Registration No. 33-12911
As filed on June 26, 1997                              Registration No. 811-5075

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM N-1A

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                         Post-Effective Amendment No. 22
                                     and/or

               REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
                                   ACT OF 1940
                                Amendment No. 24
                        (Check appropriate box or boxes)



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

                              222 West College Ave.
                         Appleton, Wisconsin 54919-0007
               (Address of Principal Executive Offices) (Zip Code)


        Registrant's Telephone Number, including Area Code (414) 734-5721
                                 Robert G. Same
                                    Secretary
                              The AAL Mutual Funds
                             222 West College Avenue
                             Appleton, WI 54919-0007
                    (Name and Address of Agent for Services)

Approximate  date of proposed public  offering:  As soon as practicable
after the effective date of the registration statement.

It is proposed that this filing will become effective (check  appropriate box) 
o  immediately  upon filing  pursuant to paragraph  (b) of Rule 485 
XX on June 30, 1997,  pursuant to paragraph (b) of Rule 485 
o  60 days after filing  pursuant to paragraph (a)(1) of Rule 485 
o  on ____________, pursuant to paragraph (a)(1) of Rule 485
o  75 days after filing pursuant to paragraph (a)(2) of Rule 485
o  on ____________, pursuant to paragraph (a)(2) of Rule 485
=======================================
Registrant  has  previously  registered  an  indefinite  number of its shares of
beneficial  interest pursuant to Rule 24f-2 under the Investment  Company Act of
1940. Registrant has filed a notice under Rule 24f-2 on June 24, 1997.
=======================================
                                Page 1 of pages.
                        Exhibit index is located at Page
<PAGE>


                          CROSS REFERENCE SHEET FOR
                The AAL U.S. Government Zero Coupon Target Funds
                              Series 2001 and 2006

N-1A ITEM NO.                                         LOCATION
PART A
     Item 1    Cover Page                             Cover Page
     Item 2    Synopsis                               General Information
     Item 3    Financial Highlights                   Financial Highlights
     Item 4    General Description of Registrant      Cover Page; General
                                                      Information; Investment
                                                      Objectives and Policies
     Item 5    Management of the Fund                 Board of Trustees
                                                      and Management of the
                                                      Trust
     Item 5A   Management's Discussion of 
               Funds' Performance                     Not Applicable, See
                                                      Annual Report
     Item 6    Capital Stock and Other Securities     Organization and Descrip-
                                                      tion of Shares
     Item 7    Purchase of Securities Being Offered   How to Buy Shares Divi-
                                                      dends, Distributions and
                                                      Taxes; Organization & De-
                                                      scription of Shares
     Item 8    Redemption or Repurchase               How to Sell (Redeem)
                                                      Shares
     Item 9    Pending Legal Proceedings              Not Applicable
PART B
     Item 10   Cover Page                             Cover Page
     Item 11   Table of Contents                      Table of Contents
     Item 12   General Information and History        Not Applicable
     Item 13   Investment Objectives and Policies     Investment Objectives &
                                                      Policies; Investment Tech-
                                                      niques; Investment Re-
                                                      strictions
     Item 14   Management of the Fund                 Investment Advisory Ser-
                                                      vices; Distribution Plan
     Item 15   Control Persons and Principal          Investment Advisory Ser-
               Holders of Securities                  vices
     Item 16   Investment Advisory and Other          Investment Advisory Ser-
               Services                               vices; Distributor; Dis-
                                                      tribution Plan
     Item 17   Brokerage Allocation                   Portfolio Transactions
     Item 18   Capital Stock and Other Securities     General
     Item 19   Purchase, Redemption and Pricing       Purchases & Redemptions;
               of Securities Being Offered            Pricing Considerations
     Item 20   Tax Status                             Dividends, Distributions
                                                      and Taxes
     Item 21   Underwriters                           Distributor
     Item 22   Calculation of Performance Data        Calculation of Yield and
                                                      Total Return
     Item 23   Financial Statements                   Financial Statements
PART C
     Item 24   Information required to be included in Part C is set forth under
               the appropriate Item, so numbered in Part C to this Registration
               Statement.

<PAGE>
   
                           Prospectus June 30, 1997
    

                              THE AAL MUTUAL FUNDS
                THE AAL U.S. GOVERNMENT ZERO COUPON TARGET FUNDS
                           Series 2001 and Series 2006
                              222 West College Ave.
                             Appleton, WI 54919-0007
                  800-553-6319 or 414-734-7633 TDD 800-684-3416

The AAL U.S.  Government  Zero Coupon  Target  Funds (the  "Funds") are two of a
series of separate mutual fund portfolios  within a single Trust, The AAL Mutual
Funds. The Funds are designed for investors seeking high future return from U.S.
government  securities  with a  reasonable  assurance  that they will  receive a
targeted  dollar amount,  predictable  at the time of investment,  on a specific
maturity date.

                               PLEASE TAKE NOTICE

SALES OF THE AAL U.S.  GOVERNMENT ZERO COUPON TARGET FUNDS, SERIES 2001 AND 2006
WERE  CLOSED  TO NEW  SHAREHOLDERS  AND TO  ADDITIONAL  PURCHASES  OF  SHARES BY
EXISTING   SHAREHOLDERS   EFFECTIVE  MAY  31,  1993.   PURCHASES  OF  SHARES  BY
REINVESTMENT  OF DIVIDENDS AND CAPITAL  GAINS,  IF ANY, IN EXISTING  SHAREHOLDER
ACCOUNTS  WILL  CONTINUE TO BE ALLOWED AND WILL BE AT NET ASSET VALUE.  ALTHOUGH
THERE IS NO INTENT TO DO SO, SALES OF THE FUNDS COULD BE REOPENED IN THE FUTURE.
THE  DISCUSSION  ELSEWHERE  HEREIN AS TO THE  PURCHASE OF SHARES OF THE FUNDS IS
QUALIFIED BY THE FOREGOING LIMITATIONS.

Because the Funds  invest  primarily  in zero coupon  securities,  the net asset
value per share may fluctuate substantially prior to the maturity date. Although
investors  may  redeem  shares  on  any  business  day  at net  asset  value,  a
shareholder  who  redeems  prior to  maturity  may  experience  a  significantly
different  investment  return  than was  anticipated  at the  time of  purchase.
Redemptions prior to maturity may result in capital gains or losses which may be
substantial.  See "Price  Variability."  Because up to 20% of a portfolio may be
invested in interest  paying U.S.  government  securities,  the total return for
investors  in the Funds cannot be  guaranteed  even if all shares are held until
maturity and all dividends and distributions are reinvested.

The Funds invest  primarily in U.S.  government  zero coupon  securities  ("zero
coupon securities" or "zeros").  Each series matures on a specified target date.
Presently,  two series of Funds are offered,  Series 2001,  maturing on November
15, 2001, and Series 2006, maturing on November 15, 2006.

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

<PAGE>


   
AAL Capital Management Corporation acts as Investment Adviser to and Distributor
for the Funds. The Funds are sold at the Public Offering Price, which includes a
maximum  sales charge of 4.75% (4.99% of the net amount  invested).  The maximum
sales  charge is  reduced  for  certain  qualifying  purchases.  See "How to Buy
Shares--Reducing  Your Sales  Charge." As the  Adviser,  AAL Capital  Management
Corporation  receives  management  and  advisory  fees  from the  Funds.  As the
Distributor, AAL Capital Management Corporation,  receives a distribution fee on
assets of the Funds. See "Management of the Trust" and "Distribution Expenses."

This prospectus  provides you with the basic  information you should know before
investing  in the  Funds.  Please  read it and keep it for future  reference.  A
Statement of Additional Information dated June 30, 1997, containing additional
information  about the Funds has been filed  with the  Securities  and  Exchange
Commission  and  (together  with any  supplements  thereto) is  incorporated  by
reference in this  prospectus in its  entirety.  You may obtain a copy of Annual
Report and/or Statement of Additional  Information  without charge by writing or
calling the Funds at the address or telephone numbers set forth above.
    

                THE AAL U.S. GOVERNMENT ZERO COUPON TARGET FUNDS

                              INVESTMENT OBJECTIVE

High investment returns from U.S. government securities over selected periods of
time

                           INVESTMENT CHARACTERISTICS

                   Two portfolios - maturing in 2001 and 2006

   Professionally managed portfolios of U.S. government securities, primarily
                      consisting of zero coupon securities

 Relatively predictable return at maturity date if dividends and distributions
                                 are reinvested


<PAGE>



                                TABLE OF CONTENTS

                                                                            Page
Summary of Fund Expenses
Financial Highlights
General Information
Zero Coupon Securities
Investment Objective
Investment Policies
Other  Investment  Factors  Regarding the Funds
Investment Restrictions
Board of Trustees
Management of the Trust
Adviser and  Distributor - General
Portfolio Manager
How to  Buy  Shares
How  to  Redeem  (Sell)  Shares
Exchange  Privilege
Telephone Transactions
Retirement Plans
Net Asset Value
Dividends, Distributions and Taxes
Distribution  Expenses
Yield and  Performance  Information
Custodian,  Transfer Agent and Independent Accountants
Organization and Description of Shares


<PAGE>



EXPENSE INFORMATION

The following  information  shows  recurring and  non-recurring  Fund  expenses.
Operating  expenses  are  expressed  as a  percentage  of  average  net  assets.
Percentages  shown for management fees and Rule 12b-1  distribution fees are the
maximum fees permitted under The AAL Mutual Funds Investment  Advisory Agreement
and Rule 12b-1 Distribution Plan, respectively,  while the percentages shown for
"Other Expenses" are based on the amounts incurred in the prior fiscal year, and
prior to voluntary reimbursements by the Adviser. This information also reflects
the Adviser's current voluntary  undertaking to pay all expenses of the Funds in
excess of 1%.


         Shareholder Transaction          Target Fund              Target Fund
                Expenses                  Series 2001              Series 2006
Maximum sales charge imposed                 4.75%                    4.75%
on purchases (as a percentage of
offering price)
Maximum sales charge imposed                 None                     None
on reinvested dividends (as a
percentage of offering price)
Deferred 12b-1 sales charges                 None                     None
Redemption Fee                               None                     None
Exchange Fee (per exchange)(1)               None                     None


Annual Fund Operating                     Target Fund              Target Fund
Expenses (giving effect to                Series 2001              Series 2006
expense undertaking as a
percentage of average net assets)
Management Fee(2)                            0.50%                    0.50%
Rule 12b-1 Distribution Plan                 0.10%                    0.10%
Fee(2)
Other Expenses (after contractual            0.40%                    0.40%
and voluntary reimbursement by
the Adviser)(3)
Total Fund Operating Expenses                1.00%                    1.00%
(giving effect to voluntary
reimbursement by the Adviser)(3)

   
(1)     A $12.00 fee will be charged for each wire redemption.
    
(2)     Since June 1, 1993,  the Adviser has  voluntarily  waived its management
        fee. Since July 1, 1993, The  Distributor has waived receipt of the Rule
        12b-1 Distribution Plan fee. Although these waivers are voluntary, there
        is no present  intention to reinstate these fees in the future.  Because
        Rule 12b- 1 fees  continue for the life of the  investment,  over time a
        long-term  investor  may pay more than the  economic  equivalent  of the
        maximum front-end sales charge permitted by the National  Association of
        Securities Dealers (NASD).



<PAGE>



   
(3)     The Adviser has a  contractual  obligation  to  reimburse  the Funds for
        expenses in excess of any applicable  state maximum expense  limitation.
        In addition,  the Adviser is currently  paying all expenses of the Funds
        in excess of 1%. "Other  Expenses" and "Total Fund  Operating  Expenses"
        reflect these contractual and voluntary expense reimbursements.  Without
        the voluntary  expense  undertaking by the Adviser,  the total operating
        expenses  would  have been  .99% and  1.17% for  Series  2001 and 2006,
        respectively, for the year ended April 30, 1997.
    

Expense Example

Based on the expense  information  provided  (assuming no exchanges and with the
waiver of  expenses  over 1% for the first  year),  the  following  hypothetical
example illustrates the expenses you would pay on a $1,000 investment in each of
the Funds for the periods  indicated.  The example  assumes a five  percent (5%)
compounded annual return and redemption at the end of each time period.


Time Period               Target Fund                               Target Fund
                          Series 2001                               Series 2006
1-year                        $57                                       $57
3-years                       $78                                       $79
5-years                       $101                                      $102
10-years                      $169                                      $172

The  purpose of these  tables is to assist the  investor  in  understanding  the
various  costs and expenses  that an investor in the Funds will bear directly or
indirectly.  The estimated  operating  expenses and the expense  examples  shown
above  should not be  considered a  representation  of future  expenses.  Actual
expenses may be greater or less than shown.

   
Without the Adviser's voluntary undertaking, it is estimated that these expenses
would be approximately  $57, $78, $101 and $169,  respectively,  for Series 2001
and approximately $59, $84, $110 and $185, respectively, for Series 2006.
    



<PAGE>



                              Financial Highlights

The audited  Financial  Highlights  Table  covers The AAL U.S.  Government  Zero
Coupon Target Funds, Series 2001 and 2006, for the period from November 14, 1990
(commencement  of  operations)  through April 30, 1991,  and for the years ended
April 30, 1992, 1993, 1994,  1995, 1996 and 1997  respectively.  You should read
the Table in conjunction with the Funds' financial statements and related notes,
all of which have been audited by Price Waterhouse LLP, independent accountants.
The Funds'  financial  statements and related notes,  including Price Waterhouse
LLP's report thereon,  are contained in the Funds' April 30, 1997 Annual Report,
copies of which are available from the Distributor at no charge.
                                                
<TABLE>
<CAPTION>

                                       Target 2001 Fund
<S>                                 <C>            <C>           <C>           <C>            <C>            <C>          <C>
                                    Period Ended   Year Ended    Year Ended    Year Ended     Year Ended     Year Ended   Year Ended
                                    4/30/91        4/30/92       4/30/93       4/30/94        4/30/95        4/30/96      4/30/97 

NAV Start of Period                 $ 10.00        $ 10.25       $  10.61      $ 12.25        $ 10.54        $ 10.37      $ 10.55
Net Investment Income(loss)         0.444          0.772         0.741         0.700          0.663          0.647        0.639
Net Realized and Unrealized 
     Gain(loss) on Invesments       0.250          0.360         1.679         (0.623)        0.000          0.335        (0.068)
Total from Investment 
     Operations                     0.694          1.132         2.420         0.077          0.663          0.982        .571
Dividends from Net Investment 
     Income                         (0.444)        (0.772)       (0.741)       (0.700)        (0.663)        (0.761)      (0.639)
Distribution from Net Realized
     Gain on Investments(d)         0.000          0.000         (0.039)       (1.087)        (0.170)        (0.041)      (0.102)
Total Dividends and Distributions   (0.444)        (0.772)       (0.780)       (1.787)        (0.833)        (0.802)      (0.741)
Net Increase\ Decrease in Net 
     Asset Value                    0.250          0.360         1.640         (1.710)        (0.170)        0.180        (0.170)
NAV: End of Period                  $ 10.25        $  10.61      $ 12.25       $ 10.54        $ 10.37        $ 10.55      10.38
Total Return for Period(e)          6.97%          10.76%        23.27%        (0.34%)        6.82%          9.23%        5.42%
Net Assets at End of Period         $ 668,211      $ 1,494,818   $ 2,760,499   $ 1,824,482    $ 1,754,517    $ 1,811,034  $1,710,814
Ratio of Net Operating Expenses
      to Average Net Assets(a)(b)   1.00%          1.00%         1.00%         1.00%          1.00%          1.00%        .97%
Ratio of Net Investment income
     (loss)to Average Net 
     Assets(a)(c)                   10.21%         7.19%         6.38%         5.74%          6.50%          5.84%        6.08%
Portfolio Turnover                  0.00%          2.93%         2.79%         1.65%          0.00%          0.00%        0.00%

</TABLE>
(a) Calculated on an annualized basis.

(b) Computed after giving effect to Adviser's expense limitation undertaking. If
the Funds had paid all of their  expenses,  the ratios  would have been  13.27%,
7.32%. 4.60%, 2.33%, 2.00%, 1.74% and .99% for Series 2001, and 17.44%, 10.36%,
6.19%, 6.19%, 2.49%, 2.07% and 1.17% for Series 2006.

(c) If the  Funds  had paid all of their  expenses  the  ratio  would  have been
(2.06%),  0.87%,  2.78%,  4.41%,  5.51%,  5.10% and 6.07% for Series  2001,  and
(5.75%), (1.68%), 1.60%, 3.72%, 5.46%, 4.76% and 6.04% for Series 2006

(d) 100% of distributions from net realized capital gains during the fiscal year
ended April 30, 1997, were long term.

(e) Total returns are based on net amount invested.

