AAL MUTUAL FUNDS, 485BPOS, 1999-12-29

AAL MUTUAL FUNDS
485BPOS, 1999-12-29

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1933 Act Registration No. 33-12911
1940 Act Registration No. 811-5075

As filed with the Securities and Exchange Commission on
December 29, 1999
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933

Pre-Effective Amendment No.
Post-Effective Amendment No. 36 X

and/or

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940

Amendment No. 38 X

THE AAL MUTUAL FUNDS
(Exact name of registrant as specified in charter)

222 WEST COLLEGE AVENUE
APPLETON, WISCONSIN 54919-0007
(Address of Principal Executive Offices)(Zip Code)

Registrant's Telephone Number, including Area Code: (920) 734-5721

ROBERT G. SAME
President
THE AAL MUTUAL FUNDS
222 WEST COLLEGE AVENUE
APPLETON, WISCONSIN 54919-0007
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offerings: Continuous

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b):
X on December 31, 1999 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on December 31, 1999 pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

THE AAL MUTUAL FUNDS

PROSPECTUS
INSTITUTIONAL SHARES
DECEMBER 31, 1999

THE AAL LARGE COMPANY INDEX FUND

THE AAL MID CAP INDEX FUND

THE AAL BOND INDEX FUND

As with other mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

TABLE OF CONTENTS

RISK/RETURN INFORMATION: INVESTMENT PROGRAMS AND PERFORMANCE

PROSPECTUS SUMMARY

Reading the Prospectus 2
Institutional Shares 2
Principal Risks Common to All Funds 3

THE AAL LARGE COMPANY INDEX FUND

Investment Objective 4
Principal Investment Strategies 4
Principal Risks 4
Past Performance 5
Expenses 5

THE AAL MID CAP INDEX FUND

Investment Objective 6
Principal Investment Strategies 6
Principal Risks 6
Past Performance 7
Expenses 7

THE AAL BOND INDEX FUND

Investment Objective 8
Principal Investment Strategies 8
Principal Risks 9
Past Performance 9
Expenses 9

MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE 10
Investment Adviser 10
Adviser Fees per Fund 10
Portfolio Management 10
Index Information 11

SHAREHOLDER INFORMATION 13
Pricing Funds' Shares 13
How to Purchase (Buy) Shares 13
How to Redeem (Sell) Shares 15

DIVIDENDS 17

TAX CONSIDERATIONS 18

DISTRIBUTION ARRANGEMENTS 19

RISK/RETURN INFORMATION: INVESTMENT PROGRAMS AND PERFORMANCE

PROSPECTUS SUMMARY

READING THE PROSPECTUS

References to "you" and "your" in the prospectus refer to prospective investors
or shareholders. References to "we," "us" or "our" refer to the Trust or the
Funds and Fund management; the Adviser, Distributor, Administrator, Transfer
Agent and Custodian.

INSTITUTIONAL SHARES

In the prospectus, we provide you with information on: the investment objectives
and policies; risks of investing in the Funds; how to buy and sell Institutional
shares; management and services provided to the Funds; and other information.

The prospectus describes a separate class of shares for each Fund, Institutional
shares ("Class I shares"), for Lutheran organizations or enterprises with
minimum initial investment in the Funds of $500,000. We designed Institutional
shares to give Lutheran organizations and enterprises (non-natural persons) or
financial institutions acting in a fiduciary or agency capacity for them, a
convenient means of accumulating an interest in The AAL Mutual Funds. We did not
design Institutional shares for individuals, their individual retirement
accounts or trusts designed for the benefit of individuals. Investors in
Institutional shares purchase at net asset value. They pay neither initial sales
charges, redemption fees, nor 12b-1distribution or service fees.

PRINCIPAL RISKS COMMON TO ALL FUNDS

You assume certain risks when you invest in any of the Funds. Risks specific to
each Fund are discussed on the following pages. More generally, the investment
style and strategies that we use to select stocks, bonds and other securities
for each Fund depends on our ability to select those that perform well over
time. Our selections may not always achieve our growth and/or income
expectations and securities we select could decline in value. There can be no
assurance that any of the Funds will achieve its objective and you could lose
money.

THE AAL LARGE COMPANY INDEX FUND

INVESTMENT OBJECTIVE

The AAL Large Company Index Fund seeks total returns that track the performance
of the S&P 500(R) Index, by investing primarily in common stocks comprising the
Index.

PRINCIPAL INVESTMENT STRATEGIES

We select stocks through the use of computer models, instead of using
traditional analysis, to duplicate the S&P 500 Index in proportion to their
weightings in the Index. We try to hold all the stocks that comprise the Index,
however, there may be variations and delays from time to time due to periodic
changes to the Index. We expect portfolio turnover of no more than 50% per year.
We seek a correlation factor of 0.95% of the S&P 500 Index.

To the extent possible, the Fund will be fully invested in the Index. Our
ability to match the performance of the S&P 500 Index will be affected by the
size and timing of cash flows into and out of the Fund. We will try to manage
the Fund to minimize such effects. The Fund has expenses that an index does not
have, so the Fund will not be able to exactly match the performance of its
comparable index.

We may also invest to some degree in money market instruments. We do not expect
to have more than 5% of the Fund's assets in money market instruments.

Stocks have historically performed better as an asset class than bonds. Although
there is a greater potential for reward, there are also greater risks. Even
though we attempt to follow the performance of the S&P 500 Index, we cannot
guarantee these results. You could lose money investing in this Fund

PRINCIPAL RISKS

FINANCIAL RISK: Many factors affect an individual company's performance, such as
management or the demand for a company's products or services. A company's
performance will affect the market price of its stocks, and consequently, it
will impact the value of the Fund's portfolio.

MARKET RISK: Over time, the stock market tends to move in cycles, with periods
when stock prices rise generally and periods when stock prices decline
generally. The value of the Fund's investments may move with these cycles, and
in some instances, increase or decrease more than the stock market as measured
by the S&P 500. You could lose money investing in the Fund.

PAST PERFORMANCE
The Fund commenced operations on December 31, 1999. Because the Fund has been in
operation for less than a full calendar year, we have not included any
performance information.

EXPENSES
Like any investor, you pay certain expenses related to your investments. Annual
Fund operating expenses are paid from Fund assets, so they directly reduce your
share price. These expenses are outlined below.

FEE TABLE
This table describes the fees and expenses you may pay if you buy and hold the
Fund's shares:

Shareholder Fees
(fees paid directly from your investment) Institutional Shares

Maximum sales charge (load) imposed on None
purchases (as a percentage of offering price)

Maximum deferred sales charge (load) None
(as a percentage of net asset value)

Annual Fund Operating Expenses
(expenses deducted from Fund assets) Institutional Shares

Management Fees 0.25%

Distribution and Service (12b-1) Fees None

Other Expenses 0.25%

======================================================= =======================

Total Fund Operating Expenses 0.50%*

* Operating expenses are expressed as a percentage of daily net assets for the
projected fiscal year ending April 30, 2000, and do not include the Adviser's
voluntary reimbursement of expenses. Actual expenses with reimbursements, "Total
Fund Operating Expenses," will be 0.20%.

EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Fund
with the costs of investing in other mutual funds. It assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all your
shares at the end of those periods, that your investment has a 5% return each
year, and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on the foregoing assumptions your
costs would be:

Time Period Institutional Shares

1 Year $52

3 Year $164

You should use the expense example for comparison purposes only. It does not
represent the Fund's actual expenses and returns, either past or future. Actual
expenses may be greater or less than those shown.

THE AAL MID CAP INDEX FUND

INVESTMENT OBJECTIVE

The AAL Mid Cap Index Fund seeks total returns that track the performance of the
S&P MidCap 400(R) Index, by investing primarily in common stocks comprising the
Index.

PRINCIPAL INVESTMENT STRATEGIES

We select stocks through the use of computer models instead of using traditional
analysis to duplicate the S&P MidCap 400 Index in proportion to their weightings
in the index. We try to hold all the stocks that comprise the Index, however,
there may be variations and delays from time to time due to periodic changes to
the Index. We expect portfolio turnover of no more than 50% per year.

To the extent possible, the Fund will be fully invested in the Index. Our
ability to match the performance of the S&P MidCap 400 Index will be affected by
the size and timing of cash flows into and out of the Fund. We will try to
manage the Fund to minimize such effects. The Fund has expenses that an index
does not have, so the Fund will not be able to exactly match the performance of
its comparable index.

We may also invest to some degree in money market instruments. We do not expect
to have more than 5% of the Fund's assets in money market instruments. Stocks
have historically performed better as an asset class than bonds. Although there
is a greater potential for reward, there are also greater risks. Although we
attempt to follow the performance of the S&P MidCap 400 Index, we cannot
guarantee these results.
You could lose money investing in this Fund

PRINCIPAL RISKS

FINANCIAL RISK: Stocks of mid-sized companies may present a greater risk of
losing value than stocks of larger, more established companies, but may present
less risk than stocks of smaller companies. Mid-sized companies tend to have
relatively smaller revenues, narrower product lines, less management depth and
smaller shares of the market for their products or services than large
companies.

Many factors affect an individual company's performance, such as management or
the demand for a company's products or services. A company's performance will
affect the market price of its stocks, and consequently, it will impact the
value of the Fund's portfolio.

MARKET RISK: Over time, the stock market tends to move in cycles, with periods
when stock prices rise generally and periods when stock prices decline
generally. Due to the tendency for mid-cap stocks to have less liquidity in the
market than large company stocks, the value of the Fund's investments might
increase or decrease more than the stock market in general, as measured by the
S&P 400 MidCap Index. You could lose money investing in the Fund.

PAST PERFORMANCE
The Fund commenced operations on December 31, 1999. Because the Fund has been in
operation for less than a full calendar year, we have not included any
performance information.

EXPENSES

Like any investor, you pay certain expenses related to your investments. Annual
Fund operating expenses are paid from Fund assets, so they directly reduce your
share price. These expenses are outlined below.

FEE TABLE
This table describes the fees and expenses you may pay if you buy and hold the
Fund's shares:

Shareholder Fees
(fees paid directly from your investment) Institutional Shares

Maximum sales charge (load) imposed on None
purchases (as a percentage of offering price)

Maximum deferred sales charge (load) None
(as a percentage of net asset value)

Annual Fund Operating Expenses
(expenses deducted from Fund assets) Institutional Shares

Management Fees 0.25%

Distribution and Service (12b-1) Fees None

Other Expenses 0.35%

======================================================= =======================

Total Fund Operating Expenses 0.60%*

EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Fund
with the costs of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all
your shares at the end of those periods, that your investment has a 5% return
each year, and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on the foregoing assumptions your
costs would be:

Time Period Institutional Shares

1 Year $62

3 Year $195

THE AAL BOND INDEX FUND

INVESTMENT OBJECTIVE

The AAL Bond Index Fund seeks total returns approximating the total return of
the Lehman Brothers Aggregate Bond Index by investing primarily in bonds and
other debt securities that comprise the Index.

PRINCIPAL INVESTMENT STRATEGIES

We invest in a representative sample of fixed-income and mortgage-backed
securities included in the Lehman Brothers Aggregate Bond Index (Lehman Bond
Index), an unmanaged, broad-based bond index. It is not possible for us to
invest in and manage all 6,300 issues that comprise the Lehman Bond Index,
however, we consider this Fund to be "indexed" (track the performance of the
Index). We invest in four classes of investment-grade, fixed-income securities
for this Fund:

1. U.S. Treasury and U.S. government agency securities;
2. corporate debt obligations;
3. mortgage-backed securities; and
4. asset-backed securities.

We seek to invest 80% or more of the Fund's total assets in securities of the
Lehman Bond Index. For inclusion in the Fund, the security must:

1. have a maturity of no less than one year;
2. have at least $100 million par amount outstanding;
3. be rated as investment quality;
4. have a fixed rate;
5. be dollar-denominated and nonconvertible; and
6. be publicly issued.

Fixed-income securities are securities that pay a fixed rate of return until
they mature. When they mature, the principal is paid back. Such an investment
provides the security of a fixed income stream but does not protect against the
eroding effects of inflation. These fixed-income securities make-up the bulk of
the Fund.

We may also invest in mortgage-backed securities. These are securities that are
"backed" by real property that has a mortgage. This type of investment pays
principal and interest on a monthly basis. At the end of the life of a mortgage,
the entire principal is repaid and no more interest is due.

For this Fund, we may select securities issued by business or the government. We
will invest in the securities of a particular agency only when we determine
there is a minimal credit risk. Even though some securities are guaranteed by
the U.S. government, it only guarantees timely payment of principal and
interest, the U.S. government does not guarantee market value.

We try to keep the Fund fully invested, allowing for some liquidity for
purchases and sales. Typically, we will invest no more than 5% of the Fund's
assets in money market instruments. Although we try to match the performance of
the Lehman Bond Index, we cannot guarantee that the Fund will achieve such
results. We do not expect the portfolio turnover rate for the Fund to be more
than 50% a year. Lehman Brothers reserves the right to make changes to the
Lehman Bond Index at any time, and eligible investments for the Fund will
include additional asset classes included in the Lehman Bond Index.

PRINCIPAL RISKS

INTEREST RATE RISK: Changes in interest rate levels affect the value of the
bonds in the portfolio and the value of the Fund as a whole. Generally, the
value of a bond moves in the opposite direction of interest rates. Longer term
bond prices tend to move more in response to interest changes than shorter term
bonds.

CREDIT RISK: The creditworthiness of bond issuers will affect the value of their
bonds, which may decline during the Fund's holding periods and affect the value
of the Fund as a whole. The risk, generally, is less pronounced for U.S.
government and U.S. agency bonds than is the case for municipal and privately
issued bonds.

PAST PERFORMANCE
The Fund commenced operations on December 31, 1999. Because the Fund has been in
operation for less than a full calendar year, we have not included any
performance information.

EXPENSES

FEE TABLE
This table describes the fees and expenses you may pay if you buy and hold the
Fund's shares:

Shareholder Fees
(fees paid directly from your investment) Institutional Shares

Maximum sales charge (load) imposed on None
purchases (as a percentage of offering price)

Maximum deferred sales charge (load) None
(as a percentage of net asset value)

Annual Fund Operating Expenses
(expenses deducted from Fund assets) Institutional Shares

Management Fees 0.25%

Distribution and Service (12b-1) Fees None

Other Expenses 0.24%

======================================================= =======================

Total Fund Operating Expenses 0.49%*

Time Period Institutional Shares

1 Year $52

3 Year $162

MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE

INVESTMENT ADVISER

AAL Capital Management Corporation (AAL CMC) serves as investment adviser and
distributor to the Funds. AAL CMC was organized in 1986 as a Delaware
corporation. AAL Holdings Inc., a wholly owned subsidiary of Aid Association for
Lutherans (AAL), owns all of AAL CMC's shares. AAL is a non-profit, non-stock,
membership organization licensed to do business as a fraternal benefit society
in all states. AAL has approximately 1.7 million members and is one of the
world's largest fraternal benefit societies in terms of assets and life
insurance in force. AAL ranks in the top two percent of all life insurers in the
United States in terms of ordinary life insurance (nearly $82 billion in force).
Membership is open to Lutherans and their families. AAL offers life, health, and
disability income insurance and fixed annuities to its members, and all members
are part of one of approximately 10,000 local AAL branches throughout the United
States. Through AAL CMC, AAL offers The AAL Mutual Funds to Lutherans and their
families. AAL CMC has served as adviser to The AAL Mutual Funds since the
commencement of operations. As of December 6, 1999, AAL CMC managed over $7.2
billion for The AAL Mutual Funds.

The adviser's principal address is:

AAL Capital Management Corporation
222 West College Avenue
Appleton, WI 54919-0007

AAL's principal address is:

Aid Association for Lutherans
4321 North Ballard Road
Appleton, Wisconsin 54919-0001

Pursuant to an investment advisory agreement with the Funds, AAL CMC manages the
investment and reinvestment of the Funds' assets. AAL CMC also provides the
Funds with personnel, facilities, administrative services, and supervises the
Funds' daily business affairs. Services provided by AAL CMC to the Funds are
subject to the supervision of the Funds' Board of Trustees. AAL CMC formulates
and implements a continuous investment program for the Funds consistent with
each Fund's investment objectives, policies and restrictions.

ADVISER FEES PER FUND
The table below reflects advisory fees paid by each Fund as a percentage of
average daily net assets.

THE AAL LARGE COMPANY INDEX FUND 0.25% on the average daily net assets*

THE AAL MID CAP INDEX FUND 0.25% on the average daily net assets*

THE AAL BOND INDEX FUND 0.25% on the average daily net assets*

* Projected advisory fee per fund and does not include the Adviser's
reimbursement of Fund expenses. Actual expenses with reimbursements, "Total Fund
Operating Expenses," will be 0.20%.

PORTFOLIO MANAGEMENT

THE AAL LARGE COMPANY INDEX FUND
David J. Schnarsky, CFA, has been the portfolio manager of the AAL Variable
Product Series Fund Large Company Stock Portfolio since June 14, 1995. Mr.
Schnarsky has also served as portfolio manager of the equity portfolio of AAL's
general account and the AAL Savings Plan since 1991. Mr. Schnarsky has been
employed by AAL since 1991.

THE AAL MID CAP INDEX FUND

Michael R. Hochholzer, CFA, has managed the day-to-day Fund investments for The
AAL Mid Cap Stock Fund since March 1997. Prior to managing The AAL Mid Cap Stock
Fund, Mr. Hochholzer served as a securities analyst and portfolio manager for
AAL from 1989 until March 1997.

THE AAL BOND INDEX FUND

Gregory R. Anderson, CPA, is an assistant portfolio manager of the mortgage and
asset-backed security portfolio of AAL's general account. He has served in a
number of investment roles with AAL since 1997. From 1991 through 1997, Mr
Anderson was employed at Telephone and Data Systems, Inc., serving as a senior
treasury analyst from 1994 through 1997.

INDEX INFORMATION

On a monthly basis we compare the performance of the Funds with that of their
benchmark index. At that time we may re-balance the Funds' portfolios. All three
Funds are considered to be indexed Funds. These Funds are passively managed;
securities that comprise the Fund are the same as the securities in their
respective index, or a representative sample of securities in their respective
index. Fund performance may not exactly correspond with the performance of the
index due to market timing, shifts in the composition of the index, and Fund
expenses.

S&P 500 AND THE S&P MIDCAP 400 INDICES
Standard & Poor's ("S&P") compiles several broad-based indices used as
benchmarks for tracking certain types of markets. The most widely known is the
S&P 500 Composite Stock Price Index ("S&P 500 Index"). The S&P 500 Index
consists of 500 stocks chosen for market size, liquidity and industry group
representation. It is a market-value weighted index (stock price times the
number of shares outstanding), with each stock's weight in the index
proportionate to its market value. Most of the largest 500 companies listed on
the U.S. stock exchanges are included in the index. The companies whose stocks
are included in the index tend to be the leading companies in leading industries
within the U.S. economy.

The weightings make each company's influence on the index performance directly
proportional to that company's market value. This characteristic has made the
S&P 500 Index the investment industry standard for measuring the performance of
Funds comprised of large-capitalization stocks.

Another index from Standard & Poor's we use as a benchmark is the S&P MidCap 400
Index. The S&P MidCap 400 Index is a benchmark for tracking performance of
medium-capitalization stocks. As of December 6, 1999, the median market
capitalization for stocks in the S&P MidCap 400 was $1.56 billion. While this
index is relatively new, the industry recognizes it as a good benchmark for
tracking mid-cap stocks. The 400 stocks that make up the index are listed on the
New York Stock Exchange, The American Stock Exchange or the NASDAQ quotation
system. In addition, the stocks that make up the index are liquid, meaning they
are easily traded. These characteristics of the S&P MidCap 400 Index make it
relatively easy to emulate. The easier it is to track an index, the more likely
it is for a Fund to track that index's performance.

Both the S&P 500 Index and the S&P MidCap 400 Index are comprised of U.S. equity
stocks. S&P periodically makes additions and deletions of stocks to its
respective indices. Selection of a stock for inclusion in either S&P Index in no
way implies an opinion by S&P as to its attractiveness as an investment.
Standard & Poor's only relationship to the Fund is the licensing of the Standard
& Poor's Marks, the S&P 500 Index and the S&P MidCap 400 Index. These indices
are determined, composed and calculated by Standard & Poor's without regard to
any particular Fund.

"Standard & Poor's(R)," "S&P(R)," "Standard & Poor's 500," "S&P 500(R)," "500,"
"Standard & Poor's MidCap 400 Index" and "S&P MidCap 400 Index" are trademarks
of The McGraw-Hill Companies, Inc. and have been licensed for use by AAL. The
Fund and the certificates are not sponsored, endorsed, or sold or promoted by
Standard & Poor's. Standard & Poor's makes no representation regarding the
advisability of investing in the Fund. See the Statement of Additional
Information for additional disclaimers and limitations of liabilities on behalf
of S&P.

SHAREHOLDER INFORMATION

PRICING FUNDS' SHARES

The price of a Fund's shares is based on the Fund's net asset value. The Funds
determine the net asset value (NAV) per share once daily at the close of trading
(normally 3:00 p.m. Central Time) on the New York Stock Exchange (NYSE). The
Funds do not determine NAV on holidays observed by the NYSE. The Exchange is
regularly closed on Saturdays and Sundays and on New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving, and Christmas. If one of these holidays falls on a
Saturday or Sunday, the Exchange will be closed the preceding Friday or
following Monday, respectively. To determine the NAV, the Funds value their
securities at current market value using readily available market quotations.
The Funds value securities that do not have readily available market quotations
at fair value as determined in good faith by or under the direction of The AAL
Mutual Funds' Board of Trustees. The Funds may use pricing services as approved
by the Board of Trustees to determine the net asset value of their securities.

The price at which you purchase or redeem shares of the Funds is the per share
NAV as next determined after the Funds have received your payment or your
redemption request.

HOW TO PURCHASE (BUY) SHARES

BUYING INSTITUTIONAL SHARES IN THE FUNDS
You purchase Institutional shares in a Fund at net asset value (purchase price).
Your initial minimum purchase must be at least $500,000, with a minimum of at
least $50,000 in any one Fund account. You can combine all your Class A, Class B
and Institutional shares for purposes of meeting the $500,000 minimum purchase
requirement.

We will pay Registered Representatives compensation of up to 0.25% of the
amounts you invest.

OPENING A NEW ACCOUNT

Please contact the Mutual Funds Service Center, Prestige Account Services at
(800) 227-8602 (the Telecommunications Device for the Deaf (TDD) is (800)
684-3416), for help in opening an institutional account. We will need to
determine eligibility for Institutional share purchases in advance.

BUYING OR SELLING SHARES BY WIRE
If your organization's or enterprise's bank is a member of, or has a
corresponding relationship with, a member of the Federal Reserve System, your
organization can buy or sell Institutional shares of the Funds by wire transfer.
When placing your order, the following steps apply:

Step One

Call AAL Capital Management Corporation at (800) 227-8602 (The AAL Mutual Funds
Service Center, Prestige Account Services ("Service Center")) and provide the
following information:

(1) your account registration;
(2) the name of the Fund(s) in which you want to invest;
(3) your address;
(4) your Social Security or tax identification number;
(5) the dollar amount;
(6) the name of the wiring bank; and
(7) the name and telephone number of the person at your bank who the Funds
can contact about your purchase.

We must receive your wire order before the closing of the NYSE (normally 3:00
p.m. Central Time) to receive that day's price.

Step Two
Instruct your bank to use the following instructions when wiring funds:

WIRE TO: FIRSTAR BANK MILWAUKEE, N. A. ABA #075000022
CREDIT: FIRSTAR TRUST COMPANY ACCOUNT 112-952-137
FURTHER CREDIT: NAME OF FUND (SHAREHOLDER ACCOUNT NUMBER)
(SHAREHOLDER REGISTRATION)

Please call (800) 227-8602 prior to sending the wire in order to obtain a
confirmation number and to ensure prompt and accurate handling of funds.

The Fund and its transfer agent are not responsible for the consequences of
delays resulting from the banking or Federal Reserve Wire system, or from
incomplete wiring instructions.

Step Three
Complete The AAL Mutual Funds Application and mail it immediately to:

THE AAL MUTUAL FUNDS
INSTITUTIONAL SALES
222 W. COLLEGE AVE.
P. O. BOX 8004
APPLETON, WI 54912-8004.

OPENING ACCOUNTS FOR RETIREMENT SAVINGS
AAL members, their enterprises and Lutheran organizations may establish their
pension, profit sharing and 401(k) plans with Institutional shares. A
third-party maintenance fee may apply to some retirement accounts. Please review
plan documents for more information.

The Mutual Funds Service Center, Prestige Account Services, at (800) 227-8602,
will provide you with all the materials, documents and forms you need, and will
work with you in establishing your retirement plan.

AUTOMATIC INVESTMENT PLANS
The capital builder plan allows you to transfer money every month from your AAL
Money Market Fund Account into another AAL Mutual Fund Account(s). The following
rules apply:

(1) you can select the transaction date;if you do not select the date, it will
automatically transfer the money from your account on the 15th of the
month;

(2) to start, stop, or change the plan, you must notify us in writing at least
24 hours prior to the transaction date; and
(3) you must have all account owners sign the Capital Builder Plan Card.

SHARE CERTIFICATES
We will not issue share certificates for the Funds' Institutional shares.

OTHER INFORMATION
The U.S. Postal Service or private delivery services are not agents of the
Funds, the Distributor, or the Transfer Agent. We do not legally receive your
purchase application or your request for redemption when you deposit them in the
mail, send them with a private delivery service or when you deposit them in our
Post Office Box. We must have physical possession of your request to consider
your request received. Current law will determine the legal effect of posting
for deadline purposes.

We reserve the right to suspend the offering of shares for a period of time and
the right to reject any specific purchase of shares.

HOW TO REDEEM (SELL) SHARES

Your Lutheran organization or enterprise can sell its shares on any business
day. When you sell your shares you receive the net asset value per share. If we
receive your request in good order (containing the information listed below)
before the close of the NYSE (normally 3:00 p.m. Central Time), the organization
or enterprise will receive that day's price. If we receive your redemption
request in good order on a holiday, weekend or day the NYSE is closed, we will
process the transaction on the next business day.

You must have a signature guarantee if you want:

(1) to sell shares with a value of more than $250,000;

(2) the proceeds sent to an address other than the one listed for your account;
or
(3) the check payable to someone other than the account owners(s).

You can usually obtain a signature guarantee at a commercial bank, trust company
or broker-dealer. A signature guarantee is not the same thing as a notarized
signature.

SYSTEMATIC WITHDRAWAL PLAN
You can have money automatically withdrawn from your AAL Mutual Fund account(s)
on a regular basis by using our systematic withdrawal plan. The plan allows you
to receive funds or pay a bill at regular intervals. The following rules and/or
guidelines apply:

(1) you can select the date(s) on which the money is withdrawn. If you don't
select the date(s), we will withdraw the money automatically from your
account on the 15th of the month;
(2) to start the plan or change the payee(s), you must notify us in writing at
least 13 business days prior to the first withdrawal and you must have all
account owner(s) sign the appropriate form;
(3) to stop or change your plan, you must notify us at least 5 business days
prior to the next withdrawal; and
(4) because of sales charges, you must consider carefully the costs of frequent
investments in and withdrawals from your account.

EXCHANGE PRIVILEGE
You may exchange Institutional shares in an AAL Mutual Fund for Institutional
shares in another AAL Mutual Fund. The $50,000 minimum investment rules apply
when you open a new account by exchanging shares. You may have a taxable gain or
loss as a result of an exchange. We reserve the right to end this privilege if
your enterprise or organization makes more than 12 exchanges in a year. We also
reserve the right to change or end this privilege upon 60 days notice, or
suspend this privilege without notice when economic or market changes make it
difficult to carry out such transactions.

By Mail
Please include the following in your request:

(1) name(s) of the account owner(s);
(2) account number(s);
(3) amount of shares (or dollar amount) you want to exchange; (4) the name of
the Fund you are exchanging into; and (5) signatures of all account owners.

By Telephone
The guidelines for exchanging by telephone are:

(1) you can exchange shares by calling the Mutual Funds Service Center,
Prestige Account Services at (800) 227-8602;
(2) when you call, Mutual Fund Service Representatives will ask for a form of
personal identification to confirm your identity; and

(3) if we receive your request, in good order, before the close of the NYSE
(normally 3:00 p.m. Central Time), you will receive that day's price.

DIVIDENDS

We endeavor to qualify annually as, and elect tax treatment applicable to, a
regulated investment company under Subchapter M of the Internal Revenue Code
("Code"). Pursuant to the requirements of the Code, we intend to distribute
substantially all of the Funds' net investment income and net realized capital
gains, if any, less any available capital loss carryover, to its shareholders
annually. We do this to avoid paying income tax on the Funds' net investment
income and net realized capital gains, and to avoid a federal excise tax on
undistributed net investment income and net realized gains. Annually, we intend
to comply with all of the requirements to qualify as a regulated investment
company for each Fund. We provide you with full information on dividends and
capital gains distributions for each Fund on an annual basis.

Below, we provide you with a general description of the distribution policies
and some of the tax consequences for the Funds' shareholders. You should always
check with your tax adviser to determine whether any dividends and distributions
paid to you by a Fund are subject to any taxes, including state and local taxes.

THE AAL LARGE COMPANY INDEX FUND AND THE AAL MID-CAP INDEX FUND
The dividends from net investment income of each of these Funds, including net
short-term capital gains, are taxable as ordinary income to shareholders,
whether paid in additional shares or in cash. Any long-term capital gains
distributed to shareholders are taxable as capital gains to shareholders,
whether they receive them in cash or in additional shares, and regardless of the
length of time a shareholder has owned the shares.

THE AAL BOND INDEX FUND
The AAL Bond Index Fund accrues income dividends daily.

We distribute substantially all net investment income and any net realized
capital gains, if any, for the Funds as shown in the table below.

Fund Dividends (if any) Capital Gains (if any)
=================================== ===================== ======================

The AAL Large Company Index Fund annually annually

The AAL Mid Cap Index Fund annually annually

The AAL Bond Index Fund* monthly annually

* The AAL Bond Index Fund accrues income dividends daily.

REINVESTMENT OF FUND DISTRIBUTIONS
You can reinvest all of your income dividends and/or capital gains distributions
into the Funds at net asset value without any up-front load or contingent
deferred sales charges. You also can have your distributions paid in cash. When
you receive a distribution you may have to pay taxes whether or not you
reinvested the proceeds or had them paid out to you in cash. If you have
requested cash distributions and we cannot locate you, we will reinvest your
dividends.

TAX CONSIDERATIONS

As with all funds distributing taxable income, you as a tax-paying investor,
will be subject to income taxes on all dividends and distributions. You will be
subject to taxes on all dividends and distributions whether you elect to take
them in cash or have them reinvested.

Each Fund intends to distribute in December and, if necessary, at such other
times as the Fund may determine, its net investment income and any net realized
capital gains resulting from investment activity. Any dividend (including a
capital gains dividend) declared in October, November or December with a record
date in such a month and paid during the following January must be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared. Cumulative statements showing all activity in the
account for the prior year will be mailed annually to all shareholders.

All income and capital gains distributions are reinvested in full and fractional
shares of a Fund at net asset value, without sales charges, on a payment date
unless a shareholder has requested payment in cash on the shareholder
application or by separate written request. If a shareholder elects to receive
these distributions in cash, the return at maturity will be substantially less
than was anticipated at the time of purchase.

The Funds are required by federal law to withhold 31% of reportable payments
(which include dividends, capital gain distributions and redemption proceeds)
paid to certain shareholders who have not properly certified that the Social
Security or other taxpayer identification number provided by the shareholder is
correct and that he or she is not otherwise subject to backup withholding. The
Funds' shareholder application includes the required certification.

No attempt is made herein to provide information as to state and local tax
consequences of ownership of shares of the Funds. Investors should consult their
personal tax adviser to determine the consequences of state and local taxes

DISTRIBUTION ARRANGEMENTS

Investors in Institutional shares purchase at net asset value. They do not pay
any sales charges, redemption fees, or 12b-1 distribution or service fees.

