SUB-ADVISORY AGREEMENT

                              THE AAL MUTUAL FUNDS
                         SUB-ADVISORY AGREEMENT FOR THE
                            AAL HIGH YIELD BOND FUND
                                      WITH
                      PACIFIC INVESTMENT MANAGEMENT COMPANY


     AGREEMENT made this 12th day of June,  2000, by and among THE AAL
MUTUAL  FUNDS  (the  "Fund"),  a  Massachusetts   business  trust,  AAL  CAPITAL
MANAGEMENT  CORPORATION  (the  "Adviser"),  a Delaware  corporation  and PACIFIC
INVESTMENT  MANAGEMENT  COMPANY  LLC (the  "Sub-Adviser"),  a  Delaware  limited
liability company.

                                   WITNESSETH:

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

1.   In General.

     The  Sub-Adviser  agrees,  as  more  fully  set  forth  herein,  to  act as
Sub-Adviser to the Fund with respect to the investment and  reinvestment  of the
assets of the Fund's series of shares described as The AAL High Yield Bond Fund.
It is  understood  that the Fund has  designated,  and  there  presently  exist,
several other series of the Fund's  shares,  and that the Fund may create one or
more  additional  series from time to time in the future.  This Agreement may be
amended by the  mutual  written  agreement  of the  parties to include  any such
additional series under the terms of this Agreement.

2.   Duties and  Obligations  of the  Sub-Adviser  with Respect to Investment of
     Assets of the High Yield Bond Fund.

          (a) Subject to the  succeeding  provisions of this section and subject
     to the oversight and review of the Adviser and the direction and control of
     the Board of Trustees  ("Trustees") of the Fund, the Sub-Adviser,  as agent
     and  attorney-in-fact  with  respect  to the Fund,  is  authorized,  in its
     discretion  and with prior  consultation  with the Fund,  on behalf of each
     series covered from time to time by this Agreement, to:

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

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

          (iii)Enter  into  and  execute  agreements  on  behalf  of  the  Fund,
               relating to the  acquisition or disposition of investment  assets
               and the execution of portfolio  transactions.  Nothing  contained
               herein,  however, shall be deemed to authorize the Sub-Adviser to
               take or receive  physical  possession  of any cash or  securities
               held for the Fund, it being intended that sole responsibility for
               safekeeping  thereof and the  consummation of all such purchases,
               sales,  deliveries,  and  investments  made  pursuant to the Sub-
               Adviser's direction shall rest upon the Fund's Custodian; and

          (iv) Provide  the Adviser and the  Trustees  with such  reports as may
               reasonably be requested in  connection  with the discharge of the
               foregoing  responsibilities  and the  discharge of the  Adviser's
               responsibilities under the Investment Advisory Agreement with the
               Fund and those of AAL Capital  Management  Corporation  under the
               Distribution Agreement with the Fund.

          Written  procedures  with respect to (i),  (ii) and (iii) above may be
     set forth as agreed to among the Fund, the Adviser and Sub-Adviser.

          (b) Any investment  purchases or sales made by the  Sub-Adviser  under
     this section shall at all times conform to, and be in accordance  with, any
     requirements  imposed by: (1) the provisions of the Investment  Company Act
     of 1940 (the "Act") and of any rules or  regulations  in force  thereunder;
     (2)  any  other  applicable   provisions  of  law;  (3)  any  policies  and
     determinations  of  the  Board  of  Trustees  of  the  Fund;  and  (4)  the
     fundamental  policies  of  the  Fund,  as  reflected  in  its  Registration
     Statement  under the Act,  or as amended by the  shareholders  of the Fund;
     provided that copies of the items  referred to in clauses (3) and (4) shall
     have been furnished to the Sub-Adviser.

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

          (d) Nothing in this  Agreement  shall prevent the  Sub-Adviser  or any
     "affiliated  person" (as defined in the Act) of the Sub-Adviser from acting
     as investment adviser or manager for any other person,  firm or corporation
     and shall  not in any way limit or  restrict  the  Sub-Adviser  or any such
     affiliated person from buying, selling or trading any securities for its or
     their own accounts or for the accounts of others for whom it or they may be
     acting,  provided,  however, that the Sub-Adviser expressly represents that
     it will  undertake no activities  which,  in its judgment,  will  adversely
     affect the performance of its obligations to the Fund under this Agreement.
     It is agreed that the Sub-Adviser shall have no responsibility or liability
     for the accuracy or completeness of the Fund's Registration Statement under
     the Act and the Securities Act of 1933 except for  information  supplied by
     the Sub-Adviser for inclusion  therein.  The Sub-Adviser shall be deemed to
     be an independent  contractor and, unless otherwise  expressly  provided or
     authorized,  have no authority  to act or represent  the Fund in any way or
     otherwise be deemed an agent of the Fund.