<TABLE>
<CAPTION>
                                                  Target 2006 Fund
<S>                                   <C>            <C>           <C>            <C>            <C>          <C>         <C>
                                      Period Ended   Year Ended    Year Ended   Year Ended     Year Ended   Year Ended   Year Ended
                                      4/30/91        4/30/92       4/30/93      4/30/94        4/30/95      4/30/96      4/30/97
                                   
NAV Start of Period                   $ 10.00        $ 10.31       $ 10.42      $ 12.52        $ 10.96      $ 10.93      $11.33
Net Investment Income(loss)           0.473          0.824         0.795        0.740          0.734        0.711        0.708
Net Realized and Unrealized      
     Gain(loss) on Invesments         0.310          0.116         2.114        (0.567)        0.184        0.648        0.075
Total from Investment            
     Operations                       0.783          0.940         2.909        0.173          0.918        1.359        0.783
Dividends from Net Investment    
     Income                           (0.473)        (0.824)       (0.795)      (0.740)        (0.734)      (0.865)      (0.708)
Distribution from Net Realized   
     Gain on Investments(d)           0.000          (0.006)       (0.014)      (0.993)        (0.214)      (0.094)      (0.165)
Total Dividends and Distributions     (0.473)        (0.830)       (0.809)      (1.733)        (0.948)      (0.959)      (0.873)
Net Increase\ Decrease in Net    
     Asset Value                      0.310          0.110         2.100        (1.560)        (0.030)      0.400        (0.090)
NAV: End of Period                    $ 10.31        $ 10.42       $ 12.52      $ 10.96        $ 10.93      $ 11.33      $11.24
Total Return for Period(e)            7.86%          8.73%         28.44%       0.18%          9.05%        11.80%        6.84%
Net Assets at End of Period           $ 451,758      $ 1,066,226   $ 1,951,566  $ 1,364,890    $ 1,400,161  $ 1,479,703  $1,452,870
Ratio of Net Operating Expenses  
      to Average Net Assets(a)(b)     1.00%          1.00%         1.00%        1.00%          1.00%        1.00%        1.00%
Ratio of Net Investment income   
     (loss)to Average Net        
     Assets(a)(c)                     10.70%         7.68%         6.79%        5.86%          6.95%        5.83%        6.22% 
Portfolio Turnover                    2.78%          2.31%         5.44%        1.05%          0.00%        0.00%        0.00%

</TABLE>
(a) Calculated on an annualized basis.

     (b)  Computed   after  giving  effect  to  Adviser's   expense   limitation
undertaking.  If the Funds had paid all of their expenses, the ratios would have
been 13.27%,  7.32%.  4.60%,  2.33%, 2.00%, 1.74% and 0.99% for Series 2001, and
17.44%, 10.36%, 6.19%, 6.19%, 2.49%, 2.07% and 1.17% for Series 2006.

(c) If the  Funds  had paid all of their  expenses  the  ratio  would  have been
(2.06%),  0.87%,  2.78%,  4.41%,  5.51%,  5.10% and 6.07% for Series  2001,  and
(5.75%), (1.68%), 1.60%, 3.72%, 5.46%, 4.76% and 6.04% for Series 2006

(d) 100% of distributions from net realized capital gains during the fiscal year
ended April 30, 1997, were long term.

(e) Total returns are based on net amount invested.


<PAGE>



GENERAL INFORMATION

   
     The AAL U.S.  Government Zero Coupon Target Funds (the "Funds") are part of
The AAL  Mutual  Funds  (the  "Trust"),  a group  of  mutual  funds  that  offer
investment  opportunities  to eligible  Lutherans  (including their families and
their enterprises), and to AAL members and employees. In addition, AAL branches,
Lutheran  congregations  and trusts,  employee  benefit plans and  organizations
sponsored by or affiliated with Lutheran  congregations are eligible to purchase
shares of the Funds. Lutheran investors in The AAL Mutual Funds are eligible for
associate  membership in Aid Association for Lutherans  ("AAL"),  which entitles
them  to  become  a part  of one  of  approximately  9,500  local  AAL  branches
throughout the U.S. Through these branches and AAL, members help each other, aid
Lutheran congregations and their institutions and reach out to their communities
through charitable,  educational,  social,  benevolent,  fraternal and patriotic
programs.

     The Trust is a Massachusetts Business Trust, which was organized on June 9,
1987, with different series of shares, each of which is referred to as a "Fund."
In addition to The AAL U.S.  Government Zero Coupon Target Funds, nine other AAL
Mutual Funds exist (available in both Class A and B shares) and are described in
a separate prospectus: The AAL Small Cap Stock Fund, The AAL Mid Cap Stock Fund,
The AAL Capital  Growth Fund , The AAL Utilities  Fund,  The AAL Bond Fund , The
AAL Municipal Bond Fund, The AAL High Yield Bond Fund, The AAL Money Market Fund
and The AAL International Fund. The AAL U.S. Government Zero Coupon Target Funds
described  in this  prospectus  seek to provide a high  investment  return  over
selected  periods,  consistent with  investment in U. S. Government  securities,
with minimum reinvestment risk. (See "Reinvestment Risk").  Presently two series
exist:  Series 2001 and Series  2006.  The  investment  objective of each of the
Funds is a  fundamental  policy  which  cannot be changed  without the vote of a
majority of the outstanding shares of a Fund.

When you invest in shares of a Fund,  the money you invest is combined with that
of many other investors. The Funds provide you with diversification by investing
your money  primarily in a variety of U.S.  government  securities,  and furnish
professional  management  to select and monitor  your  investments.  You have an
interest in each of the securities held by the Fund in which you invest.
    

Because the Funds invest in bonds, the yields and values of which fluctuate with
market  conditions,  the value of your  shares  in the Funds  will rise and fall
according to  prevailing  interest  rates and over time may be more or less than
your cost. AAL Capital Management Corporation,  the "Adviser" is responsible for
evaluating and selecting the securities held by the Funds. Although there can be
no assurance that it will be the



<PAGE>



   
case, the Adviser will use its professional expertise  to try to ensure that
the Funds' objectives will be met.  See "Management of the Trust."
    

The following sections of the prospectus include a description of the investment
objectives  and policies of the Funds,  additional  information  regarding  zero
coupon securities,  certain investment techniques used by the Funds,  management
of  the  Funds,   distribution  arrangements  for  the  Funds,  including  fees,
information  on how  to  purchase  and  redeem  shares,  yield  and  performance
information, the tax treatment of investments in the Funds, and other matters.

ZERO COUPON SECURITIES

What are Zero Coupon Securities?

Unlike  Treasury  securities  with  coupons  attached  which  generate  periodic
interest  payments to the  holders,  zero coupon  securities  pay no cash income
until their maturity date. Zero coupon securities are purchased at a substantial
discount from their value at their maturity date. The discount is amortized over
the life of the zero.  When a zero is held to maturity,  the entire return comes
from the difference  between the purchase price and the maturity value.  Because
this difference is known at the time of purchase,  investors holding zero coupon
securities until maturity know the amount of their investment return at the time
of their investment.  See "Reinvestment  Risk" for a further  explanation of how
zero coupon securities differ from traditional interest-paying bonds.

Why Invest in Zero Coupon Securities?

Because the return on zero coupon securities held to maturity is predictable, an
investment in zeros enables you to plan to meet future financial goals. However,
because there are no periodic interest payments on a zero coupon security, their
market value will decline more dramatically when interest rates rise than a bond
which pays  interest  on a current  basis and will rise more  dramatically  than
other bonds as interest rates fall.

In order to obtain the predicted  return and reduce their  exposure to the price
volatility  caused by changing  interest  rates,  investors  should plan to hold
shares of the Funds until maturity and elect automatic reinvestment of dividends
and  distributions.  Since each Fund will be  primarily  invested in zero coupon
securities,  investors  who hold shares to maturity and reinvest  dividends  and
distributions will experience a return consisting  primarily of the accretion of
discount on the underlying securities in the Fund. Because up to 20% of a Fund's
portfolio may be invested in interest  paying U.S.  government  securities,  the
total return for investors in the Funds cannot be guaranteed, even if all shares
are held until maturity and all dividends and distributions  are reinvested.  As
with all funds distributing  taxable income,  tax-paying  investors in the Funds
will be subject to income taxes on all dividends and distributions, whether they



<PAGE>
elect to take them in cash or have them reinvested.

Generally,  investors  may redeem  their shares on any business day at the daily
net asset value.  However,  the net asset value of a Fund's shares increases and
decreases with changes in the market value of that Fund's investments,  and that
market value tends to vary inversely with changes in prevailing  interest rates.
Zero coupon  securities  usually trade at a deep discount from their face or par
value and are  subject  to  greater  market  value  fluctuations  from  changing
interest rates than debt obligations of comparable maturities which make current
distributions of interest.  Therefore, an investor who redeems prior to maturity
may experience a significantly different return than was expected at the time of
purchase,  as these shares will have  substantially  more price  volatility than
shares of funds investing in traditional fixed income investments.

INVESTMENT OBJECTIVE

The objective of each of the Funds is to provide a high  investment  return over
selected  periods  of  time,  consistent  with  investment  in  U.S.  government
securities.  Presently, two Funds are offered, Series 2001 and Series 2006, each
of which matures on a specified  target date in each of those years. On a Fund's
target  date,  its  assets  will  be  converted  to  cash  and   distributed  to
shareholders or reinvested, without a sales charge, in another series of The AAL
Mutual Funds, which are described in a separate prospectus.

By pursuing this  objective,  the Funds seek to return to investors a reasonably
assured  targeted  dollar amount,  predictable  at the time of investment,  on a
specific target date in the future.  In order to realize this return,  investors
should plan to hold a Fund's  shares until  maturity and reinvest all  dividends
and distributions.  However,  as with any investment,  there can be no assurance
that the Funds' investment objective will be met.

The  Funds  may be an  appropriate  investment  for  IRAs,  403(b)(7)  custodial
accounts,  pension and profit sharing plans,  401(k) plans and other  retirement
plans where investors can match their retirement  planning needs with a specific
Fund target date. The Funds also may be appropriate  for investors  planning for
future  anticipated   expenses,   such  as  college  education  of  children  or
grandchildren or the purchase of a home. The Funds may also be appropriate for a
Uniform  Gift  to  Minors  account  or  any  other   investment   account  where
predictability of return over a specific time period is important.

INVESTMENT POLICIES

Investments

At least  80% of each Fund  will be  invested  in U.S.  government  zero  coupon
securities.  These include U.S.  Treasury  notes and bonds which have no coupons
and



<PAGE>
are not entitled to income,  U.S.  Treasury bills,  individual  interest coupons
which trade separately and evidences of receipt of such securities. At least 50%
of each Fund will be invested in zero coupon U.S. government securities maturing
within two years of the Fund's  target date,  although it is expected that under
normal  circumstances  the  percentage  of a Fund's  assets so invested  will be
greater.  Up to 20% may be invested in  interest-paying  U.S. Treasury notes and
bonds,  and in  repurchase  agreements  with respect to such  securities.  These
interest-paying securities provide income for expenses,  redemption payments and
cash dividends of each Fund.

QUALITY

All Treasury obligations in each Fund are backed by the full faith and credit of
the U.S. government. In addition, each Fund may enter into repurchase agreements
with member banks of the Federal Reserve System with respect to such securities.

REINVESTMENT RISK

A portion of the total realized return from  traditional  interest-paying  bonds
comes from the reinvestment of periodic interest. Since the rate to be earned on
these  reinvestments  may be  higher  or  lower  than  the  rate  quoted  on the
interest-paying  bonds at the time of the original  purchase,  the  investment's
total  return  is  uncertain  even for  investors  holding  the  security  until
maturity. This uncertainty is commonly referred to as reinvestment risk, and can
have a significant impact on total realized  investment return. With zero coupon
securities,  however,  there are no cash distributions to reinvest, so investors
bear no reinvestment risk if they hold the zero coupon security to maturity.

Because  each Fund  will not be  invested  entirely  in zero  coupon  securities
maturing  on the  target  date  and  may  invest  up to 20%  of  its  assets  in
interest-paying  U.S.  government  securities  and  repurchase  agreements  with
respect to such securities, there will be some reinvestment risk. To reduce this
risk,  each Fund will invest at least half the market value of its net assets in
zero coupon securities maturing within two years of the Fund's target date.

ANTICIPATED GROWTH RATE

Due to the nature of zero coupon securities,  a targeted dollar amount per share
to be  received  at the target date can be  estimated  daily for each Fund.  The
difference  between this amount and the net asset value per share at the time of
investment is the projected return and is called anticipated growth. Anticipated
growth will consist primarily of the estimated accretion of discount on the zero
coupon securities in a Fund, and to a much lesser degree, of projected cash flow
in income-producing securities in excess of estimated expenses.

On each  business day, each Fund will  calculate  its  anticipated  growth rate,
which is the annualized  rate of growth  investors may expect from the time they
purchase a



<PAGE>



Fund's share until that Fund's target date. The  anticipated  growth rate cannot
be guaranteed, as it involves certain assumptions about variable factors such as
reinvestment of dividends and  distributions,  the expense ratio and composition
of the  Fund's  portfolio.  The rate will vary from day to day due to changes in
interest  rates  and  other  market  factors  affecting  the  value  of a Fund's
investments.  Furthermore,  differences in the price changes of securities  with
different  maturities  can  affect  investment  return,  as can the skill of the
Adviser  in  managing  the  Fund.  Under  certain   circumstances,   shareholder
redemptions could also affect anticipated growth rate.

Owning shares of a Fund holding zero coupon and other securities  differs from a
direct  investment  in zero coupon  securities  in various  ways,  including the
factors  affecting  predictability  of return  described  above and the  varying
maturity dates of the securities held by a Fund. The Adviser believes,  however,
that  investors  buying and holding a Fund's shares to maturity and  reinvesting
all dividends and  distributions  should be able to realize an investment return
substantially  equal to the  anticipated  growth rate  calculated on the day the
Fund's shares were purchased.

Each Fund will be liquidated in its target maturity year. All shareholders  will
be notified of their  Fund's  pending  liquidation  prior to the target date and
asked how they wish to receive their  liquidation  proceeds.  If no instructions
are received,  proceeds will be invested  automatically  in The AAL Money Market
Fund, in an account established on behalf of the shareholder.

OTHER INVESTMENT FACTORS REGARDING THE FUNDS

Price Variability

With respect to interest-paying securities, it can be expected that a decline in
prevailing  levels  of  interest  rates  generally  will  increase  the value of
securities  held in the portfolio and an increase in rates generally will reduce
the value of these  securities.  Because they do not pay  interest,  zero coupon
securities tend to be subject to greater fluctuation of market value in response
to  changes  in  interest  rates  than  interest-paying  securities  of  similar
maturities. Investors can expect more appreciation from a Fund during periods of
declining  interest  rates  than  from  interest-paying  securities  of  similar
maturity.  Conversely,  when interest  rates rise, a Fund will normally  decline
more in price than interest-paying securities of similar maturity. The degree of
price  fluctuations  are expected to vary  directly with the length of time to a
Fund's maturity date.

Interest  rates can  change  suddenly  and  unpredictably.  The Funds may not be
appropriate  for investors who do not plan to hold their shares until  maturity.
Redemptions prior to maturity may result in capital gains or losses which may be
substantial.





<PAGE>

Portfolio Turnover

It is not anticipated that any of the Funds will have a portfolio  turnover rate
in excess of 100%.

Repurchase Agreements and Borrowing

The Funds may from time to time enter  into  repurchase  agreements.  Repurchase
agreements  involve  the  sale  of  securities  to a Fund  with  the  concurrent
agreement  of the  seller  (a bank  or  securities  dealer)  to  repurchase  the
securities  at the same price plus an amount  equal to an agreed  upon  interest
rate within a specified time,  usually less than one week, but on occasion for a
longer period. The Funds require continual maintenance of collateral (in cash or
U.S. government  securities) held by the Funds' custodian in an amount equal to,
or in excess of, the market value of the securities which are the subject of the
agreement.  Additional  information regarding Repurchase Agreements is contained
in the Statement of Additional Information.

Each Fund may borrow  money,  but only from banks,  for  temporary  or emergency
purposes in amounts not exceeding  10% of a Fund's total  assets.  Borrowings at
any time outstanding will be repaid before any purchase of securities is made.

When-Issued Purchases

The Funds may purchase  securities on a when-issued or delayed  delivery  basis.
Although the payment and interest terms of these  securities are  established at
the  time the  purchaser  enters  into the  commitment,  the  securities  may be
delivered  and paid for a month or more after the date of  purchase,  when their
value may have changed.  The Funds make such commitments only with the intention
of  actually  acquiring  the  securities,  but may  sell the  securities  before
settlement date if it is deemed advisable for investment reasons.

INVESTMENT RESTRICTIONS

The policies discussed above with respect to specific  investments,  (other than
the  policy  on  borrowing)  may be  changed  by the Board of  Trustees  without
shareholder  approval.  In addition,  the Funds are subject to other  investment
restrictions  which, like the Funds' investment  objectives,  may not be changed
without the vote of a majority of their outstanding shares.  Among other things,
these restrictions  generally prohibit the Funds from concentrating  investments
in a single  industry or purchasing  securities of an issuer if as a result more
than 5% of the Fund's total assets would be invested in that issuer, except that
up to 25% of its assets may be invested  without  regard to this  limitation and
provided that this limitation does not apply to securities  issued or guaranteed
by the U.S.  government,  its agencies or  instrumentalities.  Because the Funds
expect  to  invest  solely  in U.S.  government  securities,  the 5%  limitation
referred to above will not apply to these  portfolios.  A description  of all of
the investment restrictions applicable to the Funds is included in the Statement
of Additional Information.