SHAREHOLDER MAINTENANCE AGREEMENT

The Board of Trustees authorizes us to contract with AAL Capital Management
Corporation for certain shareholder maintenance services. AAL Capital Management
Corporation receives an annual fee for providing these services. This fee is
based upon, and limited by, the difference between the current account fees
charged and the normal full-service fee schedule established by our transfer
agent. It also includes reimbursement for out-of-pocket costs including postage
and telephone charges. This account differential, including reimbursement for
expenses, is currently $4.08 per account per year.

ADDITIONAL INFORMATION

You will find additional information in the statement of additional information
and the annual and semi-annual reports to shareholders. The Funds' statement of
additional information and annual and semi-annual reports are available, without
charge, upon request. To request this or other information about the Funds,
please call (800)-553-6319 (TDD-800-684-3416).

ANNUAL AND SEMI-ANNUAL REPORTS

In the Funds' annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Funds' performances
during their last fiscal year.

STATEMENT OF ADDITIONAL INFORMATION

The Funds' statement of additional information provides more detailed
information about the Funds.

You also may review and copy information about the Funds (including the
statement of additional information) at the Securities and Exchange Commission's
Public Reference Room in Washington, D.C. For information on the operation of
the Public Reference Room call 1-800-SEC-0330. You also may obtain reports and
other information about the Funds on the Securities and Exchange Commission's
Internet site at http://www.sec.gov. You may obtain copies of this information
upon payment of a duplication fee by writing the Public Reference Section of the
Securities and Exchange Commission at 405 5th Street, N.W., Washington,
D.C. 20549-6009.

Funds' Investment Company Act File No. is 811-5075

[Logo]
THE AAL MUTUAL FUNDS
222 West College Ave.
Appleton, WI 54919-0007
Telephone: (800) 553-6319
TDD: 800-684-3416
www.aal.org e-mail: [email protected]

STATEMENT OF ADDITIONAL INFORMATION
INSTITUTIONAL SHARES
DATED DECEMBER 31, 1999

Equity Oriented Funds

The AAL Small Cap Stock Fund:
Investing in Small Company Stocks

The AAL Mid Cap Stock Fund:
Investing in Mid-Sized Company Stocks

The AAL International Fund:
Investing in Foreign Stocks

The AAL Capital Growth Fund:
Investing in Large Company Stocks

The AAL Equity Income Fund:
Investing in Income Producing Equity Securities

The AAL Large Company Index Fund
Investing in Securities Comprising the S&P 500(R) Index

The AAL Mid Cap Index Fund
Investing in Securities Comprising the S&P MidCap(R) 400 Index

The AAL Balanced Fund:
Investing in Common Stocks, Bonds and Money Market Instruments

Income-Oriented Funds

The AAL High Yield Bond Fund:
Investing in Below-Investment-Grade Bonds

The AAL Municipal Bond Fund:
Investing in Investment-Grade Municipal Securities

The AAL Bond Fund:
Investing in Investment-Grade Bonds

The AAL Bond Index Fund
Investing in Securities Comprising the Lehman Brothers Aggregate Bond Index

The AAL Money Market Fund:
Investing in Money Market Instruments

This Statement of Additional Information is not a prospectus. It provides
additional information on the securities offered in the prospectus. You should
read this statement of additional information in conjunction with The AAL Mutual
Funds' prospectuses, Class I shares, dated July 1, 1999,and December 31, 1999,
and any supplements thereto. You may obtain a prospectus at no charge by writing
or telephoning your AAL Capital Management Corporation ("AAL CMC") Registered
Representative or the AAL Mutual Funds ("Funds" or "Trust") at the above address
and telephone number.

TABLE OF CONTENTS

FUNDS HISTORY

INVESTMENT STRATEGIES AND RISKS

MANAGEMENT OF THE FUNDS

Compensation Table

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

INVESTMENT ADVISORY AND OTHER SERVICES

BROKERAGE ALLOCATION AND OTHER PRACTICES

CAPITAL STOCK AND OTHER SECURITIES

PURCHASE, REDEMPTION, AND PRICING OF SHARES

TAXATION OF THE FUNDS

UNDERWRITERS

CALCULATION OF PERFORMANCE DATA

FINANCIAL STATEMENTS

FUNDS HISTORY

The AAL Mutual Funds (the "Trust" or "Funds") was organized as a Massachusetts
Business Trust on March 31, 1987, and is registered as an open-end diversified
management company under the Investment Company Act of 1940. The Trust commenced
operations on July 16, 1987, and currently consists of twelve series (each a
"Fund" and collectively, the "Funds"): The AAL Small Cap, Mid Cap,
International, Capital Growth, Equity Income, Balanced, High Yield Bond,
Municipal Bond, Bond, Money Market, and U.S. Government Zero Coupon Target Funds
2001 and 2006 Series Funds.

On January 8, 1997, the Trust redesignated its existing shares as Class A shares
and began offering Class B shares of The AAL Small Cap, Mid Cap, International,
Capital Growth, Equity Income, Balanced, High Yield Bond, Municipal Bond, Bond,
and Money Market Funds. The Class A shares are subject to maximum 4.00% sales
charge of the offering price and a 0.25% annual service fee. Class B shares are
offered at net asset value and a 1.00% annual 12b-1and service fee. In addition,
Class B shares have a contingent deferred sales charge of 5% declining 1% each
year upon redemption during the first five years. The AAL Balanced Fund added
Class B shares on its inception date of December 29,1997.

On December 29, 1997, the Trust began issuing a third class of Fund shares
(institutional) of The AAL Small Cap, Mid Cap, International, Capital Growth,
Equity Income, Balanced, High Yield Bond, Municipal Bond, Bond, and Money Market
Funds. The Institutional shares are offered at net asset value and have no
annual 12b-1 charges. Each class of shares has identical rights and privileges
except with respect to voting matters affecting a single class of shares and the
exchange privilege of each class of shares.

On December 31, 1999 the Trust added three series to its existing Funds. The new
series include The AAL Large Company Index Fund, The AAL Mid Cap Index Fund, and
The AAL Bond Index Fund.

ORGANIZATION AND DESCRIPTION OF SHARES

The AAL Mutual Funds or "Trust" is a diversified open-end management investment
company registered under the Investment Company Act of 1940. Each of the Funds
is a separate series of a Massachusetts Business Trust organized under a
Declaration of Trust dated March 13, 1987. The Declaration of Trust provides
that each shareholder shall be deemed to have agreed to be bound by its terms.
The Declaration of Trust may be amended by a vote of shareholders or the Board
of Trustees. The Trust may issue an unlimited number of shares in one or more
series as the Board of Trustees may authorize. Currently, the Board has
authorized twelve series. This prospectus describes Class A and Class B shares
for ten series of the Trust. Institutional shares for these same series are
described in a separate prospectus.

Each Fund's classes of shares represent interests in the assets of the Fund and
have identical dividend, liquidation and other rights. The separate share
classes have the same terms and conditions, except each Class A and Class B
share bears its separate distribution and shareholder servicing expenses. At the
Trustees' discretion, each class may pay a different share of other expenses,
not including advisory or custodial fees or other expenses related to the
management of the Trust's assets, if each class incurs the expenses in different
amounts, or if a class receives services of a different kind or to a different
degree than the other class. The Funds allocate all other expenses to each class
on the basis of the net asset value of that class in relation to the net asset
value of the particular Fund. Class A and B shares (and Institutional shares)
have identical voting rights except that each class has exclusive voting rights
on any matter submitted to shareholders relating solely to the class. In
addition, Class A and Class B shares (and Institutional shares) have separate
voting rights on any matter submitted to shareholders where the interests of one
class differ from the interests of the other class. Class A and Class B shares
have exclusive voting rights on matters involving the 12b-1 Distribution Plan as
applied to that class. Matters submitted to shareholder vote must be approved by
each Fund separately except:

1. when required otherwise by the 1940 Act; or
2. when the Trustees determine that the matter does not affect all Funds:
then, only the shareholders of the affected Funds may vote.

Shares are freely transferable, entitled to dividends declared by the Trustees,
and receive the assets of their respective Fund in the event of liquidation. The
Trust generally holds annual shareholder meetings only when required by law or
at the written request of shareholders owning at least 10% of the Trust's
outstanding shares. Shareholders may remove Trustees from office by votes cast
in person or by proxy at a shareholders meeting.

Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims shareholder, Trustee and/or officer
liability for acts on behalf of the Trust or for Trust obligations that are
binding only on the assets and property of the Trust. The Funds include this
disclaimer in each agreement, obligation, or contract entered into or executed
by the Trust or the Board. The Declaration of Trust provides for indemnification
out of the Trust's assets for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. The risk of a shareholder
incurring financial loss on account of shareholder liability is remote because
it is limited to circumstances where the Trust itself is unable to meets its
obligations.

INVESTMENT STRATEGIES AND RISKS

Each of the Funds is an open-end management investment company. The following
information supplements our discussion of the Funds' investment objectives,
policies and strategies described in the prospectus. In pursuing the Funds
objectives, we invest as described below and employ the investment techniques
described in the prospectus and elsewhere in this statement of additional
information.

INVESTMENT OBJECTIVES

The following information supplements our discussion of the Funds' investment
objectives and policies described in the prospectus. In pursuing the Funds'
objectives, we invest as described below and employ the investment techniques
described in the prospectus and elsewhere in this Statement of Additional
Information. Except for The AAL Balanced and High Yield Bond Funds, each Fund's
investment objective is a fundamental policy. As such, only a vote of a
"majority of outstanding voting securities" can change a Fund's investment
objective. A majority means the approval of the lesser of: (1) 67% or more of
the voting securities at a meeting if the holders of more than 50% of the
outstanding voting securities of a Fund are present or represented by proxy; or
(2) more than 50% of the outstanding voting securities of a Fund.

INVESTMENT RESTRICTIONS

In addition to those policies noted in the Prospectus, each Fund must follow
certain investment restrictions. We operate under the following investment
restrictions. For any Fund, we may not:

(1) invest more than 5% of its net assets (or 5% of The AAL Small Cap Stock,
International, Balanced or High Yield Bond Funds' total assets), taken at
value at the time of each investment, in the securities (including
repurchase agreements) of any one issuer (for this purpose, the issuer(s)
of a debt security being deemed to be only the entity or entities whose
assets or revenues are subject to the principal and interest obligations of
the security), except that up to 25% of Fund's net assets (or 25% of The
AAL Small Cap Stock, International, Balanced or High Yield Bond Funds'
total assets) may be invested without regard to this limitation and
provided that such restrictions shall not apply to obligations issued or
guaranteed by the U.S. government or any agency or instrumentality thereof;
(2) purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but
we may make margin deposits in connection with transactions in options,
futures and options on futures for a Fund;
(3) make short sales of securities or maintain a short position, or write,
purchase, or sell puts, calls, straddles, spreads, or combinations thereof,
except for the described transactions in options, futures, options on
futures and short sales against the box;
(4) make loans to other persons, except that we reserve freedom of action,
consistent with a Fund's other investment policies and restrictions and as
described in the prospectus and this statement of additional information,
to: (a) invest in debt obligations, including those that are either
publicly offered or of a type customarily purchased by institutional
investors, even though the purchase of such debt obligations may be deemed
the making of loans; (b) enter into repurchase agreements; and (c) lend
portfolio securities, provided we may not loan securities for a Fund if, as
a result, the aggregate value of all securities loaned would exceed 33% of
its total assets (taken at market value at the time of such loan);
(5) issue senior securities or borrow, except that we may borrow for a Fund in
amounts not in excess of 10% of its net assets, taken at current value, and
then only from banks as a temporary measure for extraordinary or emergency
purposes (we will not borrow money for the Funds to increase income, but
only to meet redemption requests that otherwise might require untimely
dispositions of portfolio securities; interest paid on any such borrowing
will reduce a Fund's net income);
(6) mortgage, pledge, hypothecate or in any manner transfer, as security for
indebtedness, any securities owned or held by a Fund except as may be
necessary in connection with and subject to the limits in restriction (5);
(7) underwrite any issue of securities, except to the extent that we purchase
securities directly from an issuer thereof in accord with a Fund's
investment objectives and policies may be deemed to be underwriting or to
the extent that in connection with the disposition of portfolio securities
we may be deemed an underwriter for the Fund under federal securities laws;
(8) purchase or sell real estate, or real estate limited partnership interests
provided that we may invest in securities for a Fund secured by real estate
or interests therein or issued by companies that invest in real estate or
interests therein;
(9) purchase or sell commodities or commodity contracts, except that we may
purchase or sell futures and options thereon for hedging purposes for a
Fund as described in this statement of additional information;

(10) invest 25% or more of a Fund's net assets (or 25% or more of The AAL Small
Cap Stock, International, Balanced or High Yield Bond Funds' total assets),
taken at current value at the time of each investment, in securities of
non-governmental issuers whose principal business activities are in the
same industry (or 25% or more of The AAL Small Cap Stock, International,
Balanced or High Yield Bond Funds' total assets in any single industry or
issuer except the U.S. government or any agency or instrumentality
thereof);

(11) invest in oil, gas or mineral related programs or leases except as may be
included in the definition of public utilities, although we may invest in
securities of enterprises engaged in oil, gas or mineral exploration for a
Fund;
(12) invest in repurchase agreements maturing in more than seven days or in
other securities with legal or contractual restrictions on resale if, as a
result thereof, more than 10% of a Fund's net assets (taken at current
value at the time of such investment) would be invested in such securities;
(13) except for The AAL High Yield Bond Fund, invest in any security if as a
result a Fund would have more than 5% of its net assets invested in
securities of companies which, together with any predecessors, have been in
continuous operation for less than three years;
(14) purchase securities of other investment companies, if the purchase would
cause more than 10% of the value of a Fund's net assets (or 10% of the
value of The AAL Small Cap Stock, International, Balanced or High Yield
Bond Funds' total assets), to be invested in investment company securities
provided that: (a) no investment will be made in the securities of any one
investment company if immediately after such investment more than 3% of the
outstanding voting securities of such company would be owned by a Fund or
more than 5% of the value of a Fund's net assets (or 5% of the value of The
AAL Small Cap Stock, International, Balanced or High Yield Bond Funds'
total assets) would be invested in such company; and (b) no restrictions
shall apply to a purchase of investment company securities in connection
with a merger, consolidation acquisition or reorganization; or
(15) purchase more than 10% of the outstanding voting securities of an issuer or
invest for the purpose of exercising control or management.

Each of the above restrictions (1) through (15), as well as each Fund's
investment objective, except for The AAL Balanced and High Yield Bond Funds, is
a fundamental policy.

INVESTMENT TECHNIQUES

We may use the following techniques described in the prospectus and statement of
additional Information in pursuing the Funds' investment objectives.

TEMPORARY DEFENSIVE POSITIONS

Except for the Index Funds, we have a temporary defensive position policy that
allows us to invest up to 100% of a Fund's total assets in cash and short-term
money market obligations, including tax-exempt money market funds and investment
grade fixed-income securities when significant adverse market, economic,
political or other circumstances require immediate action to avoid losses.
Primarily, we may purchase the following types of securities for temporary
defensive purposes:

(1) securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities; (2) commercial paper rated at the time of purchase in the
highest rating category by NRSRO's; and (3) bank obligations, including
repurchase agreements, of banks having total assets in excess of $1 billion.

For temporary defensive purposes we may invest up to 100% of The AAL
International Fund's total assets in U.S. securities or in securities primarily
traded in one or more foreign countries, or in debt securities to a greater
extent than 20%. The AAL Large Company Index, Mid Cap Index and Bond Index Funds
do not engage in defensive strategies.

LENDING PORTFOLIO SECURITIES

Subject to the fundamental investment restriction (4) listed under "Investment
Restrictions," we may lend a Fund's portfolio securities to broker-dealers and
financial institutions, such as banks and trust companies. As the adviser, we
will monitor the creditworthiness of any firm with which a Fund engages in
securities lending transactions. We would continuously secure the loan by
collateral in cash or cash equivalents maintained (on a current basis) in an
amount equal to or greater than the market value of the securities loaned. We
would continue to receive the equivalent of the interest or dividends paid by
the issuer to the Fund on the securities loaned. We would also receive any
additional returns, such as a fixed fee or a percentage of the collateral. We
would have the right to call the loan and obtain the securities loaned at any
time on notice of not more than five business days. Generally, we would not have
the right to vote the Fund's loaned securities during the existence of the loan.
However, we would call the loan to permit voting if, in our judgment, a material
event requiring a shareholder vote would otherwise occur before the repayment
date.

In the event of the borrower's default or bankruptcy, we could experience both
delays in liquidating the loan collateral or recovering the loaned securities
and any losses sustained by the Fund. For example, during the period when we
would seek to enforce the Fund's rights to the loaned securities, the
collateral's value could decline. We might receive subnormal levels of income or
no income from the loaned securities. We also would incur the expense of
enforcing the Fund's rights to the loaned securities.

REPURCHASE AGREEMENTS AND BORROWING

Except for the Index Funds, we may earn income on available cash or for
temporary defensive purposes, we may invest in repurchase agreements for the
Funds. We must hold an amount of cash or government securities at least equal to
the market value of the securities held pursuant to the agreement. In the event
of a bankruptcy or other default of a seller of a repurchase agreement, we may
experience delays and expenses in liquidating the securities, declines in the
securities' value and loss of interest for a Fund. We maintain procedures for
evaluating and monitoring the creditworthiness of firms with which we enter into
repurchase agreements for the Funds. We may not invest more than 10% of a Fund's
net assets in repurchase agreements maturing in more than seven days. Under the
Investment Company Act of 1940, repurchase agreements are considered loans by
the Fund. A reverse repurchase agreement would be considered a collateralized
borrowing by the Fund.

We may borrow money, but only from banks and only for temporary or emergency
purposes. We may not borrow more than 10% of a Fund's net assets and we must
repay any amount we borrow for a Fund before we can buy additional securities.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

We may purchase securities on a when-issued or delayed-delivery basis for a
Fund, as described in the prospectus. We only purchase on a when-issued or
delayed delivery basis with the intention of actually acquiring the securities,
including when-issued securities with long-term issue dates of a year or more.
However, we may sell such securities before settlement date if we deem it
advisable for investment reasons.

At the time of purchase we identify liquid assets having a value at least as
great as the purchase price. We have the custodian hold these securities
identified throughout the period of the obligation. Purchasing on a when-issued
or delayed basis as we have described may increase the Fund's net asset value
fluctuation or volatility.

ILLIQUID AND RESTRICTED SECURITIES

Except for The AAL Money Market Fund, we may hold up to 15% of a Fund's net
assets in illiquid securities. We may hold up to 10% of The AAL Money Market
Fund's net assets in restricted and other illiquid securities. Illiquid
securities are securities we believe cannot be sold within seven days in the
normal course of business at approximately the amount at which we have valued or
priced the securities for a Fund, including securities we acquired in private
placements that have restrictions on their resale ("restricted securities"). We
deem time deposits and repurchase agreements maturing in more than seven days
illiquid. Because an active market may not exist for illiquid securities, we may
experience delays and additional cost when trying to sell illiquid securities.
For more information on restricted and other illiquid securities regarding The
AAL Money Market Fund, please refer to the Statement of Additional Information,
"Privately Issued Securities: The AAL Money Market Fund." The Board of Trustees
has established procedures for determining the liquidity of Fund securities and
has delegated the day-to-day liquidity determinations to the Adviser.

Subject to the limitations for illiquid investments stated above, we may
purchase liquid restricted securities eligible for resale under Rule 144A under
the Securities Act of 1933 (the "Act"), without regard to the 15% or 10%
limitation. Rule 144A permits certain qualified institutional buyers, such as
the Funds, to trade in privately placed securities not registered under the Act.
Institutional markets for restricted securities have developed as a result of
Rule 144A, providing both readily ascertainable market values for 144A
securities and the ability to liquidate these investments to satisfy redemption
orders. However, an insufficient number of qualified institutional buyers
interested in purchasing certain Rule 144A securities held by a Fund could
adversely affect their marketability, causing us to sell the securities at
unfavorable prices.

INVESTMENT GRADE AND MEDIUM GRADE BOND INVESTMENTS

We may purchase investment grade bonds for The AAL International, Equity Income,
Balanced, High Yield Bond, Municipal Bond and Bond Funds. A debt or other
fixed-income security is considered investment grade if it is rated investment
grade by a NRSRO, such as BBB or better by Duff and Phelps Credit Rating Co.
("D&P") and S&P or Baa or better by Moody's. Securities rated in the fourth
highest category, such as BBB by D&P or S&P or Baa by Moody's, are considered
medium grade bonds and have more sensitivity to economic changes and speculative
characteristics. If a bond in a Fund has lost its rating or has its rating
reduced, the Fund does not have to sell the security, but the Adviser will
consider the lost or reduced rating in determining whether that Fund should
continue to hold the bond.

RATED SECURITIES

If a NRSRO reduces or eliminates its rating of a Fund security, we do not have
to sell the security. However, we consider such fact in determining whether we
should continue to hold the security for the Fund. For The AAL Money Market
Fund, we sell downgraded commercial paper to the extent required to comply with
Rule 2a-7 under the Investment Company Act of 1940 (the "Act").

At times a NRSRO changes its ratings for debt securities as a result of changes
at the rating organization or in its rating system. When this happens, we
attempt to use comparable NRSRO ratings in reassessing investments for a Fund in
accord with its investment policies.

BOND RATINGS

Moody's Rating Scale Definitions

Aaa: Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA: Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as Aaa securities or fluctuations of protective elements may
be of greater amplitude or there may be other elements present that make
long-term risk appear somewhat larger than the Aaa securities.

A: Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving security to
Principal and interest are considered adequate but elements may be present that
suggest susceptibility to impairment some time in the future.

Baa: Bonds that are rated Baa are considered medium-grade obligations (i.e. they
are neither highly protected nor poorly Secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba: Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over a long period of time may be small.

Caa: Bonds that are rated Caa have poor standing. Such issues may be in default
or present elements of danger with respect to principal or interest.

Ca: Bonds that are rated Ca represent obligations that are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

C: Bonds that are rate C are the lowest-rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.

S&P Rating Scale Definitions

AAA: Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated "AA" has very strong capacity to pay interest and repay principal
and differs from the higher-rated issues only in small degrees.

A: Debt rated "A" has strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB: Debt rated "BBB" has an adequate capacity to pay interest and repay
principal. Whereas, it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher-rated categories.

BB, B, CC, C , C: Debt rated "BB", "B", "CCC", "CC" and "C" is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. "BB"
indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

BB: Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions that could lead to inadequate
capacity to meet timely interest and principal payments. The "BBB" rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied "BBB-" rating.

B: Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions likely will impair capacity or willingness to
pay interest and repay principal. The "B" rating is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.

CCC: Debt rated "CCC" has a currently identifiable vulnerability to default and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

CC: The rating "CC" is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.

C: The rating "C" is typically applied to debt subordinated to senior debt that
is assigned an actual or implied "CCC-" debt rating. The "C" rating may be used
to cover a situation in which a bankruptcy petition has been filed, but debt
service payments are continued.

CI: The rating "CI" is reserved for income bonds on which no interest is paid.

D: Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate
the particular type of obligation as a matter of policy.

Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
category.

COMMERCIAL PAPER RATINGS

Moody's Commercial Paper Ratings

Moody's commercial paper ratings are opinions of the ability to repay punctually
promissory obligations. Moody's employs the following three category
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:

PRIME 1: Highest quality;

PRIME 2: Higher quality; and

PRIME 3: High quality.

S&P Commercial Paper Ratings

An S&P commercial paper rating is a current assessment of the likelihood of
timely payment. Ratings are graded into four categories, ranging from "A" for
the highest quality obligations to "D" for the lowest.

A: Issues assigned the highest rating category, A, are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers "1", "2" and "3" to indicate the relative degree of safety.

A-1: The designation A-1 indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. A "+" designation is applied to
those issues rated "A-1" that possess extremely strong safety characteristics.

A-2: Capacity for timely payment on issues with the designation "A-2" is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.

A-3: Issues carrying the designation A-3 have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effect of
changes in circumstances than obligations carrying the higher designations.

OTHER RATINGS

Moody's Municipal Note Ratings

MIG 1: This designation category denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.

MIG 2: This designation category denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

MIG 3: This designation category denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.

Moody's Ratings of the Demand Features On Variable Rate Demand Securities

Moody's may assign a separate rating to the demand feature of a variable rate
demand security. Such a rating may include:

VMIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.

VMIG 2: This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.

VMIG 3: This designation denotes favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.

S&P Note Ratings

SP-1: Notes rated SP-1 have very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety characteristics
are designated as SP-1+.

SP-2: Notes rated SP-2 have satisfactory capacity to pay principal and interest.
Notes due in three years or less normally receive a note rating. Notes maturing
beyond three years normally receive a bond rating, although the following
criteria are used in making that assessment: (1) the amortization schedule (the
larger the final maturity relative to other maturities, the more likely the
issue will be rated as a note); (2) and the source of payment (the more
dependent the issue is on the market for its refinancing, the more likely it
will be rated as a note).

S&P Ratings of the Demand Features on Variable Rate Demand Securities

S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a demand feature. The first rating addresses the likelihood of
repayment of principal and interest as due, and the second rating addresses only
the demand feature. The long-term debt rating symbols are used for bonds to
denote the long-term maturity and the commercial paper rating symbols are
usually used to denote the put (demand) options (i.e., AAA/A-1+). Normally
demand notes receive note rating symbols combined with commercial paper symbols
(i.e., SP-1+/A-1+).

Convertible Bonds

Except for The AAL Money Market Funds, we may invest in convertible bonds,
subject to any restrictions on the quality of bonds in which a Fund may invest.
We also may retain any stocks received upon conversion that do not fall within
the Fund's investment parameters to: (1) permit orderly disposition; (2)
establish a long-term holding basis for Federal income tax purposes; or (3) seek
capital growth.

Convertible bonds are often rated below investment grade or not rated because
they fall below debt obligations and just above equities in order of preference
or priority on the issuer's balance sheet. Convertible bonds below investment
grade are referred to as junk bonds. Any issuer with investment grade senior
debt may issue convertible securities with ratings less than investment grade
debt.

MORTGAGE-BACKED SECURITIES

For The AAL Balanced, High Yield Bond and Bond Funds, we may invest in
mortgage-backed securities with amortizing payments consisting of both interest
and principal and prepayment privileges (the ability to prepay the principal or
a portion thereof without penalty). Mortgaged-backed securities represent
interest in pools of mortgage loans made by lenders such as savings and loan
institutions, mortgage bankers, commercial banks and others. Various government,
government-related and private organizations combine these mortgages for sale to
investors (i.e., the Government National Mortgage Association ("GNMA")
guarantees and issues mortgage-backed securities). Mortgage-backed securities
generally provide for a "pass through" of monthly payments made by individual
borrowers on their residential mortgage loans, net of any fees paid to the
issuer or guarantor of the securities. We reinvest the periodic payments of
principal and interest and prepayments, if any, in securities at the prevailing
market interest rates. The prevailing rates may be higher or lower than the rate
on the original investment. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed securities tend to
accelerate. Accordingly, any prepayments on mortgage-backed securities that we
hold for a Fund reduce our ability to maintain positions in high-yielding,
mortgage-backed securities and reinvest the principal at comparable yields for
the Fund. If we buy any mortgage-backed securities for a Fund at a premium, the
Fund receives prepayments, if any, at par or stated value, which lowers the
return on the Fund.

HIGH YIELD BOND MARKET -- THE AAL INTERNATIONAL, EQUITY INCOME AND HIGH YIELD
BOND FUNDS

We may invest in high risk, high yield bonds for The AAL International, Equity
Income and High Yield Bond Funds. We normally invest at least 65% of The AAL
High Yield Bond Fund's total assets in such securities. As stated in the
prospectus, investing in high yield bonds involves market risk. The market for
high yield bonds has existed for many years and has weathered downturns. In
particular during the late 1980s and early 1990s, the high yield market
experienced a significant downturn. Many corporations had dramatically increased
their use of high yield bonds to fund highly leveraged acquisitions and
restructuring. As a result, from 1989 to 1991, the percentage of lower-quality
securities that defaulted rose significantly above previous default levels.
After this period, default rates decreased.

We may invest in lower-rated asset and mortgage-backed securities for The AAL
High Yield Bond Fund. These securities include interests in pools of lower-rated
bonds, consumer loans or mortgages, or complex instruments such as
collateralized mortgage obligations ("CMOs") and stripped mortgage-backed
securities (the separate income or principal components). Changes in interest
rates, the market's perception of the issuers and the creditworthiness of the
parties involved may significantly affect the value of these bonds. Some of
these securities may have structures that makes their reaction to interest rates
and other factors difficult to predict, causing high volatility in their market
value. These bonds also carry prepayment risk. During periods of declining
interest rates, prepayment of the loans and mortgages underlying these
securities tend to accelerate. Investors tend to refinance their mortgages (pay
the old mortgage off with a new mortgage at a lower rate) to lower payments.
Accordingly, any prepayment on the existing securities we hold for the Fund
reduces our ability to maintain positions in high-yielding, mortgage-backed
securities and reinvest the principal at comparable yields.

Certain high yield bonds carry particular market risks. Zero coupon, deferred
interest and payment-in-kind ("PIK") bonds issued at deep discounts may
experience greater volatility in market value. Asset and mortgage-backed
securities, including CMOs, in addition to greater volatility, may carry
prepayment risks.

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS PASS-THROUGH SECURITIES -
THE AAL BALANCED, HIGH YIELD BOND AND BOND FUNDS

We may invest in mortgage-backed securities, including CMOs and multi-class
pass-through securities. CMOs and multi-class pass-through securities are debt
instruments issued by special purpose entities secured by pools of mortgage
loans or other mortgage-backed securities. Multi-class pass-through securities
are interests in a trust composed of mortgage loans or other mortgage-backed
securities. Payments of principal and interest on the underlying collateral
provide the money to pay debt service on the CMO or make scheduled distributions
on the multi-class pass-through security. Multi-class pass-through securities,
CMOs, and classes thereof (including those discussed below) are examples of the
types of financial instruments commonly referred to as "derivatives."

A CMO contains a series of bonds or certificates issued in multiple classes.
Each CMO class (referred to as "tranche") has a specified coupon rate and stated
maturity or final distribution date. When people start prepaying the principal
on the collateral underlying a CMO (such as mortgages underlying a CMO), some
classes may retire substantially earlier than the stated maturity or final
distribution dates. The issuer structures a CMO to pay or accrue interest on all
classes on a monthly, quarterly or semi-annual basis. The issuer may allocate
the principal and interest on the underlying mortgages among the classes in many
ways. In a common structure, the issuer applies the principal payments on the
underlying mortgages to the classes according to scheduled cash flow priorities.

There are many classes of CMOs. Interest only classes ("IOs") entitle the class
shareholders to receive distributions consisting solely or primarily of all or a
portion of the interest in an underlying pool of mortgages or mortgage-backed
securities ("mortgage assets"). Principal only classes ("POs") entitle the class
shareholders to receive distributions consisting solely or primarily of all or a
portion of the underlying pool of mortgage assets. In addition, there are
"inverse floaters," which have coupon rates that move in the reverse direction
to an applicable index, and accrual (or "Z") bonds (described below).

At any one time, we may not invest more than 7.5% of a Fund's net assets in IOs,
POs, inverse floaters or accrual bonds individually or more than 15% in all such
obligations combined.

Inverse floating CMO classes are typically more volatile than fixed or
adjustable rate CMO classes. We would only invest in inverse floating CMOs to
protect against a reduction in the income earned on investments due to a
predicted decline in interest rates. In the event interest rates increased, we
would lose money on investments in inverse floating CMO classes. An interest
rate increase would cause the coupon rate on an inverse CMO class to decrease.

Cash flow and yields on IO and PO classes are extremely sensitive to principal
payment rates (including prepayments) on the underlying mortgage loans or
mortgage-backed securities. For example, rapid or slow principal payment rates
may adversely affect the yield to maturity of IO or PO bonds, respectively. If
the underlying mortgage assets experience greater than anticipated prepayments
of principal, the holder of an IO bond may incur substantial losses in value due
to the lost interest stream even if the IO bond has a AAA rating. If the
underlying mortgage assets experience slower than anticipated prepayments of
principal, the PO bond will incur substantial losses in value due to lost
prepayments. Rapid or slow principal payment rates may cause IO and PO bond
holders to incur substantially more losses in market value than if they had
invested in traditional mortgage-backed securities. On the other hand, if
interest rates rise, the value of an IO might increase and partially offset
other bond value declines in a Fund's portfolio. If interest rates fall, the
value of a PO might increase offsetting lower reinvestment rates in a Fund's
portfolio.