          (e) In connection with its duties to arrange for the purchase and sale
     of the securities and other assets of each series covered from time to time
     by this Agreement, the Sub-Adviser shall follow the principles set forth in
     any investment  advisory  agreement in effect from time to time between the
     Fund and the Adviser, provided that a copy of any such agreement shall have
     been provided to the Sub-Adviser. The Sub-Adviser will promptly communicate
     to the  Adviser  and to the  officers  and the  Trustees  of the Fund  such
     information  relating  to  portfolio  transactions  as they may  reasonably
     request.

          (f) The Sub-Adviser may place orders both as to sales and purchases of
     assets directly through any broker or dealer it chooses. Brokers or dealers
     may be selected who provide  brokerage and/or research services to the Fund
     and/or other accounts over which the Sub-Adviser or its affiliates exercise
     investment   discretion.   Brokers  or  dealers   who   execute   portfolio
     transactions  on behalf of the Fund may  receive  commissions  which are in
     excess of the amount of  commissions  which other  brokers or dealers would
     have charged for effecting such transactions. In order to cause the Fund to
     pay such higher  commissions,  the Sub-Adviser must determine in good faith
     that  such  commissions  are  reasonable  in  relation  to the value of the
     brokerage and/or research  services  provided by such executing  brokers or
     dealers viewed in terms of a particular  transaction  or the  Sub-Adviser's
     overall  responsibilities  to the Fund or its  other  discretionary  client
     accounts.  The  Sub-Adviser  shall not be liable for any act or omission of
     any securities  brokerage firm or firms designated by the Adviser or chosen
     with reasonable care.

          (g) On occasions when the Sub-Adviser  deems the purchase or sale of a
     security to be in the best  interest of the Fund as well as other  clients,
     the   Sub-Adviser,   to  the  extent   permitted  by  applicable  laws  and
     regulations,  may aggregate the securities to be sold or purchased in order
     to obtain the best execution and lower  brokerage  commissions,  if any. In
     such event,  allocation of the  securities so purchased or sold, as well as
     the expenses  incurred in the transaction,  will be made by the Sub-Adviser
     in the manner it considers to be most  equitable  and  consistent  with its
     fiduciary obligations to the Fund and to such clients.

          The  Sub-Adviser  may  purchase or sell for the Fund,  pursuant to the
     Fund's Rule I0f-3  Procedures,  any security  (including  securities of the
     same class as those underwritten or other securities of the same or related
     issuer)  for  which  any  affiliate  of  the  Sub-Adviser  acts  as  (1) an
     underwriter  (either as lead underwriter or syndicate member),  both during
     the pendency of any  underwriting or selling  syndicate and thereafter,  or
     (2) a market  maker,  provided  that  such  security  is  purchased  from a
     non-affiliated party.

3.   Allocation of Expenses.

         During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities, and other investments (including
brokerage commissions and other transaction charges, if any) purchased for the
Fund. The Sub-Adviser agrees that it will furnish the Fund, at the Sub-Adviser's
expense, with all office space, facilities, equipment, and clerical personnel
necessary for carrying out its duties under this Agreement.

4.   Certain Records.

          Any records  required to be maintained  and preserved  pursuant to the
     provisions  of Rule 31a-1 and Rule 31a-2 under the Act that are prepared or
     maintained by the Sub-Adviser on behalf of the Fund are the property of the
     Fund and will be surrendered promptly to the Fund or Adviser on request.

5.   Reference to the Sub-Adviser.

          Neither the Fund,  the Adviser or any affiliate or agent thereof shall
     make  reference  to or  use  the  name  of  the  Sub-Adviser  or any of its
     affiliates in any  advertising or promotional  materials  without the prior
     approval  of the  Sub-Adviser,  which  approval  shall not be  unreasonably
     withheld.

6.   Compensation of the Sub-Adviser.

          The Adviser agrees to pay the Sub-Adviser  and the Sub-Adviser  agrees
     to accept as full compensation for all services rendered by the Sub-Adviser
     as such, a management fee, payable quarterly in arrears and computed on the
     average  daily net  asset  value of The AAL High  Yield  Bond Fund at rates
     shown on Exhibit A attached hereto.