<PAGE>



Board of Trustees

The Funds' Board of Trustees  decides  matters of general policy and reviews the
activities of The Funds' Adviser.  The Funds' officers conduct and supervise the
daily business operations of the Funds.

The Trustees, their business addresses and principal occupations during the past
five years are:

<TABLE>
<CAPTION>

Name and  Address                       Position  with the Funds  
                                        and  Principal  Occupation
<S>                                     <C>
John H. Pender**                        Chairman of the Board of Trustees;  and from 1987 through May 1996,  President
P.O. Box 250                            of the Funds;  Prior to 1996, Senior Vice President and
Dunbar, WV  25064                       Chief Investment Officer,  Aid Association for
DOB 5/25/30                             Lutherans  (fraternal benefit society) and prior to 1992, Treasurer

F. Gregory Campbell                     Trustee; President of Carthage College, Kenosha, WI;
2001 Alford Park Drive                  Director, Kenosha Hospital and Medical Center;
Kenosha, WI 53140                       Chairman, WI Assoc. of Independent Colleges and
DOB 12/16/39                            Universities; Board Member, Kenosha Area
                                        Development; and Board Member, Prairie High School

Richard L. Gady                         Trustee; and Vice President, Public Affairs and Chief
One Central Park Plaza                  Economist, ConAgra, Inc. (a food and agricultural
Omaha, NE 68102                         corporation)
DOB 2/28/43

D. W. Russler                           Trustee; from 1984 through 1988, Senior Vice President, Finance and
P.O. Box 84                             Administration, NCR Corporation; 
Minocqua, WI 54548                      Director, Capital Markets Assurance Corporation
DOB 10/28/28                            (reinsurance); and Member, Advisory Board --
                                        Saratoga Partners II and III (corporate buy-out limited
                                        partnership)

Lawrence M. Woods                       Trustee; Former Executive Vice President and
P.O. Box 1860                           Director, Mobil Oil Corp. (international oil company)
Worland, WY 82401
DOB 4/14/32

Richard L.  Gunderson**                 Trustee;  Chairman of the Board of Directors  and from 1985 through 1996
10801 E Happy Valley Road #67           Chief Executive Officer and from 1985 through 1995,  
Scottsdale, AZ  85255                   President, Aid Association for Lutherans (fraternal benefit
DOB 6/14/33                             society); Trustee, Lawrence University; and
                                        Director, Banta Corp. (diversified printer and publisher)

Ronald G. Anderson                      Trustee and President; Senior Vice President and CFO, Aid Association
4321 N. Ballard Road                    for Lutherans; President, AAL Capital Management Corporation; Director, 
Appleton, WI  54919                     General Re-CKAG Reinsurance and Investment S.ar.L. (Luxembourg reinsurance
DOB 10/2/48                             corporation); and from 1991 through 1996, Chairman, General Re Financial
                                        Products and from 1995 through 1996, Vice President Corporate Development
                                        General Re (both reinsurance)
-------------------------------------------------------------- --------------------------------------------------------------
*  All of the Trustees except Mr. Pender and Mr. Gunderson are Directors for the
   AAL Variable Product Series Fund,Inc.
** Denotes an  "interested  person"  of the Funds as  defined in the  Investment
   Company Act of 1940.
</TABLE>



<PAGE>



MANAGEMENT OF THE TRUST

Adviser and Distributor--General

Through March 31, 1991, AAL Advisors Inc. ("Advisors") and AAL Distributors Inc.
("Distributors"),   Delaware  corporations,  acted  as  investment  adviser  and
distributor  for The AAL Mutual  Funds.  Effective  April 1, 1991,  Advisors was
merged  into  Distributors  and  Distributors  changed  its name to AAL  Capital
Management  Corporation.  The  ownership,  officers and directors of AAL Capital
Management Corporation are the same as Advisors and Distributors.  References to
AAL Capital Management Corporation in this prospectus include, where applicable,
references to the two former corporations.

The Adviser

   
     AAL Capital Management Corporation (the "Adviser") was organized in 1986 as
a  Delaware  corporation  all of the  shares of which are owned by AAL  Holdings
Inc., a wholly-owned subsidiary of Aid Association for Lutherans ("AAL"). 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 the world's largest  fraternal benefit society in terms of assets
and life  insurance  in force,  ranking  it in the top two  percent  of all life
insurers in the U.S. in terms of ordinary life insurance 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
approximately   9,500  local  AAL  branches  throughout  the  U.S.  AAL  Capital
Management  Corporation has served as Adviser to the Funds from the commencement
of operations.  As of April 30, 1997, AAL Capital  Management managed about $3.6
billion for the Funds. The principal  address of the Adviser is 222 West College
Avenue,  Appleton,  Wisconsin  54919-0007 and of AAL is 4321 North Ballard Road,
Appleton, Wisconsin 54919-0001.
    

Pursuant to an Investment Advisory Agreement with the Trust, the Adviser manages
the investment and  reinvestment  of the Funds' assets,  provides the Funds with
personnel,  facilities and  administrative  services,  and supervises the Funds'
daily business  affairs,  all subject to the  supervision of the Funds' Board of
Trustees.  The Adviser formulates and implements a continuous investment program
for the Funds consistent with each Fund's  investment  objectives,  policies and
restrictions.

The Adviser  provides office space,  executive and other personnel to the Funds.
In addition to the  investment  advisory  fees,  each Fund incurs the  following
expenses: legal, auditing and accounting expenses;  Trustees' fees and expenses;
insurance premiums; brokers' commissions;  taxes and governmental fees; expenses
of  issuing  and  redeeming  shares;   organizational   expenses;   expenses  of
registering or qualifying shares for sale;  postage and printing for reports and
notices to  shareholders;  fees and  disbursements of the custodian and transfer
agent; certain expenses with respect to



<PAGE>



membership fees of industry associations;  and any extraordinary  expenses, such
as
litigation expenses.

The Adviser  receives an investment  advisory fee computed  separately  and paid
monthly  for each Fund at the annual  rate of 0.50 of 1% of the  Fund's  average
daily net assets.  The Funds also pay a Distribution Fee of a maximum of 0.10 of
1% of average daily net assets annually. See "Distribution Expenses."

Portfolio Manager

   
Michael R. Hilt, CFA, has managed the day-to-day investments for the Funds since
November  1, 1995.  From April 1994  through  August  1995,  Mr.  Hilt served as
portfolio manager and quantitative analyst for Conseco Capital Management,  Inc.
From  August 1992  through  April  1994,  he served as a  portfolio  manager and
quantitative  analyst for PPM America,  Inc.  
    

Portfolio Transactions

The Adviser  directs the  placement  of orders for the  purchase and sale of the
Funds' portfolio securities. Since it is anticipated that most purchases made by
the Funds will be  principal  transactions  at net prices,  the Funds will incur
little or no brokerage  costs.  The Funds will deal directly with the selling or
purchasing  principal or market maker without incurring charges for the services
of a broker  on its  behalf  unless  it is  determined  that a  better  price or
execution  may be obtained by utilizing  the  services of a broker.  Purchase of
portfolio  securities  from the dealers of zero coupon Treasury  securities,  in
particular,  may include a commission  which may be included in a spread between
the bid and asked  price.  The Funds  will seek to obtain  prompt  execution  of
orders  at the most  favorable  net  price.  Securities  may  also be  purchased
directly from the issuer.

                               PLEASE TAKE NOTICE

SALES OF THE AAL U.S.  GOVERNMENT ZERO COUPON TARGET FUNDS, SERIES 2001 AND 2006
WERE  CLOSED  TO NEW  SHAREHOLDERS  AND TO  ADDITIONAL  PURCHASES  OF  SHARES BY
EXISTING   SHAREHOLDERS   EFFECTIVE  MAY  31,  1993.   PURCHASES  OF  SHARES  BY
REINVESTMENT  OF DIVIDENDS AND CAPITAL  GAINS,  IF ANY, IN EXISTING  SHAREHOLDER
ACCOUNTS WILL  CONTINUE TO BE ALLOWED AND WILL BE AT NET ASSETS VALUE.  ALTHOUGH
THERE IS NO INTENT TO DO SO, SALES OF THE FUNDS COULD BE REOPENED IN THE FUTURE.
THE  DISCUSSION  ELSEWHERE  HEREIN AS TO THE  PURCHASE OF SHARES OF THE FUNDS IS
QUALIFIED BY THE FOREGOING LIMITATIONS.

How to Buy Shares



<PAGE>



Initial Purchases in New Accounts

     Shares of the Funds are offered  continuously  for sale through AAL Capital
Management  Corporation  (the  "Distributor")  and your AAL  Capital  Management
Corporation Registered Representative.  Initial purchases of shares of the Funds
may be made by mail (including private mail delivery services) or by wire.

   
A separate account  registration is required for each individual account,  joint
account,  fiduciary  account,  custodial  accounts  for minors and  tax-deferred
accounts (for example, IRA, 403(b)(7) custodial accounts, and pension and profit
sharing  plans).  Additional  documentation  will be required  for some of these
accounts.  You should consult your legal adviser if you have questions regarding
the  type of  registration  best  suited  for  your  needs.  All  accounts,  but
especially  fiduciary accounts,  custodial accounts for minors, and tax-deferred
accounts,  may impose legal requirements,  and result in income, gift and estate
tax  consequences  which are the sole  responsibility  of shareholders and their
professional advisers.  Neither the Funds nor AAL Capital Management Corporation
and its Registered  Representatives provide legal or tax advice to shareholders.
Further  information  on the  documents  required  to open your  account  can be
obtained  from  your  Registered   Representative  or  AAL  Capital   Management
Corporation through the Mutual Fund Service Center at 800-553-6319.
    

Initial Purchases by Mail

Initial  purchases  by mail may be made by sending a check,  made payable to The
AAL Target Fund Series  2001 or The AAL Target  Fund Series  2006,  along with a
completed shareholder application and new account form to:

                  AAL Capital Management Corporation
                  222 West College Avenue
                  Appleton, WI 54919-0007
                  Attention:  New Accounts

A separate application and new account form must be completed for each different
account  registration  in the Funds.  A separate  check  should  accompany  each
application.  Your check should be made payable to the name of the Fund invested
in, or if more than one Fund is being purchased using a single application,  you
may send one check  payable  to "The AAL  Mutual  Funds"  for the  total  amount
invested.

Initial Purchase by Wire

Initial  purchases of shares of the Funds by wire transfer may be made by taking
the following three steps:

   
     (1)  Telephone the  Distributor  through the Mutual Fund Service  Center at
          800-553-6319 or 414-734-7633 and provide your account registration,
    



<PAGE>



          address,  social  security or tax  identification  number,  the amount
          being  wired,  the name of the wiring bank and the name and  telephone
          number of the person to be contacted at your bank in  connection  with
          the purchase; and

     (2)  Instruct your bank (which must be a member of, or have a corresponding
          relationship  with a member of the  Federal  Reserve  System)  to wire
          federal funds as follows:

                           Firstar National Bank
                           ABA No. 0750-00022
                           For Credit to Firstar Trust Co.
                           Acct. No 112-950-027

                  For Further Credit to The AAL U.S. Government Zero Coupon
                  Target Fund (specify target year)
                  Account Registration (name(s) of shareholder); and

     (3)  Complete the application form and mail it immediately to:

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

Additional Purchases in Existing Accounts

After you have opened an account  with The AAL Mutual  Funds,  you may  purchase
additional shares in your account by mail or wire.

Additional Purchase by Mail

Payment for  additional  purchases  in  existing  Fund  accounts  should be sent
directly to the Funds' Transfer Agent at the following address:

   
                           The AAL Mutual Funds
                           c/o Firstar Trust Co.
                           615 E. Michigan Street
                           P.O. Box 2981
                           Milwaukee, WI 53201-2981

Please  indicate  your  AAL  Mutual  Fund  account  number  on the  face  of all
subsequent investment checks and make your check payable to the specific fund in
which you are investing. If you have more than one account,
    


<PAGE>



always  verify that you are investing in the proper  account.  This will help to
ensure the proper handling of the transaction.

Additional Purchase by Wire

You may make  additional wire purchases in an existing Fund account by following
Step (2) of the wire transfer  instructions shown for "Initial Purchase by Wire"
above, and in addition, by providing your existing Fund account number.

   
Wire order  funds must be received  in the office of the Funds'  Transfer  Agent
prior to the close of the New York Stock Exchange  ("NYSE")  (normally 3:00 p.m.
Central Time), in order to purchase shares on that day. Funds received after the
close of the NYSE will purchase shares on the following day.
    

Purchase Price

Purchases of shares of the Funds are made at the public offering price, which is
net asset value plus a sales charge. See "Sales Charges." Purchases of all Funds
are based on the net asset value (NAV) next determined  after receipt of payment
by the Funds'  Transfer  Agent.  All shares begin earning income on the business
day following the date the shares are purchased.

Minimum Purchase Amounts

The following minimum amounts apply to purchases of shares of each Fund:

                             Minimum Purchase Amount
                           per Account per Transaction


            Account           Initial Purchase       Additional Purchase
Regular Account                    $1,000                   $50
IRA or other Retirement Plan       $250                     $50
Account
Automatic Investment Plan          $0                       $25
* Minimums may be waived for qualified group retirement plans and payroll
  deduction plans with prior approval or when required by law.

Other Purchase Information

Shareholders  begin  earning  income on the business day following the date that
payment for the purchase is received by the Funds' Transfer Agent. All purchases
must be made in U.S.  dollars and checks must be drawn on U.S.  banks.  Cash and
travelers  checks  will not be  accepted.  If your check  does not  clear,  your
purchase  will  be  canceled  and you  will be  liable  for any  losses  or fees
incurred. When you purchase



<PAGE>



shares by check,  the Funds will not honor  redemption  requests  for the shares
purchased  for 12 days or until  your  check has  cleared,  if later.  A written
confirmation of purchase will be mailed to you, usually within two business days
following your purchase date.

Share  certificates are only issued upon written request and then only for full,
not fractional shares. A new written request for a share certificate is required
for each  subsequent  purchase.  There is no charge  for the  issuance  of share
certificates.  If share certificates have been requested or issued, certificates
must be delivered to the Transfer Agent in negotiable form prior to redemptions,
transfers or exchanges.

The Funds,  the  Distributor  and the Funds'  Transfer Agent do not consider the
U.S. Postal Service or other private delivery  services to be their agents.  The
deposit in the mail or with such delivery services,  or receipt at a Post Office
Box, of purchase  applications or redemption requests, do not constitute receipt
by the Funds, the Distributor or the Transfer Agent. The legal effect of posting
for other purposes, such as the April 15th IRA deadline,  shall be determined by
the applicable laws then in effect.

The Funds  reserve the right to suspend  the  offering of shares for a period of
time. They also reserve the right to reject any specific purchase of shares.

Sales Charges

The public  offering price of the shares of the Funds is the net asset value per
share  next  computed  after  receipt  of an order in proper  form by the Funds'
transfer agent plus a sales charge received by the Distributor. The sales charge
is expressed as a percentage of the public  offering  price,  and the net amount
invested, in the table below:

<TABLE>
<CAPTION>

           Amount of Purchase           Sales Charge as a % of                    Sales Charge as a % of                          
                                        Public Offering Price                     Net Amount Invested                     
<S>                                     <C>                                       <C>                           
Less than $25,000                       4.75%                                     4.99%                                           
$25,000 or more, but less than          4.50%                                     4.71%                         
$100,000
$100,000 or more, but less than         3.50%                                     3.63%                          
$250,000
$250,000 or more, but less than         2.00%                                     2.04%                         
$500,000
$500,000 or more, but less than         0.50%                                     0.50%                         
$1,000,000
$1,000,000 or more*                     No-Load                                   No-Load                       
*        Registered Representatives may receive, from the distributor, compensation not exceeding 
         0.25  of 1% of amounts invested at this purchase level.
</TABLE>



<PAGE>   

   
Trustees,  directors,  and  employees of the Funds and the  Adviser,  as well as
persons  licensed to receive  commissions for sales of The AAL Mutual Funds, may
not pay a sales  charge on their  purchases or on the  purchases  made by family
members  residing  with  them.  We  reserve  the right to  change or stop  these
reductions at any time. We will notify you in advance of any changes.
    

Reduced Sales Charges

   
Investors  may benefit from a reduction of the sales  charges shown in the above
table through several  purchase plans which are described  below. To receive the
benefit of a reduced sales charge, a shareholder must inform the Funds' Transfer
Agent in writing at the time of the new purchase that the purchase qualifies for
a reduced  sales charge and provide  substantiating  information.  Reduced sales
charge  provisions  may be  modified  or  terminated  at any time on  notice  to
shareholders.  You may obtain further  information on reduced sales charges from
your Registered  Representative  or by calling the Mutual Fund Service Center at
800-553- 6319.

