONTENTS

PAGE

SUMMARY ...................................... 3

FEES AND EXPENSES.............................. 4
Class C Share Fees and Expenses.......... 4
Information Concerning Fees and
Expenses.............................. 5

THE FUND ...................................... 5

INVESTMENT OBJECTIVE AND POLICIES.............. 6
Real Estate Securities Fund.............. 6
Risks to Consider........................ 7

MANAGEMENT..................................... 8
Investment Adviser....................... 8

Portfolio Managers....................... 9

Custodian................................ 9
Administrator............................ 9
Transfer Agent........................... 9

DISTRIBUTOR.................................... 10

PURCHASES AND REDEMPTIONS OF
SHARES ...................................... 10
Share Purchases and Redemptions.......... 10

What Shares Cost......................... 10
Exchanging Securities for Fund
Shares................................ 11
Certificates and Confirmations........... 11
Dividends and Distributions.............. 12
Exchange Privilege....................... 12

FEDERAL INCOME TAXES........................... 13

FUND SHARES.................................... 13

CALCULATION OF PERFORMANCE DATA................ 13

SPECIAL INVESTMENT METHODS..................... 15
Cash Items............................... 15
Repurchase Agreements.................... 15
When-Issued and Delayed-Delivery
Transactions.......................... 15
Lending of Portfolio Securities.......... 16
Options Transactions..................... 16
Fixed Income Securities.................. 17
Portfolio Transactions................... 17
Portfolio Turnover....................... 17
Investment Restrictions.................. 17

SUMMARY

First American Investment Funds, Inc. ("FAIF") is an open-end
investment company which offers shares in several different mutual
funds. This Prospectus provides information with respect to the Class C
Shares of Real Estate Securities Fund (the "Fund").

INVESTMENT ADVISER First Bank National Association (the "Adviser")
serves as investment adviser to the Fund. See "Management."

ELIGIBLE INVESTORS; OFFERING PRICES Class C Shares are offered through
banks and certain other institutions for the investment of their own
funds and funds for which they act in a fiduciary, agency or custodial
capacity. Class C Shares are sold at net asset value without any
front-end or deferred sales charges. See "Purchases and Redemptions of
Shares."

EXCHANGES Class C Shares of the Fund may be exchanged for Class C
Shares of other FAIF funds at the shares' respective net asset values
with no additional charge. See "Purchases and Redemptions of Shares --
Exchange Privilege."

REDEMPTIONS Shares of the Fund may be redeemed at any time at their net
asset value next determined after receipt of a redemption request by
the Fund's transfer agent, with no additional charge. See "Purchases
and Redemptions of Shares."

FEES AND EXPENSES INSTITUTIONAL CLASS

CLASS C SHARE FEES AND EXPENSES

<TABLE>
<CAPTION>
REAL
ESTATE
SECURITIES
FUND
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum sales load imposed on purchases.................................................. None
Maximum sales load imposed on reinvested dividends....................................... None
Deferred sales load...................................................................... None
Redemption fees.......................................................................... None
Exchange fees............................................................................ None

Other expenses(1)........................................................................ 0.36%

Total fund operating expenses (after voluntary fee waivers and
reimbursements)(1)................................................................. 0.80%

EXAMPLE(2)
You would pay the following expenses on a $1,000 investment, assuming
(i) a 5% annual return, and (ii) redemption at the end of each time
period:

1 year................................................................................... $8
3 years.................................................................................. $26

</TABLE>

(1) The Adviser intends to waive a portion of its fees and/or reimburse
expenses on a voluntary basis, and the amounts shown reflect this waiver
and reimbursement as of the date of this Prospectus. The Adviser intends to
maintain such waiver and reimbursement in effect for the current fiscal
year but reserves the right to discontinue such waiver and reimbursement at
any time in its sole discretion. Absent any fee waivers, investment
advisory fees as an annualized percentage of average daily net assets would
be 0.70%; and total fund operating expenses would be 1.06%. Other expenses
includes an administration fee and is based on estimated amounts for the
current fiscal year.

(2) Absent the fee waiver and reimbursement referred to in (1) above, the
dollar amounts for the 1 and 3-year periods would be $11 and $34,
respectively.