An accrual or Z bondholder does not receive cash payments until one or more of
the other classes have received their full payments on the mortgage loans
underlying the CMO. During the period when the Z bondholders do not receive cash
payments, interest accrues on the Z class at a stated rate. The accrued interest
is added to the amount of principal due to the Z class. After the other classes
have received their payments in full, the Z class begins receiving cash payments
until it receives its full amount of principal (including the accrued interest
added to the principal amount) and interest at the stated rate. Generally, the
date when cash payments begin on the Z class depends on the prepayment rate of
the mortgage loans underlying the CMO. A faster prepayment rate results in an
earlier commencement of cash payments on the Z class. Like a zero coupon bond,
during its accrual period the Z class has the advantage of eliminating the risk
of reinvesting interest payments at lower rates during a period of declining
interest rates. Like a zero coupon bond, the market value of a Z class bond
fluctuates more widely with changes in interest rates than would the market
value of bond from a class that pays interest currently. Changing interest rates
influence prepayment rates. As noted above, such changes in prepayment rates
affect the date at which cash payments begin on a Z tranche, which in turn
influences its market value.

STRUCTURED SECURITIES -- THE AAL INTERNATIONAL AND HIGH YIELD BOND FUNDS

We may invest in structured notes and/or preferred stocks for The AAL
International and High Yield Bond Funds. The issuer of a structured security
links the security's coupon, dividend or redemption amount at maturity to some
sort of financial indicator. Such financial indicators can include currencies,
interest rates, commodities and indices. The coupon, dividend and/or redemption
amount at maturity may increase or decrease depending on the value of the linked
or underlying instrument.

Investments in structured securities involve certain risks. In addition to the
normal credit and interest rate risks inherent with a debt security, the
redemption amount may increase or decrease as a result of price changes in the
underlying instrument. Depending on how the issuer links the coupon and/or
dividend to the underlying instrument, the amount of the dividend may be reduced
to zero. Any further declines in the value of the underlying instrument may then
reduce the redemption amount at maturity. Structured securities may have more
volatility than the price of the underlying instrument.

Variable Rate Demand Notes--The AAL Small Cap Stock, Mid Cap Stock,
International, Capital Growth, Equity Income, Balanced, High Yield Bond, Bond
and Money Market Funds. We may purchase variable rate master demand notes for
The AAL Small Cap Stock, Mid Cap Stock, International, Capital Growth, Equity
Income, Balanced, High Yield Bond, Bond and Money Market Funds. Variable rate,
master demand notes are unsecured instruments that permit the indebtedness
thereunder to vary and provide for period adjustments in the interest rate. The
extent to which we can purchase these securities for the Funds listed is subject
to Rule 2a-7 under the Investment Company Act of 1940. These notes normally do
not trade and there is no secondary market for the notes. However, we may demand
payment of the principal for a Fund at any time. We limit our purchases of
variable rate, master demand notes for a Fund to those: (1) rated in one of the
two highest rating categories by a NRSRO; or (2) that have been issued by an
issuer that has received a rating from the requisite NRSRO in the top two
categories with respect to a class of short-term debt obligations that is
comparable in priority and security with the instrument. If an issuer of a
variable rate, master demand note defaulted on its payment obligation, we might
not be able to dispose of the note for a Fund due to the absence of a secondary
market. We might suffer a loss to the extent of the default for the Fund. We
only invest in variable rate master demand notes and only when we deem them to
involve minimal credit risk.

STANDARD & POOR'S DEPOSITARY RECEIPTS ("SPDRS")

The Funds may invest in Standard & Poor's Depositary Receipts, commonly referred
to as SPDRs, subject to the investment restrictions concerning the investment in
other mutual funds. A SPDR is a unit investment trust. In accordance with its
Declaration of Trust, a SPDR is a pooled investment designed to closely track
the price and yield performance of a specific index, such as the S&P 500(R)
Index, the S&P MidCap 400(R) Index, or the Nasdaq 100 Index (R).. Each SPDR
trust portfolio holds corresponding shares in all the securities of a particular
index. Each SPDR share represents an undivided ownership interest in that SPDR's
trust portfolio. SPDR shares trade on a secondary market, the American Stock
Exchange (AMEX). The Funds waive the underlying unit investment trust's advisory
fees, so there is no duplication of fees.

PORTFOLIO TURNOVER RATES -- THE AAL SMALL CAP STOCK, MID CAP STOCK, HIGH YIELD
BOND, MUNICIPAL BOND AND BOND FUNDS

We expect The AAL Small Cap Stock, Mid Cap Stock, High Yield Bond, Municipal
Bond and Bond Funds to have portfolio turnover greater than 100%, and the other
Funds to have a portfolio turnover of less than 100%. A portfolio turnover over
100% is considered a high portfolio turnover rate. We do not calculate a
portfolio turnover rate for The AAL Money Market Fund because of the short
maturities of its investments. Due to the high volume of buying and selling
activity in a portfolio with turnover in excess of 100%, we may pay more
commissions for a Fund. We also may realize more taxable gains than in
portfolios with less turnover, which may result in an increase in a Fund's
expenses and lower returns for shareholders. We may trade for a Fund at a
portfolio rate significantly exceeding 100% (i.e., 600% or more for The AAL Bond
Fund and 300% or more for The AAL Balanced Fund), when we believe the benefits
of short-term investments outweigh any increase in transactions costs or capital
gains.

For the fiscal year ended April 30, 1999, The AAL Small Cap Stock Fund and The
AAL Mid Cap Stock Fund had portfolio turnover rates of 112.96% and 125.94%,
respectively. The rates reflected our growth investment styles for the Funds. We
also purchased stocks in initial public offerings and sold them shortly
thereafter. Stock prices in initial public offerings tend to appreciate or
decline significantly after the offering and then level off in price. The rates
also reflect the volatility of small and mid cap stock prices.

The portfolio turnover rates for The AAL Municipal Bond and Bond Funds were
94.56% and 572.56%, respectively. The rate for The AAL Bond Fund reflects our
active selection of the individual bonds that we believe provide the best income
within the Fund's investment parameters at any one time for The AAL Bond Fund,
we may have a portfolio turnover rate for the next fiscal year in excess of
300%, and as high as 600% or more. Our turnover rate for The AAL Municipal Bond
Fund also reflects our active selection of the individual bonds that we believe
provide the best income and chance for capital appreciation and, thus,
preservation, at any one time. We try to exploit pricing inefficiencies we
believe exist in the municipal securities market.

The portfolio turnover rate for The AAL High Yield Bond Fund was 54.67%. In
seeking its objectives, we buy or sell portfolio securities whenever the
portfolio manager believes it appropriate. Generally, how long we have owned the
security for the Fund does not influence the portfolio manager's decision on
when we will trade the security. From time to time, we will buy securities
intending to seek short-term trading profits. As a result, The AAL High Yield
Bond Fund's portfolio turnover rate may be higher than that of other mutual
funds in this category. The turnover rate is not a limiting factor when
considering a change in the Fund's portfolio.

OPTIONS AND FUTURES

The following sections pertain to options and futures. Except for The AAL Money
Market Fund, we may engage in options, futures and options on futures
transactions for the Funds. We may engage in options and futures transactions
for bona fide hedging. When entering into these transactions, we follow the SEC
and the Commodities Futures Trading Commission requirements and set aside liquid
assets in a separate account to secure a Fund's potential obligations under such
contracts. We cannot sell securities held in a segregated account while the
futures or options strategy is outstanding, unless we replace such assets with
other suitable assets. As a result, there is a possibility that segregation of a
large percentage of a Fund's assets could impede portfolio management or our
ability to meet redemption requests or other obligations for a Fund.

We may try to enhance returns or hedge against a decline in the value of a
Fund's securities by writing (selling) and purchasing options and futures
contracts. For example, during a neutral or declining market, we may gain
additional income by writing options and receiving premiums for a Fund. When we
write (sell) covered call options for a Fund, we forgo the opportunity to profit
from increases in the market value of the underlying securities above the sum of
the options' premium and the exercise price. On the other hand, we reduce the
amount of any decline in the value of the underlying securities to the extent of
the premium we receive from writing the call for a Fund. During a rising market,
we may gain incremental income by purchasing call options and futures contracts
for a Fund.

We also may use options and futures to hedge against an anticipated price
increase in a security we plan to buy for a Fund.

If new types of options and futures contracts become available, we may use them
for the Funds. Prior to their use, however, we must obtain a determination from
the Funds' Board of Trustees that their use would be consistent with the Fund's
investment objectives and policies.

OPTIONS ON SECURITIES AND INDEXES

An option contract on a security (or index) gives the holder, in return for a
premium, the right to buy from (call) or sell to (put) the option writer of the
underlying security (or cash value of underlying index) at a specified exercise
price at any time during the option term.

Upon exercise of a call option, the writer (seller) has the obligation to
deliver the underlying security to the holder; provided the holder pays the
exercise price. Upon exercise of a put option, the writer has the obligation to
pay the holder the exercise price upon delivery of the underlying security.

Upon the exercise of an index options, the writer must pay the difference
between the cash value of the index and the exercise price multiplied by the
specified multiplier for the index option. (An index is a statistical composite
that measures changes in the economy or financial market, usually reflecting
specified facets of a particular securities market, a specific group of
financial instruments, securities or economic indicators.).

Options and futures exist on debt, equity, indexes and other securities or
instruments. They may take the form of standardized contracts traded on national
securities exchanges, boards of trade or similar entities. They also may trade
in the over-the-counter market. Some debt instruments, such as bonds, trade with
cash put options, which generally allow the holder to sell the security back to
the issuer at a specified price for a specified amount of time.

WHEN WE WRITE OPTIONS, WE MAY ONLY WRITE "COVERED" CALLS OR PUTS FOR A FUND.

A call option for a Fund is covered if we hold the security underlying the call
for the Fund. Also a call option for a Fund is covered if we have an absolute
and immediate right to acquire the security for the Fund without additional cash
consideration upon conversion or exchange of other securities held in the
portfolio. If additional cash consideration is required, we hold cash or cash
equivalents in such an amount in a segregated account with the Fund's custodian.
An index call option is covered if we hold cash or cash equivalents with the
Fund's custodian equal to the contract value. A written call option is covered
if we hold a call option on the same security or index under two conditions. The
first condition is where the exercise price of the call purchased is equal to or
less than the exercise price of the call written. The second conditions is where
the exercise price of the call purchased is greater than the exercise price of
the call written; provided that we maintain the difference with the Fund's
custodian in cash or cash equivalents in a segregated account.

A put option on a security or an index is covered if we maintain cash or cash
equivalents equal to the exercise price in a segregated account with the Fund's
custodian. A put option is covered if we hold a put on the same security or
index as the put written under two conditions. The first condition is where the
exercise price of the put is equal to or greater than the exercise price of the
put written. The second condition is where the exercise price of the put is less
than the exercise price of the put written; provided we maintain cash or cash
equivalents with the Fund's custodian in a segregated account.

Prior to the expiration or exercise of an option, we may close the option out by
entering into an offsetting transaction. We would affect an offsetting
transaction for a Fund by purchasing or selling an option of the same series
(type, exchange, underlying security or index, exercise price and expiration).
Due to market factors, we may not be able to affect a closing purchase or sale
at the time we would like to for a Fund.

We realize a capital gain from a closing purchase transaction if the premium for
purchasing the closing option is less than the premium received from writing the
option. If the premium for purchasing the closing option is more, we realize a
capital loss for the Fund. If the premium received from a closing sale
transaction is more than the premium paid to purchase the option, we realize a
capital gain for the Fund. If the premium is less, we realize a capital loss for
the Fund.

If an option we write for a Fund expires unexercised, we realize a capital gain
equal to the premium received. If an option we purchased for a Fund expires
unexercised, we realize a capital loss equal to the premium we paid for the
option.

The principal factors affecting the market value of a put or call option include
supply and demand, interest rates, the current market price of the underlying
security or index in relation to the exercise price of the option, the
volatility of the underlying security or index and the time remaining until the
expiration date.

We record a premium paid for an option purchased by us for a Fund as an asset.
We record the premium received for an option written by us for a Fund as a
deferred liability. We mark-to-market the value of an option purchased or
written on a daily basis at the closing price on the exchange on which it
traded. If the option was not traded on an exchange or a closing price was not
available, we would value the option at the mean between the last bid and asked
prices.

RISKS ASSOCIATED WITH OPTIONS ON SECURITIES AND INDEXES

Options transactions have risks. A decision as to whether, when and how we use
options involves the exercise of skill and judgment. For example, significant
differences could exist between the market for the underlying security (or
index) and the market for the overlying options. These differences, such as
differences in the way the underlying securities are trading and the way the
options on the securities are trading, could result in an imperfect correlation
between the markets. As a result, we might not be able to achieve our objectives
in an options transaction for the Fund. Market behavior and unexpected events
may hinder our otherwise well-conceived options transactions we have entered
into for a Fund.

We cannot assure you that a liquid market will exist when we seek to close out
an option position for a Fund. If we could not close out an option we had
purchased for a Fund, we would have to exercise the option to realize any profit
or let the option expire worthless. If we could not close out a covered call
option that we had written for a Fund, we could not sell the underlying security
unless the option had expired not exercised.

When we write a covered call option for a Fund, we forgo the opportunity to
profit from increases in the covering security's market value above the sum of
the premium and the call's exercise price.

If the exchange (or Board of Trade) suspends trading in an option we purchased
for a Fund, we cannot enter into a closing transaction during the suspension. If
the exchange imposes restrictions on the option's exercise, we might not be able
to exercise an option we have purchased for a Fund. Except to the extent that a
call option on an index written by a Fund is covered by an option on the same
index purchased by a Fund, movements in the index may result in a loss to a
Fund. Such losses may be mitigated by changes in the value of a Fund's portfolio
securities during the period the option was outstanding.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

In addition to foreign currency futures contracts, which we discuss below, we
may enter into interest rate and index futures contracts. An interest rate or
index futures contract provides for the future sale by one party and purchase by
another party of a specified quantity of a financial instrument or the cash
value of an index at a specified price and time. A futures contract on an index
is an agreement by which two parties agree to take or make delivery of an amount
of cash equal to the difference between the closing value of the index on the
contract's last trading day and the original price entered into for the
contract. Although the index's value may reflect the value of certain underlying
securities, the party responsible for delivery delivers cash (not the underlying
securities).

A public market exists in futures contracts covering a number of indexes as well
as other financial instruments. Such instruments include: U.S. Treasury bonds;
U.S. Treasury notes; GNMA certificates; three-month U.S. Treasury bills; 90-day
commercial paper; bank certificates of deposit; and Eurodollar certificates of
deposit. Boards of trade and other issuers may develop and trade other futures
contracts. As with options, if new types of futures contracts become available,
we may use them for the Funds. Prior to their use, however, we must obtain a
determination from the Funds' Board of Trustees that their use would be
consistent with the Fund's investment objectives and policies.

We may purchase and write call and put futures options for a Fund. Our ability
to write call and put futures, however, depends on whether the Commodity Futures
Trading Commission grants certain regulatory relief (such as an exemption from
being considered a commodities pool operator).

Options on futures possess many of the same characteristics as options on
securities and indexes. A futures option gives the holder the right, in return
for the premium paid, to assume a long position (call) or short position (put)
in a futures contract at a specified exercise price at any time during the
period of the option. Upon exercise of a call option, the holder acquires a long
position in the futures contract and the writer is assigned the opposite short
position. In the case of a put option, the opposite is true.

As long as regulatory authorities require, we limit our use of futures and
options on futures to hedging transactions. We might use futures contracts to
hedge against anticipated interest rate changes we believe might adversely
affect either the value of a Fund's securities or the price of securities we
intend to purchase for a Fund. Our hedging strategy may include sales of futures
contracts to offset the effect of expected interest rate increases. It also may
include purchases of futures contracts to offset the effect of expected interest
rate declines. Although we could use other techniques to reduce a Fund's
exposure to interest rate fluctuations, we may be able to hedge a Fund's
exposure more effectively and perhaps at a lower cost by using futures and
options on futures.

The success of any hedging technique depends on our ability to correctly predict
changes in the level and direction of interest rates and other factors. Should
our predictions prove incorrect, the Fund's return might be lower than it would
have been had we not tried the hedging strategy. However, in the absence of the
ability to hedge, we might have to take portfolio actions in anticipation of the
same market movements with similar investment results at potentially greater
transaction costs.

We only enter into standardized futures or options on futures contracts that
trade on U.S. exchanges, boards of trade, or similar entities, or are quoted on
an automated quotation system.

When we purchase or sell a futures contract for a Fund, we deposit with the
custodian (or broker, if legally permitted) a specified amount of cash or U.S.
government securities ("initial margin"). The exchange or board of trade on
which the futures contract trades sets the margin requirement. The exchange may
modify the margin requirement during the term of a futures contract. The initial
margin is in the nature of a performance bond or good faith deposit on the
futures contract. The custodian or broker returns the margin to a Fund upon
termination of the contract, assuming we have fulfilled all contractual
obligations for the Fund. We expect to earn interest income on the initial
margin deposit for a Fund. We value a futures contract held for a Fund on a
daily basis at the official settlement price of the exchange on which it trades.
Each day a we pay or receive cash for the Fund, called "variation margin," equal
to the daily change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or loan by
us for a Fund, but is instead a settlement between a Fund and the broker of the
amount one would owe the other if the futures contract expired. In computing
daily net asset value, we mark-to-market a Fund's open futures positions.

We are required to deposit and maintain margin on any put and call options on
futures contracts that we have written for a Fund. Such margin deposits vary
depending on the nature of the underlying futures contract (and the related
initial margin requirements), the option's current market and other futures
positions we hold for the Fund.

Some futures contracts call for making or taking delivery of the underlying
securities. Generally we would close out these obligations prior to delivery by
making offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, we realize a capital gain
for the Fund. If the offsetting purchase price is more, we realize a capital
loss for the Fund. Conversely, if an offsetting sale price is more than the
original purchase price, we realize a capital gain for a Fund. If the offsetting
sale price is less, we realize a capital loss for a Fund. We must include the
transaction costs in calculating a gain or loss on the offsetting transactions.

RISKS ASSOCIATED WITH FUTURES

There are several risks associated with using futures contracts and options on
futures as hedging techniques. Our purchase or sale of a futures contract may
result in losses in excess of the amount we invested in the futures contract for
a Fund. We cannot guarantee how price movements in the market for the hedging
vehicle and market for the underlying portfolio securities being hedged will
correlate. Significant differences exist between the securities and futures
markets that could result in an imperfect correlation. These differences could
cause a given hedging strategy we have entered into for a Fund to not achieve
its objectives. The degree of imperfect correlation depends on circumstances
such as the variations in the speculative market demand for the futures and/or
futures options contracts used to hedge the underlying portfolio securities. A
decision as to whether, when and how we hedge involves the exercise of skill and
judgment. Our hedges may be unsuccessful to some degree because of unexpected
market behavior or interest rate trends.

Futures exchanges may limit the amount of price fluctuation in a contract for
trading in a single day. An exchange establishes a daily limit on the amount a
contract's price may vary either up or down from the previous day's settlement
price. Once the futures contract trades above or below the daily limit, the
exchange stops trading beyond the limit. The daily limit governs price movements
during a particular trading day but does not limit potential losses for the
contract holders. The daily limit may prevent us from being able to liquidate an
unfavorable position for a Fund. For example, futures prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of positions and subjecting some
holders of futures contracts to substantial losses.

We cannot ensure a liquid market will exist at a time when we seek to close out
a futures or futures options position for a Fund. If a liquid market did not
exist, we would have to continue meeting margin requirements until we could
close the position. We also cannot ensure that an active secondary market will
develop or continue to exist for the futures and futures options discussed
above.

LIMITATIONS ON OPTIONS AND FUTURES

We do not enter into an open futures contract position or purchase an option if
the initial margin deposit plus the premiums paid, less the amount by which any
such position is "in the money," exceeds 5% of a Fund's net assets. A call
option is "in the money" if the value of the futures contract that is the
subject of the option exceeds the exercise price. A put option is "in the money"
if the exercise price exceeds the value of the futures contract that is the
subject of the option.

When purchasing a futures contract or writing a put on a futures contract, we
must maintain with the Fund's custodian (or broker, if legally permitted) cash
or cash equivalents (including any margin) equal to the market value of such
contract. When writing a call option on a futures contract, we maintain with the
Fund's custodian cash or cash equivalents (including any margin) equal to the
amount such option is in the money until the option expires or we have entered
into an offsetting transaction closing out the option for the Fund.

We may not maintain open short positions in futures contracts, call options
written on futures contracts or call options written on indexes for a Fund, if,
in the aggregate, the market value of all such open positions exceeds the
current value of the Fund's portfolio. In valuing the portfolio, we have to take
into account unrealized gains and losses on the open positions and adjust for
the historical relative volatility of the relationship between the portfolio and
the positions. To the extent we have written call options on specific securities
in a Fund's portfolio, we deduct the value of those securities from the
portfolio's current market value.

We avoid being deemed a "commodity pool operator" by complying with the
Commodity Futures Trading Commission Rules. As such, we do not invest in a
commodity contract for a Fund where the "underlying commodity value" of each
long position at any time exceeds the sum of:

(1) the value of the Fund's short-term U.S. debt obligations or other U.S.
dollar denominated, high-quality short-term money market instruments and
cash that we have set aside for the Fund in an identifiable manner, plus
any funds deposited as margin on the contract;
(2) unrealized appreciation on the contract held by the broker; and
(3) cash proceeds from existing investments due in not more than 30 days.

"Underlying commodity value" means the size of the contract multiplied by the
daily settlement price of the contract.

TAXATION OF OPTIONS AND FUTURES

If we exercise a call option for a Fund, we add the premium paid for the call
option to the cost of the security purchased. If we exercise a put option, we
deduct the premium paid for the put option from the proceeds of the security
sold. For index options and futures, which are settled in cash, the difference
between the cash received at exercise and the premium paid is a capital gain or
loss.

Our entry into closing purchase transactions for a Fund results in a capital
gain or loss. If an option was "in the money" when we wrote it and we held the
security covering the option for more than one year before writing it for a
Fund, any loss realized in a closing purchase transaction would be long-term for
federal tax purposes. The holding period of the securities covering an "in the
money" option does not include the time period the option was outstanding.

When we hold a futures contract for a Fund until delivery, we will realize a
capital gain or loss on the futures contract. The capital gain or loss is equal
to the difference between the price at the time we entered into the futures
contract for the Fund and the settlement price on the earlier of the delivery
notice date or expiration date. If we deliver securities for a Fund under a
futures contract, we realize a capital gain or loss for the Fund on those
securities.

For Federal income tax purposes, we generally recognize as income a Fund's
yearly net unrealized gains and losses on its options, futures and options on
futures positions ("year-end mark to market"). Generally, any gain or loss
recognized with respect to such positions (either by year-end mark to market or
by actual closing of the positions) is considered to be 60% long term and 40%
short term, without regard to the holding periods of the contracts. However, in
the case of positions classified as part of a "mixed straddle," we may defer the
recognition of losses on certain positions (including options, futures and
options on futures positions, the related securities and certain successor
positions thereto) to a later taxable year for a Fund. Selling futures contracts
or writing call options (or call options on futures) or buying put options (or
put options on futures) for the purposes of hedging against an anticipated
change in the value of a Fund's securities may affect the securities' holding
period.

We distribute any recognized net capital gains for a Fund, including any
recognized net capital gains (including year-end mark-to-market gains) on
options and futures transactions for federal income tax purposes. We combine and
distribute a Fund's capital gains on its options and futures transactions and
its capital gains on other investments. We also advise shareholders on the
nature of these distributions for a Fund.

FEDERAL TAX TREATMENT OF FORWARD FOREIGN EXCHANGE CONTRACTS

We may enter into certain forward foreign exchange contracts for a Fund that the
Internal Revenue Service will treat as Section 1256 contracts or straddles under
the Internal Revenue Code.

We must consider these Section 1256 contracts as having been closed at the end
of a Fund's fiscal year and we must recognize any gains or losses on these
contracts for tax purposes at that time. The IRS characterizes such gains or
losses from the normal closing or settlement of such transactions as ordinary
gain or loss. We are required to distribute any net gains on such transactions
to the Fund's shareholders even if we have not actually closed the transaction
and received cash to pay for the distribution.

We may consider forward foreign exchange contracts that offset a foreign dollar
denominated bond or currency position as straddles for tax purposes. Considering
these contracts as straddles allows us to defer a loss on any position in a
straddle to the extent of unrealized gain in an offsetting position.

For a Fund to continue qualifying for federal income tax treatment as a
regulated investment company, it must derive at least 90% of its gross income
from qualifying income (i.e., dividends, interest, income derived from loans of
securities and gains from the sale of securities or currencies). Pending tax
regulations could limit the extent that net gains realized from options, futures
or foreign forward exchange contracts on currencies are qualifying income for
purposes of 90% requirement.

Foreign Securities - The AAL Small Cap Stock, Mid Cap Stock, Capital Growth,
Balanced and Bond Funds

We also may invest assets of the Fund in foreign securities trading domestically
through depository receipts or on a U.S. national securities exchange or Nasdaq
National Market for The AAL Small Cap Stock, Mid Cap Stock and Capital Growth
Funds. We do not intend to invest more than 10% of their net assets in such
foreign securities. We may invest up to 20% of The AAL Bond Fund's net assets in
debt securities of foreign issuers payable in U.S. dollars. We may invest in
foreign securities for The AAL Balanced Fund to the extent The AAL Capital
Growth and Bond Funds allow investments in foreign securities for the common
stock and fixed-income sectors of the Fund, respectively. Foreign securities may
present a greater degree of risk (including risks relating to tax provisions or
expropriation of assets) than do securities of domestic issuers.

Foreign Securities - The AAL International, Equity Income and High Yield Bond
Funds

We normally invest at least 65% of The AAL International Fund's total assets in
foreign securities primarily trading in at least 3 different countries, not
including the U.S.

We may invest up to 15% of The AAL Equity Income Fund's net assets in foreign
securities. We also may invest in foreign securities trading domestically
through depository receipts and securities of foreign issuers traded on a U.S.
national securities exchange or Nasdaq National Market without regard to the 15%
limitation. For purposes of diversification for a Fund, we consider depository
receipts as investments in the underlying stocks.

We may invest up to 15% of The AAL High Yield Bond Fund's net assets in foreign
bonds. At this time, we intend to limit our foreign bond purchases for the Fund
to those trading in the U.S.

Foreign investing involves risks in addition to the risks inherent in U.S.
investing. Foreign countries tend to disseminate less public information about
their issuers. Many foreign countries do not subject their companies to uniform
accounting, auditing and financial reporting standards. The value of foreign
investments may rise or fall because of changes in currency exchange rates. As a
result, we may incur costs in converting securities denominated in foreign
currencies into U.S. dollars for a Fund. Dividends and interest on foreign
securities may be subject to foreign withholding taxes, which would reduce a
Fund's income without providing a tax credit to shareholders. When necessary, we
may have more difficulty obtaining and enforcing judgments in foreign countries.
We also would incur more expense. Even though we mainly intend to invest in
securities trading in stable and developed countries, we still face the
possibility of expropriation, confiscatory taxation, nationalization, currency
blockage or political or social instability that could affect investments in
such countries.

We may invest in American Depository Receipts ("ADRs") for The AAL International
and Equity Income Funds without limit. ADR facilities may be either "sponsored"
or "un-sponsored." While sponsored and un-sponsored ADR facilities are similar,
distinctions exist between the rights and duties of ADR holders and market
practices. Sponsored facilities have the backing or participation of the
underlying foreign issuers. Un-sponsored facilities do not have the
participation by or consent of the issuer of the deposited shares. Un-sponsored
facilities usually request a letter of non-objection from the issuer.

Holders of un-sponsored ADRs generally bear all the costs of such facility. The
costs of the facility can include deposit and withdrawal fees, currency
conversion and other service fees. The depository of an un-sponsored facility
may not have a duty to distribute shareholder communications from the issuer or
to pass through voting rights. Issuers of un-sponsored ADRs do not have an
obligation to disclose material information about the foreign issuers in the
U.S. As a result, the value of the un-sponsored ADR may not correlate with the
value of the underlying security trading abroad or any material information
about the security or the issuer disseminated abroad.

Sponsored facilities enter into an agreement with the issuer that sets out
rights and duties of the issuer, the depository and the ADR holder. The
sponsored agreement also allocates fees among the parties. Most sponsored
agreements provide that the depository will distribute shareholder notices,
voting instructions and other communications. The AAL International and Equity
Income Funds may invest in sponsored and un-sponsored ADRs.

For The AAL International Fund, we also may hold foreign securities in the form
of American Depository Shares ("ADSs"), Global Depository Receipts ("GDRs") and
European Depository Receipts ("EDRs"), or other securities convertible into
foreign securities. These receipts may not be denominated in the same currency
as the underlying securities. Generally, American banks or trust companies issue
ADRs and ADSs, which evidence ownership of underlying foreign securities. GDRs
represent global offerings where an issuer issues two securities simultaneously
in two markets, usually publicly in a non-U.S. market and privately in the U.S.
market. EDRs (sometimes called Continental Depository Receipts ("CDRs")) are
similar to ADRs, but usually issued in Europe. Typically issued by foreign banks
or trust companies, EDRs and CDRs evidence ownership of foreign securities.
Generally, ADRs and ADSs in registered form trade in the U.S. securities
markets, GDRs in the U.S. and European markets, and EDRs and CDRs (in bearer
form) in European markets. For diversification purposes, we consider investments
in ADRs, ADSs, GDRs, EDRs and CDRs as investments in the underlying stocks for
the Fund.

FOREIGN CURRENCY TRANSACTIONS

Foreign Currency Spot Transactions and Forward Contracts

To manage the currency risk accompanying investments in foreign securities and
to facilitate the purchase and sale of foreign securities, we may engage in
foreign currency transactions on a spot (cash) basis for the Funds. We invest at
the spot rate prevailing in the foreign currency exchange market. We also may
enter into contracts to purchase or sell foreign currencies at a future date
("forward foreign currency" contracts or "forward" contracts).

A forward contract involves an obligation to purchase or sell a specific foreign
currency at a future date at a set price. Forward contracts principally trade in
the inter-bank market and are conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement and no commissions are charged at any stage
for trades.

Whenever we intend to purchase or sell a security denominated in a foreign
currency for a Fund, we may want to "lock in" the U.S. dollar price of the
security. We can protect a Fund by entering into a forward contract for the
purchase or sale of a fixed amount of U.S. dollars equal to the amount of
foreign currency involved in the underlying security transaction. With a forward
contract, we can protect the Fund against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and the subject
foreign currency between the date the security is purchased or sold and the date
on which the payment is made or received.

We may use forward contracts for a Fund when we believe that a particular
foreign currency may suffer a substantial decline against the U.S. dollar. In
this situation, we would enter into a forward contract to sell a fixed amount of
the foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. We, however, cannot
precisely match the forward contract amounts and the value of the securities
involved. The securities' values change as a consequence of market movements
between the date we entered into the forward contract for the underlying
currency and the date it matures.

Due to the fact that movement in the short-term currency market is extremely
difficult to predict, successful execution of a short-term hedging strategy is
highly uncertain. Therefore, we do not enter into forward contracts or maintain
a net exposure to such contracts where completion would obligate us to deliver
foreign currency in excess of the value of the Fund's securities or other assets
denominated in that currency. Under normal circumstances, we consider the
long-term prospects for a particular currency. We incorporate the prospects into
our overall long-term diversification strategies. However, we believe that it is
important to have the flexibility to enter into such forward contracts when we
determine that it is in the Fund's best interest.

At the maturity of a forward contract for a Fund, we may either: (1) sell the
portfolio securities and make delivery of the foreign currency; or (2) retain
the securities and terminate our contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract obligating us to purchase, on
the same maturity date, the same amount of foreign currency.