Reduced  Sales  Charges  for  AAL  Branches,  Lutheran  Congregations,  Lutheran
Charitable Remainder Unitrusts and Related Charitable Non-Profit  Organizations.
AAL  branches,   Lutheran  congregations,   Lutheran  charitable  organizations,
charitable remainder unitrusts and other charitable  organizations  sponsored by
or affiliated with Lutheran congregations, which qualify for tax exemption under
Section 501(c)(3) or (13) of the Internal Revenue Code, will be charged one-half
of the standard sales charge for purchase of the Funds, except that no reduction
will be given  in  connection  with  403(b)(7)  custodial  accounts,  which  are
individual custodial accounts.  Qualifying charitable  non-profit  organizations
will generally include churches, schools, colleges, seminaries,  cemetery funds,
and  foundations  organized  for  charitable  purposes.  Lutheran  organizations
qualified  to receive  the reduced  sales  charge  must  include  substantiating
information at the time of purchase.  The reduced sales charges,  expressed as a
percentage of the public  offering price and the net amount  invested,  for this
exception to the standard sales charges are as follows: 
    


   Amount of Purchase    Sales Charge      Sales Charge        50% Sales Charge 
                         as a % of Public  as a % of Net       as a % of Public
                         Offering Price    Amount Invested     Offering Price
Less than $25,000            2.375%             2.430%              1.187%   
$25,000 or more,             2.250%             2.302%              1.125%
but less than $100,000
            


<PAGE>



$100,000 or more,            1.75%              1.781%              .875%
but less than $250,000       
$250,000 or more,            1.000%             1.010%              .500% 
but less than $500,000
$500,000 or more,            0.250%             0.250%              .125 
but less than$1,000,000
$1,000,000 or more*          No-Load            No-Load             No Load

   
Right of Accumulation.  An investor with multiple accounts and investors who are
related and living within the same  household  may "link" their  accounts in the
Funds and in the other AAL Mutual Funds so they are eligible for a reduced sales
charge  based on the  current  value of shares  owned,  computed  at the  public
offering price, plus the amount of the new investment. The AAL Money Market Fund
shares may be included if they were acquired in a simultaneous transaction (i.e.
exchange) in which shares of another AAL Mutual Fund on which a sales charge was
paid are redeemed  and the  proceeds of sale were used to purchase  Money Market
Fund shares.  SEPs, SARSEPs and 403(b)(7)  custodial accounts (except individual
IRAs) are linked with all other  accounts in the plan and  therefore  may not be
linked with individual accounts.  Accounts of institutional trustees will not be
linked,  except within individual  trusts.  Please refer to the table on page __
for the sales  charges,  expressed as a percentage of the public  offering price
and the net amount invested, at the different breakpoint levels.

Letter of Intent.  Investors who establish a total  investment goal in shares of
any of The AAL Mutual  Funds  (except The AAL Money  Market  Fund) of $25,000 or
more to be made over a 13-month period may purchase shares during this period at
the reduced sales charge  applicable  to the goal amount.  To meet the Letter of
Intent goal, the investment  amount must be fully invested at some point in time
during the  13-month  period.  The  effective  date of a Letter of Intent may be
back-dated up to 90 days, in order that any  investment  made during this 90-day
period, valued at the purchaser's cost, can be applied to the fulfillment of the
Letter of Intent goal. Sales charges on prior purchases will not be recalculated
or refunded.  All shares of the Funds with the same registration,  and shares in
accounts  which have been "linked"  under the Right of  Accumulation,  which are
purchased during the 13-month period,  and still owned,  will be included at the
purchaser's cost in determining the applicable sales charge, provided,  however,
that AAL Money  Market Fund shares may be included  only to the extent they were
acquired  in a  simultaneous  transaction  (i.e.  exchange)  in which  shares of
another AAL Mutual Fund, on which a sales charge was paid,  are redeemed and the
proceeds of sale were used to purchase the Money Market Fund shares.  The Letter
of Intent option is not available on 403(b)(7) custodial  accounts,  SEP-IRAs or
SARSEP-  IRAs.  Please  refer  to the  table on page __ for the  sales  charges,
expressed  as a  percentage  of the  public  offering  price and the net  amount
invested, at the different breakpoint levels above $25,000.
    




<PAGE>



A Letter  of Intent  does not  obligate  the  investor  to buy any Fund  shares.
However,  if the goal amount is not  purchased  during the term of the Letter of
Intent, the sales charge will be recalculated and charged at the rate applicable
to the shares actually  purchased,  and the difference  between the sales charge
paid and the sales charge due will be charged  against the  account.  During the
term of the Letter of Intent,  the Transfer Agent will escrow shares totaling 5%
of the investment goal indicated in the Letter of Intent to cover any additional
sales  charge  which  may  become  due,  and will  redeem  the  number of shares
necessary to pay the  additional  sales charge after  expiration  of a Letter of
Intent if the goal amount is not met. A Letter of Intent will be  considered  in
default and the additional sales charges will be recovered if redemptions reduce
the account value below 5% of the investment goal during the 13-month period.

Automatic Investment Plans

The AAL Mutual Funds offer several Automatic  Investment Plans available to make
periodic  investing  more  convenient.  These  Plans  do  not  need  an  initial
investment.  It takes 12 days from the time you invest for the transfer agent to
validate any electronic transfer.  This will cause some delay in your ability to
write checks on an AAL Money  Market Fund Account or to redeem or transfer  from
your account.

   
The Bank Draft Plan.  Investors who wish to make regular additional  investments
in an existing Fund Account may do so through the Funds' Bank Draft Plan.  Under
this Plan the Funds will draft an investor's bank checking or savings account in
the  amount  specified  --  which  may not be less  than $25 per  account  -- on
specified dates, up to two transactions per month (at least 10 days apart),  and
have the proceeds  invested in shares of the  specified  Fund at the  applicable
offering  price  determined on the date of the draft.  To use this Plan you must
authorize the Plan on your  application  form, or subsequently  in writing,  and
submit additional documents. Your instructions to establish a Bank Draft Plan or
to change the Bank on an existing Plan,  must be received by the Funds' Transfer
Agent at least 13 business days prior to the transaction date. Your instructions
for stopping a Bank Draft Plan or changing the dollar amount on an existing Plan
must be received by the Funds'  Transfer Agent at least 5 business days prior to
the transaction  date. For further  information  contact AAL Capital  Management
Corporation  (Mutual Fund Service  Center --  800-553-6319)  or your  Registered
Representative.  Instructions  for changes,  additions or  termination of a Bank
Draft Plan must be in writing and signed by all bank account owners.

     The Capital Builder Plan. The Capital Builder Plan also allows investors to
make regular  automatic  investments in an existing account in The AAL Small Cap
Stock,  Mid Cap Stock,  Capital Growth,  Bond,  Municipal Bond, High Yield Bond,
Utilities, International or U.S.  Government Zero Coupon Target Funds,  Series
2001 and 2006 by redemption of shares from their AAL Money Market Fund. The
    



<PAGE>



   
Capital Builder Plan Allows investors to select the transaction  date. If you do
not select the date,  it will  automatically  be drawn from their account on the
15th of the month.  All such investments will be subject to the applicable sales
charge . These  transactions  must meet the minimum purchase  amounts  described
above. To start,  stop or change the plan, you must notify The Funds at least 24
hours prior to the transaction date.

Payroll Deduction Savings and Investment Plan. The Payroll Deduction Savings and
Investment  Plan  allows  employees  of AAL,  employees  of  Lutheran-affiliated
institutions,  and Lutheran  employees  whose  employers  agree to invest in The
Funds through direct deduction from their paychecks or commission checks.
    

         Prestige Account

   
Investors who maintain a significant share balance will be provided
with additional  benefits,  including  personal  attention from Prestige Account
Representatives,   an  exclusive   toll-free   telephone  number,   personalized
investment analysis,  complimentary  financial  information,  a Prestige Account
organizer  and  more.  Your  AAL  Capital  Management   Corporation   Registered
Representative can provide more detailed information. 
    

Changes to Your Account

   
After opening your AAL Mutual Fund account, you may wish to make changes to your
account.  Certain types of changes, such as moving to a new address or getting a
new telephone  number,  do not have any other effect on an account.  Any feature
such as telephone  exchange or  participation  in an automatic  investment  plan
would continue uninterrupted. Other changes, such as exchanging from one Fund to
another  or  transferring  shares  from a regular  account to an IRA or adding a
joint owner,  will affect your account options because a new account is actually
created.  Account options such as an automatic  investment plan are discontinued
unless  additional  action  is  taken.  These  changes  may  require  additional
instructions  and specific  forms.  If you are not sure whether a change affects
your account, please contact your local Registered  Representative or the Mutual
Fund Service Center at 800-553-6319.  When making these types of changes, please
use The AAL Mutual Funds Account  Change  Request,  which is available from your
local Registered Representative or from the Mutual Fund Service Center.
    



<PAGE>



How to Redeem (Sell) Shares

Because the Funds  invest  primarily  in zero coupon  securities,  the net asset
value per share may fluctuate substantially prior to the maturity date. Although
investors  may  redeem  shares  on  any  business  day  at net  asset  value,  a
shareholder  who  redeems  prior to  maturity  may  experience  a  significantly
different investment return than was anticipated at the time of purchase.

Redemption by Mail

Shareholders  of any of the Funds may have their shares  redeemed at any time at
the net asset value per share next  determined  after a written  request and all
additional  documents,  if  required,  are received in proper form by the Funds'
Transfer Agent.

Payment for shares  presented for redemption will be based on a Fund's net asset
value next  computed  after a request is received in proper form by the Transfer
Agent.  Shareholders earn income and receive dividends paid on funds through the
date of redemption.  Payment proceeds will be mailed within seven days following
receipt of all  required  documents.  However,  payment may be  postponed or the
right of  redemption  suspended in unusual  circumstances.  Shares  purchased by
check  will not be  redeemed  for 12 days or until your  check has  cleared,  if
later.

You may redeem shares of any of the Funds by mail, by sending a written  request
for redemption to:

                                      The AAL Mutual Funds
                                      c/o Firstar Trust Co.
                                      615 East Michigan Street
                                      P.O. Box 2981
                                      Milwaukee, Wisconsin 53201-2981

The redemption request must include your shareholder account number, specify the
dollar or share  amount  you wish to  redeem  and be signed by you and any other
persons  registered as  shareholders  on the account,  exactly as the account is
registered. If you wish to redeem shares with a value in excess of $25,000, your
signature(s)  must be  guaranteed.  The  transfer  agent will  accept  signature
guarantees  from  all  institutions  that  are  eligible  to  provide  signature
guarantees under federal or state law,  provided that the individual  giving the
signature  guarantee  is  authorized  to do so.  Institutions  that  usually are
eligible  to  provide  signature  guarantees  include  commercial  banks,  trust
companies,  brokers,  dealers,  national securities exchanges,  savings and loan
institutions  and credit unions.  Please note that a signature  guarantee is not
the  same  as a  notarized  signature.  If  shares  are  held  in the  name of a
corporation, trust, estate, custodianship,  guardianship, partnership or pension
and  profit   sharing  plan,  or  if  you  have  requested  and  received  share
certificates, additional



<PAGE>



documentation may be necessary. If you wish to redeem an IRA or other retirement
plan you must indicate on the redemption  request  whether or not Federal income
tax should be withheld.  Redemption  requests  that fail to indicate an election
not to have Federal tax withheld will be subject to withholding.

Telephone Redemptions

   
The  privilege to redeem  shares by telephone is  automatically  extended to all
accounts,  unless the option is  specifically  declined.  If you do not want the
telephone  redemption option,  please call the AAL Mutual Fund Service Center at
800-553-6319.   By  accepting  this   privilege,   you  assume  some  risks  for
unauthorized  transaction.  See Important Information on Transacting Business by
Telephone  at  page__.  AAL  Capital  Management   Corporation  has  implemented
procedures  designed  to  reasonably  ensure  that  telephone  instructions  are
genuine. These procedures include recording telephone conversations,  requesting
verification  of  certain  personal  information,   restricting  transmittal  of
redemption  proceeds to  pre-authorized  designations and supplying  transaction
verification information.
    

         Telephone Redemptions and Checks Mailed

The following conditions apply to telephone redemptions described above:

a.       Telephone redemption checks will be issued to the same payee(s) as the
         account registration and sent only to the address of record;

b.       There has been no change of address in the preceding 60 days;

c.       The request is for $25,000 or less;

d.       Retirement plan accounts are not eligible;

e.       Shares to be redeemed cannot be in certificate form; and

f.       Only one telephone redemption is permitted within any 30 day period for
         each authorized account.

Telephone Redemptions by Bank Wire

a.       Existing  shareholders  must send The AAL Mutual Funds  Application  or
         Change Form with the appropriate  section completed prior to exercising
         the privilege of wire redemption to:

                                      Firstar Trust Company
                                      615 E. Michigan Street,
                                      P.O. Box 2981, Milwaukee, WI  53201-2981.



<PAGE>




b.       Wire redemptions can be made for any amount.

   
c.       A $12.00 fee is assessed for redemptions by wire.

d.       Requests received in good order before the close of the NYSE (usually
         3:00 p.m. Central Time) receive that day's price.
    

If an account has multiple owners, AAL Capital  Management  Corporation may rely
on the  instructions  of any  one  account  owner.  This  privilege  may  not be
available on all retirement plan accounts.

Reinstatement Privilege

So long as sales of the Funds are closed, the following  reinstatement privilege
does not apply.

A shareholder  who redeems  shares in a Fund on which a commission has been paid
may,  within 60 days after the date of redemption,  reinstate any portion or all
of a  redemption  in  shares  of a Fund  (in the  same  Fund  and  with the same
registration)  without  sales charges at net asset value next  determined  after
receipt by the Transfer Agent of a written  request for  reinstatement  together
with a check for the amount to be reinstated.  This  reinstatement  privilege is
available  only once with  respect to any one  shareholder  account.  Reinvested
funds must be provided by a single check.  In order to receive the  reinvestment
privilege,  shareholders  must clearly  state in writing at the time of purchase
that they qualify for the privilege.

Any gain  recognized on a redemption is taxable despite the  reinstatement  in a
Fund.  Any loss  realized  as a result of a  redemption  may not be allowed as a
deduction for federal income tax purposes, but may be applied,  depending on the
amount  reinstated,  to  adjust  the  cost  basis  of  the  shares  acquired  on
reinstatement.

Involuntary Redemption

Because all account owners share the high cost of maintaining  accounts with low
balances,  the Funds reserve the right to  involuntarily  redeem a shareholder's
account,  other than a  retirement  plan  account,  at any time the value of the
account  falls  below  $250.  Shareholders  will be  notified  in writing of any
planned  involuntary  redemption  and will be  allowed 30 days to  increase  the
account balance above the stated minimum before the redemption is processed.

EXCHANGE PRIVILEGE

Exchange by Mail




<PAGE>



Shares of the Funds held for at least 12 days may be  exchanged  for shares
of any other AAL Mutual Fund (Class A shares  only)with  the same  registration,
without  additional sales charge, at the net asset value per share next computed
after  receipt  of a written  exchange  request in proper  form by the  Transfer
Agent.

An exchange  constitutes  a redemption  of the shares of one mutual fund and the
purchase of shares of another. Because the Funds invest primarily in zero coupon
securities,  the net asset value per share may fluctuate  substantially prior to
the maturity date. Therefore, a shareholder who exchanges shares of a Fund prior
to maturity may experience a significantly  different investment return than was
anticipated at the time of purchase.

   
     In addition to the two series of The AAL U.S. Government Zero Coupon Target
Funds, nine other AAL Mutual Funds currently are offered.  They are: (1) The AAL
Small Cap Stock  Fund;(2) The AAL Mid Cap Stock Fund; (3) The AAL Capital Growth
Fund; (4) The AAL Bond Fund ; (5) The AAL Municipal Bond Fund; (6) The AAL Money
Market Fund; (7) The AAL Utilities Fund; (8) The AAL International  Fund and (9)
The AAL High Yield Bond Fund.  Shareholders interested in exchanging into any of
these Funds should contact the The Mutual Fund Service  Center at  800-553-6319,
or their AAL Capital  Management  Corporation  Registered  Representative  for a
current prospectus prior to making an exchange.
    

Shareholders  of a Fund may only  exchange  into such other Funds as are legally
available  for  sale  in  any  state.  If  shares  are  held  in the  name  of a
corporation, trust, estate, custodianship,  guardianship, partnership or pension
and  profit   sharing  plan,  or  if  you  have  requested  and  received  share
certificates, additional documentation may be necessary.

Exchanges  are  sales  for tax  purposes  and  could  result  in a gain or loss,
depending on the original cost of shares exchanged.

An excessive number of exchanges may be disadvantageous to the Funds. Therefore,
the  Funds  reserve  the  right  to  terminate  the  exchange  privilege  of any
shareholder who makes more than twelve exchanges in a year.  Further,  the Funds
reserve the right to modify or terminate the exchange privilege at any time with
respect to any Fund,  if the  Funds'  Trustees  determine  that  continuing  the
privilege may be detrimental to shareholders.