INFORMATION CONCERNING FEES AND EXPENSES

The purpose of the preceding tables is to assist the investor in
understanding the various costs and expenses that an investor in the
Fund may bear directly or indirectly. THE EXAMPLES CONTAINED IN THE
TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
information set forth in the foregoing tables and examples relates only
to the Class C Shares of the Fund. The Fund also offers Class A and
Class B Shares which are subject to the same expenses and, in addition,
to a front-end or contingent deferred sales load and certain
distribution expenses.

The examples in the above tables are based on projected annual Fund
operating expenses after voluntary fee waivers and expense
reimbursements by the Adviser. Although the Adviser intends to maintain
such waivers in effect for the current fiscal year, any such waivers
are voluntary and may be discontinued at any time. Prior to fee
waivers, investment advisory fees accrue at the annual rate as a
percentage of average daily net assets of 0.70%.

THE FUND

This Prospectus relates only to the Class C Shares of the Fund named on
the cover hereof. Information regarding the Class A and Class B Shares
of this Fund and regarding the Class A, Class B and Class C Shares of
the other FAIF Funds is contained in separate prospectuses that may be
obtained from FAIF's Distributor, SEI Financial Services Company, 680
East Swedesford Road, Wayne, Pennsylvania 19087, or by calling (800)
637-2548. The Board of Directors of FAIF may authorize additional
series or classes of common stock in the future.

INVESTMENT OBJECTIVE AND POLICIES

REAL ESTATE SECURITIES FUND

The Fund also may invest up to 35% of its total assets in fixed income
securities of the kinds described under "Special Investment Methods --
Fixed Income Securities."

RISKS TO CONSIDER

An investment the Fund involves certain risks. These include the
following:

OTHER. Investors also should review "Special Investment Methods" for
information concerning risks associated with certain investment
techniques which may be utilized by the Fund.

MANAGEMENT

INVESTMENT ADVISER

Although the scope of the prohibitions and limitations imposed by the
Glass-Steagall Act has not been fully defined by the courts or the
appropriate regulatory agencies, the Fund has received an opinion from
their counsel that the Adviser is not prohibited from performing the
investment advisory services described above. In the event of changes
in federal or state statutes or regulations or judicial and
administrative interpretations or decisions pertaining to permissible
activities of bank holding companies and their bank and nonbank
subsidiaries, the Adviser might be prohibited from continuing these
arrangements. In that event, it is expected that the Board of Directors
would make other arrangements and that shareholders would not suffer
adverse financial consequences.

PORTFOLIO MANAGERS

CUSTODIAN

As compensation for its services, the Custodian is paid monthly fees
equal to 0.03% of the average daily net assets of the Fund.

ADMINISTRATOR

TRANSFER AGENT

DISTRIBUTOR

The Distributor, the Administrator and the Adviser may in their
discretion use their own assets to pay for certain costs of
distributing Fund shares. They also may discontinue any payment of such
costs at any time.

PURCHASES AND REDEMPTIONS OF SHARES

SHARE PURCHASES AND REDEMPTIONS

Shares of the Fund are sold and redeemed on days on which the New York
Stock Exchange is open for business ("Business Days").

Payment for shares can be made only by wire transfer. Wire transfers of
federal funds for share purchases should be sent to First Bank National
Association, Minneapolis, Minnesota: ABA Number 091000022; For Credit
to: Supervised Service Company: Account Number 6023458026; For Further
Credit To: (Investor Name and Fund Name). Shares cannot be purchased by
Federal Reserve wire on days on which the New York Stock Exchange is
closed and on Federal holidays upon which wire transfers are
restricted. Purchase orders will be effective and eligible to receive
dividends declared the same day if the Transfer Agent receives an order
before 3:00 p.m. Central time and the Custodian receives Federal funds
before the close of business that day. Otherwise, the purchase order
will be effective the next Business Day. The net asset value per share
is calculated as of 3:00 p.m. Central time each Business Day. The Fund
reserves the right to reject a purchase order.

The Fund is required to redeem for cash all full and fractional shares
of the Fund. Redemption orders may be made any time before 3:00 p.m.
Central time in order to receive that day's redemption price. For
redemption orders received before 3:00 p.m. Central time, payment will
ordinarily be made the same day by transfer of Federal funds, but
payment may be made up to 7 days later.