If we retain the portfolio securities and engage in an offsetting transaction
for the Fund, we will incur a gain or a loss to the extent that there has been
movement in forward contract prices. If we enter into an offsetting transaction,
we may subsequently enter into a forward contract to sell the foreign currency.
Should forward prices decline during the period when we entered into a forward
contract to sell a foreign currency and the date we entered into an offsetting
contract to buy a foreign currency, we will realize a gain to the extent the
price of the currency we agreed to sell exceeds the price of the currency we
agreed to buy. Should forward prices increase, we will suffer a loss to the
extent that the price of the currency we agreed to buy exceeds the price of the
currency we agreed to sell for a Fund. We may not be able to hedge against a
currency devaluation at a price above the level where the market itself has
anticipated the currency's devaluation.

A foreign currency hedge transactions does not protect against or eliminate
fluctuations in the prices of particular portfolio securities. For example, a
foreign currency hedge transaction does not prevent a security's price decline
due to an issuer's deteriorating credit situation. We also cannot forecast with
precision the market value of securities at the expiration of a forward
contract. Accordingly, we may have to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if: (1) the market value
of the Fund's securities are less than the amount of the foreign currency we are
obligated to deliver for the Fund; and (2) we made a decision to sell the
foreign securities and make delivery of the foreign currency upon expiration of
the contract for the Fund. Conversely, we may have to sell some of a Fund's
foreign currency received upon the sale of a portfolio security if the market
value of the Fund's securities exceed the amount of foreign currency we are
obligated to deliver for the Fund. We limit our dealings in forward foreign
currency exchange contracts for a Fund to the transactions described above.

Although we value the Funds' assets daily in terms of U.S. dollars, we do not
intend to convert their holdings of foreign currencies into U.S. dollars on a
daily basis. From time to time, however, we will convert a Fund's foreign
currency holdings into U.S. dollars. There are costs associated with converting
foreign currencies into U.S. dollars and you should be award of these costs.
Although foreign exchange dealers do not charge a fee for conversion, they
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to us for a Fund at one rate, while offering a lesser
rate of exchange should we desire to resell that currency to the dealer for the
Fund.

OPTIONS AND FUTURES RELATING TO FOREIGN CURRENCIES

We may purchase and sell currency futures and purchase and write currency
options to increase or decrease a Fund's exposure to different foreign
currencies. We also may purchase and write currency options in conjunction with
the currency futures or forward contracts of the Fund's other series. The uses
and risks of currency options and futures are similar to options and futures on
securities or indices, as discussed above.

Currency futures contracts are similar to forward foreign currency contracts,
except that they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars.

The underlying instrument of a currency option generally is either a foreign
currency or a currency futures contract. The purchaser of a currency call option
obtains the right to purchase the underlying currency. The purchaser of a
currency put option obtains the right to sell the underlying currency.

Currency futures and options values correlate with exchange rates. However, the
futures and options values do not reflect other factors affecting a Fund's
investment value. A currency hedge, for example, should protect a Japanese
Yen-denominated security from a decline in the Yen. The currency hedge, however,
will not protect the particular Fund's Yen denominated investments against a
price decline in the Yen denominated security resulting from deterioration in
the issuers' creditworthiness. Because the value of a Fund's foreign-denominated
investments change in response to many factors other than exchange rates, we
have difficulty matching the exact value of any hedge in currency options and
futures to the value of our foreign investments for a Fund over time.

FOREIGN INVESTING EXPENSES

Investing in foreign securities costs more than investing in U.S. securities due
generally to higher transaction costs, such as the commissions paid per share.
As a result, Funds that invest in foreign securities tend to have higher
expenses, particularly funds that invest primarily in foreign securities (i.e.,
The AAL International Fund). In addition to higher commissions, they generally
have higher advisory and custodial fees. However, you may find investing in a
fund that purchases foreign securities a more efficient way to invest in foreign
securities than investing in individual foreign securities. Higher expenses
attributable to a Fund that invests in foreign securities does not mean that the
Fund has higher expenses than other funds with similar investment policies and
percentages of assets invested in foreign securities.

PRIVATELY ISSUED SECURITIES: THE AAL MONEY MARKET FUND

We may invest in securities issued by major corporations without registration
under the Securities Act of 1933 for The AAL Money Market Fund in reliance on
certain exemptions, including the "private placement" exemption afforded by
Section 4(2) of that Act. Section 4(2) paper is restricted as to disposition
under the federal securities laws in that any resale must be made in an exempt
transaction. This paper normally is resold to other institutional investors
through or with the assistance of investment dealers who make a market in it,
thus providing liquidity. In our opinion (as the Adviser), Section 4(2) paper is
no less liquid or salable than commercial paper issued without legal
restrictions on disposition. The secondary market for Section 4(2) paper could
become illiquid if institutional participants lost interest in these
investments. However, should we deem that section 4(2) paper issue is illiquid,
we would purchase such security for a Fund only in accordance with our
limitations on illiquid securities.

INVESTMENTS IN OTHER INVESTMENT COMPANIES

Due to the administration and distribution expenses of managing a mutual fund,
our investments in other investment companies (mutual funds, which are limited
by fundamental investment restriction 14 above) may cause us to increase
payments of such expenses for a Fund.

RISKS

Each of the previously described investment techniques contains an element of
risk. You should also be aware of the following risks associated with an
investment in the Funds.

INTEREST RATE RISK

For The AAL Balanced, High Yield Bond, Municipal Bond, Bond and Money Market
Funds and, to some extent, The AAL Equity Income Fund, you can expect that
interest rate changes will significantly impact upon the value of your Fund
investments. Interest rates are influenced by supply and demand as well as
economic monetary policies. In general, a decline in prevailing interest rate
levels generally will increase the value of the securities, particularly the
bonds, held in a Fund's portfolio and vice versa. As a result, interest rate
fluctuations will affect a Fund's net asset values but not the income received
from its existing portfolio. However, changes in the prevailing interest rate
level will affect the yield on subsequently purchased securities. Because yields
on the securities available for purchase by the Funds will vary over time, we
cannot assure a specific yield on a Fund's shares.

Longer-term bonds are more sensitive to interest rate changes than shorter-term
bonds, reflecting the greater risk of holding these bonds for a longer period of
time. Longer-term bond prices increase more dramatically when interest rates
fall and decrease more dramatically when interest rates rise. Prices of
short-term debt, such as money market instruments, are less price sensitive to
interest rate changes because of their short duration. Securities that pay high
dividends, like bonds, are more sensitive to interest rate levels than other
equity securities that pay low dividends.

INVESTING IN A BOND VERSUS INVESTING IN A MUTUAL FUND

Investing in a mutual fund that owns bonds is not the same as buying an
individual bond. Both bonds and funds owning bonds offer regular income. While
individual bonds can offer a fixed amount of regular income until maturity, a
mutual fund portfolio may include a constantly changing pool of bonds with
differing interest rates, maturities and prices. Both share prices and dividends
may fluctuate in a mutual fund owning bonds.

MANAGEMENT OF THE FUNDS

BOARD OF TRUSTEES AND EXECUTIVE OFFICERS
The Trustees and Executive Officers of the Funds and their principal occupations
during the past five years are described below. Unless otherwise specified, the
business address of all Trustees and Officers is 222 West College Avenue,
Appleton, WI 54919-0007:

<TABLE>
<CAPTION>
<S> <C> <C>
Name, Address and Age Position with the Funds Principal Occupation

F. Gregory Campbell Trustee President, Carthage College
d/o/b 2/16/39
2001 Alford Park Drive
Kenosha, WI 53140

Woodrow E. Eno Trustee* Senior Vice-President
d/o/b 4/5/46 Vice-President* Secretary and General Counsel
Aid Association for Lutherans

Richard L. Gady Trustee Vice-President of Public Affairs
d/o/b 2/28/43 and Chief Economist, ConAagra,
One ConAgra Drive Inc. (agribusiness)
Omaha, NE 68102-5001

John O. Gilbert Trustee President and Chief Executive Officer,
d/o/b 8/30/42 Aid Association for Lutherans

John H. Pender Trustee Retired; formerly Senior Vice-President
d/o/b 5/25/30 And Chief Investment Officer,
1056 S. Manzanita Avenue Aid Association for Lutherans
Palm Springs, CA 92264

Edward W. Smeds Trustee Retired; President, Customer Service
d/o/b 2/15/36 and Operations, Kraft Foods
10 Regent Wood Road (food and agriculture)
Northfield, IL 60093

Lawrence M. Woods Trustee Retired; formerly Executive
d/o/b 4/14/32 Vice-President and Director Mobil Oil
524 Sunset Drive Corporation (oil producer)
Worland, WY 82401

Robert G. Same President Vice-President, Chief Compliance
d/o/b 7/28/45 Officer and Deputy General Counsel,
Aid Association for Lutherans;
President, AAL Capital Management
Corporation

James H. Abitz Vice-President Vice-President, Investments, Aid
d/o/b 5/27/45 Association for Lutherans

Charles D. Gariboldi Treasurer Assistant Vice-President, Fund
d/o/b 12/31/59 Accounting, Aid Association for
Lutherans

Joseph R. Mauel Assistant Treasurer Director, Fund Accounting
d/o/b 11/26/59

Todd J. Kelly Assistant Treasurer Manager of Mutual Fund Accounting, Aid
d/o/b 8/15/69 Association for Lutherans

Frederick D. Kelsven Secretary Assistant General Counsel, Aid
d/o/b 2/9/47 Association for Lutherans;
Vice-President and Chief Compliance
Officer, Aetna Retirement Services
(financial services); Director of
Compliance, Nationwide Financial
Services (financial services)

Steven Fredricks Assistant Secretary Attorney III, Securities and
d/o/b 7/25/70 Investment Law, Aid Association for
Lutherans; Attorney, Azaria Financial
Services, LLP (financial services)

Norma A. Brink Assistant Secretary Associate General Counsel and
d/o/b 6/23/58 Associate Vice-President, Aid
Associations for Lutherans
</TABLE>

* Denotes Directors who are "interested persons" of the Funds, as defined in the
Investment Company Act of 1940.

COMPENSATION TABLE

The Funds do not make payments to any of the officers for services to the Trust.
The Funds, however, pay the independent Trustees (those who are not officers or
employees of AAL CMC or Aid Association for Lutherans) an annual fee of $25,000.
The Funds assess these fees ratably to each series of the AAL Mutual Funds. The
Funds reimburse the Trustees for any expenses they may incur by reason of
attending such meetings or in connection with services they may perform for The
AAL Mutual Funds. For the fiscal year ended April 30, 1999, the Funds paid an
aggregate of $106,214.33 in Trustees' fees and expenses. Fees paid to the
Trustees for the fiscal year ended April 30, 1999 are set forth below.

Total
Compensation
Aggregate From Funds and
Compensation Fund Complex(1)
Name, Position from Funds Paid to Trustees

F. Gregory Campbell $25,000 $30,000

Woodrow E. Eno $0 $0

Richard L. Gady $25,000 $30,000

John O Gilbert 0 0

John H. Pender $25,000 $25,000

D.W. Russler(2) $18,750 $22,500

Edward W. Smeds(2) $6,250 $7,500

Lawrence M. Woods $25,000 $30,000

(1) The Fund complex includes the AAL Variable Product Series Fund, Inc.

(2) As of December 31, 1998, Mr. Russler retired from the Board of Trustees and
Mr. Smeds joined the Board of Trustees

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

THE AAL SAVINGS PLAN

As of December 3,1999, AAL, on behalf of the Aid Association for Lutherans
Savings Plan, held in excess of 5% of the following Funds' Class I shares. The
ownership percentage for each Fund is set forth below.

Ownership
Percentage

The AAL Capital Growth Fund 47.68%
The AAL Equity Income Fund 26.50%
The AAL Mid Cap Stock Fund 64.76%
The AAL Bond Fund 5.07%

AAL CAPITAL MANAGEMENT CORPORATION

As of December 3, 1999, the Trust's officers and Trustees owned less than 1% of
the shares of any Fund. AAL CMC, as the adviser and distributor of the Funds,
held in excess of 5% of the following Funds' Class I shares.

The ownership percentage for each Fund is set forth below.

Ownership
Percentage

The AAL Balanced Fund 34.65%
The AAL Money Market Fund 58.53%
The AAL Small Cap Stock Fund 5.63%

THE AAL TRUST COMPANY, FSB

As of December 3, 1999, the AAL Trust Company owned in excess of 5% of the
following Funds' Class I shares. The ownership percentage for each Fund is set
forth below.

Ownership
Percentage

The AAL Balanced Fund 6.45%
The AAL Municipal Bond Fund 44.43%
The AAL High Yield Bond Fund 21.68%
The AAL Money Market Fund 16.22%
The AAL Equity Income Fund 6.38%
The AAL Bond Fund 7.08%

OUTSIDE SHAREHOLDERS

As of December 3, 1999, the following account holders held in excess of 5% of
the following Funds' Class I shares. The ownership percentage for each Fund is
set forth below.

Ownership
Percentage

LCMS Foundation

The AAL Capital Growth Fund 12.77%
The AAL Bond Fund 75.12%
The AAL Equity Income Fund 55.91%

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISER
Please refer to our description of the adviser, advisory agreement and fees
under "Management, Organization, and Capital Structure" in the prospectus. We
have incorporated the prospectus herein by reference.

AFFILIATED PERSONS
There are currently no affiliated persons of the Fund or AAL CMC, the Funds'
adviser.

ADVISER FEES PER FUND

<TABLE>
<CAPTION>
<S> <C>
THE AAL SMALL CAP STOCK FUND 0.70% on the first $200 million
0.65% on the average daily net assets over $200 million

THE AAL MID CAP STOCK FUND 0.70% on the first $200 million
0.65% on the average daily net assets over $200 million

THE AAL INTERNATIONAL FUND 0.25% on average daily net assets above the sub-adviser's fee
Sub-Adviser Fees
Oechsle International Advisers 0.40% on the first $50 million
0.35% on the average daily net assets over $50 million

THE AAL CAPITAL GROWTH FUND 0.65% on the first $500 million
0.575% on the next $500 million
0.50% on the average daily net assets over $1 billion

THE AAL EQUITY INCOME FUND 0.45% on the average daily net assets

THE AAL LARGE COMPANY INDEX FUND 0.25% on the first $50 million
0.175% on the average daily net assets over $50 million

THE AAL MID CAP INDEX FUND 0.25% on the first $50 million
0.20% on the average daily net assets over $50 million

THE AAL BALANCED FUND 0.55% on the average daily net assets

THE AAL HIGH YIELD BOND FUND 0.55% on the average daily net assets

THE AAL MUNICIPAL BOND FUND 0.45% on the average daily net assets

THE AAL BOND FUND 0.45% on the average daily net assets

THE AAL BOND INDEX FUND 0.25% on the first $50 million
0.175% on the average daily net assets over $50 million

THE AAL MONEY MARKET FUND 0.50% on the first $500 million
0.45% on the average daily net assets over $500 million
</TABLE>

ADVISORY FEES
The adviser, AAL CMC, furnishes and pays for all office space and facilities,
equipment and clerical personnel necessary for carrying out the adviser's duties
under the advisory agreement. The adviser also pays all compensation of
Trustees, officers and employees of the Trust who are the adviser's affiliated
persons. All costs and expenses not expressly assumed by the adviser under the
advisory agreement are paid by the Funds, including, but not limited to: (a)
interest and taxes; (b) brokerage commissions; (c) insurance premiums; (d)
compensation and expenses of the Funds' Trustees other than those affiliated
with the adviser; (e) legal and audit expenses; (f) fees and expenses of the
Trust's custodian and transfer agent; (g) expenses incident to the issuance of
the Trust's shares, including stock certificates and issuance of shares on the
payment of, or reinvestment of, dividends; (h) fees and expenses incident to the
registration under Federal or state securities laws of the Trust or its shares;
(i) expenses of preparing, printing and mailing reports and notices and proxy
material to the Trust's shareholders; (j) all other expenses incidental to
holding meetings of the Trust's shareholders; (k) dues or assessments of or
contributions to the Investment Company Institute or its successor, or other
industry organizations; (l) such non-recurring expenses as may arise, including
litigation affecting the Trust and the legal obligations that the Trust may have
to indemnify its officers and Trustees with respect thereto; and (m) all
expenses that the Trust agrees to bear in any distribution agreement or in any
plan adopted by the Trust pursuant to Rule 12b-1 under the Act.

The adviser may waive its advisory fees for, assume or reimburse the expenses
of, any Fund at any time. As of September 1, 1997, the adviser is waiving .225
of 1% of its .50 of 1% maximum advisory fee for The AAL Money Market Fund.
Effectively, the adviser is charging only a 0.275 of 1% advisory fee for the
Fund. The adviser is reimbursing The AAL High Yield Bond Fund expenses in excess
of 1.00% and 1.75% for Class A and Class B shares, respectively. Any fee waivers
or expense assumptions the adviser makes are voluntary. The adviser may
discontinue any fee waivers or expense reimbursements at any time. The Funds
have paid advisory fees net of reimbursements to the adviser, for the past three
fiscal years ended April 30, 1999, as follows:

<TABLE>
<CAPTION>
FUNDS APRIL 30, 1999 APRIL 30, 1998 APRIL 30, 1997
- ----- -------------- -------------- --------------

<S> <C> <C> <C>
SMALL CAP STOCK FUND $913,406 $690,590 $159,016

MID CAP STOCK FUND $4,027,980 $4,070,582 $3,188,294

INTERNATIONAL FUND $1,050,033 $1,280,101 $873,585

CAPITAL GROWTH FUND $16,628,122 $12,742,588 $9,121,422

EQUITY INCOME FUND $1,091,335 $809,233 $643,683

LARGE COMPANY INDEX FUND $0 $0 $0

MID CAP INDEX FUND $0 $0 $0

BALANCED FUND $478,088 $27,618 N/A

HIGH YIELD BOND FUND $736,426 $522,217 $60,205

MUNICIPAL BOND FUND $2,272,533 $2,163,729 $2,153,751

BOND FUND $1,858,562 $1,921,733 $2,214,486

BOND INDEX FUND $0 $0 $0

MONEY MARKET FUND $1,360,362 $1,088,957 $780,148
</TABLE>

The sub-advisory fee for The AAL International Fund is payable from the 0.65%
annual advisory fee paid to the adviser. The advisory agreement and sub-advisory
agreement for The AAL International Fund provide that subject to Section 36 of
the Act, neither the adviser nor sub-adviser shall be liable to the Trust for
any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the management of the Trust and the
performance of their duties under the advisory agreement except for willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of reckless disregard of their obligations and duties under the
agreements.

The Trust has agreed to use its best efforts to change its name if the adviser
ceases to act as such with respect to the Funds and the continued use of the
Trust's present name (The AAL Mutual Funds) would create confusion in the
context of the adviser or AAL's business.

The investment advisory agreement was approved by the Board of Trustees,
including a majority of the Trustees who were not interested persons (as defined
in the Act) of any party to the agreement on August 21, 1990, and was approved
by the shareholders of The AAL Municipal Bond Fund on November 27, 1990, and The
AAL Capital Growth, Bond and Money Market Funds on December 20, 1990. After
December 20, 1990, the advisory agreement was approved for:

- - The AAL Mid Cap Stock Fund by the Board of Trustees on May 18, 1993, and
the sole shareholder on June 30, 1993;

- - The AAL Equity Income Fund by the Board of Trustees on February 24, 1994,
and the sole shareholder on March 18, 1994;

- - The AAL International Fund by the Board of Trustees on May 23, 1995, and
the sole shareholder on July 31, 1995;

- - The AAL Small Cap Stock Fund by the Board of Trustees on February 23, 1996,
and the sole shareholder on July 1, 1996;

- - The AAL High Yield Bond Fund by the Board of Trustees on May 29, 1996, and
the sole shareholder on January 8, 1997; and

- - The AAL Balanced Fund by the Board of Trustees on November 19, 1997, and
the sole shareholder on January 2, 1998.

- - The AAL Large Company Index Fund by the Board of Trustees on December 3,
1999, and sole shareholder on December 31, 1999.

- - The AAL Mid Cap Index Fund by the Board of Trustees on December 3, 1999,
and sole shareholder on December 31, 1999.

- - The AAL Bond Index Fund by the Board of Trustees on December 3, 1999, and
sole shareholder on December 31, 1999.

On October 16, 1995, the Board of Trustees terminated the sub-advisory
agreements (effective November 1, 1995) with, and approved the assumption of the
duties by AAL CMC (as the adviser) of, the sub-advisers, Duff & Phelps
Investment Management Co., and Pilgrim Baxter & Associates Ltd., for The AAL Mid
Cap Stock, Capital Growth, Equity Income, Municipal Bond, Bond and Money Market
Funds. The Board of Trustees also approved reductions in the advisory fees for
these Funds.

On May 23, 1995, the Board of Trustees, including a majority of the Trustees who
were not interested persons (as defined in the Act) of any party to the
agreement approved a sub-advisory agreement with Societe Generale Asset
Management Corp. ("SoGen") for The AAL International Fund.

On October 30, 1998, The AAL International Fund's shareholders approved a
sub-advisory agreement with Oechsle International Advisers LLC. On November 1,
1998, Oechsle replaced SoGen as the sub-adviser for The AAL International Fund.

The advisory agreement and sub-advisory agreement will continue in effect from
year to year only so long as such continuances are specifically approved at
least annually by the Board of Trustees. The vote for approval must include the
approval of a majority of the Trustees who are not interested persons (as
defined in the Act). The advisory and sub-advisory agreements are terminable
upon assignment. The advisory agreement is also terminable at any time without
penalty by the Board of Trustees or by vote of the holders of a majority of the
outstanding voting securities of the Trust. With respect to a particular Fund,
the advisory or sub-advisory agreement, if any, is terminable by the vote of a
majority of the outstanding shares of such Fund. The adviser may terminate the
agreement on 60 days written notice to the Trust.

ADDITIONAL INFORMATION

Custodian
The custodian for the Funds is Citibank, N.A.. The custodian is responsible for
holding the Funds' assets.

Administrative Services Agreement

Pursuant to a new Administrative Services Agreement between the Funds and AAL,
effective January 1, 1999, AAL provides certain administrative, accounting and
pricing services to the Funds. Prior to January 1, 1999, these services were
provided by AAL CMC. The Administrative Services Agreement was amended on
December 31, 1999 to reflect the inclusion of the Index Funds. These
administrative services include calculating the daily net asset value per class
share; maintaining original entry documents and books of record and general
ledgers; posting cash receipts and disbursements; reconciling bank account
balances monthly; recording purchases and sales based on sub-adviser
communications (Oechsle's communications regarding The AAL International Fund);
and preparing monthly and annual summaries to assist in the preparation of
financial statements of, and regulatory reports for, the Funds. Formerly,
Firstar, provided these administrative services. However, the Funds' Trustees
and shareholders approved an administrative services agreement with AAL CMC to
provide these administrative services for the Funds. The Administrative Services
Agreement was approved by a majority of the Trustees of the Funds, including a
majority of the Trustees who are not interested persons of the Funds or of the
Adviser and was approved by the shareholders of The AAL Municipal Bond Fund on
November 27, 1990 and of The AAL Capital Growth, Bond and Money Market Funds on
December 20, 1990. The Board of Trustees approved the addition of the following
Funds to this agreement on the following dates:

The AAL Mid Cap Stock Fund on May 18, 1993;
The AAL Equity Income Fund on February 24, 1994;
The AAL International Fund on May 23, 1995;
The AAL Small Cap Stock Fund on February 28, 1996;
The AAL High Yield Bond Fund on May 29, 1996;
The AAL Balanced Fund on November 19, 1997;
The AAL Large Company Index Fund on December 3, 1999;
The AAL Mid Cap Index Fund on December 3, 1999; and
The AAL Bond Index Fund on December 3, 1999.

The principal motivation for having AAL provide these services was cost. AAL has
agreed to provide these services at rates that would not exceed the rates
charged by unaffiliated vendors for similar services. The annual rates of
payment approved by the Trustees presently are:

The AAL Small Cap Stock Fund - $40,000
The AAL Mid Cap Stock Fund - $40,000
The AAL International Fund - $45,000
The AAL Capital Growth Fund - $40,000
The AAL Equity Income Fund - $40,000
The AAL Large Company Index Fund: $35,000
The AAL Mid Cap Index Fund: $35,000
The AAL Balanced Fund - $40,000
The AAL High Yield Bond Fund - $40,000
The AAL Municipal Bond Fund - $40,000
The AAL Bond Fund - $40,000
The AAL Bond Index Fund: $35,000
The AAL Money Market Fund - $40,000
The AAL U. S. Government Zero Coupon Target Fund Series 2001 - $1,000
The AAL U. S. Government Zero Coupon Target Fund Series 2006 - $1,000

The agreement continues in effect from year to year, as long as it is approved
at least annually by the Funds' Board of Trustees or by a vote of the
outstanding voting securities of the Funds. In either case, the agreement must
also be approved at least annually by a majority of the Trustees who are not
parties to the agreement or interested persons of any such party. The agreement
terminates automatically if either party assigns the agreement. The agreement
also terminates without penalty by either party on 60-days' notice. The
agreement provides that neither AAL nor its personnel shall be liable for any
error of judgment or mistake of law or for any loss arising out of any act or
omission in the execution and the discharge of its obligations under the
agreement, except for willful misfeasance, bad faith or gross negligence in the
performance of their duties or by reason of reckless disregard of their
obligations and duties under the agreement.

Shareholder Maintenance Agreement
The Board of Trustees authorized the Funds to contract with AAL CMC for certain
shareholder maintenance services, effective April 1, 1995. These shareholder
services include answering customer inquiries regarding account status,
explaining and assisting customers with the exercise of their account options
and facilitating shareholder telephone transaction requests.

The annual fee payable to AAL CMC for providing such shareholder services is
based upon, and limited by, the difference between the current account fees
actually charged by Firstar Trust Company, as transfer and dividend disbursing
agent, and the normal full-service fee schedule published by Firstar Trust
Company. The annual fee is also based on reimbursement for certain actual
out-of-pocket costs including postage and telephone charges. This account
differential, including reimbursement for expenses, is at an annualized rate of
$4.08 per account, effective April 30, 1999. The shareholder maintenance
agreement continues in effect from year to year, as long as it is approved at
least annually by the Funds' Board of Trustees or by a vote of the outstanding
voting securities of the Funds. In either case, the agreement must be approved
annually by a majority of the Trustees who are not parties to the agreement or
interested persons of any such party. The agreement terminates automatically if
either party assigns the agreement. The agreement also terminates without
penalty by either party on 60-days notice. The Agreement provides that neither
the Adviser nor its personnel shall be liable for any error of judgment or
mistake of law or for any loss arising out of any act or omission in the
execution and the discharge of its obligations under the Agreement, except for
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of reckless disregard of their obligations and duties under
the Agreement. These fees are not currently assessed against the Funds but may
be in the future.

Independent Accountants
The Trust's independent accountants, PricewaterhouseCoopers LLP
("PricewaterhouseCoopers"), examine the Funds' annual financial statements.
PricewaterhouseCoopers also assists in the preparation of certain reports to the
SEC and reviews the Trust's state and federal tax returns.

BROKERAGE ALLOCATION AND OTHER PRACTICES
AAL CMC, as the adviser, and Oechsle, as the sub-adviser for The AAL
International Fund, direct the placement of orders for the purchase and sale of
the Funds' portfolio securities.

The securities transaction costs for each Fund consist primarily of brokerage
commissions or dealer or underwriter spreads. Bonds and money market instruments
generally trade on a net basis and do not involve either brokerage commissions
or transfer taxes.

Occasionally, we may purchase securities directly from the issuer for a Fund.
For securities traded primarily in the over-the-counter market, we deal with the
sellers who make a market in the securities directly unless we can find better
prices and execution available elsewhere. Such dealers usually act as principals
for their own account. In placing portfolio transactions, we seek the best
combination of price and execution.

In determining which brokers provide best execution, AAL CMC looks primarily at
the prices quoted by the brokers. Normally, we place orders with the broker who
has the most favorable prices. Ordinarily, we expect to execute securities
transactions in the primary markets. In assessing the best net price, we
consider all relevant factors. The relevant factors include the security
market's breadth, the security's price, the broker or dealer's financial
condition and execution capability and the reasonableness of the commission, if
any (for the specific transaction and on a continuing basis). Although we are
the sole distributors for the Funds' shares, we (as the adviser) may in the
future consider the willingness of particular brokers to sell the Funds' shares
as a factor in the selection of brokers for the Funds' portfolio transactions.
However our selection would still be subject to the overall best price and
execution standard.

Assuming equal execution capabilities, we may take into consideration other
factors in selecting brokers or dealers. We may consider "brokerage and research
services" (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934), statistical quotations (specifically the quotations
necessary to determine the Funds' net asset values, and other information
provided to us or the sub-adviser for The AAL International Fund (or their
affiliates). We may also cause a Fund to pay to a broker or dealer who provides
such brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction. We must determine, in
good faith, however, that such commission was reasonable in relation to the
value of the brokerage and research services provided. The commission must be
reasonable in terms of that particular transaction or in terms of all the
accounts over which we, as an adviser, exercise investment discretion. It is
possible that certain of the services received by us attributable to a
particular transaction benefit one or more other accounts for which we exercise
investment discretion. The Funds paid the following in brokerage commissions in
each of the past three fiscal years ended April 30, 1999:

April 30, 1999 April 30, 1998 April 30, 1997
-------------- -------------- --------------

The AAL Mutual Funds $3,693,873 $3,143,251 $4,205,263

CAPITAL STOCK AND OTHER SECURITIES

The AAL Mutual Funds' Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest. The
Declaration also permits the Trustees to divide or combine the shares into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interest in a Fund. Pursuant to this authority, the Trustees have
issued Class A, Class B and Institutional shares for the Funds, except for The
AAL U.S. Government Zero Coupon Target Funds, Series 2001 and 2006. Each class
share represents an interest in a Fund proportionately equal to the interest of
each other share in its class. If the Trust liquidated the Funds' shares, all
shareholders of a Fund would share pro rata in its net assets for the class
available for distribution to shareholders. If the Board deems it advisable and
in the best interests of shareholders, it may create additional share classes.
These share classes may differ from each other only as to dividends or, as is
the case with the Funds, as to assets and liabilities. Where share classes
differ in regards to assets and liabilities, the different classes are referred
to as the different series of the Funds (i.e., The AAL Bond Fund is a series of
The AAL Mutual Funds). Within each series, the different classes of shares are
referred to as different share classes, such as Class A, Class B and
Institutional shares. Shares of each series are entitled to vote as a series
only to the extent required by the '40 Act or as permitted by the Trustees. The
Trustees allocate income and operating expenses among the different Funds'
series and classes of shares fairly.

Except for the election of Trustees and ratification of the selection of
accountants, any matter that the Funds are required to submit to the
shareholders for a vote is not deemed to be effective unless approved by the
holders of a "majority" (as defined in the Rule) of the voting securities of
each Series affected by the matter.

Except for The AAL Small Cap Stock, Mid Cap Stock, Balanced, and High Yield Bond
Funds, each Fund's investment objective is a fundamental policy. As such, only a
vote of a "majority of outstanding voting securities" can change a Fund's
investment objective. A majority means the approval of the lesser of: (1) 67% or
more of the voting securities at a meeting if the holders of more than 50% of
the outstanding voting securities of a Fund are present or represented by proxy;
or (2) more than 50% of the outstanding voting securities of a Fund.

PURCHASE, REDEMPTION, AND PRICING OF SHARES
Purchases and redemptions are discussed in the Prospectus under the headings;
"Purchasing Shares" and "How to Redeem Shares," and that information is
incorporated herein by reference.

We determine the Funds' net asset value only on the days the New York Stock
Exchange ("NYSE") is open for trading. The NYSE is regularly closed on Saturdays
and Sundays and on New Years' Day, the third Monday in February, Good Friday,
the last Monday in May, Independence Day, Labor Day, Thanksgiving and Christmas.
If one of these holidays falls on a Saturday or Sunday, the NYSE closes on the
preceding Friday or the following Monday, respectively.