TELEPHONE TRANSACTIONS

You can sell or exchange shares by phone. By doing so, you assume some risks for
unauthorized transactions. AAL Capital Management Corporation has



<PAGE>



   
implemented procedures designed to reasonably assure that telephone instructions
are  genuine.  These  procedures  include  recording  telephone   conversations,
requesting  verification of various pieces of personal information,  restricting
transmittal of redemption proceeds to pre-authorized designations, and supplying
transaction/taping  identification numbers and/or symbols. Please note, however,
that The AAL Mutual Funds, AAL Capital  Management  Corporation,  the Custodian,
the  Transfer  Agent or any of their  employees  will not be liable  for  losses
suffered by a  shareholder  that result from  following  telephone  instructions
reasonably  believed  to be  authentic  after  verification  pursuant  to  these
procedures. 
    

Exchange by Telephone

Telephone exchanges (transactions in which the registration does not change) are
subject to the  requirements  described  above,  and additional  requirements as
follows.

   
Shareholders may exchange shares for which  certificates have not been issued by
telephoning  the Mutual Fund Service  Center at  800-553-6319  or 414-734- 7633.
Telephone  exchange  requests  received  prior to the close of the NYSE (usually
3:00  p.m.  Central  Time)  will be made at the net asset  value per share  next
determined that day. 
    

Telephone  exchanges  will be  permitted  only  if the  shareholder  elects  the
telephone exchange option on his initial purchase  application,  or requests the
telephone  exchange  privilege in a subsequent  written  request,  signed by all
registered owners, with all signatures guaranteed.

   
During  periods of extreme  volume  caused by dramatic  economic or stock market
changes,  shareholders  may have  difficulty  reaching  the Mutual Fund  Service
Center by phone, and a telephone exchange may be difficult to implement at those
times.  The Funds  reserve the right to  temporarily  discontinue  the telephone
exchange privilege during such periods of extreme volume.
    

RETIREMENT PLANS

AAL members and their enterprises and Lutheran organizations may establish their
own individual or business  retirement  plans,  with assets  invested in The AAL
Mutual Funds,  by choosing  among a variety of plans which may be made available
and which are designed to meet most long-term retirement planning needs.
Available plans may include:




<PAGE>



o        IRA (Individual Retirement Account)

o        403(b)(7) Custodial Account (for employees of public schools and
         certain non-profit organizations)

o        SEP-IRA (Simplified Employee Pension Plan)

o        SARSEP-IRA (Salary Reduction Simplified Employee Pension Plan)

o        Money Purchase Pension Plan

o        Profit Sharing Plan

o        401(k) Plan

Retirement Plans involve commitments covering future years and require long-term
planning.  Because all of the plans  available  through  AAL Capital  Management
Corporation  invest  their  plan  assets  in one or  more  of the  Funds,  it is
important that the investment  objectives of the Fund(s) in which a plan invests
are  consistent  with  the  retirement  plan  objectives.  It is the  investor's
responsibility  to determine which plan and investment best meets the retirement
objectives  desired,  and to understand the tax  consequences  of establishing a
retirement  plan. Each investor  should consult with a professional  tax adviser
prior to establishing a retirement plan.

Your AAL Capital Management Corporation  Registered  Representative will provide
you with descriptive  materials,  plan documents,  adoption agreements and other
related forms describing the plans available and the requirements to establish a
plan. Firstar Trust Company acts as Custodian for all AAL Mutual Fund Retirement
Plans.  Administrative services for retirement plans may be arranged through AAL
Capital  Management  Corporation  or may be provided by the  employer.  Fees are
charged for custodial and plan administration  services.  Information  regarding
those  services  and  fees  are  available  from  your  AAL  Capital  Management
Corporation Registered Representative.

NET ASSET VALUE

   
The net asset value per share of each Fund is determined once daily at the close
of trading on the NYSE (normally 3:00 p.m.  Central Time).  Net asset value will
not be determined on holidays observed by NYSE. The net asset value of shares is
computed by adding the sum of the value of the securities held by each Fund plus
any cash or other  assets it holds,  less all of that  Fund's  liabilities,  and
dividing  the result by the total number of  outstanding  shares of that Fund at
such time. Securities owned by the Funds for which market quotations are readily
available are valued at current  market value;  all other  securities and assets
are valued at fair value as  determined  in good faith by or under the direction
of the Board of Trustees. The Funds may make use of a 
    


<PAGE>



pricing service in the determination of their net asset value as approved by the
Board of Trustees.

DIVIDENDS, DISTRIBUTIONS AND TAXES

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  will 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.

A shareholder's  projected  return at maturity  assumes the  reinvestment of all
income and capital gains distributions. 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.

Each Fund  intends to  qualify as a  "regulated  investment  company"  under the
Internal Revenue Code (the "Code") and to take all other action required so that
no federal income tax will be payable by the Funds themselves. Each Fund will be
treated as a separate regulated investment company under the Code.  Shareholders
are  provided  annually  with full  information  on  income  and  capital  gains
distributions for tax purposes.  Shareholders  should consult their tax advisers
regarding  the   applicability  of  state  and  local  taxes  to  dividends  and
distributions.

Under federal income tax laws, a portion of the difference  between the purchase
price of zero coupon  securities and their face value is considered to be income
to a Fund each year,  even  though the Fund will not in each year  receive  cash
interest payments from these securities.

The Funds must  distribute  substantially  all their net investment  income each
year,  including the imputed income from their zero coupon investments.  Because
of its  imputed  income,  each  Fund  may be  required  to pay out as an  income
distribution  each year an amount greater than the total amount of cash interest
a Fund actually  received.  Such distributions may come from cash assets or from
liquidating some portfolio securities.  If securities are liquidated, a Fund may
realize  a gain or loss from the sale.  As with all funds  distributing  taxable
income,  tax-paying  investors  in the Fund will be subject  to income  taxes on
income and capital gain distributions whether they elect to



<PAGE>



take them in cash or have them reinvested.

Other Tax Information

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 EXPENSES

Because  the  Funds  are  no  longer  being  sold,  the  12b-1  fees  under  the
Distribution  Plan are  being  waived  by the  Distributor  and they will not be
reinstated  as long as the Funds make no new sales.  The  following  description
applies to the plan when such fees were paid.

In addition to the sales charge  deducted at the time of  purchase,  each of the
Funds is  authorized  under a  Distribution  Plan (the "Plan")  pursuant to Rule
12b-1 under the  Investment  Company Act of 1940 (the "Act") to use a portion of
its assets to finance  certain  activities  relating to the  distribution of its
shares to investors.  The Plan permits  payments to be made by each of the Funds
to the Distributor to reimburse it for expenditures incurred by it in connection
with the distribution of each of the Fund's shares to investors.  These payments
include,  but are not  limited  to,  the  payment  of  compensation  to  selling
representatives (excluding the initial sales charge),  advertising,  preparation
and distribution of sales literature and prospectuses to prospective  investors,
implementing  and  operating  the Plan,  and  performing  other  promotional  or
advertising activities on behalf of each of the Funds. Plan payments may also be
made  to  reimburse  the  Distributor  for  its  overhead  expenses  related  to
distribution of the Funds' shares.  No reimbursement  may be made under the Plan
for  expenses of past fiscal  years or in  contemplation  of expenses for future
fiscal  years.  Distribution  fees  paid by one Fund may not be used to  finance
distribution of shares of another Fund.

Under the Plan, the payments may not exceed an amount computed at an annual rate
of 0.10 of 1% of the average daily net assets of each Fund.  The Plan is subject
to review and annual approval by the Board of Trustees.

YIELD AND PERFORMANCE INFORMATION

The Funds will calculate and advertise performance information from time to



<PAGE>



time, and for different  historical  periods of time, by quoting yields or total
returns  designed to inform  investors  of the  performance  of the Funds.  Such
information  will always include uniform  performance  information in accordance
with standardized methods established by the Securities and Exchange Commission,
and may also include other total return  calculations,  if deemed appropriate to
permit investors to evaluate the investment performance of the Funds. Yields and
total  returns  are based on  historical  performance  and are not  intended  to
indicate  future  performance.  Investment  return and the principal value of an
investment will fluctuate, and the value of the investment,  if redeemed, may be
worth more or less than the original cost.

Standardized Yield and Total Return

The Funds may  advertise  a  standardized  current  yield  which is based on the
income  generated by an investment in the particular  Fund over a 30-day period,
which  period  will  be  stated  in the  advertisement.  Income  earned  on debt
obligations is determined by applying a calculated  yield-to-maturity percentage
to the obligations held during the period. This income,  less expenses,  is then
annualized.  That is, the amount of income generated during the 30 day period is
assumed to be generated  and  reinvested  monthly to provide a six-month  return
which is then  annualized.  The  return  is then  shown as a  percentage  of the
maximum offering price per share on the last day of the period.

The Funds may also advertise a standardized  average annual total rate of return
for one,  five and ten year  periods,  or so much  thereof as a Fund has been in
existence. Average annual total rate of return is the change in redemption value
of shares purchased with an assumed initial  investment of $1,000,  after giving
effect to the maximum  applicable  sales charge,  assuming the  reinvestment  of
dividends and capital gains distributions.

Other Total Returns

Because there are many ways to evaluate  investment  performance,  the Funds may
advertise total returns,  other than those described  above, if such information
is deemed  informative to investors for use in evaluating  the Funds.  The Funds
may  advertise  total returns  calculated on the basis of net  investment in the
Fund.  Some of these  calculations  will give  investment  performance  based on
dollars invested  without giving effect to the maximum  applicable sales charge,
which will result in performance  figures which are higher than those calculated
by the standardized methods.

Additional information regarding yield and performance  information is contained
in the Statement of Additional Information.

CUSTODIAN, TRANSFER AGENT AND INDEPENDENT ACCOUNTANTS

Firstar Trust Company, P.O. Box 2981, 615 E. Michigan Street, Milwaukee,


<PAGE>



Wisconsin  53201-2981,  serves as Custodian  and  Transfer  Agent for the Funds.
Price  Waterhouse  LLP,  100  East  Wisconsin  Avenue,  Suite  1500,  Milwaukee,
Wisconsin 53202, serves as the Funds' independent accountants.

ORGANIZATION AND DESCRIPTION OF SHARES

   
     The  Trust  is  a  diversified   open-end  management   investment  company
registered  under  the  Act.  Each  of  the  Funds  is a  separate  series  of a
Massachusetts  Business Trust organized under a Declaration of Trust dated March
13, 1987, which provides that each shareholder shall be deemed to have agreed to
be bound by the terms thereof. The Declaration of Trust may be amended by a vote
of either  its  shareholders  or its 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 eleven series which bear the name
of the Fund.
    

Each share of a Fund is entitled to  participate  pro rata in any  dividends  or
other  distributions  declared by the Board with  respect to that Fund,  and all
shares of a Fund have equal rights in the event of liquidation of that Fund.

Each share of each Fund is  entitled  to one vote on each  matter  presented  to
shareholders  of that Fund.  As a business  trust,  the Trust is not required to
hold annual shareholder  meetings.  However,  special meetings may be called for
purposes such as electing or removing Trustees,  changing fundamental  policies,
or approving an investment advisory contract. On matters affecting an individual
Fund (such as approval of advisory  and  sub-advisory  contracts  and changes in
fundamental  policies  of a Fund) a separate  vote of the shares of that Fund is
required.  Shares of a Fund are not entitled to vote on any matter not affecting
that Fund. All shares of each Fund vote together in the election of Trustees.

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 liability of the shareholders,  the
Trustees,  or officers of the Trust for acts or obligations of the Trust,  which
are  binding  only on the  assets  and  property  of the  Trust.  Notice of such
disclaimer is given 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.  Thus, 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 meet its obligations.

Shareholder Inquiries

All inquiries  from  shareholders  regarding the Funds should be directed to the
Funds at the address and telephone number shown on the back cover of the
prospectus.

<PAGE>

Board of Trustees

John H. Pender
Richard L. Gunderson
D. W. Russler
F. Gregory Campbell
Richard L. Gady
Lawrence M. Woods
Ronald G. Anderson

Officers

Ronald G. Anderson
President
Robert G. Same
Vice President and Secretary
Terrance P. Gallagher
Treasurer
Joseph F. Wreschnig
Assistant Secretary
Charles D. Gariboldi, Jr.
Assistant Treasurer

   
Investment Adviser and Distributor
    
AAL Capital Management Corporation
222 West College Avenue
Appleton, WI  54919-0007

Custodian, Transfer Agent, and Disbursing Agent
Firstar Trust Company
615 East Michigan Street
P.O. Box 2981
Milwaukee, WI  53201-2981

Independent Accountants
Price Waterhouse LLP
100 East Wisconsin Avenue
Suite 1500
Milwaukee, WI  53202

Legal Counsel
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI  53202


<PAGE>




                              THE AAL MUTUAL FUNDS
                THE AAL U.S. GOVERNMENT ZERO COUPON TARGET FUNDS
                           Series 2001 and Series 2006
                              222 West College Ave.
                             Appleton, WI 54919-0007
                            Telephone (414) 734-5721

   
                       STATEMENT OF ADDITIONAL INFORMATION
                                 June 30, 1997

This  Statement of  Additional  Information  is not a  prospectus,  but provides
additional  information  which should be read in conjunction with the Prospectus
of The AAL U.S.  Government Zero Coupon Target Funds Series 2001 and Series 2006
dated June 30, 1997, and any supplements thereto. The Funds' Prospectus may be
obtained  at no charge by writing or  telephoning  your AAL  Capital  Management
Corporation Registered  Representative or the Funds at the address and telephone
number above. 
    

In this  Statement  of  Additional  Information,  The AAL  Mutual  Funds  may be
referred to as the "Trust," and The AAL U.S. Government Zero Coupon Target Funds
may be referred to  collectively  as the  "Funds" or  individually  as a "Fund."
Terms not otherwise defined have the same meaning as in the Prospectus.

                               PLEASE TAKE NOTICE

Sales of The AAL U.S.  Government Zero Coupon Target Funds, Series 2001 and 2006
were  closed  to new  shareholders  and to  additional  purchases  of  shares by
existing  shareholders  effective May 31, 1993, except for automatic  investment
plan purchases which were allowed to continue  through June 30, 1993.  Purchases
of shares by  reinvestment  of dividends and capital gains,  if any, in existing
shareholder  accounts  will  continue  to be  allowed  and will be at net assets
value.  Although  there  is no  intent  to do so,  sales of the  Funds  could be
reopened in the future.  The discussion  elsewhere  herein as to the purchase of
shares of the Funds is qualified by the foregoing limitations.



<PAGE>




Table of Contents                            Page                Prospectus Page

Investment Objective............................................
and Policies
Investment Techniques ..........................................
Investment Restrictions ........................................
Purchases & Redemptions;
  Pricing Considerations .......................................
Investment Advisory Services . . . . . . . . . . . .. . . .     
Distributor.....................................................
Distribution Plan.............................................. 
Portfolio Transactions......................................... 
Dividends, Distributions
  and Taxes ................................................... 
Calculation of Yield
and Total Return............................................... 
General........................................................ 
Financial Statements........................................... 



<PAGE>



INVESTMENT OBJECTIVE AND POLICIES

The following  information  supplements the discussion of the Funds'  respective
investment  objectives  and policies  described in the  Prospectus.  In pursuing
their respective objective, each Fund invests as described below and employs the
investment  techniques  described  in  the  Prospectus  and  elsewhere  in  this
Statement  of  Additional  Information.  Each Fund's  investment  objective is a
fundamental policy, which may not be changed without the approval of a "majority
of  the  outstanding  voting  securities"  of  that  Fund.  A  "majority  of the
outstanding  voting  securities" means the approval of the lesser of: (i) 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 (ii) more than 50% of the outstanding voting securities of a Fund.

The  objective of each of the Funds is to provide as high an  investment  return
over selected periods of time as is consistent with an investment in U.S.
government securities.

Zero Coupon Securities

At least 80% of a Fund's net assets  will be invested  in U.S.  Government  zero
coupon  securities.  Zero coupon  securities are non-interest  (non-cash) paying
debt obligations which are payable in full at maturity. These securities include
U.S.  Treasury  notes and  bonds  that do not have  coupons  and do not pay cash
income,  U.S. Treasury bills,  individual interest coupons that trade separately
and  evidences  of receipt of such  securities.  At least 50% of each Fund's net
assets will be  invested in U.S.  Government  zero  coupon  securities  maturing
within two years of the Fund's target date.

Up to 20% of each  Fund's net assets may be  invested  in  interest-paying  U.S.
Treasury  notes and  bonds,  and  repurchase  agreements  with  respect  to such
securities.  These  interest-paying  securities  produce  income which may be an
efficient way to provide for expenses and redemptions, among other things.