WHAT SHARES COST

Class C Shares of the Fund are sold and redeemed at net asset value.
The net asset value per share is determined as of the earlier of the
close of the New York Stock Exchange or 3:00 p.m. Central time on each
day the New York Stock Exchange is open for business, provided that net
asset value need not be determined on days when no Fund shares are
tendered for redemption and no order for the Fund's shares is received
and on days on which changes in the value of portfolio securities will
not materially affect the current net asset value of the Fund's shares.
The price per share for purchases or redemptions is such value next
computed after the Transfer Agent receives the purchase order or
redemption request. In the case of redemptions and repurchases of
shares owned by corporations, trusts or estates, the Transfer Agent may
require additional documents to evidence appropriate authority in order
to effect the redemption, and the applicable price will be that next
determined following the receipt of the required documentation.

DETERMINING NET ASSET VALUE. The net asset value per share of the Fund
is determined by dividing the value of the securities owned by the Fund
plus any cash and other assets (including interest accrued and
dividends declared but not collected), less all liabilities, by the
number of Fund shares outstanding. For the purpose of determining the
aggregate net assets of the Fund, cash and receivables will be valued
at their face amounts. Interest will be recorded as accrued and
dividends will be recorded on the ex-dividend date. Securities traded
on a national securities exchange or on the NASDAQ National Market
System are valued at the last reported sale price that day. Securities
traded on a national securities exchange or on the NASDAQ National
Market System for which there were no sales on that day, and securities
traded on other over-the-counter markets for which market quotations
are readily available, are valued at the mean between the bid and asked
prices.

EXCHANGING SECURITIES FOR FUND SHARES

CERTIFICATES AND CONFIRMATIONS

The Transfer Agent maintains a share account for each shareholder.
Share certificates will not be issued by the Fund.

Confirmations of each purchase and redemption are sent to each
shareholder. In addition, monthly confirmations are sent to report all
transactions and dividends paid during that month for the Fund.

DIVIDENDS AND DISTRIBUTIONS

The amount of dividends payable on Class C Shares generally will be
more than the dividends payable on Class A or Class B Shares because of
the distribution expenses charged to Class A and Class B Shares.

EXCHANGE PRIVILEGE

Shareholders may exchange Class C Shares of the Fund for currently
available Class C Shares of the other FAIF Funds or of other funds in
the First American family at net asset value. Exchanges of shares among
the FAIF Funds must meet any applicable minimum investment of the fund
for which shares are being exchanged.

The ability to exchange shares of the Fund does not constitute an
offering or recommendation of shares of one fund by another fund. This
privilege is available to shareholders resident in any state in which
the fund shares being acquired may be sold. An investor who is
considering acquiring shares in another First American Fund pursuant to
the exchange privilege should obtain and carefully read a prospectus of
the fund to be acquired. Exchanges may be accomplished by a written
request, or by telephone if a preauthorized exchange authorization is
on file with the Transfer Agent, shareholder servicing agent, or
financial institution. Neither the Transfer Agent nor the Fund will be
responsible for the authenticity of exchange instructions received by
telephone if it reasonably believes those instructions to be genuine.
The Fund and the Transfer Agent will each employ reasonable procedures
to confirm that telephone instructions are genuine, and they may be
liable for losses resulting from unauthorized or fraudulent telephone
instructions if they do not employ these procedures. These procedures
may include taping of telephone conversations.

Shares of a class in which an investor is no longer eligible to
participate may be exchanged for shares of a class in which that
investor is eligible to participate. An example of this kind of
exchange would be a situation in which Class C Shares of the Fund held
by a financial institution in a trust or agency capacity for one or
more individual beneficiaries are exchanged for Class A Shares of the
Fund and distributed to the individual beneficiaries.

FEDERAL INCOME TAXES

Dividends paid from the Fund's net investment income and net short-term
capital gains will be taxable to shareholders as ordinary income,
whether or not the shareholder elects to have such dividends
automatically reinvested in additional shares. Dividends paid by the
Fund attributable to investments in the securities of REITs will not be
eligible for the 70% deduction for dividends received by corporations.
Dividends paid from the net capital gains of the Fund and designated as
capital gain dividends will be taxable to shareholders as long-term
capital gains, regardless of the length of time for which they have
held their shares in the Fund.

FUND SHARES

CALCULATION OF PERFORMANCE DATA

The performance of the Class C Shares of the Fund will normally be
higher than for the Class A and Class B Shares because Class C Shares
are not subject to the sales charges and distribution expenses
applicable to Class A and Class B Shares.