We determine the net asset value for a Fund by adding the value of a Fund's
assets, subtracting the Fund's liabilities, and dividing the balance by the
total number of shares outstanding. In determining the current market value for
securities traded or listed on an exchange, we use the last sale price on the
exchange where the securities primarily trade. For securities that have readily
available market quotations, we use an over-the-counter or exchange bid
quotation. When a Fund holds securities or other assets that either do not have
readily available market quotations or are restricted, we value them at fair
market value, as we determine in good faith under the direction of our Board of
Trustees. We may use pricing services in determining the current or fair market
value of securities held in the Funds' portfolios. We value money market
instruments with a remaining maturity of 60 days or less on an amortized costs
basis. We comply with the SEC's requirements for using an amortized cost
valuation method.

Many long-term corporate bonds and notes, certain preferred stocks, tax-exempt
securities and foreign securities do not have reliable market quotations and are
not considered to be readily available for purchase or sale.

To determine the current or fair market value for debt securities, we may, and
generally will, use a pricing service or services approved by the Board of
Trustees. A pricing service generally will determine valuations based upon
normal, institutional-size trading units of such securities using market
transactions for comparable securities and various relationships between
securities generally recognized by institutional traders.

We generally price foreign securities in terms of U.S. dollars at the official
exchange rate. Alternatively, we may price these securities at the average of
the current bid and asked price of such currencies against the dollar last
quoted by a major bank. The bank must be a regular participant in the foreign
exchange market. We also may price foreign securities on the basis of a pricing
service that takes into account the quotes provided by a number of such major
banks. If management does not have any of these alternatives available or the
alternatives do not provide a suitable method for converting a foreign currency
into U.S. dollars, the Board of Trustees in good faith will establish a
conversion rate for such currency.

Foreign securities may not be traded on all days when the NYSE is open. Also,
foreign securities may trade on Saturdays and other days when the NYSE is not
open and when we do not calculate the Funds' net asset values. We value foreign
securities primarily listed and/or traded in foreign markets at the price as of
the close on its primary market. Unless we determine (under the supervision of
the Board of Trustees) that material events have occurred affecting the value of
a Fund's foreign securities between the time the foreign securities' primary
market closed and the close of the NYSE, we will not reflect the change in the
Fund's net asset value. As a result, trading on days when a Fund is not
accepting purchases or redemptions may significantly affect a Fund's net asset
value.

Generally, U.S. government securities and other fixed income securities complete
trading at various times prior to the close of the NYSE. For purposes of
computing net asset value, we use the market value of any such securities as of
the time their trading day ends. Occasionally, events affecting the value of
such securities may occur between the times these markets close and the time the
NYSE closes. We generally will not reflect these events in the computation of a
Fund's net asset value, unless they are material. If there is a material event,
we will value such securities at their fair value as determined in good faith by
the Board of Trustees.

We intend to pay all redemptions in cash. We are obligated to redeem shares
solely in cash up to the lesser of $250,000 or one percent of the net assets of
a Fund during any 90-day period for any one shareholder. However, we may pay
redemptions in excess of such limit in whole or part by a distribution in kind
of securities. If and to the extent we redeem shares in kind, you, as a
redeeming shareholder might incur brokerage fees in selling the securities
received.

We reserve the right for each Fund to suspend or postpone redemptions during any
period when: (a) trading on the NYSE is restricted, as determined by the SEC, or
the NYSE is closed for other than customary weekend and holiday closings; (b)
the SEC has by order permitted such suspension; or (c) an emergency, as
determined by the SEC, exists, making disposal of a Fund's portfolio securities
or valuation of its net assets not reasonably practicable.

THE AAL MONEY MARKET FUND-AMORTIZED COST VALUATION
We value The AAL Money Market Fund's portfolio securities on the basis of their
amortized cost. Amortized cost is an approximation of market value, whereby the
difference between acquisition cost and value at maturity is amortized on a
straight-line basis over the remaining life of the instrument. The effect of
changes in the market value of a security as a result of fluctuating interest
rates is not taken into account. The amortized cost method of valuation may
result in the value of a security being higher or lower than its actual market
value. In addition, if a large number of redemptions take place at a time when
interest rates have increased, we may have to sell portfolio securities for a
Fund prior to maturity and at a less desirable price.

Although we cannot assure you that we will be able to do so, we will use our
best efforts to maintain a net asset value of $1.00 per share for purchases and
redemptions of The AAL Money Market Fund. The Board of Trustees has established
procedures for this purpose. These procedures require us to review the extent of
any deviation in the Fund's net asset value per share, based on available market
quotations, from the $1.00 amortized cost per share. Should the deviation exceed
1/2 of 1% for the Fund, the Board of Trustees will promptly consider whether we
should initiate efforts to eliminate or reduce material dilution or other unfair
results to shareholders. Such action may include redemption of shares in kind,
selling portfolio securities prior to maturity, reducing or withholding
dividends, and utilizing a net asset value per share as determined by using
available market quotations. We maintain a dollar-weighted average portfolio
maturity of 90 days or less for the Fund. We also do not purchase any instrument
deemed to have a remaining maturity greater than 397 days. We limit portfolio
investments, including repurchase agreements, to those dollar denominated
instruments that the Board of Trustees determines present minimal credit risks
as advised by the Adviser. We also comply with the SEC requirements on the
quality of certain portfolio securities for money market funds using the
amortized cost method of valuation. We also comply with the SEC reporting and
record keeping procedures regarding money market funds. We cannot assure you
that we can maintain a constant net asset value at all times. In the event
amortized cost ceases to represent fair value, the Board of Trustees will take
appropriate action.

LETTER OF INTENT
Under a Letter of Intent, as described in the prospectus, shares totaling 5% of
the dollar amount indicated in the letter will be held in escrow by the transfer
agent in the name of the purchaser. A Letter of Intent neither obligates you to
purchase nor requires us to sell the indicated amount. If you do not invest the
amount indicated within the 13-month period, you, as the purchaser, are required
to pay the difference between the sales commission otherwise applicable to the
purchases made during this period and sales charges actually paid. When the
Letter of Intent expires, we liquidate sufficient shares in escrow to obtain the
difference.

TAXATION OF THE FUNDS
The following is only a summary of certain tax considerations generally
affecting the Funds and shareholders. We urge you to consult your tax advisors
with specific reference to your own tax situations, including state and local
tax liability.

DIVIDENDS, DISTRIBUTIONS AND TAXES

The AAL Small Cap Stock, Mid Cap Stock, International, Capital Growth, Equity
Income, Large Company Index, Mid Cap Index, Balanced, High Yield Bond, Bond,
Bond Index and Money Market Funds -- Except for the dividends from The AAL
Municipal Bond Fund, any dividends from net investment income and short-term
capital gains (collectively "income dividends") that we distribute to you from
the Funds are taxable to you as ordinary income whether we have paid these
distributions in cash or additional shares. Any long-term capital gains
("capital gains distributions") that we distribute to you from the Funds are
taxable to you as long-term capital gains, whether we have paid these
distributions in cash or additional shares. Long-term capital gains are treated
as long-term capital gains regardless of the length of time you have owned the
shares. We distribute substantially all of the Funds' net investment income and
net realized long-term capital gains to avoid the imposition of federal income
and excise tax liability. We pay any dividends for The AAL Small Cap Stock, Mid
Cap Stock and International Funds annually. We pay any dividends for The AAL
Capital Growth Fund semi-annually and we pay any dividends for the AAL Equity
Income and Balanced Funds quarterly. We accrue income dividends daily and pay
any dividends monthly for The AAL High Yield Bond, Bond and Money Market Funds.
We expect to distribute any capital gains annually for these Funds.

The AAL Municipal Bond Fund -- This Fund expects to accrue any income dividends
daily and distribute any net investment income in monthly dividends. We
distribute any net realized capital gains at least annually. Dividends derived
from the interest earned on municipal securities constitute "exempt-interest
dividends." Generally, exempt-interest dividends are not subject to federal
income tax. Distributions of net realized capital gains (whether from tax-exempt
or taxable securities) are taxable to shareholders. We report the federal income
tax status of all distributions to shareholders annually. In the report, we
allocate income dividends between tax-exempt and taxable income (if any) in
approximately the same proportions as the Fund's total income during the year.
Accordingly, income derived from each of these sources by the Fund may vary
substantially in any particular distribution period from the allocation reported
to shareholders annually.

You may not be able to deduct any interest expense you incur on money borrowed
to purchase or carry shares of the Fund for federal income tax purposes. You
also may be subject to state and local taxes on dividends from this Fund,
including those which are exempt from federal income tax.

If you or your entity are "substantial users" (or persons who are related to
"substantial users") of facilities financed by industrial revenue bonds, you or
your entity should consult your tax advisers before purchasing shares of The AAL
Municipal Bond Fund. The term "substantial user" is defined generally to include
a "nonexempt person" who regularly uses in trade or business a part of a
facility financed from the proceeds of industrial development revenue bonds.

The 1986 Tax Reform Act subjects tax-exempt interest attributable to certain"
private activity bonds" to the individual and corporate alternative minimum tax.
Such tax-exempt interest includes, in the case of a regulated investment company
receiving interest on such bonds, a proportionate part of the exempt-interest
dividends paid by that company. We limit our investment in private activity
bonds to no more than 20% of the Fund's assets. Certain corporate shareholders
may be subject to a federal "environmental" tax with respect to their receipt of
dividends and distributions.

The use of options and futures for The AAL Municipal Bond Fund portfolio may
result in taxable income. You should consult your personal tax adviser to
determine the consequences of federal, state and local taxes.

THE AAL INTERNATIONAL FUND -- FOREIGN WITHHOLDING TAX
We may be subject to income and withholding taxes on income and gains derived
from The AAL International Fund's investments outside the U.S. Our payment of
such foreign taxes reduces the yield on investments for the Fund. Tax treaties
between certain countries and the U.S. may reduce or eliminate these foreign
withholding taxes. If more than 50% of the Fund's total asset value at the close
of any taxable year consists of foreign corporate stocks or other securities, we
may elect (for U.S. federal income tax purposes) to treat any foreign country
income or withholding taxes we have paid on behalf of the Fund as paid by the
Fund's shareholders. The foreign income or withholding taxes must be those that
could be treated as income taxes under U.S. income tax principles. For any year
we make such an election for the Fund, the shareholder must include as income
(in addition to taxable dividends received) his pro rata share of such foreign
income and withholding taxes. The shareholder is entitled, subject to certain
limitations, to credit his portion of these foreign taxes against his U.S.
federal income tax due or deduct it (as an itemized deduction) from his U.S.
taxable income. Generally, this foreign tax credit is subject to the limitation
that it may not exceed the shareholder's U.S. tax attributable to his foreign
source taxable income.

If we make the pass through election described above, the Fund's foreign income
flows through to the shareholders. The Internal Revenue Service will not treat
certain gains from the sale of securities and currency fluctuations as foreign
source taxable income. In addition, this foreign tax credit limitation must be
applied separately to certain categories of foreign source income, one of which
is foreign source "passive income." For this purpose, foreign "passive income"
includes dividends, interest, capital gains and certain foreign currency gains.
As a consequence, certain shareholders may not be able to claim a foreign tax
credit for the full amount of their proportionate share of the foreign tax paid
by the Fund.

Corporations and individuals can use the foreign tax credit to offset only 90%
of any alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed upon them. If we do not make the pass through election, the
foreign taxes we pay for the Fund will reduce the Fund's income. Any
distributions we make for the Fund will be treated as U.S. source income.

We will notify each shareholder within 60 days after the close of the Fund's
taxable year whether, pursuant to the election described above, we will make the
pass through election and treat any foreign taxes paid by the Fund as paid by
its shareholders for that year. If we make the pass through election, we will
designate the shareholder's portion of the foreign taxes paid to such country.
We also will designate the portion of the Fund's dividends and distributions
that represent income derived from sources within such country.

Our investments in certain foreign corporations that generate largely passive
investment type income, or that hold a significant percentage of assets which
generate passive income ("passive foreign investment companies" or "PFICs") are
subject to special tax rules. These special tax rules are designed to prevent
deferral of U.S. taxation on the Fund's share of the PFICs earnings. In the
absence of certain elections to report these earnings on a current basis, we
would have to report certain "excess distributions" and any gain from the
disposition of PFICs stock as ordinary income. We would have to report these
excess distributions and gains as ordinary income regardless of whether we
actually received any distributions from the PFIC. We would have to allocate
this ordinary income ratably throughout the holding period for the stocks. We
would have to pay taxes for the Fund on any amounts allocable to a prior taxable
year at the highest applicable tax rate from that year. We also would have to
increase this rate by an interest charge determined as though the amounts were
an underpayment of the tax for that year. We would have to include the amounts
allocated to the year of the distribution or disposition in the Fund's net
investment income for that year. To the extent the amounts allocated were
distributed as a dividend to shareholders such amounts would not be taxable to
the Fund.

UNDERWRITERS
The distributor, AAL CMC, is the exclusive underwriter for the Funds, with a
principal place of business at 222 West College Avenue, Appleton, WI 54919-0007.
The distributor has a written distribution agreement with the Funds, dated June
15, 1987, as amended. The distributor offers the Funds' shares for sale on a
continuous basis through its field sales force.

The public offering price of a Fund's Institutional shares is the net asset
value next computed. An investor can combine Class A, Class B and Institutional
shares for purposes of qualifying for the $500,000 minimum purchase requirement
for Institutional shares. The Funds began offering Institutional shares on
December 29, 1997.

The distributor does not receive compensation in connection with redemptions and
repurchases or brokerage commissions for Institutional shares.

GENERAL
The distributor, AAL CMC, acts as exclusive underwriter for the Fund's Class A
and Class B shares and two additional series of The AAL Mutual Funds: The AAL
U.S. Government Zero Coupon Target Fund, Series 2001; and The AAL U.S.
Government Zero Coupon Target Fund, Series 2006.

CALCULATION OF PERFORMANCE DATA
From time to time we advertise the yields and total returns for the Funds' Class
I shares for various investment periods. We always include uniform performance
calculations based on standardized methods established by the SEC. Yields and
total returns are calculated based on historical earnings and appreciation. We
do not intend any yield or total return calculations to indicate future
performance. You should consider performance information in light of: the
particular Fund's investment objectives and policies; characteristics and
quality of the Fund's portfolio securities; and the market conditions during the
applicable period. You should not consider the performance information as a
representation of what may be achieved in the future. When comparing any such
performance information to published performance data for alternative
investments, you should consider the differences in the methods used in
calculating performance information, and the impact of taxes on alternative
investments in addition to the factors listed.

STANDARDIZED PERFORMANCE INFORMATION

Average Annual Total Return

For each of the Funds, except The AAL Money Market Fund, we compute the
standardized average annual total return by finding the average annual
compounded rates of return for Class I shares over the 1, 5 and 10 year periods
(or the portion thereof during which the Fund has been in existence) that would
equate the initial amount invested in each class to the ending redeemable value
according to the following formula:

P(1+T)^n = ERV

Where:

P = hypothetical $1,000 initial payment;

T = Average annual total return for the class;

n = Number of years;

ERV = Ending redeemable value for the class (of the
hypothetical $1,000 payment) at the end of the 1, 5
and 10 year periods (or fractional portion thereof),
after deduction of all non-recurring charges for the
class, assuming redemption at the end of the period;

^ = raised to the power of.

ANNUAL RETURNS FOR THE 1-YEAR AND SINCE INCEPTION PERIODS ENDED APRIL 30, 1999,
FOR INSTITUTIONAL CLASS SHARES BASED ON GROSS AMOUNT INVESTED

The AAL Mutual Fund and Total Return for the Average Annual Return
Inception Date 1-Year Period for the Period Since
Inception

Small Cap Stock (18.41)% (6.88)%
12/29/97

Mid Cap Stock (7.17)% 1.69%
12/29/97

International 7.49% 13.81%
12/29/97

Capital Growth 23.55% 29.50%
12/29/97

Equity Income 10.62% 15.39%
12/29/97

Balanced 14.73% 17.64%
12/29/97

High Yield Bond (3.85)% (0.52)%
12/29/97

Municipal Bond 7.09% 5.42%
12/29/97

Bond 5.02% 5.03%
12/29/97

Current Yield

We base current yield quotations for the Funds, except The AAL Money Market
Fund, on a 30-day (or one-month) period. We compute the current yield by
dividing the net investment income per share for each class earned during the
period by the maximum offering price per share for each class on the last day of
the period, according to the following formula:

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

Where:

a = Dividends and interest earned by the Class during the period;

b = Expenses accrued by the Class for the period (net of reimbursements);

c = The average daily number of shares outstanding for
the Class during the period that were entitled to
receive dividends; and

d = the maximum offering price per share for the Class on the
last day of the period.

^ = to the power of.

For purposes of this calculation, we determine the income earned on debt
obligations by applying a calculated yield-to-maturity percentage to the
obligations held during the period. We calculate the Interest earned on
mortgage-backed securities by using the coupon rate and principal amount after
adjustment for a monthly pay down. We determine the income earned on stocks by
using the stated annual dividend rate applied over the performance period. The
current yields for The AAL Small Cap Stock, Mid Cap Stock, International,
Capital Growth, Equity Income, Balanced, High Yield Bond, Municipal Bond and
Bond Funds for the 30-day period ended April 30, 1999, for Class I shares were:

THE AAL MUTUAL FUNDS
INSTITUTIONAL CLASS SHARE YIELDS
30-DAY PERIOD ENDED 4/30/99

SMALL CAP STOCK (1.76)% BALANCED 2.90%

MID CAP STOCK 0.33% HIGH YIELD BOND 10.35%

INTERNATIONAL 1.37% MUNICIPAL BOND 4.39%

CAPITAL GROWTH 0.83% BOND 5.78%

EQUITY INCOME 1.87%

When we are advertising yield for a Fund, we will not advertise a one-month or a
30-day period that ends more than 45 days before the date on which the
advertisement is published.

Tax Equivalent Yield

We calculate a tax equivalent yield for The AAL Municipal Bond Fund based on a
30-day (or one-month) period for Class I shares. We compute the tax equivalent
yield by dividing the portion of the Fund's yield for the share class (computed
as described above) that is tax-exempt by one minus a stated income tax rate and
adding the quotient to the portion of the yield that is not tax exempt. The
formula for computation of the tax equivalent yield is:

X = ( N/1-F) + T

Where:

N = % of yield for the class derived from tax-exempt income;

F = federal income tax rate; and

T = % of yield for the class derived from taxable income.

The tax equivalent yield at 31% tax rate for the 30-day period ended April 30,
1999, for a Class I share was 6.36%.

Current and Effective Yield - The AAL Money Market Fund

We may quote a current or effective yield for The AAL Money Market Fund's Class
I shares from time-to-time. The current yield is an annualized yield based on
the net change in account value for each class for a seven-day period. The
effective yield is an annualized yield based on a daily compounding of the
current yield for each share class. We compute these yields by first determining
the "Net Change in Account Value" for each share class for a hypothetical
account having a share balance of one share at the beginning of a seven-day
period ("Beginning Account Value"), excluding capital changes. The Net Change in
Account Value always equals the total dividends declared with respect to the
account. We compute the yields for each share class as follows:

Current Yield = (Net Change in Account Value per Class/
Beginning Account Value per Class) x (365/7)

Effective Yield = [(Net Change in Account Value per Class/
Beginning Account Value per Class)]^(365/7)] - 1

For the seven-day period ended April 30, 1999, the current and effective yields
of The AAL Money Market Fund for Class I shares was 4.39% and 4.40%,
respectively.

Normal changes in the income earned and expenses affect the Fund's yield. Also,
any efforts we undertake to restrict or supplement the Fund's dividends to
maintain its net asset value at $1.00 will affect the Fund's yield. (See "Net
Asset Value" in the prospectus and in this statement of additional information.)
Any portfolio changes we make due to net purchases or redemptions will affect
the Fund's yield. Accordingly, the Fund's yield may vary from day to day. The
yield stated for a particular past period is not a representation as to its
future yield. We do not guarantee the Fund's yield and the Fund's principal is
not insured. Although there is no assurance that we will be able to do so, we
use our best efforts to maintain a net asset value of $1.00 per share for the
Fund.

OTHER PERFORMANCE INFORMATION
We may from time to time, include in the Funds' sales literature and
advertisements: (1) total return quotations computed for different time periods
or by a method that differs from the computations described in the section above
for Class I shares; (2) calculations of the growth of an investment (or series
of investments), at various assumed interest rates and compounding, to show the
effect of the length of time, interest rate and/or tax deferral on an investment
for Class I shares; (3) illustrate the concepts of asset allocation by use of
hypothetical case studies using various risk levels and life cycles, as well as
illustrating the effect of various tax brackets and tax deferrals on
hypothetical systematic investing for Class I shares; and (4) performance
relative to the performance of other investments such as stocks, bonds, closed
end funds, certificates of deposit, as well as various indices such as the
Consumer Price Index and indices generated by lbbotson & Associates and Chase
Global Data and Research Products for Class I shares.

Performance information for Class I shares for the Funds may be compared to
various unmanaged indexes, such as Morgan Stanley's EAFE and World, Dow Jones
Industrial and Averages, the S&P 500, S&P MidCap 400, S&P Small Cap or Lehman
Brothers High Yield Index, Lehman Brothers Aggregate or other Lehman Bond
Indexes, as well as indices of similar mutual funds, and various foreign country
and currency indices. The Funds may include in their advertising rankings
published by recognized statistical services or publishers such as Morningstar,
Lipper Analytical Services, Inc., Weisenberger Investment Companies Services or
rankings shares published by other comparable national services that rank mutual
funds. They also may use information from publications such as Barron's,
Business Week, The Economist, Financial World, Forbes, Fortune, Kiplinger's
Personal Finance, Money, Smart Money, the Star, The Wall Street Journal or
Worth, and from videotapes of television shows and interviews involving
investment experts, including employees of the adviser and/or sub-adviser for
The AAL International Fund. Advertisements may depict performance graphically.

The S&P 500 Index
The S&P 500 Index is a broad index of larger capitalization stocks. It is
composed of 500 common stocks representing more than 70% of the total market
value of all publicly traded common stocks. The index is constructed by Standard
& Poor's, which chooses stocks on the basis of market values and industry
diversification. Most of the largest 500 companies listed on the U.S. stock
exchanges are included in the index. Most stocks in the index are listed on the
New York Stock Exchange. A much smaller number come from the American Stock
Exchange and the over-the-counter market. The index is capitalization-weighted,
- --that is, stocks with a larger capitalization (shares outstanding times current
price) have a greater weight in the index. Market capitalizations of stocks in
the index as of December 1998, range from $487 million to $345.8 billion. The
median capitalization was $7.75 billion. S&P periodically makes additions and
deletions to the index. Selection of a stock for inclusion in the S&P 500 Index
in no way implies an opinion by Standard & Poor's as to its attractiveness as an
investment.

The S&P MidCap 400 Index
The S&P MidCap 400 Index is a capitalization weighted index of 400 domestic
stocks chosen for market size, liquidity and industry representation. The
component stocks are weighted according to the total market value of their
outstanding shares. The impact of a component's price change is proportional to
the issue's total market share value, which is share price times the number of
shares outstanding. These are summed up for all 400 stocks and divided by a
predetermined base value. The base value for the Standard & Poor's MidCap 400
Index is adjusted to reflect changes in capitalization resulting from mergers,
acquisitions, stock rights and substitutions, as well as other activities.

Disclaimers and Limitations of Liabilities of Standard & Poor's
The disclaimers and limitations set forth below are set forth in a contract
between Standard & Poor's and AAL CMC. The Product refers to the Large Company
Index Fund and the Mid Cap Index Fund, and the Licensee refers to AAL CMC.
Standard & Poor's requires that such disclaimers be disclosed in this
Registration Statement.

The Product is not sponsored , endorsed, sold or promoted by Standard & Poor's,
a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes no
representation or warranty, express or implied, to the owners of the Product or
any member of the public regarding the advisability of investing in securities
generally or in the Product particularly or the ability of the S&P 500 Index or
the S&P MidCap 400 Index to track general stock market performance. S&P's only
relationship to the Licensee is the licensing of certain trademarks and trade
names of S&P, the S&P 500 Index and the S&P MidCap 400 Index which is
determined, composed and calculated by S&P without regard to Licensee or the
Product. S&P has no obligation to take the needs of the Licensee or the owners
of the Product into consideration in determining, composing or calculating the
S&P 500 Index and the S&P MidCap 400 Index. S&P is not responsible for, and has
not participated in the determination of the prices and amount of the Product or
timing of the issuance or sale of the Product or in the determination or
calculation of the equation by which the Product is to be converted into cash.
S&P has no obligation or liability in connection with the administration,
marketing or trading of the Product.

S&P does not guarantee the accuracy and/or the completeness of the the S&P 500
Index and the S&P MidCap 400 Index or any data included therein and S&P shall
have no liability for any errors, omissions or interruptions therein. S&P makes
no warranty, express or implied, as to the results obtained by Licensee, owners
of the Product or any other person or entity from the use of the S&P 500 Index
and the S&P MidCap 400 Index or any data included therein. S&P makes no express
or implied warranties and expressly disclaims all warranties of merchantability
or fitness for a particular purpose or use with respect to the S&P 500 Index and
the S&P MidCap 400 Index or any data included therein. Without limiting any of
the foregoing, in no event shall S&P have any liability for any special,
punitive, indirect or consequential damages (including lost profits), even if
notified of the possibility of such damages.

FINANCIAL STATEMENTS

The AAL Mutual Funds (Trust) has filed audited financial statements, notes to
financial statements and report of independent accountants for the Trust for the
fiscal year ended April 30, 1999, for The AAL Mutual Funds, which are
incorporated by reference from the Annual Report to Shareholders dated April 30,
1999, into this Post-Effective Amendment to this Registration Statement. The AAL
Mutual Funds has filed the audited financial statements below:

1. Schedules of Investments as of April 30, 1999.
2. Statement of Assets and Liabilities as of April 30, 1999.
3. Statement of Operations for fiscal year ended April 30, 1999.
4. Statement of Changes in Net Assets for fiscal year ended April 30, 1999.
5. Notes to Financial Statements

PART C: OTHER INFORMATION
INSTITUTIONAL SHARES

ITEM 23. EXHIBITS

In response to this item, the Registrant incorporates by reference the Exhibit
Index following the Signature Page to this amendment. Except as noted below, all
required exhibits have been previously filed and are incorporated by reference
from the Funds' Registration Statement on Form N-1(A) (File No. 33-12911), as
amended:
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Exhibit Incorporated by Reference Filed Herewith
- ------------------------------------------------- ---------------------------------------- ------------------

(a) Articles of Incorporation for The AAL Filed June 25., 1998, Post-Effective
Mutual Funds, as amended Amendment No. 26

(b) By-Laws of the Fund, as amended Filed June 25., 1998, Post-Effective
Amendment No. 26
(c) Instruments Defining Rights of X
Security Holders (Share Certificates for
The AAL Large Company Index Fund, The AAL
Mid Cap Index Fund, and The AAL Bond Index
Fund)

(d)(i) Investment Advisory Agreement with AAL X
CMC, as amended

(d)(ii) Sub Advisory Agreement with Oechsle Filed April 6, 1999, Post-Effective
International Advisors, LLC Amendment No. 30

(e) Distribution Agreement with AAL CMC, X
as amended

(f) N/A

(g) Global Custodial Services Agreements Filed April 6, 1999, Post-Effective
between the Funds and Citibank, N.A., Amendment No.30
as amended

(h)(i) Administrative Services Agreement X
between the Funds and AAL, as amended

(h)(ii) Shareholder Maintenance Agreement, as X
amended

(h)(iii) Transfer and Dividend Disbursing X
Agent Agreement, as amended

(i) Legal Opinion X

(j) Consent of Independent Auditors X

(k) N/A

(l) N/A

(m) N/A

(n) Financial Data Schedule Filed June 25., 1999, Post-Effective
Amendment No. 32

(o) Rule 18f-3 Plan Filed June 25., 1998, Post-Effective
Amendment No. 26

(p) Powers of Attorney for all Trustees X
</TABLE>

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND

AAL is a fraternal benefit society organized under the laws of the State of
Wisconsin and is owned by and operated for its members. It has no stockholders
and is not subject to the control of any affiliated persons. AAL controls the
following wholly-owned, direct and indirect subsidiaries: (a) AAL Holdings,
Inc., a Delaware corporation that is a holding company that has no independent
operations; (b) AAL Capital Management Corporation, a Delaware corporation that
is a registered investment adviser and broker-dealer; (c) North Meadows
Investment Ltd., a Wisconsin corporation organized for the purpose of holding
and investing in real estate; and (d) AAL Trust Company, FSB, a federally
chartered thrift institution. Financial statements of AAL are filed on a
consolidated basis with regard to each of the foregoing entities.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
-----------------------------
Parent Company AAL
(Wisconsin corp.)
Holding Company AAL Holdings, Inc.
(Delaware corp.)
-----------------------------
------------------------------ ----------------------------- -----------------------------
Wholly-owned AAL Capital Management Corp. AAL Trust Co., FSB North Meadows Investment
subsidiaries of (Delaware corp.) (Federal charter) Ltd.
AAL Holdings, Inc. (Wisconsin corp.)
------------------------------ ----------------------------- -----------------------------
</TABLE>

ITEM 25. INDEMNIFICATION

Under Section 12 of Article Seven of the Funds' Declaration of Trust, the Funds
may not indemnify any trustee, officer or employee for expenses (e.g.,
attorney's fees, judgments, fines and settlement amounts) incurred in any
threatened, pending or completed action, if there has been an adjudication of
liability against such person based on a finding of willful misfeasance, bad
faith, gross negligence or reckless disregard of such person's duties of office
("disabling conduct").

The Funds shall indemnify their trustees, officers or employees for such
expenses whether or not there is an adjudication of liability, if, pursuant to
Investment Company Act Release 11330, a determination is made that such person
was not liable by reason of disabling conduct by: (i) final decision of the
court before which the proceeding was brought; or (ii) in the absence of such a
decision, a reasonable determination, based on factual review, that the person
was not liable for reasons of such conduct is made by: (a) a majority vote of
disinterested, independent trustees; or (b) independent legal counsel in a
written opinion.

Advancement of expenses incurred in defending such actions may be made pursuant
to Release 11330, provided that the person undertakes to repay the advance
unless it is ultimately determined that such person is entitled to
indemnification and one or more of the following conditions is met: (1) the
person provides security for the undertaking; (2) the Funds are insured against
losses arising by reason of any lawful advances; or (3) a majority of
disinterested non-party trustees or independent legal counsel in a written
opinion determines, based on review of readily available facts, that there is
reason to believe the person ultimately will be found entitled to
indemnification.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of the Funds
pursuant to the foregoing provision, or otherwise, the Funds have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Funds of expenses incurred or
paid by a trustee, officer or controlling person of the Funds in the successful
defense of any action, suit or proceeding) is asserted by such trustees, officer
or controlling person in connection with the securities being registered, the
Funds will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER

AAL Capital Management Corporation is the investment adviser ("Adviser") of the
Funds. Oechsle International Advisers LLC is the sub-adviser for The AAL
International Fund. For information as to the business, profession, vocation or
employment of a substantial nature of the Adviser, reference is made to Parts A
and B of this Registration Statement and to Form ADV filed under the Investment
Advisers Act of 1940 by the Adviser. AAL CMC also serves as sub-adviser to the
AAL Variable Product Series Fund, Inc..

ITEM 27. PRINCIPAL UNDERWRITERS

(a) Not Applicable

(b) AAL Capital Management Corporation serves as principal
underwriter/distributor for shares of each of the Funds.