Zero coupon  securities  usually trade at a deep discount from their face or par
value and are  subject  to  greater  market  value  fluctuations  from  changing
interest rates than debt obligations of comparable  maturities that make current
distributions of interest (cash). As a result,  the net asset value of shares of
a Fund prior to its target date may  fluctuate  over a greater range than shares
of other mutual funds  investing in U.S.  Treasury  securities,  making  current
distributions of interest and having similar  maturities.  The current net asset
value of a Fund generally  will vary inversely with changes in current  interest
rates and the degree of fluctuations  will vary directly with the length of time
to the maturity date of the Fund.

Zero coupon securities include U.S. Treasury bills issued directly by the U.S.



<PAGE>



Treasury,  and U.S. Treasury bonds or notes and their unmatured interest coupons
which  have been  separated  by their  holder,  typically  a  custodian  bank or
investment  brokerage firm. A holder will separate the interest coupons from the
underlying  principal (the "corpus") of the U.S. Treasury security.  A number of
securities firms and banks have stripped the interest coupons and resold them in
custodial receipt programs with a number of different names, including "Treasury
Income  Growth  Receipts"  ("TIGRS")  and  Certificate  of Accrual on Treasuries
("CATS").  The underlying U.S.  Treasury bonds and notes  themselves are held in
book-entry  form  at the  Federal  Reserve  Bank  or,  in  the  case  of  bearer
securities,  (i.e.,  unregistered  securities  that are owned  ostensibly by the
bearer or holder thereof),  in trust on behalf of the owners thereof.  The staff
of the Securities and Exchange Commission no longer considers "TIGRS" and "CATS"
government securities.

The Treasury has facilitated transfers of ownership of zero coupon securities by
accounting separately for the beneficial ownership of particular interest coupon
and  corpus  payments  on  Treasury   securities  through  the  Federal  Reserve
book-entry  record-keeping system. The Federal Reserve program as established by
the Treasury  Department is known as "STRIPS" or "Separate Trading of Registered
Interest and Principal of Securities."  Under the STRIPS program, a Fund will be
able  to have  its  beneficial  ownership  of zero  coupon  securities  recorded
directly  in the  book-entry  record-keeping  system  in lieu of  having to hold
certificates  or other  evidences of ownership of the underlying  U.S.  Treasury
securities.

When U.S.  Treasury  obligations have been stripped of their unmatured  interest
coupons by the holder,  the stripped coupons are sold separately.  The principal
or corpus is sold at a deep discount  because the buyer  receives only the right
to receive a future  fixed  payment on the  security  and does not  receive  any
rights to periodic  interest (cash)  payments.  Once stripped or separated,  the
corpus and  coupons  may be sold  separately.  Typically,  the  coupons are sold
separately or grouped with other  coupons with like  maturity  dates and sold in
bundled form.  Purchasers of stripped obligations  acquire, in effect,  discount
obligations that are economically  identical to the zero coupon  securities that
the Treasury sells itself.

Trading Opportunities

Although  there is no present  intention  to do so, the Funds,  consistent  with
their investment policies,  may engage in short-term trading (selling securities
for brief  periods  of time,  usually  less than three  months)  if the  Adviser
believes that such  transactions,  net of costs, would further the attainment of
their  investment  objectives.  The needs of  different  classes of lenders  and
borrowers and their  changing  preferences  and  circumstances  have in the past
caused market dislocations unrelated to fundamental  creditworthiness and trends
in interest rates which have presented market trading opportunities. Such market
dislocations  might result from a broker  needing to cover a  substantial  short
position  in a security  or an  abnormal  demand  for a  security  created by an
unusually large purchase or sale by an institutional portfolio manager.



<PAGE>



There can be no  assurance  that such  dislocations  will occur in the future or
that a Fund will be able to take  advantage of them.  The Funds will limit their
voluntary  short-term  trading,  if any, to the extent necessary to qualify as a
"regulated investment company" under the Internal Revenue Code.

INVESTMENT TECHNIQUES

Each of the Funds may use the following  techniques  described in the prospectus
and in the  Statement of  Additional  Information  in pursuit of its  investment
objective.

Lending Portfolio Securities

Although there is no present intention to do so, the Funds may from time to time
lend  securities  from  their  portfolios  to  brokers,  dealers  and  financial
institutions  such as banks and trust  companies.  The Adviser  will monitor the
creditworthiness  of firms with  which the Funds  engage in  securities  lending
transactions.  In doing so, a Fund would  continue to receive the  equivalent of
the interest or dividends paid by the issuer on the securities loaned, and would
also receive an  additional  return which may be in the form of a fixed fee or a
percentage of the  collateral.  A Fund 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.

The  Adviser  will  monitor the  creditworthiness  of firms with which the Funds
engage in securities  lending  transactions.  Collateral values are continuously
maintained  at 100%  and  marked  to  market  daily.  However,  in the  event of
bankruptcy or other default of the borrower, a Fund could experience both delays
in  liquidating  the  loan  collateral  or  recovering  the  loaned  securities,
including  possible  decline in value of the  collateral  or loaned  securities,
possible lack of access to income during this period,  and expenses of enforcing
its rights.

When-Issued and Delayed Delivery Securities

A Fund may purchase  securities on a when-issued or  delayed-delivery  basis, as
described  in the  Prospectus.  A Fund  makes  such  commitments  only  with the
intention of actually  acquiring  the  securities,  but may sell the  securities
before settlement date if the Adviser deems it advisable for investment reasons.

At the time a Fund enters into a binding obligation to purchase  securities on a
when-issued basis, liquid assets of the Fund having a value at least as great as
the purchase price of the securities to be purchased are identified on the books
of the  Fund and held by the  Fund`s  custodian  throughout  the  period  of the
obligation.  The use of these investment strategies may increase net asset value
fluctuation.

Repurchase Agreements




<PAGE>



In the  event of a  bankruptcy  or other  default  of a seller  of a  repurchase
agreement,  there may be delays and  expenses  in  liquidating  the  securities,
declines  in  their  value,  and  losses  of  interest.  The  Adviser  maintains
procedures for evaluating  and  monitoring  the  creditworthiness  of firms with
which they enter into repurchase agreements. No Fund may invest more than 10% of
its total assets in repurchase agreements maturing in more than seven days or in
securities subject to legal or contractual restrictions on resale.

INVESTMENT RESTRICTIONS

Each  of  the  AAL  Mutual  Funds  operates   under  the  following   investment
restrictions.  The AAL U.S. Government Zero Coupon Target Funds do not engage in
the options and futures transactions and real estate transactions referred to in
(2), (3), (8) and (9) below. A Fund may not:

(1) invest more than 5% of its 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
its 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 a Federal agency or evidences of receipt of such securities;

(2) purchase securities on margin, except for use of short-term credit necessary
for  clearance of purchases  and sales of portfolio  securities,  but a Fund may
make margin  deposits in connection with  transactions  in options,  futures and
options on futures;

(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  and  options on
futures;

(4) make  loans to other  persons,  except  that the Fund  reserves  freedom  of
action,  consistent with its other  investment  policies and restrictions and as
described  in the  Prospectus  and  this  Statement,  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 that the Fund
may not loan  securities 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 the Fund may  borrow in
amounts not in excess of 10% of its total assets,  taken at current  value,  and
then only


<PAGE>



from banks as a temporary measure for  extraordinary or emergency  purposes (the
Funds will not borrow to increase income,  but only to meet redemption  requests
that otherwise  might require  untimely  dispositions  of portfolio  securities;
interest paid on any such borrowings will reduce 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 the purchase
of 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 a Fund may be deemed
an underwriter under federal securities laws;

(8) purchase or sell real estate, or real estate limited partnership  interests,
provided  that a Fund  may  invest  in  securities  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 a Fund may
purchase or sell futures and options thereon for hedging purposes;

(10) invest  more than 25% of its 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;

(11) invest in oil, gas or mineral related programs or leases;

(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 total assets (taken at current value
at the time of such investment) would be invested in such securities;

(13) invest in any security if as a result a Fund would have more than 5% of its
total 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  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  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;



<PAGE>



(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,  is a fundamental policy. In addition,  each Fund may not,
so long as it publicly offers its shares for sale in certain states:  (a) buy or
sell a call  option  unless  (i) the  option is issued by the  Options  Clearing
Corporation,  an  exchange,  NASDAQ or  similar  entity,  and (ii) the  security
underlying  the option is listed on an exchange  or similar  entity or is a U.S.
Government  or Federal  agency  obligation;  (b) invest  more than 5% of its net
assets  (valued  at the time of  investment  at the lower of cost or  market) in
warrants.  Included  within that amount,  but not to exceed 2% of the value of a
Fund's  net  assets,  may be  warrants  that are not  listed  on the New York or
American Stock Exchange;  (c) write a put option except as a closing transaction
or purchase a put option if the  aggregate  premiums  paid for all such  options
exceed 2% of its net assets (less the amount by which any such  positions are in
the money),  excluding puts purchased as closing transactions;  and (d) purchase
or retain  securities  of any issuer if 5% of the  securities of such issuer are
owned by those  officers and directors of the Fund or by partners of its Adviser
who own individually more than 1/2 of 1% of its securities.

PURCHASES AND REDEMPTIONS; PRICING CONSIDERATIONS

Purchases and  redemptions  are discussed in the  Prospectus  under the headings
"How to Buy Shares," "How to Redeem  (Sell)  Shares," and "Net Asset Value," and
that information is incorporated herein by reference.

The Funds' net asset value is determined  only on the days on which the New York
Stock  Exchange  is open for  trading.  That  Exchange  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 Exchange
will be closed on the preceding Friday or the following Monday, respectively.

Net asset value is  determined  by dividing the total  assets of the  particular
Fund,  less all its  liabilities,  by the  total  number  of shares of that Fund
outstanding.  The Funds'  portfolio  securities may be valued through the use of
pricing  services  approved by the  Trustees,  which  utilize  information  with
respect to bond and note  transactions,  quotations  from bond  dealers,  market
transactions  in  comparable   securities  and  various   relationships  between
securities.  Money market  instruments  with remaining  maturities of 60 days or
less are  valued  by the  amortized  cost  method,  which the  Trustees  believe
approximates  fair value.  Because of the large number of zero coupon securities
available,  many  may not  trade  each  day;  therefore,  bid and  asked  prices
frequently  are not  available.  In valuing such  securities,  then, the pricing
services  generally  take into account  institutional  size,  trading in similar
groups of securities and any developments related to specific securities.  Other
securities and assets are valued in good faith at fair



<PAGE>



value using methods (including pricing services)  determined by the Trustees and
applied on a consistent  basis. The Trustees review the valuation of each Fund's
portfolio securities through receipt of regular reports from the Adviser.

Generally,  trading  in  U.S.  Government  Securities  and  other  fixed  income
securities  is  substantially  completed  each day at various times prior to the
close of the New York  Stock  Exchange.  The values of such  securities  used in
determining  the net asset  value of a Fund's  shares  are  computed  as of such
times.  Occasionally,  events  affecting the value of such  securities may occur
between  such times and the close of the New York Stock  Exchange,  which events
will not be reflected in the  computation of a Fund's net asset value. If events
materially  affecting  the value of the Trust's  securities  occur during such a
period,  then these  securities will be valued at their fair value as determined
in good faith by the Trustees.

The Funds  intend to pay all  redemptions  in cash and are  obligated  to redeem
shares  solely in cash up to the lesser of  $250,000  or one  percent of the net
assets of the Fund during any 90-day  period for any one  shareholder.  However,
redemptions  in  excess  of  such  limit  may be  paid  wholly  or  partly  by a
distribution  in kind of  securities.  If  redemptions  were  made in kind,  the
redeeming  shareholders  might incur  brokerage  fees in selling the  securities
received in the redemptions.

Each Fund  reserves  the right to suspend  or  postpone  redemptions  during any
period  when:  (a)  trading on the New York Stock  Exchange  is  restricted,  as
determined by the Securities and Exchange Commission, or that Exchange is closed
for other than customary  weekend and holiday  closings;  (b) the Securities and
Exchange Commission has by order permitted such suspension; or (c) an emergency,
as determined by the Securities and Exchange Commission, exists, making disposal
of portfolio  securities  or valuation of net assets of the Fund not  reasonably
practicable.

Confirmation of Fund Transactions

Shareholders  of The AAL U.S.  Government  Zero Coupon Target Funds will receive
immediate  written   confirmations  of  all  account   transactions  and  annual
statements summarizing all transactions for the prior period.

   
Shareholders   may  always  obtain  current  account   information  by  calling,
toll-free,  AAL Capital  Management  Corporation's   Mutual Fund Service
Center at 800-553-6319.
    

INVESTMENT ADVISORY SERVICES

Please refer to the  description of the Adviser and Advisory  Agreement and fees
under "Management of the Trust" in the Prospectus,  which is incorporated herein
by reference.



<PAGE>



The  following  Executive  Officers of the Trust also serve as directors  and/or
officers of the Adviser as shown below:


Ronald G. Anderson           President; Director, President of AAL Capital
222 West College Avenue      Management Corporation since 1996
Appleton, WI 54919-0007 
DOB 10/2/48     

Robert G. Same               Secretary; Director, Executive
222 West College Avenue      Vice President and Chief Operating Officer since 
Appleton, WI 54919-0007      1996, Senior Vice President and Secretary of AAL
DOB 7/28/45                  Capital Management Corporation from 1987 to 1997 
                             

Terrance P. Gallagher        Treasurer; Director, Chief Financial Officer of AAL
222 West College Avenue      Capital Management Corporation since 1994, Senior
Appleton, WI 54919           Vice President since 1987 and Comptroller since
DOB 9/20/58                  1992

The Adviser furnishes the Fund, at the Adviser's expense,  with all office space
and facilities,  equipment and clerical personnel necessary for carrying out its
duties under the Advisory Agreement.  The Adviser also will pay all compensation
of 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
the Advisory Agreement are paid by the Fund, 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 and transfer  agent;  (vii)  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;  (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 and
proxy material 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 its successor,  or other
industry  organizations;   (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



<PAGE>



thereto;  and  (xiii)  all  expenses  which  the  Trust  agrees  to  bear in any
distribution  agreement  or in any plan  adopted by the Trust  pursuant  to Rule
12b-1 under the Investment Company Act of 1940 (the "Act").

The Adviser has agreed to reimburse each of the Funds monthly to the extent that
total annual expenses  (excluding taxes,  interest and brokers'  commissions and
other normal charges incident to the purchase and sale of portfolio  securities,
but  including  fees paid to the  Adviser)  that  exceed the  applicable  limits
prescribed  by any state in which the shares of such Fund are being  offered for
sale. The Funds believe that currently the most  restrictive  state limits are 2
1/2% of a Fund's average daily net assets up to $30 million,  2% of the next $70
million  and 1  1/2%  thereafter.  In  addition,  the  Adviser  has  voluntarily
undertaken  to pay all  expenses  of the  Funds in  excess  of 1% until  further
notice.

The  Funds  have  paid  the  following   advisory  fees  to  the  Adviser  since
commencement of operations:

<TABLE>
<CAPTION>
            Period Ended                       The AAL U.S. Government                 The AAL U.S. Government
                                               Zero Coupon Target Fund                 Zero Coupon Target Fund
                                               Series 2001                             Series 2006
            <S>                                <C>                                     <C>
            April 30, 1991*                    $920                                    $692
            April 30, 1992                     $5,559                                  $ 3,815
            April 30, 1993                     $10,418                                 $7,430
            April 30, 1994                     $1,175                                  $833
            April 30, 1995                     $0                                      $0
            April 30, 1996                     $0                                      $0
            April 30, 1997                     $0                                      $0       
</TABLE>

The  Advisory  Agreement  provides  that  subject to Section 36 of the Act,  the
Adviser shall not 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 its  duties  under  the
Agreement except for willful  misfeasance,  bad faith or gross negligence in the
performance of its duties or by reason of reckless  disregard of its 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 Fund and the  continued  use of the
Trust's present name would create confusion in the context of the Adviser or its
parent's business.

As to the Funds, the Advisory Agreement was approved by the Board of Trustees on
February 27, 1990 and were approved by shareholders on November 12,



<PAGE>



1991.  The  Agreement  will  continue  from  year to  year  only so long as such
continuance is specifically approved at least annually by the Board of Trustees,
including a majority of the Trustees who are not Interested  Persons (as defined
in the Act.)

The Advisory  Agreement is  terminable  upon  assignment  or 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 any Fund by the vote
of a majority of the  outstanding  shares of such Fund,  or by the Adviser on 60
days' written notice to the Trust.

Compensation of The Board of Trustees

   
The Fund makes no payments to any of its officers for services.  However, any of
the  Trustees who are not officers or employees of the adviser or its parent are
paid, by The AAL Mutual Funds,  an annual fee of $10,000 and a fee of $1,000 per
meeting. These fees are assessed ratably to each series of The AAL Mutual Funds,
including The AAL International  Fund. Trustees are reimbursed by The AAL Mutual
Funds 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,  1997,  The AAL Mutual  Funds paid an  aggregate  of
$60,280.54 in Trustees' fees and expenses.     