<TABLE>
<CAPTION>
<S> <C> <C>
Name and Principal Position and Offices Position and Offices
Business Address with AAL CMC with the Funds
- ---------------------------------------- -------------------------------------- --------------------------------------
Robert G. Same President and Director President
222 W. College Ave.
Appleton, WI 54919

Charles D. Gariboldi, Jr. Vice President Treasurer
222 W. College Ave.
Appleton, WI 54919

Woodrow E. Eno General Counsel, Director and Trustee and Vice-President
222 W. College Ave. Chairman
Appleton, WI 54919

James H. Abitz Sr. Vice President and Director Vice-President
222 W. College Avenue
Appleton, WI 54919

Frederick D. Kelsven Vice President Secretary
222 W. College Avenue
Appleton, WI 54919

James H. Krueger Vice President and Director None
222 W. College Avenue
Appleton, WI 54919

Marnie L. Loomans-Thuecks Vice President None
222 W. College Avenue
Appleton, WI 54919

Michael J. Mevis Vice President None
222 W. College Avenue
Appleton, WI 54919

Russell A. Evenson Director None
4321 N. Ballard Road
Appleton, WI 54919

Paul M. Stadler Vice President None
222 W. College Avenue
Appleton, WI 54919

Lori T. Richardson Vice President None
222 W. College Avenue
Appleton, WI 54919

Jeffrey L. Verhagen Vice President None
222 W. College Avenue
Appleton, WI 54919

Charles A. Friedman Vice President None
222 W. College Avenue
Appleton, WI 54919

Wendy S. Schmidt Assistant Vice President None
4321 N. Ballard Road
Appleton, WI 54919

Carl J. Rudolph Director None
222 W. College Avenue
Appleton, WI 54919

Krien VerBerkmoes, III Vice President, Chief Compliance None
222 W. College Avenue Officer
Appleton, WI 54919

Thomas R. Mischka Vice President None
4321 N. Ballard Road
Appleton, WI 54919

Jon M. Stellmacher Vice President and Director None
4321 N. Ballard Road
Appleton, WI 54919

Norma A. Brink Assistant Secretary Assistant Secretary
222 W. College Avenue
Appleton, WI 54919

Steven J. Fredricks Assistant Secretary Assistant Secretary
222 W. College Avenue
Appleton, WI 54919

Steven R. Wendt Vice President and Chief None
222 W. College Avenue Financial Officer
Appleton, WI 54919

Jeffery R. Kargus Treasurer None
222 W. College Avenue
Appleton, WI 54919

</TABLE>

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

The accounts, books and other documents required to be maintained by the Funds
pursuant to Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder are in the possession of the Funds and the Funds'
Custodian as follows: all documents required to be maintained by Rule 31a-1(b)
will be maintained by the Funds, (222 W. College Avenue, Appleton, WI
54919-0007) except that records required to be maintained by paragraph (2)(iv)
of Rule 31a-1(b) will be maintained by the Custodian (Citibank, N.A., 111 Wall
Street, New York, NY 10043)

ITEM 29. MANAGEMENT SERVICES

Not Applicable

ITEM 30. UNDERTAKINGS

Not Applicable

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all the
requirements for effectiveness of this amended registration statement under rule
485(b) of the Securities Act of 1933 and has duly caused this amended
registration statement to be duly signed on its behalf by the undersigned, duly
authorized, in the City of Appleton and State of Wisconsin on this day of
December 29, 1999.

THE AAL MUTUAL FUNDS

By: /s/ Robert G. Same
-------------------------
Robert G. Same
President

Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed below by the following persons in the
capacities and on the dates indicated:

/s/ Robert G. Same President December 29, 1999
- ---------------------------
Robert G. Same

/s/ Charles D. Gariboldi Treasurer December 29, 1999
- --------------------------- (Principal Accounting
Charles D. Gariboldi Financial Officer)

All of the Board of Trustees:

F. Gregory Campbell Richard L. Gady
John H. Pender Edward W. Smeds
Lawrence M. Woods John O. Gilbert
Woodrow E. Eno

Robert G. Same, by signing his name hereto, does hereby sign this
document on behalf of himself and each of the other above-named Trustees of The
AAL Mutual Funds pursuant to the powers of attorney duly executed by such
persons.

/s/ Robert G. Same December 29, 1999
- ----------------------------
Robert G. Same
Attorney-in-Fact

<PAGE>

The AAL Mutual Funds
Index to Exhibits

- ---------------------------- ---------------------------------------------------
Exhibit Number Name of Exhibit

- ---------------------------- ---------------------------------------------------
- ---------------------------- ---------------------------------------------------
(c) Instruments Defining Rights of Security Holders
(Share Certificates for The AAL Large Company Index
Fund, The AAL Mid Cap Index Fund, and The AAL Bond
Index Fund)

- ---------------------------- ---------------------------------------------------
- ---------------------------- ---------------------------------------------------
(h)(i) Administrative Services Agreement between the Funds
and AAL, as amended

- ---------------------------- ---------------------------------------------------
- ---------------------------- ---------------------------------------------------
(h)(iii) Transfer and Dividend Disbursing Agent Agreement,
as amended

- ---------------------------- ---------------------------------------------------
- ---------------------------- ---------------------------------------------------
(i) Legal Opinion

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

THE AAL MUTUAL FUNDS
The AAL Large Company Index Fund Specimen
(Specimen stock certificate)

THE AAL MUTUAL FUNDS
The AAL Mid Cap Index Fund Specimen
(Specimen stock certificate)

THE AAL MUTUAL FUNDS
The AAL Bond Index Fund Specimen
(Specimen stock certificate)

THE AAL MUTUAL FUNDS
INVESTMENT ADVISORY AGREEMENT

AGREEMENT made this 28th day of November, 1990, by and between THE AAL
MUTUAL FUNDS (the "Trust"), a Massachusetts Business Trust, and AAL ADVISORS
INC. (the "Adviser").

WITNESSETH:

In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:

1. In General

The Trust hereby appoints the Adviser to act as investment adviser to the
Trust with respect to its series of shares described on Exhibit A attached
hereto. Each series is referred to herein individually as "a Fund" and
collectively as "the Funds." The Adviser agrees, all as more fully set forth
herein, to provide professional investment management with respect to the
investment of the assets of each Fund and to supervise and arrange the purchase
and sale of securities and other assets held in the portfolio of each Fund and
generally administer the affairs of the Trust. The Adviser may engage, on behalf
of the Trust or any Fund, the services of a Sub-Adviser, subject to any
limitations imposed by the Investment Company Act of 1940 (the "Act").

2. Duties and Obligations of the Adviser With Respect to Management of the
Trust

(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Trustees of the Trust, the
Adviser (and the Sub-Adviser when authorized by the Adviser), as agent
and attorney-in-fact with respect to the Trust, is authorized, in its
discretion and without prior consultation with the Trust to:

(i) Buy, sell, exchange, convert, lend and otherwise trade in any
stocks, bonds and any other securities or assets; and

(ii) Place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Adviser may select.

(b) Any investment purchases or sales made by the Adviser and/or any
Sub-Adviser shall at all times conform to, and be in accordance with,
any requirements imposed by: (1) the provisions of the Act and of any
rules or regulations in force thereunder; (2) any other applicable
provisions of law; (3) the provisions of the Declaration of Trust and
By-Laws of the Trust as amended from time to time; (4) any policies
and determinations of the Board of Trustees of the Trust; and (5) the
fundamental policies of the Trust, as reflected in its Registration
Statement under the Act, or as amended by the shareholders of the
Trust.

(c) The Adviser shall also administer the affairs of the Trust and, in
connection therewith, shall be responsible for (i) maintaining the
Trust's books and records (other than financial or accounting books
and records maintained by any accounting services agent and such
records maintained by the Trust's custodian or transfer agent); (ii)
overseeing the Trust's insurance relationships; (iii) preparing for
the Trust (or assisting counsel and/or auditors in the preparation of)
all required tax returns, proxy statements and reports to the Trust's
shareholders and Trustees and reports to and other filings with the
Securities and Exchange Commission and any other governmental agency
(the Trust agreeing to supply or cause to be supplied to the Adviser
all necessary financial and other information in connection with the
foregoing); (iv) preparing such applications and reports as may be
necessary to register or maintain the Trust's registration and/or the
registration of the shares of the Funds under the securities or "Blue
Sky" laws of the various states selected by the Trust's distributor (a
Fund or Funds agreeing to pay all filing fees or other similar fees in
connection therewith); (v) responding to all inquiries or to other
communications of shareholders, if any, which are directed to the
Adviser, or if any such inquiry or communication is more properly to
be responded to by the Trust's custodian, transfer agent or accounting
services agent, overseeing their response thereto; (vi) overseeing all
relationships between the Trust and its custodian(s), transfer
agent(s) and accounting services agent(s), including the negotiation
of agreements and the supervision of the performance of such
agreements; and (vii) authorizing and directing any of the Adviser's
directors, officers and employees who may be elected as Trustees or
officers of the Trust to serve in the capacities in which they are
elected. All services to be furnished by the Adviser under this
Agreement may be furnished through the medium of any directors,
officers or employees of the Adviser.

(d) The Adviser shall give the Trust the benefit of its best judgment and
effort in rendering services hereunder. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties ("disabling conduct") hereunder on the part of
the Adviser (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or entity
affiliated with the Adviser) the Adviser shall not be subject to
liability to the Trust or to any shareholder of the Trust for any act
or omission in the course of, or connected with rendering services
hereunder, including without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection
with the matters to which this Agreement is related, except to the
extent specified in Section 36(b) of the Act concerning loss resulting
from a breach of fiduciary duty with respect to the receipt of
compensation for services. Except for such disabling conduct, the
Trust shall indemnify the Adviser (and its officers, directors,
agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Adviser) from any liability
arising from the Adviser's conduct under the Agreement to the extent
permitted by the Declaration of Trust and applicable law.

(e) Nothing in this Agreement shall prevent the Adviser or any "affiliated
person" (as defined in the Act) of the Adviser from acting as
investment adviser or manager and/or principal underwriter for any
other person, firm or corporation and shall not in any way limit or
restrict the Adviser or any such affiliated person from buying,
selling or trading any securities for its or their own accounts or the
accounts of others for whom it or they may be acting, provided,
however, that the Adviser expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.

(f) It is agreed that the Adviser shall have no responsibility or
liability for the accuracy or completeness of the Funds' Registration
Statement under the Act or the Securities Act of 1933 except for
information supplied by the Adviser for inclusion therein.

3. Broker-Dealer Relationships

In connection with its duties set forth in Section 2(a)(ii) of this
Agreement to arrange for the purchase and sale of securities and other assets
held by each Fund by placing purchase and sale orders for the Fund, the Adviser
and/or any Sub-Adviser shall select such broker-dealers ("brokers") as shall, in
the Adviser's or Sub-Adviser's judgment, implement the policy of the Trust to
achieve "best execution," i.e., prompt and efficient execution at the most
favorable net price. In making such selection, the Adviser and/or Sub-Adviser is
authorized to consider the reliability, integrity and financial condition of the
broker. The Adviser and/or Sub-Adviser is also authorized to consider whether
the broker provides brokerage and/or research services to the Trust and/or other
accounts of the Adviser or Sub-Adviser. The commissions paid to such brokers may
be higher than another broker would have charged is a good faith determination
is made by the Adviser and/or Sub-Adviser that the commission is reasonable in
relation to the services provided, viewed in terms of either that particular
transaction or the Adviser's or Sub-Adviser's overall responsibilities as to the
accounts as to which it exercises investment discretion. The Adviser and/or
Sub-Adviser shall use its judgment in determining that the amount of commissions
paid are reasonable in relation to the value of brokerage and research services
provided and need not place or attempt to place a specific dollar value on such
services or on the portion of commission rates reflecting such services. To
demonstrate that such determinations were in good faith, and to show the overall
reasonableness of commissions paid, the Adviser and/or Sub-Adviser shall be
prepared to show that commissions paid (i) were for purposes contemplated by
this Agreement; (ii) provide lawful and appropriate assistance to the Adviser
and/or Sub-Adviser in the performance of its decision-making responsibilities;
and (iii) were within a reasonable range as compared to the rates charged by
qualified brokers to other institutional investors as such rates may become
known from available information. The Trust recognizes that, on any particular
transaction, a higher than usual commission may be paid due to the difficulty of
the transaction in question. The Adviser and/or Sub-Adviser is also authorized
to consider sales of shares as a factor in the selection of brokers to execute
brokerage and principal transactions, subject to the requirements of "best
execution," as defined above.

4. Allocation of Expenses

The Adviser agrees that it will furnish the Trust, at the Adviser's
expense, with all office space, facilities, equipment and clerical personnel
necessary for carrying out its duties under this Agreement. The Adviser will
also pay all compensation of all Trustees, officers and employees of the Trust
who are affiliated persons of the Adviser. All costs and expenses not expressly
assumed by the Adviser under this Agreement shall be paid by the Trust,
including, but not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and expenses of its
Trustees other than those affiliated with the Adviser; (v) legal and audit
expenses; (vi) fees and expenses of the Trust's custodian, shareholder servicing
or transfer agent and accounting services agent; (vii) expenses incident to the
issuance of its shares, including stock certificates and issuance of shares on
the payment of, or reinvestment of, dividends; (viii) fees and expenses incident
to the registration under Federal or state securities laws of the Trust or its
shares; (ix) expenses of preparing, printing and mailing reports and notices,
proxy material and prospectuses to shareholders of the Trust; (x) all other
expenses incidental to holding meetings of the Trust's shareholders; (xi) dues
or assessments of or contributions to the Investment Company Institute or any
successor or other industry association; (xii) such non-recurring expenses as
may arise, including litigation affecting the Trust and the legal obligations
which the Trust may have to indemnify its officers and Trustees with respect
thereto; and (xiii) all expenses which the Trust or a Fund agrees to bear in any
distribution agreement or in any plan adopted by the Trust and/or a Fund
pursuant to Rule 12b-1 under the Act.

5. Compensation of the Adviser

(a) The Trust agrees to pay the Adviser and the Adviser agrees to accept
as full compensation for all services rendered by the Adviser as such,
an annual management fee, payable monthly and computed on the average
daily net asset value of each Fund as shown on Exhibit A attached
hereto.

(b) In the event the expenses of a Fund (including the fees of the Adviser
and amortization of organization expenses, but excluding interest,
taxes, brokerage commissions, extraordinary expenses and sales charges
and distribution fees) for any fiscal year exceed the limits set by
applicable regulations of state securities commissions, the Adviser
will reduce its fee by up to the amount of such excess. Any such
reductions are subject to readjustment during the year. The payment of
the management fee at the end of any month will be reduced or
postponed or, if necessary, a refund will be made to a Fund so that at
no time will there be any accrued, but unpaid, liability under this
expense limitation.

6. Duration and Termination

(a) this Agreement shall go into effect for The AAL Capital Growth Fund,
The AAL Income Fund, The AAL Municipal Bond Fund, and The AAL Money
Market Fund on the first business day following approval by a vote of
a "majority" (as defined in the Act) of the outstanding voting
securities of the Fund, replacing any prior agreement; and for
additional funds initiated after the date of this Agreement, on such
date as specified on Schedule A hereto; and shall, unless terminated
as hereinafter provided, continue in effect thereafter from year to
year, but only so long as such continuance is specifically approved at
least annually by a majority of the Trust's Board of Trustees, or by
the vote of the holders of a "majority" (as defined int he Act) of the
outstanding voting securities of the Fund, and, in either case, a
majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party cast in
person at a meeting called for the purpose of voting on such approval.

(b) This Agreement may be terminated by the Adviser at any time without
penalty upon giving the Trust sixty (60) days' written notice (which
notice may be waived by the Trust) and may be terminated by the Trust
at any time without penalty upon giving the Adviser sixty (60) days'
written notice (which notice may be waived by the Adviser), provided
that such termination by the Trust shall be directed or approved by
the vote of a majority of all of its Trustees in office at the time or
by the vote of the holders of a majority of the outstanding voting
securities of the Trust or with respect to any Fund by the vote of a
majority of the outstanding voting shares of such Fund. This Agreement
shall automatically terminate in the event of its "assignment" (as
defined in the Act).

(c) The Trust hereby agrees that if (i) the Adviser ceases to act as
investment adviser to the Trust and (ii) continued use of the Trust's
present name would create confusion in the context of the Adviser's
business or that of Aid Association for Lutherans or its affiliates,
the Trust will use its best efforts to change its name in order to
delete the abbreviation "AAL" from its name.

7. Agreement Binding Only on Trust Property

The Adviser understands that the obligations of this Agreement are not
binding upon any shareholder of the Trust personally, but bind only the Trust's
property; the Adviser represents that it has notice of the provisions of the
Trust's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Trust.

IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by duly authorized persons and their seals to be hereunto
affixed, all as of the day and year first above written.

ATTEST: THE AAL MUTUAL FUNDS

/s/Robert G. Same /s/John H. Pender
- --------------------------- ---------------------------
Robert G. Same, Secretary John H. Pender, President

ATTEST: AAL ADVISORS INC.

/s/Robert G. Same /s/Rochelle Lamm Wallach
- --------------------------- ---------------------------
Robert G. Same, Secretary Rochelle Lamm Wallach, President

EXHIBIT A
TO
THE AAL MUTUAL FUNDS INVESTMENT ADVISORY AGREEMENT
(DATED NOVEMBER 28, 1990)

1. The AAL Capital Growth Fund (effective November 28, 1990)

The management fee for this Fund, calculated in accordance with
paragraph 5 of The AAL Mutual funds Investment Advisory Agreement,
shall be at the annual rate of 0.75 of 1% on the first $250 million of
average daily net assets and 0.65 of 1% on average daily net assets
over $250 million.

2. The AAL Income Fund (effective December 21, 1990)

The management fee for this Fund, calculated in accordance with
paragraph 5 of The AAL Mutual Funds Investment Advisory Agreement,
shall be at the annual rate of 0.60 of 1% on the first $250 million of
average daily net assets and 0.525 of 1% on average daily net assets
over $250 million.

3. The AAL Municipal Bond Fund (effective December 21, 1990)

4. The AAL Money Market Fund (effective December 21, 1990)

The management fee for this Fund, calculated in accordance with
paragraph 5 of The AAL Mutual Funds Investment Advisory Agreement,
shall be at the annual rate of 0.50 of 1% on the first $500 million of
average daily net assets and 0.45 of 1% on average daily net assets
over $500 million.

5. The AAL U.S. Government Zero Coupon Target Fund, Series 2001
(effective November 13, 1991)

the management fee for this Fund, calculated in accordance with
paragraph 5 of The AAL Mutual Funds Investment Advisory Agreement,
shall be at the annual rate of 0.50 of 1% of average daily net assets.

6. The AAL U.S. Government Zero Coupon Target Fund, Series 2006
(effective November 13, 1991)

The management fee for this Fund, calculated in accordance with
paragraph 5 of The AAL Mutual Funds Investment Advisory Agreement,
shall be at the annual rate of 0.50 of 1% of average daily net assets.

AMENDMENT NO. 12
TO
INVESTMENT ADVISORY AGREEMENT

The Investment Advisory Agreement between The AAL Mutual Funds and AAL Capital
Management Corporation (f/k/a AAL Advisors, Inc.), effective November 28, 1990,
is hereby amended, effective December 31, 1999, as follows:

1. Schedule A attached to the Investment Advisory Agreement is
modified to add The AAL Large Company Index Fund, The AAL Mid Cap
Index Fund, and The AAL Bond Index Fund.

A revised Exhibit A, effective as of the date of this Amendment No. 12 is
attached and incorporated herein.

IN WITNESS WHEREOF the parties hereto have caused this Amendment to be signed by
the respective officers effective as of December 31, 1999.

ATTEST: THE AAL MUTUAL FUNDS

By: /s/Frederick D. Kelsven By: /s/Robert G. Same
--------------------------- ---------------------------
Frederick D. Kelsven Robert G. Same

ATTEST: AAL CAPITAL MANAGEMENT CORPORATION

By: /s/Frederick D. Kelsven By: /s/Robert G. Same
--------------------------- ---------------------------
Frederick D. Kelsven Robert G. Same

EXHIBIT A
TO
THE AAL MUTUAL FUNDS INVESTMENT ADVISORY AGREEMENT
Dated November 28, 1990

1. The AAL Capital Growth Fund (effective September 1, 1998)

The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.65 of 1% on the first $500 million of average daily net assets, 0.575 of 1%
on the next $500 million of average daily net assets, and 0.50 of 1% of average
daily net assets over $1 billion.

2. The AAL Bond Fund (effective September 1, 1998)

The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.45 of 1% of average daily net assets.

3. The AAL Municipal Bond Fund (effective September 1, 1998)

The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.45 of 1% of average daily assets.

4. The AAL Money Market Fund (effective date December 21, 1990)

The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.50 of 1% on the first $500 million of average daily net assets and 0.45 of
1% of average daily net assets over $500 million.

5. The AAL U.S. Government Zero Coupon Target Fund, Series 2001 (effective
November 13, 1991)

The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.50 of 1% of average daily net assets.

6. The AAL U.S. Government Zero Coupon Target Fund, Series 2006 (effective
November 13, 1991)

The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.50 of 1% of average daily net assets.

7. The AAL Mid Cap Stock Fund (effective September 1, 1998)

The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.70 of 1% on the first $200 million of average daily net assets and 0.65 of
1% of average daily net assets over $200 million.

8. The AAL Equity Income Fund (f/k/a Utilities Fund) (effective September 1,
1998)

9. The AAL International Fund (effective November 1, 1998)

The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.65 of 1% on the first $50 million of average daily net assets and .60 of 1%
of average daily net assets over $50 million.

10. The AAL Small Cap Stock Fund (effective September 1, 1998)

11. The AAL High Yield Bond Fund (effective September 1, 1998)

The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at the annual rate
of 0.55 of 1% of average daily net assets.

12. The AAL Balanced Fund (effective September 1, 1998)

13. The AAL Large Company Index Fund (effective December 31, 1999)

The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at an annual rate
of 0.25 of 1% on the first $50 million of average daily net assets and 0.175 of
1% of average daily net assets over $50 million.

14. The AAL Mid Cap Index Fund (effective December 31, 1999)

The management fee for this Fund, calculated in accordance with paragraph 5 of
The AAL Mutual Funds Investment Advisory Agreement, shall be at an annual rate
of 0.25 of 1% on the first $50 million of average daily net assets and 0.20 of
1% of average daily net assets over $50 million.

15. The AAL Bond Index Fund (effective December 31, 1999)

Effective April 1, 1991, AAL Distributors Inc. changed its name to AAL Capital
Management Corporation. All references to AAL Distributors Inc. ("Distributor")
are now to AAL Capital Management Corporation.

THE AAL MUTUAL FUNDS
DISTRIBUTION AGREEMENT

This Agreement, made as of the 15TH day of JUNE, 1987, between THE AAL MUTUAL
FUNDS, a Massachusetts business trust (the "Trust"), and AAL DISTRIBUTORS INC.,
a Delaware corporation (the "Distributor").

WITNESSETH:

WHEREAS, the Trust proposes to engage in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "1940 Act") and it is in the interest of the Trust to
offer its classes of shares entitled the Capital Growth Series ("Capital Growth
Fund"), the Income Series ("Income Fund") and the Municipal Bond Series
("Municipal Bond Fund") (individually a "Fund" and collectively the "Funds") for
sale continuously; and

WHEREAS, the Distributor is registered as a broker-deal under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
and

WHEREAS, the Trust and the Distributor wish to enter into an agreement with each
other with respect to the continuous offering of the shares of beneficial
interest of all series of shares of the Trust (the "Shares"), to commence after
the effectiveness of its initial registration statement filed pursuant to the
Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act.

NOW, THEREFORE, the parties agree as follows:

1. Appointment of Distributor

The Trust hereby appoints the Distributor as its exclusive agent to sell
and to arrange for the sale of the Shares, on the terms and for the period
set forth in this Agreement, and the Distributor hereby accepts such
appointment and agrees to act hereunder directly and/or through the Trust's
transfer agent in the manner set forth in the prospectus (as defined
below). It is understood and agreed that the services of the Distributor
hereunder are not exclusive, and the Distributor may act as principal
underwriter for the shares of any other registered investment company. It
is also understood that purchases of shares may be made directly through
the Funds' Transfer Agent in the manner set forth in the prospectus.

<PAGE>

2. Services and Duties of the Distributor

(a) The Distributor agrees to sell the Shares, as agent for the Trust,
from time to time during the term of this Agreement upon the terms
described in the Trust's prospectus. As used in this Agreement, the
term "prospectus" shall mean the prospectus and statement of
additional information included as part of the Trust's Registration
Statement, as such prospectus and statement of additional information
may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement most
recently filed from time to time by the Trust with the Securities and
Exchange Commission and effective under the 1933 Act and the 1940 Act,
as such Registration Statement is amended by any amendments thereto at
the time in effect. The Distributor shall not be obligated to sell any
certain number of Shares.

(b) Upon commencement of the Trust's operations, the Distributor will hold
itself available to receive orders, satisfactory to the Distributor,
for the purchase of the Shares and will accept such orders and will
transmit such orders and funds received by it in payment for such
Shares as are so accepted to the Trust's transfer agent or custodian,
as appropriate, as promptly as practicable. Purchase orders shall be
deemed effective at the time and in the manner set forth in the
prospectus. The distributor shall not make any short sales of shares.

(c) The offering price of the Shares shall be the net asset value per
share of the Shares (as defined in the Declaration of Trust) and as
determined as set forth in the prospectus, plus the sales charge
(determined as set forth in the prospectus). The Trust shall furnish
the Distributor, with all possible promptness, an advice of each
computation of net asset value and offering price.

(d) The above-mentioned sales charge shall constitute the entire
compensation of the Distributor, except that the Distributor may also
be compensated through payments under the Distribution Plan adopted
pursuant to Rule 12b-1 under the 1940 Act.

3. Duties of the Trust

<PAGE>

(a) Maintenance of Federal Registration. The Trust shall, as its expense,
take, from time to time, all necessary action and such steps,
including payment of the related filing fees, as may be necessary to
register and maintain registration of a sufficient number of Shares
under the 1933 Act. The Trust agrees to file from time to time such
amendments, reports and other documents as may be necessary in order
that there may be no untrue statement of a material fact in a
registration statement or prospectus, or necessary in order that there
may be no omission to state a material fact in the registration
statement or prospectus which omission would make the statements
therein misleading.

(b) Maintenance of "Blue Sky" Qualifications. The Trust shall, at its
expense, use its best efforts to qualify and maintain the
qualifications of an appropriate number of Shares for sale under the
securities laws of such states as the Distributor and the Trust may
approve, and, if necessary or appropriate in connection therewith, to
qualify and maintain the qualification of the Trust as a broker or
dealer in such states; provided that the Trust shall not be required
to amend its Declaration of Trust or By-Laws to comply with the laws
of any state, to maintain an office in any state, to change the terms
of the offering of the Shares in any state, to change the terms of the
offering of the Shares in any state from the terms set forth in its
prospectus, to qualify as a foreign corporation in any state or to
consent to service of process in any state other than with respect to
claims arising out of the offering and sale of the Shares. The
Distributor shall furnish such information and other material relating
to its affairs and activities as may be required by the Trust in
connection with such qualifications.

(c) Copies of Reports and Prospectus. The Trust shall, at its expense,
keep the Distributor fully informed with regard to its affairs and in
connection therewith shall furnish to the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Shares, including such reasonable number of copies of
its prospectus and annual and interim reports as the Distributor may
request and shall cooperate fully in the efforts of the Distributor to
sell and arrange for the sale of the Shares and in the performance of
the Distributor under this Agreement.

4. Conformity with Applicable Law and Rules

The Distributor agrees that in selling Shares hereunder it shall conform in
all respects with the laws of the United States and of any state in which
Shares may be offered, and with applicable rules and regulations of the
NASD.

<PAGE>

5. Expenses

(a) The Trust shall bear all costs and expenses of the continuous offering
of its Shares in connection with: (i) fees and disbursements of its
counsel and independent accountants, (ii) the preparations, filing and
printing of any registration statements and/or prospectus required by
and under the federal securities laws, (iii) the preparation and
mailing of annual and interim reports, prospectus and proxy materials
to shareholders and (iv) the qualifications of Shares of the Trust for
sale under the securities laws of such states or other jurisdictions
as shall be selected by the Trust and the Distributor and the cost and
expenses payable to each such state for continuing qualification
therein.

(b) The Distributor shall bear (i) the costs and expenses of preparing,
printing and distributing any materials not prepared by the Trust and
other materials used by the Distributor in connection with this
offering of Shares for sale to the public, including the additional
cost of printing copies of the prospectus and of annual and interim
reports to shareholders other than copies thereof required for
distribution to shareholders or for filing with any federal securities
authorities, (ii) any expenses of advertising incurred by the
Distributor in connection with such offering and (iii) the expenses of
registration or qualification of the Distributor as a dealer or broker
under federal or state laws and the expenses of continuing such
registration or qualification.

6. Independent Contractor

In performing its duties hereunder, the Distributor shall be an independent
contractor and neither the Distributor, nor any of its officers, directors,
employees, or representatives is or shall be an employee of the Trust in
the performance of the Distributor's duties hereunder. The Distributor
shall be responsible for its own conduct and the employment, control, and
conduct of its agents and employees and for injury to such agents or
employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employee taxes thereunder.

7. Indemnification

<PAGE>

(a) Indemnification of Trust. The Distributor agrees to indemnify and hold
harmless the Trust and each of its present or former trustees,
officers, employees, representatives and each person, if any, who
controls or previously controlled the Trust within the meaning of
Section 15 of the 1933 Act against any and all losses, liabilities,
damages, claims or expenses (including the reasonable costs of
investigating or defending any alleged loss, liability, damage, claims
or expense and reasonable legal counsel fees incurred in connection
therewith) to which the Trust or any such person may become subject
under the 1933 Act, under any other statute, at common law, or
otherwise, arising out o the acquisition of any Shares by any person
which (i) may be based upon any wrongful act by the Distributor or any
of the Distributor's directors, officers, employees or
representatives, or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other
information covering Shares filed or made public by the Trust or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if
such statement or omission was made in reliance upon information
furnished to the Trust by the Distributor. In no case (i) is the
Distributor's indemnity in favor of the Trust, or any person
indemnified to be deemed to protect the Trust or such indemnified
person against any liability to which the Trust or such person would
otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance of his duties or by reason of his
reckless disregard of his obligations and duties under this Agreement
or (ii) is the Distributor to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against the
Trust or any person indemnified unless the Trust or such person, as
the case may be, shall have notified the Distributor in writing of the
claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim
shall have been served upon the Trust or upon such person (or after
the Trust or such person shall have received notice to such service on
any designated agent.) However, failure to notify the Distributor of
any such claim shall not relieve the Distributor from any liability
which the Distributor may have to the Trust or any person against whom
such action is brought otherwise than on account of the Distributor's
indemnity agreement contained in this Paragraph.

<PAGE>

The Distributor shall be entitled to participate, at its own expense,
in the defense, or, if the Distributor so elects, to assume the
defense of any suit brought to endorse any such claim, but, if the
Distributor elects to assume the defense, such defense shall be
conducted by legal counsel chosen by the Distributor and satisfactory
to the Trust and to the defendant or defendants who are entitled to
such indemnification. In the event that the Distributor elects to
assume the defense of any suit and retain legal counsel, the Trust and
the defendant or defendants who are entitled to such indemnification,
shall bear the fees and expenses of any additional legal counsel
retained by them. If the Distributor does not elect to assume the
defense of any such suit, the Distributor will reimburse the Trust and
the defendant or defendants entitled to such indemnification for the
reasonable fees and expenses of any legal counsel retained by them.
The Distributor agrees to promptly notify the Trust of the
commencement of any litigation of proceedings against it or any of its
officers, employees or representatives in connection with the issue or
sale of any Shares.

(b) Indemnification of the Distributor. The Trust agrees to indemnify and
hold harmless the Distributor and each of its present or former
directors, officers, employees, representatives and each person, if
any, who controls or previously controlled the Distributor within the
meaning of Section 15 of the 1933 Act, under any other statute, at
common law, or otherwise, arising out of the acquisition of any Shares
by any person which (i) may be based upon any wrongful act by the
Trust or any of the Trust's trustees, officers, employees or
representatives (other than the Distributor), or (ii) may be based
upon any untrue statement or alleged untrue statement or a material
fact contained in a registration statement, prospectus, shareholder
report or other information covering Shares filed or made public by
the Trust or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to made the statements therein not
misleading unless such statement or omission was made in reliance upon
information furnished to the Trust by the Distributor. In no case (i)
is the Trust's indemnity in favor of the Distributor, or any person
indemnified to be deemed to protect the Distributor or such
indemnified person against any liability to which the Distributor or
such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his
duties or by reason of his reckless disregard of his obligations and
duties under this Agreement, or (ii) is the Trust to be liable under
its indemnity agreement contained in this Paragraph with respect to
any claim made against Distributor or person indemnified unless the
Distributor, or such person, as the case may be, shall have notified
the Trust in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor or
upon such person (or after the Distributor or such person shall have
received notice of such service on any designated agent.) However,
failure to notify the Trust of any such claim shall not relieve the
Trust from any liability which the Trust may have to the Distributor
or any person against whom such action is brought otherwise than on
account of the Trust's indemnity agreement contained in this
Paragraph.

<PAGE>

The Trust shall be entitled to participate, at its own expense, in the
defense, or, if the Trust so elects, to assume the defense of any suit
brought to enforce any such claim, but if the Trust elects to assume
the defense, such defense shall be conducted by legal counsel chosen
by the Trust and satisfactory to the Distributor and to the defendant
or defendants entitled to such indemnification. In the vent that the
Trust elects to assume the defense of any suit and retain legal
counsel, the Distributor and the defendant or defendants entitled to
such indemnification, shall bear the fees and expenses of any
additional legal counsel retained by them. If the Trust does not elect
to assume the defense of any such suit, the Trust will reimburse the
Distributor and the defendant or defendants entitled to such
indemnification for the reasonable fees and expenses of any legal
counsel retained by them. The Trust agrees to promptly notify the
Distributor of the commencement of any litigation or proceedings
against it or any of its trustees, officers, employees, or
representatives in connection with the issue or sale of any Shares.

8. Authorized Representatives

The Distributor is not authorized by the Trust to give on behalf of the
Trust any information or to make any representations in connection with the
sale of Shares other than the information and representations contained in
a registration statement or prospectus filed with the Securities and
Exchange Commission ("SEC") under the 1933 Act and/or the 1940 Act,
covering Shares, as such registration statement and prospectus may be
amended or supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on behalf of the Trust
for the Distributor's use. This shall not be construed to prevent the
Distributor from preparing and distributing tombstone ads and sales
literature or other material as it may deem appropriate. No person other
than the Distributor is authorized to act as principal underwriter (as such
term is defined in the 1940 Act) for the Trust.

9. Term of Agreement

The term of this Agreement shall begin on the date first above written, and
unless sooner terminated as hereinafter provided, this Agreement shall
remain in effect through JUNE 15, 1989. Thereafter, this Agreement shall
continue in effect from year to year, subject to the termination provisions
and all other terms and conditions thereof, so long as such continuation
shall be specifically approved at least annually by the Board of Trustees
or by vote of a majority of the outstanding voting securities of the Trust
and, concurrently with such approval by the Board of Trustees or prior to
such approval by the holders of the outstanding voting securities of the
Trust, as the case may be, by the vote, cast in person at a meeting called
for the purpose of voting on such approval, of a majority of the trustees
of the Trust who are not parties to this Agreement or interested persons of
any such party. The Distributor shall furnish to the Trust, promptly upon
its

<PAGE>

request, such information as may reasonably be necessary to evaluate the
terms of this Agreement or any extension, renewal or amendment hereof.

10. Amendment or Assignment of Agreement

This Agreement may not be amended or assigned except as permitted by the
1940 Act, and this Agreement shall automatically and immediately terminate
in the event of its assignment.

11. Termination of Agreement

This Agreement may be terminated by either party hereto, without the
payment of any penalty, on not more than upon 60 days' nor less than 30
days' prior notice in writing to the other party; provided, that in the
case of termination by the Trust such action shall have been authorized by
resolution of a majority of the trustees of the Trust who are not parties
to this Agreement or interested persons of any such party, or by vote of a
majority of the outstanding voting securities of the Trust.

12. Miscellaneous

The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.

This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

Nothing herein contained shall be deemed to require the Trust to take any
action contrary to its Declaration of Trust or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it
is bound, or to relieve or deprive the Board of Trustees of the Trust of
responsibility for and control of the conduct of the affairs of the Trust.

13. Definition of Terms

<PAGE>

Any questions of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of
the 1940 Act shall be resolved by reference to such term or provision of
the 1940 Act and to interpretation thereof, if any, by the United States
courts or, in the absence of any controlling decision of any such court, by
rules, regulations or orders of the Securities and Exchange Commission
validly issued pursuant to the 1940 Act. Specifically, the terms "vote of a
majority of the outstanding voting securities", " interested persons",
"assignment" and "affiliated person", as used in Paragraphs 8, 9 and 10
hereof, shall have the meanings assigned to them by Section 2(a) of the
1940 Act. In addition, where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is relaxed by a rule,
regulation or order of the Securities and Exchange Commission, whether of
special or of general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.

14. Compliance with Securities Laws

The Trust represents that it is registered as an open-end management
investment company under the 1940 Act, and agrees that it will comply with
all the provisions of the 1940 Act and of the rules and regulations
thereunder. The Trust and the Distributor each agree to comply with all of
the applicable terms and provisions of the 1940 Act, the 1933 Act and,
subject to the provisions of Section 4(d), all applicable "Blue Sky" laws.
The Distributor agrees to comply with all of the applicable terms and
provisions of the Securities Exchange Act of 1934.

15. Notices

Any notice required to be given pursuant to this Agreement shall be deemed
duly given if delivered or mailed by registered mail, postage prepaid, to
the Distributor or to the Trust at 222 West College Avenue, Appleton,
Wisconsin, 54919-0007.

16. Governing Law

This Agreement shall be governed and construed in accordance with the laws
of the State of Wisconsin.

17. No Shareholder Liability

The Distributor understands that the obligations of this Agreement are not
biding upon any shareholder of the Trust personally, but bind only the
Trust's property; the Distributor represents that it has notice of the
provisions of the Declaration of Trust disclaiming shareholder liability
for acts or obligations of the Trust.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives and their respective corporate
seals to be hereunto affixed, as of the day and year first above written.

ATTEST: THE AAL MUTUAL FUNDS

/s/ Robert G. Same /s/John H. Pender
- --------------------------- ---------------------------
Robert G. Same, Secretary John H. Pender, President

ATTEST: AAL DISTRIBUTORS INC.

/s/Robert G. Same /s/Rochelle Lamm Wallach
- --------------------------- ---------------------------
Robert G. Same, Secretary Rochelle Lamm Wallach, President

<PAGE>

AMENDMENT NO. 9
TO
DISTRIBUTION AGREEMENT

Effective December 31, 1999, The AAL Mutual Funds Distribution Agreement (the
"Agreement") dated June 15, 1987, as amended, between The AAL Mutual Funds and
AAL Capital Management Corporation (f/k/a AAL Distributors, Inc.), is further
amended as follows:

1. Exhibit A to the Agreement is amended to add The AAL Large Company Index
Fund, The AAL Mid Cap Index Fund, and The AAL Bond Index Fund.

A revised Exhibit A, effective as of the date of this Amendment No. 9 is
attached an incorporated herein.

IN WITNESS WHEREOF the parties hereto have caused this Amendment to be signed by
the respective officers effective as of December 31, 1999.

ATTEST: THE AAL MUTUAL FUNDS

By: /s/Frederick D. Kelsven By: /s/Robert G. Same
--------------------------- ---------------------------
Frederick D. Kelsven Robert G. Same

ATTEST: AAL CAPITAL MANAGEMENT CORPORATION

By: /s/Frederick D. Kelsven By: /s/Robert G. Same
--------------------------- ---------------------------
Frederick D. Kelsven Robert G. Same

EXHIBIT A
TO
THE AAL MUTUAL FUNDS DISTRIBUTION AGREEMENT
(EFFECTIVE DECEMBER 31, 1999)

1. The AAL Capital Growth Fund

2. The AAL Bond Fund

3. The AAL Municipal Bond Fund

4. The AAL Money Market Fund

5. The AAL U.S Government Zero Coupon Target Fund, Series 2001

6. The AAL U.S Government Zero Coupon Target Fund, Series 2006

7. The AAL Mid Cap Stock Fund (f/k/a The AAL Smaller Company Stock Fund)

8. The AAL Equity Income Fund (f/k/a The AAL Utilities Fund)

9. The AAL International Fund

10. The AAL Small Cap Stock Fund

11. The AAL High Yield Bond Fund

12. The AAL Balanced Fund

13. The AAL Large Company Index Fund

14. The AAL Mid Cap Index Fund

15. The AAL Bond Index Fund

ADMINISTRATIVE SERVICES AGREEMENT

This Administrative Services Agreement is made as of this 1st day of
January, 1999 by and between The AAL Mutual Funds, a Massachusetts business
trust (the "Fund") and Aid Association for Lutherans, a Wisconsin Corporation
("AAL" "Administrator").

WHEREAS, AAL has offered to provide fund accounting and pricing
services to the Fund at a fair and reasonable price and the Fund desires to have
AAL provide such services; and

WHEREAS, a majority of the Trustees of the Fund and a majority of the
disinterested Trustees of the Fund have approved this Agreement between AAL and
the Fund, and in so approving the Agreement made the following findings:

a. The Agreement is in the best interest of the Fund and its Shareholders;

b. The services to be performed pursuant to the Agreement are services
required for the operation of the Fund;

c. AAL can provide services, the nature and quality of which are at least
equal to those provided by others offering the same or similar services;
and

d. The fees for such services are fair and reasonable in light of the usual
and customary charges made by others for services of the same nature and
quality.

WHEREAS, the Fund is authorized to issue shares in separate series with
each such series representing interests in a separate portfolio of securities
and other assets; and

WHEREAS, the Fund desires AAL to render the services to the Fund in the
manner and on the terms and conditions hereinafter set forth with respect to
each of the Fund's series identified on Schedule B attached hereto, as modified
from time to time by the mutual consent of the parties.

NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1. Services. The Fund hereby engages AAL, and AAL accepts such
engagement, to perform accounting and pricing services for the
Fund as described in more detail on Schedule A, as the same may be
modified from time to time by vote of a majority of the Fund's
Trustees including a majority of those who are not interested
persons of AAL (the "Services"). The Fund agrees that AAL shall
have ready access to the Fund's agents, books, records, financial
information, management and resources at such times and for such
periods as AAL deems necessary to perform the Services.

2. Rate of Payment for the Services.

2.1 Contract Price. The Fund agrees to pay AAL for the Services at such
rate, not to exceed the rates charged by unaffiliated vendors for
comparable Services, as may be approved annually by a majority of the
Fund's Trustees, including a majority of Trustees who are not parties
to this Agreement or interested persons of AAL (the "Contract
Price")(Schedule C). The Fund shall also pay all expenses, as set
forth in Section 2.2 below, applicable taxes, duties and charges
(including sales, use and excise taxes) levied or assessed as a result
of this Agreement, except those taxes measured solely by the net
income of AAL. The Contract Price shall be payable monthly within ten
(10) days of the date of invoice. The Contract Price shall be adjusted
annually by mutual agreement.

2.2 Reimbursement for Expenses. Subject to the Fund's prior approvals, AAL
shall be paid by the Fund for actual expenses and costs incurred by
AAL in the performance of the Services, including, but not limited to,
long distance telephone calls, postage, computer time and supplies.

3. Employees. All personnel assigned by AAL to perform the Services will be
employees of AAL or its affiliates. AAL will be considered, for all
purposes an independent contractor, and it will not, directly or
indirectly, act as an agent, servant or employee of the Fund, or make any
commitments or incur any liabilities on behalf of the Fund without its
prior written consent.

4. Administrator Use of the Services of Others. AAL may (at its costs except
as contemplated by Paragraph 2.2 of this Agreement) employ, retain or
otherwise avail itself of the Services or facilities of other persons or
organizations for the purpose of providing the Fund with such information
or Services as it may deem necessary, appropriate or convenient for the
discharge of its obligations hereunder or otherwise helpful to the Fund, or
in the discharge of its overall responsibilities with respect to the
Services to be provided to the Fund.

5. Ownership of Records. All records required to be maintained and preserved
by the Fund pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the Investment
Company Act of 1940 (the "Act") and maintained and preserved by AAL on
behalf of the Fund are the property of the Fund and will be surrendered by
AAL promptly on request by the Fund.

6. Reports to Fund by AAL. AAL shall provide the Fund, at such times as the
Fund may reasonably require, with reports relating to the Services provided
by AAL under this Agreement. Such reports shall be of sufficient scope and
in sufficient detail, as may reasonably be required by the Fund.

7. Services to Other Clients. Nothing herein contained shall limit the freedom
of AAL or any affiliated person of AAL to render investment advice or
corporate administrative services to other investment companies, to act as
investment advisor or investment counselor to other persons, firms or
corporations, or to engage in other business activities.

8. Limitation of Liability of AAL. Neither AAL, nor any of its officers,
directors, or employees, not any person performing administrative or other
functions for the Fund (at the direction or request of AAL) in connection
with Administrator discharge of its obligations undertaken or reasonably
assumed with respect to this Agreement, shall be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except for
loss resulting from willful misfeasance, bad faith, or negligence in the
performance of its or their duties on behalf of the Fund or from reckless
disregard by AAL or any such person of the duties of AAL under this
Agreement.

9. Term of Agreement. The term of this Agreement shall begin on the date first
above written, and unless sooner terminated as hereinafter provided, this
Agreement shall be submitted for approval to the Board of Trustees and will
continue in effect from year to year as it pertains to each such series,
subject to the termination provisions and all other terms and conditions
hereof, so long as: (a) such continuation shall be specifically approved at
least annually by the Board of Trustees of the Fund including a majority of
the Trustees of the Fund who are not parties to this Agreement or
interested persons of any such party; and (b) AAL shall not have notified
the Fund, in writing, at least 60 days prior to October 31, 1999 or prior
to October 31 of any year thereafter, that it does not desire such
continuation. AAL shall furnish to the Fund, promptly upon its request,
such information as may reasonably be necessary to evaluate the terms of
this Agreement or any extension, renewal or amendment hereof.

10. Amendment and Assignment of Agreement. This Agreement may only be amended
or assigned either as it pertains generally to all of the series or as it
pertains to a particular series by a written agreement by each party.

11. Termination of Agreement. This Agreement may be terminated by any party
hereto either as it pertains generally to all of the series or as it
pertains to a particular series, without the payment of any penalty, upon
60 days' prior notice in writing to the other party; provided, that in the
case of termination by the Fund such action shall have been authorized by
resolution of a majority of the Trustees of the Fund who are not parties to
this Agreement or interested persons of any such party, or by vote of a
majority of the outstanding voting securities of each series affected by
such termination.

12. Miscellaneous.

12.1 Captions. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.

12.2 Interpretation. Nothing herein contained shall be deemed to require
the Fund to take any action contrary to its Declaration of Trust or
By-Laws, or any applicable statutory or regulatory requirement to
which it is subject or by which it is bound, or to relieve or deprive
the Board of Trustees of the Fund of its responsibility for and
control of the conduct of the affairs of the Fund.

12.3 Definitions. Any question of interpretation of any term or provision
of this Agreement having a counterpart in or otherwise derived from a
term or provision of the Act shall be resolved by reference to such
term or provision of the Act and to interpretations thereof if any, by
the United States courts or, in the absence of any controlling
decision of any such court, by rules, regulations or orders of the
Securities and Exchange Commission validly issued pursuant to the Act.
Specifically, the terms "vote of a majority of the outstanding voting
securities," "interested person," "assignment," and "affiliated
person," as used in Paragraphs 1, 2.1, 7, 9, 10, and 11 hereof, shall
have the meanings assigned to them by Section 2(a) of the Act. In
addition, where the effect of a requirement of the Act reflected in
any provision of this Agreement is relaxed by a rule, regulation or
order of the Securities and Exchange Commission, whether of special or
of general application, such provision shall be deemed to incorporate
the effect of such rule, regulation or order.

12.4 Governing Law. This Agreement shall be construed and governed by the
laws of the state of Wisconsin.

12.5 Amendment. This Agreement, including the Schedules hereto, may be
amended only by an instrument in writing executed by the parties or
their permitted assignees.

12.6 Notices. All communications or notices required permitted by this
Agreement shall be in writing and shall be deemed to have been give at
the earlier of the date when actually delivered to an officer of a
party or when deposited in the United States Mail, certified or
registered mail, postage prepaid, return receipt requested, and
addressed to the principal place of business of such parties notifies
the parties in accordance with this section of change of address.

12.7 Entire Agreement. This Agreement together with the Schedules hereto
constitutes the entire agreement between the Fund and AAL with respect
to the subject matter hereof. There are no restrictions, promises,
warranties, covenants or undertakings other than those expressly set
forth herein and therein. This Agreement supersedes all prior
negotiations, agreements and undertakings between the parties with
respect to such subject matter.

12.8 Enforceability. The invalidity or unenforceability of any provision
hereof shall not affect or impair any other provisions.

12.9 Scope of Agreement. If the scope of any of the provisions of the
Agreement is to broaden any respect whatsoever to prevent enforcement
to its full extent, then such provisions shall be enforced to the
maximum extent permitted by law, and the parties hereto consent and
agree that such scope may be judicially modified accordingly and that
the whole of such provisions of this Agreement shall not thereby fail,
but that the scope of such provisions shall be curtailed only to the
extent necessary to conform to the law.

12.10 Agreement Binding Only on Trust Property. AAL understands that the
obligations of this Agreement are not binding upon any shareholder of
the Fund personally, but bind only the Fund's property; AAL represents
that it has notice of the Fund's Declaration of Trust disclaiming
shareholder liability for acts and obligations of the Fund.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.

THE AAL MUTUAL FUNDS

By: /s/Ronald G. Anderson
-----------------------------
Ronald G. Anderson, President

AID ASSOCIATION FOR LUTHERANS

By: /s/John O. Gilbert
-----------------------------
John O. Gilbert, President

<PAGE>

SCHEDULE A

Services to be performed by AAL:

1. Portfolio Accounting Services. AAL shall provide the following portfolio
accounting and reporting services for each series of the Fund covered by
this Agreement:

(a) Maintain daily portfolio records for each series on a trade date basis
using security trade information obtained by it as Investment Advisor
to the Fund, or communicated from a Sub-Advisor for the series;

(b) On each business day record the prices of the portfolio positions of
each series as obtained from a source approved by the Board of
Trustees;

(c) Record interest and dividend accrual balances each business day on the
portfolio securities of each series and calculate and record each
series' gross earnings on investments for that day;

(d) Determine gains and losses on portfolio security sales on a daily
basis for each series and identify such gains and loses as
short-short, short or long-term. Account for periodic distributions of
gain to shareholders of each series and maintain undistributed gain or
loss balances as of each business day; and

(e) Provide each series with portfolio-based reports on the foregoing on a
periodic basis as mutually agreed upon between the Board of Trustees
and AAL.

2. Expense Accrual. AAL shall provide accounting and reporting services
relating to the accrual of expenses as described below for each series of
the Fund covered by this agreement:

(a) On each business day, calculate the amounts of expense accrual for
each series according to the methodology, rate or dollar amount
specified by the Board of Trustees;

(b) Account for expenditures and maintain expense accrual balances for
each series at a level of accounting detail specified by the Board of
Trustees;

(c) Conduct periodic expense accrual reviews for each series as requested
by the Board of Trustees comparing actual expenses to accrual amounts;
and

(d) Issue periodic reports for each series detailing expense accruals and
payments at the times requested by the Board of Trustees.

3. Valuation and Financial Reporting Services. AAL shall provide accounting
and reporting services relating to the net asset value of each series of
the Fund's covered by this Agreement as described below:

(a) Account for purchases, sales, exchanges, transfers, dividend
reinvestments and other activity relating to the shares of each series
as reported by the Fund's Transfer Agent on a daily basis;

(b) Provide the Investment Advisor and were applicable, the Sub Advisor a
daily report of cash reserves available for short term investing;

(c) Record daily the net investment income (earnings) for each series.
Account for periodic distributions of earnings to shareholders of each
series and maintain undistributed net investment income balances as of
each business day;

(d) Maintain a general ledger for each series in the form specified by the
Board of Trustees and produce a set of financial statements for each
series as requested from time to time by the Board of Trustees;

(e) On each business day of the Fund determine the net asset value of each
series in accordance with the accounting policies and procedures
described in the current Prospectus of the Fund;

(f) On each business day of the Fund, calculate the per share net asset
value, per share net earnings and other per share amounts reflective
of the operations of each series on the basis of the number of shares
outstanding as reported by the Transfer Agent;

(g) Issue daily reports detailing such per share information of each
series to such persons (including the Transfer Agent and AAL
Distributors, Inc. as Distributor of the Fund's shares) as directed by
the Board of Trustees; and

(h) Issue to the Board of Trustees monthly reports which document the
adequacy of the accounting detail necessary to support month-end
ledger balances for each series.

4. Tax Accounting Services. AAL shall provide the following tax accounting
services for each series of the Fund covered by this Agreement:

(a) Maintain tax accounting records for the investment portfolio of each
series necessary to support IRS tax reporting requirements for
regulated investment companies;

(b) Maintain tax lot detail for the investment portfolio of each series;

(c) Calculate taxable gains and losses on sales of portfolio securities
for each series using the tax cost basis defined for the particular
series;

(d) Issue reports to the Transfer Agent of each series detailing the
taxable components of income and capital gains distributions as
necessary to assist such Transfer Agent in issuing reports to
shareholders; and

(e) Provide any other reports relating to tax matters for each series as
reasonably requested from time to time by the Board of Trustees.

<PAGE>

SCHEDULE B

Effective January 1, 1999

The AAL Capital Growth Fund

The AAL Bond Fund

The AAL Municipal Bond Fund

The AAL Money Market Fund

The AAL Mid Cap Stock Fund

The AAL Small Cap Stock Fund

The AAL International Fund

The AAL Equity Income Fund

The AAL Balanced Fund

The High Yield Bond Fund

The AAL U.S. Government Zero Coupon Target Fund Series 2001

The AAL U.S. Government Zero Coupon Target Fund Series 2006

<PAGE>

SCHEDULE C

CONTRACT FEE SCHEDULE

EFFECTIVE JANUARY 1, 1999

The AAL Capital Growth Fund $40,000

The AAL Bond Fund $40,000

The AAL Municipal Bond Fund $40,000

The AAL Money Market Fund $40,000

The AAL Mid Cap Stock Fund $40,000

The AAL Small Cap Stock Fund $40,000

The AAL International Fund $45,000

The AAL Equity Income Fund $40,000

The AAL Balanced Fund $40,000

The High Yield Bond Fund $40,000

The AAL U.S. Government Zero Coupon Target Fund, Series 2001 $ 2,500

The AAL U.S. Government Zero Coupon Target Fund, Series 2006 $ 2,500

AMENDMENT NO. 1
TO
ADMINISTRATIVE SERVICES AGREEMENT

The Administrative Services Agreement between The AAL Mutual Funds and Aid
Association for Lutherans, effective January 1, 1999, is hereby amended,
effective December 31, 1999, as follows:

1. Schedule B, List of Funds, is modified to add The AAL Large Company
Index Fund, The AAL Mid Cap Index Fund, and The AAL Bond Index Fund. A
revised Schedule B, effective as of the date of this Amendment No. 1,
is attached and incorporated herein.

2. Schedule C, Contract Fee Schedule, is modified to add The AAL Large
Company Index Fund, The AAL Mid Cap Index Fund, and The AAL Bond Index
Fund. Schedule C, Contract Fee Schedule is further modified to reduce
the fees for The AAL U.S. Government Zero Coupon Target Series Fund,
Series 2001 and The AAL U.S. Government Zero Coupon Target Series
Fund, Series 2006. A revised Schedule C, effective as of the date of
this Amendment No. 1, is attached and incorporated herein.

IN WITNESS WHEREOF the parties hereto have caused this Amendment to be signed by
the respective officers effective as of December 31, 1999.

ATTEST: THE AAL MUTUAL FUNDS

By: /s/Frederick D. Kelsven By: /s/Robert G. Same
------------------------------- -------------------------------
Frederick D. Kelsven Robert G. Same

ATTEST: AID ASSOCIATION FOR LUTHERANS

By: /s/Woodrow E. Eno By: John O. Gilbert
------------------------------- -------------------------------
Woodrow E. Eno John O. Gilbert

SCHEDULE B

LIST OF FUNDS

EFFECTIVE DECEMBER 31, 1999

1. The AAL Capital Growth Fund

2. The AAL Bond Fund

3. The AAL Municipal Bond Fund

4. The AAL Money Market Fund

5. The AAL Mid Cap Stock Fund

6. The AAL Small Cap Stock Fund

7. The AAL International Fund

8. The AAL Equity Income Fund

9. The AAL Balanced Fund

10. The AAL High Yield Bond Fund

11. The AAL U.S. Government Zero Coupon Target Fund, Series 2001

12. The AAL U.S. Government Zero Coupon Target Fund, Series 2006

13. The AAL Large Company Index Fund

14. The AAL Mid Cap Index Fund

15. The AAL Bond Index Fund

SCHEDULE C

CONTRACT FEE SCHEDULE

EFFECTIVE DECEMBER 31, 1999

1. The AAL Capital Growth Fund $40,000

2. The AAL Bond Fund $40,000

3. The AAL Municipal Bond Fund $40,000

4. The AAL Money Market Fund $40,000

5. The AAL Mid Cap Stock Fund $40,000

6. The AAL Small Cap Stock Fund $40,000

7. The AAL International Fund $45,000

8. The AAL Equity Income Fund $40,000

9. The AAL Balanced Fund $40,000

10. The AAL High Yield Bond Fund $40,000

11. The AAL U.S. Government Zero Coupon Target Fund, Series 2001 $1,000

12. The AAL U.S. Government Zero Coupon Target Fund, Series 2006 $1,000

13. The AAL Large Company Index Fund $35,000

14. The AAL Mid Cap Index Fund $35,000

15. The AAL Bond Index Fund $35,000

SHAREHOLDER MAINTENANCE AGREEMENT

This Agreement effective April 1, 1995, by and between The AAL Mutual Funds, a
Massachusetts Business Trust, ("The Funds"), and AAL Capital Management
Corporation, a Delaware Corporation ("CMC").

WHEREAS, The Board of Trustees desires to provide shareholders of The Funds
certain shareholder services now commonly provided in the mutual fund industry
but not currently provided, under contract, to The Funds' shareholders; and

WHEREAS, a majority of the Board of Trustees, including all of the disinterested
Trustees, have approved this Agreement between The Funds and CMC, and in so
approving, made the following findings:

a. The Agreement is in the best interest of The Funds and its
shareholders;

b. The services described in the Agreement are necessary for the
operation of The Funds and are not services that are appropriately
funded by fees paid under The Funds' Rule 12b-1 Distribution Plan;

c. CMC can provide services, the nature and quality of which are at least
equal to those provided by others offering the same or similar
services;

d. The fees for such services are fair and reasonable in light of the
usual and customary charges made by others for the same or similar
services; and

e. CMC has the knowledge and experience concerning the operations of The
Funds that would enable it to provide a quality of service not
currently available from a third party, and

WHEREAS, the Funds desire CMC to render the service to the Funds in the manner
and on the terms and conditions hereinafter set forth with respect to each of
the Funds' Series identified on Schedule A attached hereto, as modified from
time-to-time by the mutual consent of the parties.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

<PAGE>

1. Description of Services. CMC shall provide certain shareholder services,
including:

1.1 Operating a toll-free telephone number staffed by licensed investment
professionals at least 9 hours per day. The assistance provided will
include providing current account information as well as explanation
and assistance with The Funds' procedures and practices;

1.2 Operating a recording system, staffed by licensed investment
professionals, to facilitate shareholder telephone transactions and
serve as documentation for such transactions;

1.3 Providing trained personnel to research and answer shareholder written
correspondence and requests for documents directed to The Funds;

1.4 Providing, on or before May 1, 1995, the hardware, software
programming and maintenance, to operate a 24 hour Voice Response Unit
(VRU) to provide shareholders with 24 hour access to basic Fund and
account information;

1.5 Quality control of all new accounts;

1.6 Pre-processing of all new accounts and subsequent orders received by
CMC;

1.7 Availability and maintenance of a computerized application for new
account purchases; and

1.8 Electronic Funds processing.

2. Payment for Services. The fee payable to CMC is the difference between the
standard fee schedule of Firstar Trust Company (Firstar) and the fees
currently charged to the Funds by Firstar for active shareholder accounts,
plus reimbursement for actual out-of-pocket expenses incurred by CMC in the
course of providing such services, including, without limitation, expenses
for telephone services and postage. The rate of this fee and the amounts
reimbursed to CMC for out-of-pocket expenses shall be reviewed no less
frequently than annually by the Board of Trustees, at such time as said
Board reviews The Funds' contract with Firstar. Fees under this Agreement
shall be accrued daily and payable monthly.

<PAGE>

3. Employees. All personnel assigned by CMC to perform services under the
Agreement will be employees of CMC. CMC will be considered, for all
purposes, an independent contractor, and it will not directly or indirectly
make any commitment or incur any liabilities on behalf of The Funds without
prior written consent from an authorized Officer of the Funds.

4. Term of Agreement. The term of this Agreement shall begin on the date first
above written, and, will continue in effect from year-to-year as it
pertains to each series, subject to the termination provisions and all
other terms and conditions hereof, so long as such continuation shall be
specifically approved at least annually by the Board of Trustees of the
Fund or by vote of a majority of the outstanding voting securities of such
series and, concurrently with such approval by the Board of Trustees or
prior to such approval by the holders of the outstanding voting securities
of such series, as the case may be, by the vote, cast in person at a
meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Fund who are not parties to this Agreement or
interested persons of any such party.

5. Termination of Agreement. This Agreement may be terminated by any party
hereto either as it pertains generally to all of the series or as it
pertains to a particular series, without the payment of any penalty, upon
60 days' prior notice in writing to the other party; provided, that in the
case of termination by the Fund such action shall have been authorized by
resolution of a majority of the Trustees of the Fund who are not parties to
this Agreement or interested persons of any such party, or by vote of a
majority of the outstanding voting securities of each series affected by
such termination.

6. Miscellaneous.

6.1 Services by Others. CMC may, at its cost, subcontract with others to
better provide shareholders with the services described in this
Agreement; provided CMC shall be responsible for the performance by
such third party(ies) as though CMC had directly provided the service.

6.2 Ownership of Records. CMC shall maintain all records arising from
services provided hereunder and required to be maintained and
preserved by The Funds pursuant to all applicable laws and
regulations. CMC shall surrender these records promptly upon request
of The Funds.

<PAGE>

6.3 Reports to The Board of Trustees. CMC shall provide the Board of
Trustees, at such times as it may request, information concerning
CMC's performance under this Agreement, including information as to
costs actually incurred and the volume and nature of shareholder
contacts.

6.4 Services to Others. Nothing contained herein shall limit CMC or any
affiliate from providing services to third parties or to engage in
other business activities.

6.5 Agreement Binding only on Trust Property. CMC understands that the
obligations of this Agreement are not binding on any shareholder of
The Funds personally, but bind only The Funds' property. CMC
represents that it has notice of The Funds' Declaration of Trust
disclaiming shareholder liability for acts and obligations of The
Funds.

6.6 Law and Enforceability. This Agreement shall be construed according to
the laws of the State of Wisconsin and the invalidity or
unenforceability of any provision shall not affect or impair any other
provisions.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their
respective officers, effective the date first above written.

ATTEST: THE AAL MUTUAL FUNDS

/s/Robert G. Same /s/John H. Pender
- ------------------------------- -------------------------------
Robert G. Same, Secretary John H. Pender, President

ATTEST: AAL CAPITAL MANAGEMENT CORPORATION

/s/Robert G. Same /s/H. Michael Spence
- ------------------------------- -------------------------------
Robert G. Same, Secretary H. Michael Spence, President

<PAGE>

SHAREHOLDER MAINTENANCE AGREEMENT
SCHEDULE A
(EFFECTIVE APRIL 1, 1995)

The AAL Capital Growth Fund
The AAL Bond Fund
The AAL Municipal Bond Fund
The AAL Money Market Fund'
The AAL U.S. Government Zero Coupon Target Fund, Series 2001
The AAL U.S. Government Zero Coupon Target Fund, Series 2006
The AAL Smaller Company Stock Fund
The AAL Utilities Fund

AMENDMENT NO. 6
TO
SHAREHOLDER MAINTENANCE AGREEMENT

The Shareholder Maintenance Agreement between The AAL Mutual Funds and AAL
Capital Management Corporation, as amended, effective January 8, 1997, is hereby
amended, December 31, 1999, as follows:

1. Schedule A, attached to the Shareholder Maintenance Agreement, is
amended to add The AAL Large Company Index Fund, The AAL Mid Cap Index
Fund, and The AAL Bond Index Fund.