<TABLE>
<CAPTION>
(1)                           (2)                 (3)                     (4)                 (5)                (6)Total
Name of                       Capacities in       Aggregate               Pension or          Estimated          Compensation
Person                        Which               Remuneration            Retirement          Annual             from Registrant
                              Remuneration                                Benefits            Benefits           and Fund
                              Received                                    Accrued During      Upon               Complex paid to
                                                                          Registrant's        Retirement         Trustees (1)
                                                                          Last Fiscal Year
<C>                           <C>                 <C>                     <C>                 <C>                <C>
John H. Pender                Trustee             -                       -                   -                  $4,500
DOB 5/25/30
Richard L.                    Trustee             -                       -                   -                  -
Gunderson,
DOB 6/14/33
F. Gregory                    Trustee             $14,000                 -                   -                  $20,000
Campbell
DOB 12/16/39
Richard L. Gady               Trustee             $14,000                 -                   -                  $20,000
DOB 2/28/43
D. W. Russler                 Trustee             $14,000                 -                   -                  $20,000
DOB 10/28/28
Lawrence M.                   Trustee             $14,000                 -                   -                  $20,000
Woods
DOB 4/14/32
Ronald G. Anderson            Trustee             -                       -                   -                  -
DOB 10/2/48 
(1)  The Fund complex includes the AAL Variable Product Series Fund, Inc.
</TABLE>


<PAGE>



DISTRIBUTOR

AAL Capital  Management  Corporation is the exclusive  underwriter for the Funds
under a written  Distribution  Agreement with the Funds. Until May 31, 1993, the
underwriter  offered  the  shares of the Funds  for sale on a  continuous  basis
through its field sales force. The aggregate  underwriting  commissions received
and the amount of  commissions  retained by the  underwriter  for the last three
years were as follows:


              Time Period      Aggregate Commissions        Retained Commissions
For the fiscal year ended          $0                               $0
4/30/95
For the fiscal year ended          $0                               $0
4/30/96
For the fiscal year ended          $0                               $0
4/30/97

   
With respect to all commissions and other  compensation,  AAL Capital Management
Corporation,   the  sole  distributor  for  the  Funds,  does  not  receive  any
compensation  in  connection  with   redemptions  and   repurchases,   brokerage
commissions or other compensation.

AAL Capital Management  Corporation also acts as exclusive  underwriter for
the nine  additional  series of The AAL  Mutual  Funds:  The AAL Small Cap Stock
Fund;  The  AAL Mid  Cap  Stock  Fund ; The AAL  Capital  Growth  Fund;  The AAL
Utilities  Fund;  The AAL Bond Fund;  The AAL Municipal Bond Fund; The AAL Money
Market Fund; The AAL International  Fund and The AAL High Yield Bond Fund.
    

DISTRIBUTION PLAN

Because  the  Funds  are  no  longer  being  sold,  the  12b-1  fees  under  the
Distribution  Plan are  being  waived  by the  Distributor  and they will not be
reinstated  as long as the Funds make no new sales.  The  following  description
applies to the plan when such fees were paid.

The Trust's  Distribution Plan (the "Plan" ) is written in contemplation of Rule
12b- 1 (the "Rule") under the Act.

The Plan  authorizes the  distributor to make certain  payments to any qualified
recipient,  as  defined  in  the  Plan,  that  has  rendered  assistance  in the
distribution  of a Fund's shares (such as sale or placement of a Fund's  shares,
or  administrative  assistance,  such as maintenance of  sub-accounting or other
records).  The Plan also authorizes the Distributor to purchase  advertising for
shares of the Funds, to pay for sales literature and other promotional material,
and to make payments to its sales


<PAGE>



personnel.  Any such  payments  to  qualified  recipients  or  expenses  will be
reimbursed or paid by the Funds,  up to a limit of 0.10 of 1% of the average net
assets in a given  fiscal  year.  No  reimbursement  or payment  may be made for
expenses of past fiscal years or in  contemplation of expenses for future fiscal
years.

The Plan states that if and to the extent that any of the following  payments by
the Funds are  considered  to be  "primarily  intended  to result in the sale of
shares" issued by a Fund within the meaning of the Rule, such payments by a Fund
are  authorized  without  limit  under the Plan and shall not be included in the
limitations  contained  in the Plan.  Such costs  include:  (a) the costs of the
preparation,  printing,  and  mailing of all  required  reports  and  notices to
shareholders,  irrespective  of whether such  reports or notices  contain or are
accompanied  by  material  intended to result in the sale of shares of a fund or
other  funds or other  investments;  (b) the costs of  preparing,  printing  and
mailing  of all  prospectuses  to  shareholders;  (c) the  costs  of  preparing,
printing  and  mailing of any proxy  statements  and  proxies,  irrespective  of
whether any such proxy  statement  includes  any item  relating  to, or directed
toward,  the sale of the  Funds'  shares;  (d) all  legal  and  accounting  fees
relating to the preparation of any such reports, prospectuses, proxies and proxy
statements; (e) all fees and expenses relating to the qualification of the Funds
and or their shares under the securities or "Blue Sky" laws of any jurisdiction;
(f) all fees under the Act and the  Securities  Act of 1933,  including  fees in
connection with any application for exemption relating to or directed toward the
sale of the  Funds'  shares;  (g) all fees  and  assessments  of the  Investment
Company  Institute  or  any  successor   organization  or  industry  association
irrespective  of whether some of its  activities  are designed to provide  sales
assistance;  (h) all costs of preparing and mailing confirmations of shares sold
or redeemed or share  certificates  and reports of share  balances;  and (i) all
costs of responding to telephone or mail inquiries of shareholders.

The Plan also states it has  recognized  that the costs of  distribution  of the
Trust's shares are expected to exceed the sum of permitted  payments,  permitted
expenses,  and the portion of the sales charge retained by the Distributor,  and
that the profits, if any, of the Adviser are dependent primarily on the advisory
fees paid by the Funds to the Adviser.  If and to the extent that any investment
advisory fees paid by the Funds might, in view of any excess  distribution costs
and the common  ownership  of the  Adviser and  Distributor,  be  considered  as
indirectly  financing any activity  that is primarily  intended to result in the
sale of shares issued by the Funds, the payment of such fees is authorized under
the Plan. The Plan states that in taking any action  contemplated  by Section 15
of the Act as to any investment advisory contract to which the Trust is a party,
the Board of Trustees,  including its Trustees who are not "interested  persons"
as defined in the Act, and who have no direct or indirect  financial interest in
the  operation  of the Plan or any  agreements  related to the Plan  ("Qualified
Trustees"),  shall,  in  acting  on the  terms of any such  contract,  apply the
"fiduciary duty" standard contained in Sections 36(a) and (b) of the Act.

The Plan  requires  that while it is in effect the  Distributor  shall report in
writing at



<PAGE>



least quarterly to the Trustees,  and the Trustees shall review,  the following:
(a) the  amounts  of all  payments,  the  identity  of  recipients  of each such
payment,  the basis on which  each such  recipient  was  chosen and the basis on
which the amount of the  payment was made;  (b) the amounts of expenses  and the
purpose of each such expense;  and (c) all costs of the other payments specified
in the Plan (making  estimates of such costs where  necessary or  desirable)  in
each case during the preceding calendar or fiscal quarter.

   
Currently, the Distributor is waiving the 12b-1 fees for the AAL U.S. Government
Zero Coupon Target Funds, Series 2001 and 2006. Therefore,  the aggregate amount
paid by the Funds to the  Distributor  under the Plan for the fiscal  year ended
April 30, 1997, and the manner in which this amount was spent is as follows:
    


Gross 12b-1 fees paid by the Funds                             $0
                                  Expenditures
Compensation to Registered Representatives                     $0
Other                                                          $0

The Plan was approved by  shareholders  of the Funds on November  12, 1991.  The
Plan  continues in effect from year to year only so long as such  continuance is
specifically  approved  at  least  annually  by the  Board of  Trustees  and the
Qualified  Trustees (as defined in the Plan) cast in person at a meeting  called
for the purpose of voting on such continuance. The Plan may be terminated at any
time without penalty by a vote of a majority of the Qualified Trustees or by the
vote of the holders of a majority of the  outstanding  voting  securities of the
Trust,  and  with  respect  to  any  Fund,  by the  vote  of a  majority  of the
outstanding  shares  of such  Fund.  The Plan  may not be  amended  to  increase
materially the amount of payments to be made without shareholder approval. While
the Plan is in effect,  the selection and  nomination of those  Trustees who are
not  interested  persons of the Trust is  committed  to the  discretion  of such
disinterested  Trustees.  Nothing in the Plan will  prevent the  involvement  of
others  in such  selection  and  nomination  if the final  decision  on any such
selection  and  nomination  is  approved  by a  majority  of such  disinterested
Trustees.

PORTFOLIO TRANSACTIONS

The Adviser  directs the  placement  or orders for the  purchase and sale of the
Funds' portfolio securities.

The Funds'  purchases and sales of portfolio  securities are generally placed by
the Adviser  with primary  market  makers for these  securities  on a net basis,
without any brokerage commission being paid by the Funds. Trading does, however,
involve  transaction costs.  Transactions with dealers serving as primary market
makers  reflect  the  spread  between  the bid and asked  prices.  Purchases  of
portfolio securities from the dealers of zero coupon securities,  in particular,
may include a mark-up which may



<PAGE>



be  included  in a  spread  between  the  bid  and  asked  price.  Purchases  of
underwritten  issues may be made which will include an underwriting  fee paid to
the underwriter.

In placing  portfolio  transactions,  the Adviser seeks the best  combination of
price and execution.  In determining  which dealers provide best execution,  the
Adviser looks  primarily to the price quoted and normally  place orders with the
dealer  through which the most favorable  price can be obtained.  It is expected
that securities will ordinarily be purchased in the primary markets, and that in
assessing the best net price and execution available to a Fund, the Adviser will
consider all factors it deems  relevant,  including the breadth of the market in
the security,  the price of the security,  the financial condition and execution
capability of the dealer and the  reasonableness of the commission,  if any (for
the specific  transaction  and on a continuing  basis).  Although it is expected
that  sales of  shares of the Funds  will be made only by the  Distributor,  the
Adviser may in the future consider the willingness of particular dealers to sell
shares of the Funds as a factor  in the  selection  of  dealers  for the  Funds'
portfolio  transactions,  subject  to  the  overall  best  price  and  execution
standard.

   
     Assuming  equal  execution  capabilities,  other  factors may be taken into
account in selecting brokers or dealers to execute  particular  transactions and
in  evaluating  the best net price and  execution  available.  The  Adviser  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 the Funds, to the Adviser or its affiliates.
The Adviser may also cause a Fund to pay to a broker or dealer who provides such
brokerage  or  research   services  a  commission   for  executing  a  portfolio
transaction  that is in excess of the  amount of  commission  another  broker or
dealer  would have  charged for  effecting  that  transaction.  The Adviser must
determine,  in good faith,  however,  that such  commission  was  reasonable  in
relation to the value of the brokerage and research services provided, viewed in
terms of that particular  transaction or in terms of all the accounts over which
the Adviser exercises investment discretion.  It is possible that certain of the
services received by the Adviser  attributable to a particular  transaction will
benefit one or more other accounts for which investment  discretion is exercised
by the  Adviser.  The Trust paid,  $1,108,673,  $1,697,844  and  $4,205,263  in
brokerage commissions in each of the past 3 years.
    

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each of the Funds has  elected to be treated as a regulated  investment  company
under  Subchapter  M of the  Internal  Revenue  Code of 1986,  as  amended  (the
"Code").

A regulated  investment  company  qualifying  under  Subchapter M of the Code is
required to distribute to its shareholders at least 90 percent of its investment
company  taxable  income  (including  net  short-term  capital gains) and is not
subject to federal  income tax to the extent that it  distributes  annually  its
investment  company taxable income and net realized  capital gains in the manner
required under the Code.



<PAGE>



Each Fund is subject to a 4% nondeductible  excise tax on amounts required to be
distributed,  but not  actually  distributed  under a  prescribed  formula.  The
formula requires each Fund to distribute to shareholders  during a calendar year
an amount  equal to at least 98% of a Fund's  ordinary  income for the  calendar
year,  at least 98% of the  excess of its  capital  gains  over  capital  losses
(adjusted for certain ordinary losses as prescribed in the Code) realized during
the one-year  period ending October 31 during such year, and all ordinary income
and capital gains for prior years that were not previously distributed.

Investment  company  taxable  income  includes  dividends,  interest  (including
original issue discount amortization) and net short-term capital gains in excess
of net long-term capital losses, less expenses.  Net realized capital gains of a
Fund for a fiscal  year are  computed by taking  into  account any capital  loss
carry forward of such Fund to the extent allowed by the Internal Revenue Code.

If any net realized long-term capital gains in excess of net realized short-term
capital losses are not distributed by a Fund for reinvestment, requiring federal
income taxes to be paid thereon by the Fund,  the Fund intends to elect to treat
such capital  gains as having been  distributed  to  shareholders.  As a result,
shareholders  will report such capital gains as long-term capital gains, will be
able to claim their share of federal income taxes paid by the Fund on such gains
as a credit against their own federal income tax liability, and will be entitled
to increase the adjusted  tax basis of their  shares by the  difference  between
their pro rata share of such gains and their tax credit.

Distributions  of investment  company taxable income are taxable to shareholders
as  ordinary  income.  Under  the  federal  income  tax law,  a  portion  of the
difference  between  the  purchase  price  and the face  amount  of zero  coupon
securities  ("original  issue  discount")  will be treated as income to any Fund
holding  securities with original issue discount each year,  although no current
payments  will be  received  by such  Fund with  respect  to such  income.  This
original issue  discount  amortization  will comprise a part of that  investment
company  taxable income of such Fund that must be distributed to shareholders in
order to maintain its  qualification  as a regulated  investment  company and to
avoid federal income tax at the Fund level.  Taxable shareholders of such a Fund
will be subject  to income tax on such  original  issue  discount  amortization,
whether or not they elect to receive their  distributions  in cash. In the event
that a Fund acquires a debt instrument at a market discount, it is possible that
a portion of any gain  recognized on the  disposition of such  instrument may be
treated as ordinary income.

Since the Funds invest primarily in zero coupon  securities upon which they will
not receive cash payments of interest,  to the extent  shareholders of the Funds
elect to take their  distributions in cash, these Funds may have to generate the
required  cash from  interest  earned on  non-zero  coupon  securities  from the
disposition  of such  securities,  or possibly from the  disposition  of some of
their zero coupon securities.

Distributions of the excess of net long-term capital gain over net short-term



<PAGE>



capital loss are taxable to shareholders as long-term  capital gain,  regardless
of the  length of time the  shares of the  relevant  Fund have been held by such
shareholders.  Such  distributions  are not eligible for the  dividends-received
deduction.  Any loss realized upon the  redemption of shares held at the time of
redemption for six months or less will be treated as a long-term capital loss to
the extent of any amounts  treated as  distributions  of long-term  capital gain
during such six-month period.

Distributions  of investment  company  taxable  income and net realized  capital
gains will be taxable whether received in shares or in cash.

The  foregoing  is  only a  summary  of  certain  tax  considerations  generally
affecting the Funds and their shareholders. Investors are urged to consult their
tax advisors  with  specific  reference to their own tax  situations,  including
state and local tax liability.

CALCULATION OF YIELD AND TOTAL RETURN

From time to time,  the Funds may  advertise  yield and total return for various
periods of investment.  Such information will always include uniform performance
calculations  based on  standardized  methods  established by the Securities and
Exchange Commission, and may also include other total return information.  Yield
is based  on  historical  earnings  and  total  return  is  based on  historical
calculated  earnings;  neither  is  intended  to  indicate  future  performance.
Performance  information  should be considered in light of the Funds' investment
objectives  and  policies,   characteristics  and  quality  of  their  portfolio
securities and the market conditions during the applicable period and should not
be  considered  as a  representation  of what  may be  achieved  in the  future.
Investors  should  consider  these  factors in  addition to  differences  in the
methods used in calculating performance information,  and the impact of taxes on
alternative  investments when comparing a particular  Fund's  performance to the
performance data published for alternative investments.

Standardized Performance Information

Average Annual Total Return. For each of the Funds,  standardized average annual
total  return is  computed by finding the  average  annual  compounded  rates of
return 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 to
the ending redeemable value according to the following formula:

   
         T =  (ERV/P)^(1/n) - 1
    

         Where:

         T =  average annual total return;

         n =  number of years and portion of a year;


<PAGE>



         ERV = ending  redeemable value (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 to be deducted,  assuming
         redemption at the end of the period;

         P = $1,000 (the  hypothetical  initial payment before  deduction of the
         maximum sales load); and

   
         ^ =  raised to the power of.
    


  Average Annual Total Return      Series 2001                    Series 2006
  for the Period Ended 4/30/97

1-Year (total return)                  2.28%                          1.59%
5-year                                 7.88%                          9.66%
From Inception                         8.40%                          9.57%

Current Yield.  Current yield quotations for the Funds are based on a 30-day (or
one month) period,  and are computed by dividing the net  investment  income per
share earned  during the period by the maximum  offering  price per share on the
last day of the period, according to the following formula:

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

          a = dividends and interest earned during the period;

          b = expenses accrued for the period (net of reimbursements);

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

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

   
                ^ =               to the power of.

For  purposes  of  this  calculation,  income  earned  on  debt  obligations  is
determined  by  applying  a  calculated   yield-to-maturity  percentage  to  the
obligations  held during the period.  The yields for The Funds,  Series 2001 and
2006,  for the  30-day  period  ended  April  30,  1997 were  5.69%  and  5.89%,
respectively. When advertising yield, a Fund will not advertise a one-month or a
30-day  period  which  ends  more  than 45 days  before  the date on  which  the
advertisement is published.     

Other Performance Information




<PAGE>



The Funds may,  from time to time,  include in their  advertisements  quotations
computed for a time period,  or by a method which differs from the  computations
described in the foregoing section.

Average  Annual Total Return.  The Funds may  advertise an average  annual total
return  calculation for any appropriate  time period,  based upon the value of a
net  investment  in the  Fund,  after  deduction  of the  maximum  sales  charge
according to the following formula:

   
                T =               n(ERV/P)^(1/n) -1
    

                where:
                      T =                 average annual total return;

                      n =                 number of years and portion of a year;

                      ERV =               ending  redeemable  value
                                          (of the hypothetical $1,000
                                          investment)  at the  end of
                                          any period after  deduction
                                          of    all     non-recurring
                                          charges   to  be   deducted
                                          assuming  redemption at the
                                          end of the period;

                       P                  = $1,000 (the hypothetical initial net
                                          investment   after  deduction  of  the
                                          sales load).

   
                       ^ =                raised to the power of.
    


   Average Annual Total Return      Series 2001                  Series 2006
   ended April 30, 1997
1-year (total return)                   6.54%                        5.81%
5-year                                  8.76%                        10.55%
From Inception                          9.09%                        10.27%

Anticipated  Growth  Rate.  The  anticipated  growth  rate is a  calculation  of
predicted  return.  Anticipated  growth will consist  primarily of the estimated
amortization of discount on the zero coupon  securities in a Fund and, to a much
lesser degree, of projected cash flow on  income-producing  securities in excess
of  estimated  expenses.  The  anticipated  growth rate is the rate which,  when
compounded on a semi-annual  basis,  equates the current  market value of a Zero
Coupon Fund to the sum of the present values of the payments to be received from
securities   held  in  the  Fund.  It  is  calculated   net  of  expenses  on  a
bond-equivalent  basis in order to facilitate comparison with returns obtainable
from U.S. Treasury notes, bonds and stripped (zero coupon)  securities,  if held
directly.  The  calculation  is based on certain  assumptions  (See  "Investment
Objectives and Policies"). A shareholder who redeems prior to maturity of



<PAGE>



a Fund may  experience  a  significantly  different  investment  return than was
anticipated at time of purchase.

   
Performance  information  for the Funds may be  compared  to various  un-managed
indices,  such as the Dow Jones  Industrial  Average,  the S&P 500 or the Lehman
Brothers  Aggregate Index, as well as indices of similar mutual funds. The Funds
may  also  include  in  their  advertising   rankings  published  by  recognized
statistical  services or publishers such as Lipper  Analytical  Services,  Inc.,
Wiesenberger  Investment  Companies  Services  or  rankings  published  by other
comparable national services which rank mutual funds.
    

GENERAL

The Trust's  Declaration  of Trust  permits its  Trustees to issue an  unlimited
number of full and  fractional  shares of  beneficial  interest and to divide or
combine the shares  into a greater or lesser  number of shares  without  thereby
changing the proportionate  beneficial interest in a Fund. Each share represents
an interest in a Fund proportionately equal to the interest of each other share.
If the Trust were to liquidate,  all shareholders of a Fund would share pro rata
in its net assets available for  distribution to  shareholders.  If they deem it
advisable  and in the best  interests  of  shareholders,  the Board  may  create
additional  classes  of shares  which may  differ  from  each  other  only as to
dividends or, as is the case with the Funds,  each of which has separate  assets
and liabilities (in which case any such class would have a designation including
the word "Series").  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.  Income
and operating expenses are allocated fairly among the series by the Trustees.

   
As of June 10,  1997,  the officers and Trustees of the Trust owned less than 1%
of the shares of any Funds.  As of June 10, 1997, the following  account holders
held  in  excess  of 5% of the  Funds:  B.  Mc  Phearson,  605 W  Grant  Avenue,
Charleston, IL 61920-3262, owned 5.71% of the outstanding shares of Series 2001;
G. J.  McPhearson,  as  custodian  under a Uniform  Transfer to Minors Act,  361
Bunker Hill,  Belleville,  IL 62221-5765,  controlled  9.13% of the  outstanding
shares of Series 2001; S.W. Heriot,  guardian, 9118 Little Sweden Road, Cook, MN
55723-8814,  owned 5.40% of Series 2001;  and J. May and N. May, 35  Interlachen
Place, Tonka Bay, MN 55331-9522,  jointly owned 10.76% of the outstanding shares
of Series 2006.
    

Except for the  election  of  Trustees  and  ratification  of the  selection  of
accountants,  any matter  required to be  submitted to  shareholder  vote is not
deemed to have been  effectively  acted upon unless approved by the holders of a
"majority"  (as  defined in the Rule) of the voting  securities  of each  Series
affected by the matter.

   
The Trust's custodian,  Firstar Trust Company, formerly known as First Wisconsin
Trust Company, is responsible for holding the Funds' assets.
    



<PAGE>



Pursuant to an Administrative Services Agreement (the "Agreement"),  AAL Capital
Management   Corporation  (the  "Adviser")   provides  certain   administrative,
accounting and pricing services to the Funds,  including:  calculating the daily
net asset value per share;  maintaining  original  entry  documents and books of
record and general ledgers; posting cash receipts and disbursements; reconciling
bank account  balance  monthly;  recording  purchases  and sales;  and preparing
monthly  and  annual  summaries  to  assist  in  the  preparation  of  financial
statements of, and regulatory reports for, the Funds. The 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.  The
Adviser has agreed to provide these services at rates which would not exceed the
rates charged by unaffiliated vendors for similar services.  The initial rate of
payment  for these  services  is  $25,000  per Fund per  year,  plus the cost of
outside  pricing  services but only to the extent the Adviser is not voluntarily
absorbing  any expenses of that Fund.  The present  agreement  provides that the
annual rates of payment are:

        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

The  Agreement  will  continue  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 and in either case 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  assigned  and may be
terminated  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.

The Trust's  independent  accountants,  Price Waterhouse LLP, examine the Funds'
annual financial statements, assist in the preparation of certain reports to the
Securities  and  Exchange  Commission  and prepare the Trust's  state and Funds'
federal tax returns.

Financial Statements

   
The  financial  statements,  notes to  financial  statements  and report of
independent  accountants  for  the  Funds  included  in  the  Annual  Report  to
Shareholders  of the  Trust,  for the year  ended  April 30,  1997,  are  hereby
incorporated by reference.
    



<PAGE>



                              THE AAL MUTUAL FUNDS

                                     PART C

                                OTHER INFORMATION

Item 24.                 Financial Statements and Exhibits

        (a)                      Financial Statements

The audited  financial  statement of the Trust for The AAL U.S.  Government Zero
Coupon Target Funds,  Series 2001 and 2006,  for the fiscal year ended April 30,
1997, which have been filed electronically,  are included and/or incorporated by
reference into this  Post-Effective  Amendment to this  Registration  Statement.
Such report contains the information required in parts (a) and (b) of this item.

        (b)                      Exhibits

Except as noted below, all required  exhibits have been previously filed and are
incorporated by reference from the Registrant's  Registration  Statement on Form
N-1A (File No. 33-12911), as amended:

        (10)             Opinion and Consent of Counsel
        
        (11)             Consent of Independent Accountants;

        (27)             Financial Data Schedule  

        
Item 25.                 Persons Controlled by or under Common Control with
                         Registrant

AAL Capital Management  Corporation (the "Adviser" and "Distributor" for The AAL
Mutual Funds ("Trust")) was organized in 1986 as a Delaware corporation,  all of
the



<PAGE>



shares of which are owned by AAL Holdings Inc., a wholly-owned subsidiary of the
Aid Association for Lutherans ("AAL"). AAL is a non-profit, non-stock membership
organization,  licensed to do business  as a  fraternal  benefit  society in all
states. Under an Investment Advisory Agreement and a Distribution Agreement with
the Trust,  and subject to the supervision of the Funds' Board of Trustees,  AAL
Capital Management Corporation provides the investment advisory, administrative,
shareholder, distribution and other services for the Funds.

Item 26.          Number of Holders of Securities

On May 30, 1997, the following were the numbers of record holders of the series
of the Registrant covered by this filing:

             The AAL U.S. Government Zero Coupon Target Funds, Series 2001 - 224
             The AAL U.S. Government Zero Coupon Target Funds, Series 2006 - 230

Item 27.          Indemnification

Under Section 12 of Article  Seventh of the  Registrant's  Declaration of Trust,
the Trust 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
("disability conduct").

The Trust shall indemnify its 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, non-party Trustees, or (b) independent legal counsel in a written
opinion.

Advancements 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  registrant is 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



<PAGE>



may be permitted to trustees,  officers and  controlling  persons of  Registrant
pursuant to the foregoing provision,  or otherwise,  Registrant has 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 Registrant of expenses  incurred or
paid by a trustee, officer or controlling person of Registrant 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,
Registrant  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 28.          Business and Other Connections of The Investment Adviser

AAL Capital Management  Corporation (the "Adviser") is the investment adviser of
the  Registrant.  For  information as to the business,  profession,  vocation or
employment  of a  substantial  nature of the Adviser,  refer to Parts A and B of
this Registration  Statement and to Form ADV filed under the Investment Advisers
Act of 1940 by the Adviser.

Item 29.          Principal Underwriters

                  (a)      None

                  (b)

<TABLE>
<CAPTION>

Name and Principal Business Address                    Positions and                      Positions and Offices with
                                                       Offices with                       Registrant
                                                       Underwriter
<C>                                                    <C>                                <C>
Ronald G. Anderson                                     Chairman of the                    Trustee
222 W. College Ave.                                    Board of Directors
Appleton, WI 54919                                     President, Director


Robert G. Same                                         Executive Vice                     Secretary and
222 W. College Ave.                                    President, COO                     Vice President
Appleton, WI  54919                                    Secretary and
                                                       Director

Terrance P. Gallagher                                  Senior Vice                        Treasurer
222 W. College Ave.                                    President, CFO,
Appleton, WI  54919                                    Treasurer and
                                                       Director
</TABLE>



<PAGE>


<TABLE>
<CAPTION>
Name and Principal Business Address                    Positions and                      Positions and Offices with
                                                       Offices with                       Registrant
                                                       Underwriter
<C>                                                    <C>                                <C>
Robert Roth                                            Senior Vice                        None
222 W. College Ave.                                    President
Appleton, WI  54919

James H. Abitz                                         Director                           None
222 W. College Ave.
Appleton, WI  54915

Woody Eno                                              Director                           None
222 W. College Avenue
Appleton, WI 54914

Jerome Laubenstein                                     Director                           None
4321 N. Ballard Rd.
Appleton, WI 54919

Steven Weber                                           Director                           None
4321 N. Ballard Rd.
Appleton, WI 54919

Anthony De Angelis                                     Vice President                     None
222 West College Ave.
Appleton, WI 54919

Kenneth E. Podell                                      Assistant                          None
222 West College Ave.                                  Secretary
Appleton, WI  54919

Paul Stadler                                           Vice                               None
222 West College Ave.                                  President
Appleton, WI  54919

Lori Richardson                                        Vice President                     None
222 West College Ave.
Appleton, WI  54919


</TABLE>
<PAGE>


<TABLE>
<CAPTION>
Name and Principal Business Address                    Positions and                      Positions and Offices with
                                                       Offices with                       Registrant
                                                       Underwriter

<C>                                                    <C>                                <C>
Charles Gariboldi, Jr                                  Assistant Vice                     Assistant Treasurer
222 West College Ave.                                  President
Appleton, WI  54919

Wendy Schmidt                                          Assistant Vice                     None
222 West College Ave.                                  President
Appleton, WI  54919

Charles Friedman                                       Assistant Vice                     None
222 West College Ave.                                  President
Appleton, WI  54919

Joseph Wreschnig                                       Assistant Vice                     Assistant Secretary
222 West College Ave.                                  President and
Appleton, WI  54919                                    Assistant
                                                       Secretary

Roger Johnson                                          Director                           None
4321 N Ballard Road
Appleton, WI  54919

</TABLE>

Item 30.          Location of Accounts and Records.

The accounts,  books and other documents required to be maintained by Registrant
pursuant to Section  31(a) of The  Investment  Company Act of 1940 and the rules
promulgated  thereunder are in the possession of the Registrant and Registrant's
Custodian as follows:  all documents  required to be maintained by Rule 31a-1(b)
will be maintained by Registrant,  except that records required to be maintained
by paragraph (2)(iv) of Rule 31a-1(b) will be maintained by the Custodian.

Item 31.          Management Services

Not applicable

Item 32.          Undertakings

The  Registrant  further  undertakes  that,  at the request of the  shareholders
holding 10% or more of the outstanding shares of the Registrant,  the Registrant
will hold a special  meeting  for the  purpose of  considering  the removal of a
trustee  from  office,  and  the  Registrant  will  cooperate  with  and  assist
shareholders  of record who notify the Registrant  that they wish to communicate
with the other  shareholders for the purpose of obtaining  signatures to request
such a meeting,  all pursuant to and in  accordance  with  Section  16(c) of the
Investment Company Act, as amended.

Registrant undertakes to furnish a copy of the Registrant's latest annual report
to  shareholders,  upon  request  and without  charge,  to each person to whom a
prospectus is delivered.



<PAGE>



SIGNATURES

Pursuant  to  the  requirements  of the  Securities  Act of  1933  and  the
Investment Company Act of 1940, the Registrant  certifies that this filing meets
the  requirements  of Rule  485(b) and has duly  caused  this  amendment  to its
Registration  Statement to be signed on its behalf by the  undersigned,  thereto
duly authorized, in the City of Appleton and State of Wisconsin, on the 24th day
of June, 1997.

THE AAL MUTUAL FUNDS


/s/Ronald G. Anderson         *
-----------------------------
Ronald G. Anderson, President

Pursuant to the  requirements  of the Securities Act of 1933,  this amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.

/s/ John H. Pender*                
---------------------------------        Trustee                  June 24, 1997
John H. Pender

/s/  Richard L. Gady*                    Trustee                  June 24, 1997
---------------------------------
Richard L. Gady

/s/  D. W. Russler*                      Trustee                  June 24, 1997
-----------------------------------
D. W. Russler

/s/  Lawrence M. Woods*                  Trustee                  June 24, 1997
----------------------------
Lawrence M. Woods

/s/  F. Gregory Campbell*                Trustee                  June 24, 1997
------------------------------
F. Gregory Campbell

/s/ Richard L. Gunderson*                Trustee                  June 24, 1997
-----------------------------
Richard L. Gunderson

/s/ Terrance P. Gallagher                Principal                June 24, 1997
------------------------------           Financial and
Terrance P. Gallagher                    Accounting
                                         Officer

/s/ Ronald G. Anderson
------------------------------
Ronald G. Anderson, Trustee
Pursuant to Powers of Attorney

<PAGE>



POWER OF ATTORNEY

NOW ALL MEN BY THESE PRESENTS that the person whose signature appears below
constitutes Ron Anderson to act as 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 (including post-effective amendments) to the Registration Statement
on Form N-1A of The AAL Mutual Funds, and to the file the same, 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/ Richard L. Gunderson
Richard L. Gunderson,
as Trustee, but not
individually

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below
constitutes Ron Anderson, to act as 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 (including post-effective amendments) to the Registration
Statement on Form N-1A of The AAL Mutual Funds, and to the file the same, 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 H. Pender
John H. Pender
as Trustee, but not
individually

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below
constitutes Ron Anderson to act as 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 (including post-effective amendments) to the Registration Statement
on Form N-1A of The AAL Mutual Funds, and to the file the same, 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/ D.W. Russler
D.W. Russler,
as Trustee, but not
individually

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below
constitutes Ron Anderson to act as 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 (including post-effective amendments) to the Registration Statement
on Form N-1A of The AAL Mutual Funds, and to the file the same, 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/ F. Gregory Campbell
F. Gregory Campbell,
as Trustee, but not
individually

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below
constitutes Ron Anderson to act as 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 (including post-effective amendments) to the Registration Statement
on Form N-1A of The AAL Mutual Funds, and to the file the same, 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/ Richard L. Gady
Richard L. Gady,
as Trustee, but not
individually

<PAGE>
POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below
constitutes Ron Anderson to act as 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 (including post-effective amendments) to the Registration Statement
on Form N-1A of The AAL Mutual Funds, and to the file the same, 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,
as Trustee, but not
individually

<PAGE>


                                 EXHIBIT INDEX


24(b)(10)      Opinion and Consent of Counsel 
               
     (11)      Consent of Independent Accountants

     (27)      Financial Data Schedule