A revised Exhibit A, effective as of the date of this Amendment No. 6 is
attached an incorporated herein.

IN WITNESS WHEREOF the parties have caused this Amendment to be signed by their
respective officers effective December 31, 1999.

ATTEST: THE AAL MUTUAL FUNDS

By: /s/Frederick D. Kelsven By: /s/Robert G. Same
--------------------------- ---------------------------
Frederick D. Kelsven Robert G. Same

ATTEST: AAL CAPITAL MANAGEMENT CORPORATION

By: /s/Frederick D. Kelsven By: /s/Robert G. Same
--------------------------- ---------------------------
Frederick D. Kelsven Robert G. Same

SHAREHOLDER MAINTENANCE AGREEMENT
SCHEDULE A
(EFFECTIVE DECEMBER 31, 1999)

1. The AAL Capital Growth Fund

2. The AAL Bond Fund

3. The AAL Municipal Bond Fund

4. The AAL Money Market Fund'

5. The AAL U.S. Government Zero Coupon Target Fund, Series 2001

6. The AAL U.S. Government Zero Coupon Target Fund, Series 2006

7. The AAL Mid Cap Stock Fund (f/k/a The AAL Smaller Company Stock Fund)

8. The AAL Equity Income Fund (f/k/a The AAL Utilities Fund)

9. The AAL Small Cap Stock Fund

10. The AAL International Fund

11. The AAL High Yield Bond Fund

12. The AAL Balanced Fund

13. The AAL Large Company Index Fund

14. The AAL Mid Cap Index Fund

15. The AAL Bond Index Fund

TRANSFER AND DIVIDEND DISBURSING
AGENT AGREEMENT

Between

THE AAL MUTUAL FUNDS

And

FIRST WISCONSIN TRUST COMPANY

June 15, 1987

<PAGE>

TABLE OF CONTENTS
Page

1. Copies of Corporate Documents......................................1

2. Transfer of Shares.................................................1

3. Share Certificates.................................................1

4. Lost or Destroyed Certificates.....................................2

5. Receipt of Funds for Investment....................................2

6. Shareholder Accounts...............................................2

7. Unpaid Checks and Drafts...........................................3

8. Sales Charge.......................................................3

9. Dividends and Distributions........................................3

10. Repurchase and Redemptions.........................................4

11. Systematic Withdrawal Plans........................................5

12. Letters of Intent..................................................5

13. Other Plans........................................................5

14. Tax Returns and Reports............................................5

15. Record Keeping.....................................................5

16. Other Information Furnished........................................6

17. Correspondence.....................................................6

18. Communications to Shareholders and Meetings........................6

19. Compensation.......................................................6

20. Use of The Agent's Name............................................7

21. Duty of Care and Indemnification ..................................7

22. Notices............................................................8

23. Further Assurances.................................................8

24. Termination, Etc...................................................8

25. Remedies Available to Trust........................................9

26. Miscellaneous......................................................9

<PAGE>

TRANSFER AND DIVIDEND DISBURSING AGENT AGREEMENT

THIS AGREEMENT, is entered into on this 15th day of June, 1987, between
The AAL Mutual Funds, a business trust organized and existing under the laws of
the Commonwealth of Massachusetts, having its principal place of business at 222
West College Avenue, Appleton, Wisconsin 54919 (the "Trust") and First Wisconsin
Trust Company, a Wisconsin corporation, having its principal place of business
at 777 East Wisconsin Avenue, P.O. Box 701, Milwaukee, Wisconsin 53201 (the
"Agent").

WITNESSETH

WHEREAS, the Trust is authorized to issue units of beneficial interest
in separate series, with units of each such series representing an interest in a
separate portfolio of securities and other assets; and

WHEREAS, the Trust intends to initially offer units in three series,
AAL Capital Growth Series, AAL Income Series and AAL Municipal Bond Series (such
series together with any other series subsequently established by the Trust and
made subject to this Agreement by the mutual consent of the parties hereto being
herein referred to collectively as the "Funds" and individually as a "Fund");

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:

1. Copies of Corporate Documents. The Trust will furnish the Agent
promptly with copies of any Registration Statements now in effect or hereafter
filed by it with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, or the Investment Company Act of 1940, as amended, together
with any financial statements and Exhibits included therein, and all amendments
or supplements thereto hereafter filed.

2. Transfer of Shares. The Agent is authorized to transfer on our
records from time to time shares of a Fund for which certificates are
surrendered to the Agent in proper form for transfer, and, upon cancellation and
destruction thereof, to countersign, register and issue new certificates for the
same number of shares and to deliver them pursuant to instructions received from
the transferor. The Agent is authorized to transfer on our records from time to
time shares for which no certificates are issued upon surrender to the Agent of
sufficient documentation in proper form to effect such transfer.

3. Share Certificates. Each Fund shall supply the Agent with a
sufficient supply of blank share certificates representing its shares, in the
form approved from time to time by the Board of Trustees of the Trust, and, from
time to time, shall replenish such supply upon the Agent's request. Such blank
stock certificates shall be properly signed, manually or by facsimile signature,
by the duly authorized officers of the Trust, and shall bear the corporate seal
or facsimile thereof of the Trust; and notwithstanding the death, resignation or
removal of any officer of the Trust authorized to sign such share certificates,
the Agent may continue to countersign certificates which bear the manual or
facsimile signature of such officer until otherwise directed by the Trust.

4. Lost or Destroyed Certificates. In case of the alleged loss or
destruction of any certificate of stock, no new certificate shall be issued in
lieu thereof, unless there shall first be furnished an appropriate bond
satisfactory to the Agent and the Trust, and issued by Travelers Insurance
Company or a surety company satisfactory to the Agent.

5. Receipt of Funds for Investment. Upon receipt of any check drawn or
endorsed to the Agent as agent for, or otherwise identified as being for the
account of, a Fund, the Trust, or AAL Distributors, Inc. as the distributor of
the Trust's shares (hereinafter referred to as the "Distributor"), the Agent
will stamp the check with the date of receipt, determine the amount thereof due
the appropriate Fund and the Distributor, respectively, deposit the portion due
the Distributor in its account with First Wisconsin Trust Company (hereinafter
referred to as "Custodian") or such other bank as may from time to time be
designated by the Distributor, deposit the net amount due the Fund in its
account with Custodian or any successor thereto as custodian for the Fund and
notify the Distributor and Custodian respectively, of such deposits, such
notification to be given as soon as practicable on the next business day stating
the total amount deposited to said accounts during the previous business day.
Such notification shall be confirmed in writing.

6. Shareholder Accounts. Upon receipt of any check referred to in
paragraph 5 hereof, the Agent will compute the number of shares in the
appropriate Fund due to the shareholder according to the price of that Fund's
shares in effect for purchases made on the date of such receipt as set forth in
the Trust's then current Prospectus, and:

(a) In the case of a new shareholder, open and maintain a
bookshare account for such shareholder in the appropriate Fund in the
name or names set forth in the subscription application form;

(b) If specifically requested in writing by the shareholder,
countersign, issue and mail, by first class mail, to the shareholder
at his address as set forth on such application, a share certificate
for full shares of the appropriate Fund;

(c) Send to the shareholder a confirmation indicating the amount
of full and fractional shares purchased (in the case of fractional
shares, rounded to three decimal places), the price per share and a
historical confirmation of any transactions made on the shareholder's
account since the inception of the calendar year in which such
investment is made; and

(d) In the case of a request to establish an accumulation plan,
group program, withdrawal plan or other plan or program being offered
by the Trust's then current Prospectus, open and maintain such plan or
program for the shareholder in accordance with the terms thereof;

all subject to any reasonable instructions which the Distributor or
the Trust may give to the Agent with respect to rejection of orders
for shares.

7. Unpaid Checks and Drafts. In the event that any check or other order
for payment of money on the account of any shareholder or new investor is
returned unpaid for any reason, the Agent will:

(a) Give prompt notification to the Trust of such nonpayment; and

(b) Take such other steps, including redepositing those checks in
excess of $2500 for collection or redelivering such check to the
shareholder or new investor and placing a stop transfer order against
any shares in any Fund held by him, as the Trust or the Distributor
may instruct the Agent.

8. Sales Charge. In computing the number of shares to credit the
account of a shareholder pursuant to paragraph 6 hereof, the Agent will
calculate the total of the applicable Distributor and representative sales
charges with respect to each purchase as set forth in the Trust's then current
Prospectus and in accordance with any notification filed with respect to
combined and accumulated purchases, qualifying group purchases, purchases with
proceeds from AAL and other qualifying life insurance and annuities or purchases
pursuant to a reinstatement or exchange privilege; the Agent will also determine
the portion of each sales charge payable by the Distributor to the
representative participating in the sale in accordance with such schedules as
are from time to time delivered by the Distributor to the Agent; provided,
however, the Agent shall have no liability hereunder growing out of the
incorrect selection by the Agent of the gross rate of sales charges except that
this exculpation shall not apply in the event the rate is specified by the
Distributor or the Trust and the Agent fails to select the rate specified.

9. Dividends and Distributions. The Trust will promptly notify the
Agent of the declaration of any dividend or distribution with respect to shares
of any Fund. The Agent will, as soon as reasonab1y possible after the record
date of any such dividend or distribution, notify the Trust of the total number
of shares of that Fund issued and outstanding as of the record date for such
dividend or distribution and the amount of cash required to pay such dividend or
distribution. The Trust agrees that on or before the mailing date of such
dividend or distribution it will instruct First Wisconsin Trust Company (the
"Custodian Bank") to make available to the Agent sufficient funds in the
dividend and distribution account maintained by the particular Fund with the
Agent to pay such dividend and distribution. The Agent will prepare and mail to
shareholders any checks to which they are entitled by reason of any dividend or
distribution and, in the case of shareholders entitled to receive additional
shares by reason of any such dividend or distribution, the Agent will make
appropriate credits to their bookshare accounts or prepare and mail to
shareholders certificates, if any, in accordance with their requests submitted
in writing. No later than 1:00 P.M. on any dividend or distribution payment
date, the Agent shall inform the Trust of the total number of full and
fractional shares reinvested by shareholders of the particular Fund. Each such
shareholder shall be notified of any dividend and distribution, including the
amount of any reinvested shares and copies of such notices shall also be sent to
such shareholders' dealers.

10. Repurchases and Redemptions. The Agent will receive and stamp with
the date all certificates and requests delivered to the Agent for repurchase or
redemption of shares of each Fund and the Agent will process such repurchases as
agent for the Distributor and such redemptions as agent for the particular Fund
as follows:

(a) If such certificate or request complies with the standards
for repurchase or redemption as approved by the Trust, the Agent will,
on or prior to the seventh calendar day succeeding the receipt of any
such request for repurchase or redemption in good order, pay from
funds available from time to time in the repurchase and redemption
account maintained by the particular Fund with Custodian, the
appropriate repurchase or redemption price, as the case may be, to the
shareholder as set forth in the then current Prospectus of the Trust.

(b) If such certificate or request does not comply with said
standards for repurchases or redemptions as approved by the Trust, the
Agent will promptly notify the shareholder of such fact, together with
the reason therefor, and shall effect such repurchase or redemption at
the price in effect at the time of receipt of documents complying with
said standards, or, in the case of a repurchase, at such other time as
the Distributor shall so direct. Notification shall be provided by
first-class mail for accounts of $5,000 or less, and by telephone,
confirmed by a first-class letter, for accounts in excess of $5,000;
and

<PAGE>

(c) The Agent shall notify the Trust and the Distributor as soon
as practicable for each business day of the total number of Shares of
each Fund covered by requests for repurchase or redemption which were
received by the Agent in proper form on the previous business day,
such notification to be confirmed in writing.

11. Systematic Withdrawal Plans. The Agent will process systematic
withdrawal orders pursuant to the provisions of withdrawal plans duly executed
by shareholders and the current Prospectus of the Trust. Payment upon such
withdrawal orders shall be made by the Agent from the appropriate account
maintained by the particular Fund with Custodian approximately the fifteenth
(15th) day of each month in which a payment has been requested, and the Agent,
on or after the fifth business day prior to the payment date, will withdraw from
a shareholder's account and present for repurchase or redemption as many shares
of the particular Fund as shall be sufficient to make such withdrawal payment
pursuant to the provisions of the shareholder's withdrawal plan and the current
Prospectus of the Trust. From time to time on new systematic withdrawal plans, a
check for a payment date already past may be issued upon request by the
shareholder.

12. Letters of Intent. The Agent will process such letters of intent
for investing shares of each Fund as are provided for in the Trust's current
Prospectus and the Agent will act as Escrow Agent pursuant to the terms of such
letters of intent (as incorporated from the Prospectus by the account
application form) duly executed by shareholders. The Agent will make appropriate
deposits to the account of the Distributor for the adjustment of sales charges
as therein provided and will currently report the same to the Distributor.

13. Other Plans. The Agent will process such accumulation plans, group
programs, exchange programs, reinvestment programs and other plans or programs
for investing in shares of the Funds as are now provided for in the Trust's
current Prospectus and will act as plan agent for shareholders of each Fund
pursuant to the terms of such plans and programs duly executed by such
shareholders.

14. Tax Returns and Reports. In the event that a Fund revises its
investment objectives and policies to provide for the payment of dividends and
other distributions to its shareholders, the Agent will prepare, file with the
Internal Revenue Service and, if required, mail to shareholders such returns for
reporting dividends and distributions paid by the Fund as are required to be so
prepared, filed and mailed by applicable laws, rules and regulations: and the
Agent will withhold such sums as are required to be withheld under applicable
Federal and State income tax law, rules and regulations.

15. Record Keeping. The Agent will maintain records, which at all times
will be the property of the Trust and available for inspection by the Trust and
the Distributor, showing for each shareholder's account in each Fund the
following:

(a) Name and address;

(b) Number of shares held and number of shares for which
certificates have been issued:

(c) Historical information regarding the particular account,
including dividends and distributions paid and the date and price for
all transactions on the account;

(d) Any stop or restraining order placed against the account;

(e) Any instructions as to withdrawal orders under withdrawal
plans, letters of intent, dividend address, and any correspondence or
instructions relating to the current maintenance of the account.

The Agent shall be obligated to maintain at the Agent's expense those records
necessary to carry out the Agent's duties hereunder. The remaining records will
be preserved by the Agent, at the particular Fund's expense, in a manner that
shall be determined before any change in the status of said records is made by
the Agent.

16. Other Information Furnished. The Agent will furnish to the Trust
and the Distributor such other information, including shareholder lists and
statistical information as may be agreed upon from time to time between the
Agent and the Trust. The Agent shall notify the Trust of any request or demand
to inspect the stock books of a Fund and will act upon the instructions of the
Trust as to permitting or refusing such inspection.

17. Correspondence. The Agent will answer promptly that correspondence
from shareholders, representatives, the Trust and the Distributor relating to
the Agent's duties hereunder and such other correspondence as may from time to
time be mutually agreed upon between the Agent and the Trust.

18. Communications to Shareholders and Meetings. The Agent will address
and mail communications by each Fund to its shareholders, including financial
reports to shareholders, proxy material for meetings of the shareholders and
periodic communications and publications to shareholders (including publications
to only those shareholders whose accounts in all of the Funds exceed in the
aggregate on amount specified in the Trust's current prospectus).

19. Compensation. The Agent will receive a fee as specified in Schedule
A hereto, payable monthly by each Fund for each shareholder account existing in
that Fund during each month for the performance of all the Agent's duties and
responsibilities hereunder; provided that the Agent will be entitled to
reimbursement for postage expenses incurred in the mailing of all shareholder
communications and publications; and provided further that the Agent shall be
entitled to additional reasonable compensation on a time and materials basis in
connection with the annual proxy solicitation and any shareholder communications
in addition to those currently being distributed. From time to time, a Fund may
request additional reports, dates and/or services which will be provided by the
Agent in accordance with the mutual agreement of the parties hereto as to
additional reasonable fees. In addition, the Agent will be reimbursed by the
appropriate Fund for any out-of-pocket expenses or disbursements which the Agent
may reasonably incur in excess of the Agent's basic overhead expenses incurred
for providing such services to the particular Fund.

20. Use of The Agent's Name. The Trust will not use the Agent's name in
any prospectus, sales literature or other material relating to a Fund or the
Trust in a manner not approved by the Agent in writing before such use;
provided, however, that the Agent hereby agrees to consent to all uses of the
Agent's name which merely refer in accurate terms to the Agent's appointments
hereunder or which are required by the Securities and Exchange Commission or a
state securities commission; and, provided further, that in no case will such
approval be unreasonably withheld.

21. Duty of Care and Indemnification. The Agent shall at all times use
reasonable care and act in good faith in performing duties hereunder. Without
limiting the generality of the foregoing, the Agent shall not be liable or
responsible for delays or errors occurring by reason of circumstances beyond its
control, including acts of civil or military authority, national or state
emergencies, an announced employee strike significant enough to cease mutual
fund transfer operations, fire, mechanical breakdown, flood or catastrophe, acts
of God, insurrection, war, riots or failure of transportation, communication or
power supply. The Trust will indemnify and hold the Agent harmless against any
and all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit not
resulting from the Agent's bad faith or negligence, and arising out of, or in
connection with the Agent's duties on behalf of the Trust hereunder. In
addition, the Trust will indemnify and hold the Agent harmless against any and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit as a
result of the negligence of the Trust or the Distributor (unless contributed to
by the Agent's negligence or bad faith), or as a result of the Agent's acting
upon any instructions executed or orally communicated by a duly authorized
officer or employee of the Trust or the Distributor, according to such lists of
authorized officers and employees furnished the Agent and as amended from time
to time in writing by the President or Executive Vice President, or as a result
of acting in reliance upon any genuine instrument or stock certificate signed,
counter-signed or executed by any person or persons authorized to sign,
countersign or execute the same. In order for this paragraph to apply, it is
understood that if in any case the Trust may be asked to indemnify or hold the
Agent harmless, the Trust shall be advised of all pertinent facts concerning the
situation in question, and it is further understood that the Agent will use
reasonable care to identify and notify the Trustee promptly concerning any
situation which presents or appears likely to present a claim for
indemnification against the Trust. The Trust shall have the option to defend the
Agent against any claim which may be the subject of this indemnification and in
the event that the Trust so elects, it will so notify the Agent and thereupon
the Trust shall take over complete defense of the claim and the Agent shall
sustain no further legal or other expenses in such situation for which the Agent
shall seek indemnification under this paragraph. The Agent will in no case
confess any claim or make any compromise in any case in which the Trust will be
asked to indemnify the Agent except with the Trust's prior written consent.

22. Notices. Notices or other communications hereunder shall be in
writing and shall be deemed effective when served or otherwise delivered to
either party hereto at the addresses set forth herein, or at such other
addresses as a party hereto may designate by notice to the other.

23. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.

24. Termination. Neither this agreement nor any provisions hereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing which shall make specific reference to this agreement and which shall
be signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. After the first full year, this agreement
may be terminated upon six months' written notice given by one party to the
other, either in its entirety or as it applies to a particular Fund.

Upon termination of this agreement with respect to any Fund or Funds, the Trust
shall pay to the Agent such compensation as may be due to the Agent from each
such Fund as of the date of such termination, and shall likewise reimburse the
Agent for any out-of-pocket expenses and disbursements reasonably incurred by
the Agent to such date in connection with the Agent's services to each such
Fund. In the event that in connection with such termination a successor to any
of the Agent's duties or responsibilities hereunder is designated by the Trust
by written notice to the Agent, the Agent shall promptly upon such termination
and at the expense of the Trust, transfer to such successor a certified list of
the shareholders of each Fund as to which the agreement is so terminated (with
name, address and tax identification or Social Security number), a record of the
account of each shareholder of such Funds and the status thereof, and all other
relevant books, records and other data established or maintained by the Agent
under this agreement relating to such Funds and shall cooperate in the transfer
of such duties and responsibilities, including provision for assistance from the
Agent's cognizant personnel in the establishment of books, records and other
data by such successor.

25. Remedies Available to Trust. The Trust's sole and exclusive
remedies under this agreement, in the event it is determined that the Agent is
in breach of its responsibilities and not entitled to indemnification, shall be:

(a) termination; or

(b) to collect damages directly and actually incurred in a sum up
to but not in excess of fifty percent (50%) of any fees received
during the period of 12 months immediately preceding the Agent's
performance or failure to perform which constitutes a material breach
of this agreement; or

(c) to submit a claim for damages directly incurred by the the
Trust as a consequence of the Agent's failure to perform which
constituted a material breach of this agreement, and which act, nonact
or event was covered under the Agent's Banker's Blanket Bond policy or
policies, in which event the Agent agrees to indemnify and save the
Trust harmless solely to the extent of the Agent's best efforts to
include the Trust's claim as a Loss Payee under the Agent's filing of
a Proof of Loss under such policy; or

(d) at the Agent's own expense to reprocess and correct the
Agent's administrative errors.

IN NO EVENT SHALL THE AGENT BE LIABLE TO THE TRUST, ANY FUND THEREOF,
OR TO ANY THIRD PARTY, FOR ANY DAMAGES, OTHER THAN THOSE IN CLAUSE (b) ABOVE,
INCLUDING SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF FROFITS OR A LOSS
OF BUSINESS, ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF
PREVIOUSLY INFORMED OF THE POSSIBILITY OF SUCH DAMAGES, AND REGARDLESS OF THE
FORM OF ACTION.

26. Miscellaneous. This agreement shall be construed and enforced in
accordance with and governed by the internal laws of the State of Wisconsin. The
captions in this agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.

<PAGE>

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized officer on the date written above.

FIRST WISCONSIN TRUST COMPANY THE AAL MUTUAL FUNDS
(the "Agent") (the "Trust")

By: /s/James N. Hintz By: /s/John H. Pender
- ---------------------------- ----------------------------
Name: James N. Hintz Name: John H. Pender
(type or print) (type or print)

Title: Vice President Title: President

Attest: /s/Andrea Lidolph Attest: /s/Robert G. Same
- ---------------------------- ---------------------------
Andrea Lidolph Robert G. Same
Assistant Secretary Secretary

<PAGE>

AMENDMENT NO. 14
TO
THE TRANSFER AND DIVIDEND DISBURSING AGREEMENT
BETWEEN
THE AAL MUTUAL FUNDS
AND FIRSTAR TRUST COMPANY

Effective December 31, 1999, the Transfer and Dividend Disbursing Agent
Agreement ("Agreement"), dated June 15, 1987, between The AAL Mutual Funds and
Firstar Trust Company (f/k/a First Wisconsin Trust Company) is amended as
follows:

1. Schedule A (Mutual Fund Shareholder Service Fee Schedule) to the Agreement,
effective as of December 31, 1999, is amended to add a The AAL Large
Company Index Fund, The AAL Mid Cap Index Fund, and The AAL Bond Index
Fund.

An amended Schedule A, effective December 31, 1999 is attached hereto. All other
provisions of this Agreement, as amended, shall be in full force and effect.

IN WITNESS WHEREOF, the parties have caused this Amendment No. 14 to be signed
by their duly authorized officers.

ATTEST FIRSTAR TRUST COMPANY

By: /s/Michael R. McVoy By: /s/Joe D. Redwine
---------------------------- ----------------------------
Michael R. McVoy Joe D. Redwine

ATTEST: THE AAL MUTUAL FUNDS

By: /s/Frederick D. Kelsven By: /s/Robert G. Same
---------------------------- ----------------------------
Frederick D. Kelsven, Secretary Robert G. Same, President

SCHEDULE A
TO
THE AAL MUTUAL FUNDS TRANSFER AND DIVIDEND DISBURSING AGENT
AGREEMENT BETWEEN THE AAL MUTUAL FUNDS AND
FIRSTAR TRUST COMPANY
MUTUAL FUND SHAREHOLDER SERVICES
TRANSFER AGENCY FEE SCHEDULE EFFECTIVE DECEMBER 31, 1999

(Reflects addition of Index Funds for one day - see Amendment No.15 for Fee
Schedules as of January 1, 2000)

1. Annual Maintenance Fees

A. The AAL Capital Growth, Bond, Municipal Bond, Mid Cap (f/k/a The AAL
Smaller Company Stock Fund, Equity Income (f/ka The AAL Utilities
Fund), International, Small Cap Stock, High Yield Bond, Balanced,
Large Company Index, Mid Cap Index, and Bond Index Funds.

- $13.00 per account, first 50,000 open accounts; $12.50 per
account, next 100,000 open accounts; $12.25 per account, next
350,000 open accounts; $12.00 per account, balance of open
accounts.

B. The AAL Target Funds

- $6.00 per open/closed account

C. The AAL Money Market Fund

- $15.00 per open account
- $6.00 per closed account

2. Money Market Fund Drafts

- $1.50 each

3. ACH (Automatic Clearing House)

- $125.00 per cycle
- $0.50 account set-up/charge
- $0.35 per item (EFT to account)
- $3.25 per correction/reversal/return

4. IRA/403(b) Maintenance

- $12.50 per IRA or 403(b) account
- $25.00 cap for multiple IRA or 403(b) accounts with same social
security number (Firstar will charge $12.50 per IRA or 403(b)
account, with a $25.00 cap for multiple IRA or 403(b) accounts
with the same social security number.

5. IRA/403(b) Miscellaneous

- Systematic Withdrawals - No Charge
- Direct Stock Rollovers - No Charge
- Transfers Out - No Charge
- Total Liquidations - No Charge
- Partial Liquidations - No Charge
- Transfers In - No Charge

6. Other

A. Outgoing Wires

- $10.00 per wire

B. Stop Payment/Return Item Fee

- $20.00

C. All fees not paid by shareholders are billed monthly.

D. Out-of-pocket expenses are billed monthly.

[QUARLES & BRADY LLP LETTERHEAD]

December 28, 1999

AAL Mutual Funds
Legal Department
222 West College Avenue
Appleton, WI 54914

Re: OPINION LETTER

Gentlemen:

We are furnishing this opinion to you in connection with the filing of
Post-Effective Amendment No. 36 (the "Amendment") to the Registration Statement
on Form N-1A of The AAL Mutual Funds (the "Trust"), a Massachusetts business
trust which is registered with the Securities and Exchange Commission as a
series open-end management investment company under the Investment Company Act
of 1940 ("1940 Act"). This Amendment is being filed to amend and continue the
registration of an indefinite number of shares of beneficial interest, $0.01 par
value per share (the "Shares"), under the Securities Act of 1933("1933 Act").
The Trust has designated and offers its shares in the following series (each a
"Fund"):

The AAL Small Cap Stock Fund
The AAL Mid Cap Stock Fund
The AAL International Fund
The AAL Capital Growth Fund
The AAL Equity Income Fund
The AAL Balanced Fund
The AAL High Yield Bond Fund
The AAL Municipal Bond Fund
The AAL Bond Fund
The AAL Large Company Index Fund
The AAL Mid Cap Index Fund
The AAL Bond Index Fund
The AAL Money Market Fund
The AAL U.S. Government Zero Coupon Target Fund, Series 2001
The AAL U.S. Government Zero Coupon Target Fund, Series 2006

<PAGE>

The Shares of each Fund, other than The U.S. Government Zero Coupon
Target Funds, Series 2001 and 2006, are further divided into three separate
classes, namely Class A Shares (Front End Sales Charge Shares), Class B Shares
(Contingent Deferred Sales Charge Shares) and Institutional Shares. The Shares
of the Target Funds consist only of Class A Shares.

You have requested that we furnish you with the following opinion and
consent, which we understand is to be used in connection with, and filed as an
Exhibit to, the Amendment to the Trust's Registration Statement ("Registration
No. 33-12911")

We understand that the Shares have been and will be offered to the
public in the manner and on the terms identified and referred to in the
Registration Statement. For purposes of rendering this opinion, we have examined
originals or electrostatic copies of such documents as we considered necessary,
including those listed below. In conducting such examination, we have assumed
the genuineness of all signatures and the authenticity of all documents
submitted to as originals and the conformity to original documents of all
documents submitted to us as copies.

The documents we have examined are:

1. The Registration Statement, which was initially filed with the Securities
and Exchange Commission on March 26, 1987, as since amended and presently
in effect, and the Amendment to be filed on or about December 29, 1999, in
which this opinion and consent letter is to be included as an exhibit.

2. The Declaration of Trust dated March 10, 1987, filed with and approved by
the Secretary of State, Corporation Division for the Commonwealth of
Massachusetts on March 15, 1987.

3. A Certificate of the Secretary of the Commonwealth of Massachusetts, dated
a recent date, certifying the status of the Trust as a voluntary
association possessing all powers recited in its Declaration of Trust and
authorized to transact business in the Commonwealth of Massachusetts.

4. Minutes of meetings of the Board of Trustees of the Trust establishing the
various series of Shares of the Trust and Classes of Shares within such
series, as recited above.

<PAGE>

Based upon and subject to the foregoing, after having given due regard
to such issues of law as we deemed relevant, and assuming that:

5. The Registration Statement, as amended by the Amendment, becomes and
remains effective, and each Prospectus and Statement of Additional
Information constituting a part of said Registration Statement and your
Prospectus and Statement of Additional Information delivery procedures with
respect thereto have fulfilled and will fulfill all the requirements of the
1933 Act and the 1940 Act through all periods relevant to this opinion;

6. All offers and sales of the Trust's Shares have been and will be made in a
manner complying with the terms of the Registration Statement;

7. All offers and sales of the Trust's Shares have been and will be in
compliance with the state securities laws of the states having jurisdiction
thereof; and

8. Each agreement, obligation or contract entered into by the Trust contains
and will contain a notice that the Declaration of Trust disclaims personal
liability of the shareholders, Trustees and their agents for payment under
any credit extended to, contract with or claim against the Trust;

we are of the opinion that the issued and outstanding Shares of Trust are, and
the Shares of the Trust to be issued in the future will be, when so issued,
legal and validly issued, fully paid and non-assessable.

We hereby consent to the filing of this opinion as an exhibit to the
Amendment to the Registration Statement.

Very truly yours,

/s/QUARLES & BRADY LLP

QUARLES & BRADY LLP

291:ba
100142.40001

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference into the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 36
to the registration statement on form N-1A (the "Registration Statement") of our
report dated May 22, 1999, relating to the financial statements and financial
highlights appearing in the April 30, 1999 Annual Report which is also
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading "Independent Accountants" in the Statement
of Additional Information.

PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 27, 1999

LIMITED POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature
appears below constitutes and appoints John O. Gilbert, Robert G. Same,
Frederick D. Kelsven or Steven J. Fredricks as true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for such person
and in such person's name, place and stead, in any and all capacities, to sign
any or all amendments to the Registration Statement on Form N1-A for The AAL
Mutual Funds, or any other Form as may be required by the Securities and
Exchange Commission, and to file each and any of them, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done to all intents and purposes as such person might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.

/s/Lawrence M. Woods
- ----------------------------
Lawrence M. Woods

Trustee

THE AAL MUTUAL FUNDS

LIMITED POWER OF ATTORNEY

/s/John H. Pender
- ----------------------------
John H. Pender

Trustee

THE AAL MUTUAL FUNDS

LIMITED POWER OF ATTORNEY

/s/F. Gregory Campbell
- ----------------------------
F. Gregory Campbell

Trustee

THE AAL MUTUAL FUNDS

LIMITED POWER OF ATTORNEY

/s/Richard L. Gady
- ----------------------------
Richard L. Gady

Trustee

THE AAL MUTUAL FUNDS

LIMITED POWER OF ATTORNEY

/s/Edward W. Smeds
- ----------------------------
Edward W. Smeds

Trustee

THE AAL MUTUAL FUNDS

LIMITED POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature
appears below constitutes and appoints Robert G. Same, Frederick D. Kelsven or
Steven J. Fredricks as true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign any or all amendments
to the Registration Statement on Form N1-A for The AAL Mutual Funds, or any
other Form as may be required by the Securities and Exchange Commission, and to
file each and any of them, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done to all intents and
purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.

/s/John O. Gilbert
- ----------------------------
John O. Gilbert

Trustee

THE AAL MUTUAL FUNDS

LIMITED POWER OF ATTORNEY

/s/Woodrow E. Eno
- ----------------------------
Woodrow E. Eno

Trustee

THE AAL MUTUAL FUNDS