7.   Duration and Termination.

          (a) This  Agreement  shall go into  effect for The AAL High Yield Bond
     Fund  on  July  1,  2000,  or as  soon  thereafter  as it  is  approved  by
     shareholders  of that Fund,  and shall,  unless  terminated as  hereinafter
     provided, continue in effect thereafter from year to year, but only so long
     as such  continuance  is  specifically  approved  at  least  annually  by a
     majority of the Fund's Board of Trustees,  or by the vote of the holders of
     a "majority" (as defined in the Act) of the outstanding  voting  securities
     of the Fund, with respect to the High Yield Bond Fund, and, in either case,
     a  majority  of the  Trustees  who are not  parties  to this  Agreement  or
     "interested  persons"  (as  defined  in the Act) of any such  party cast in
     person at a meeting called for the purpose of voting on such approval.

          (b) This  Agreement may be terminated by the  Sub-Adviser  at any time
     without  penalty  upon  giving  the Fund and the  Adviser  sixty (60) days'
     written notice (which notice may be waived by the Fund and Adviser) and may
     be terminated  by the Fund or the Adviser at any time without  penalty upon
     giving the Sub-Adviser sixty (60) days' written notice (which notice may be
     waived by the  Sub-Adviser),  provided  that such  termination  by the Fund
     shall be  directed  or  approved  by the vote of a  majority  of all of the
     Trustees  in office at the time or by the vote of the holders of a majority
     (as defined in the Act) of the voting  securities of the Fund, with respect
     to The AAL High Yield Bond Fund, or with respect to any other series of the
     Fund  covered  by  this  Agreement,  by  the  vote  of a  majority  of  the
     outstanding  shares of such  series.  This  Agreement  shall  automatically
     terminate in the event of its  "assignment"  (as defined in the Act).  This
     Agreement  will also  terminate in the event that the  Investment  Advisory
     Agreement is terminated.  Furthermore,  the Fund and the Adviser understand
     and agree that Pacific  Investment  Management  Company LLC was  indirectly
     acquired by Allianz AG on May 5, 2000.

8.   Agreement Binding Only On Fund Property.

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



<PAGE>


9.   Action By An Individual Series.

          The  provisions  of this  Agreement  and any  amendments  hereto  with
     respect  to The AAL High  Yield  Bond Fund or any other  series of the Fund
     covered  hereby may be  approved  by the  shareholders  of such  series and
     become  effective  with  respect to the assets of such  series  without the
     necessity of approval  thereof by  shareholders  of any other  series.  The
     Adviser represents that the holders of a majority (as defined in the "Act")
     of The AAL High  Yield  Bond Fund will vote on  approval  of the entry into
     this Agreement on behalf of said series.

10.  Notices.

          The  Sub-Adviser   agrees  to  promptly  notify  the  Adviser  of  the
     occurrence of any of the following events:

          (a) Any change in any of the Sub-Adviser's portfolio managers;

          (b) The  Sub-Adviser  fails to be registered as an investment  adviser
     under the Advisers Act or under the laws of any  jurisdiction  in which the
     Sub-Adviser is required to be registered as an investment  adviser in order
     to perform its obligations under this Agreement;

          (c) The  Sub-Adviser is the subject of any action,  suit,  proceeding,
     inquiry  or  investigation  at law or in equity,  before any court,  public
     board or body,  involving the affairs of the Fund or another  series of the
     Fund covered by this Agreement, or

          (d) Any change in ownership or control,  or  partnership  structure of
     the Sub-Adviser.

     11.  Manner of Notice.

          Any notice  given  hereunder  shall be in writing and may be served by
     being sent by telex, facsimile or other electronic transmission, or sent by
     registered  mail or by courier to the address set forth below for the party
     for which it is intended.  A notice  served by mail shall be deemed  served
     seven  days  after  mailing  and in the case of telex,  facsimile  or other
     electronic  transmission,  twelve hours after  confirmed  receipt  thereof.
     Addresses for notice may be changed by written notice to the other party.



<PAGE>


                  The Adviser:     Robert G. Same, President
                                   AAL Capital Management Corporation
                                   222 West College Avenue
                                   Appleton, WI 54919-0007
                                   Fax: (920)730-3783

                  The Fund:        Robert G. Same, President
                                   The AAL Mutual Funds
                                   222 West College Avenue
                                   Appleton, WI 54919-0001
                                   Fax: (920) 734-5721

                  The Sub-Adviser: Craig Dawson
                                   Pacific Investment Management Company
                                   800 Newport Center Drive
                                   Suite 300
                                   Newport Beach, CA 92660
                                   Fax: (949) 720-1376
                                   cc: Chief Administrative Officer

         No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by all of the
parties.

         The Adviser and the Fund acknowledges receipt of the Sub-Adviser's Part
II, Form ADV at least 48 hours in advance of signing this Agreement.

         The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule, or
otherwise, the remainder of this Agreement shall not be affected thereby.

         The Adviser represents to the Sub-Adviser that the Adviser has all
necessary power and authority to execute, deliver and perform this Agreement and
all transactions contemplated hereby, and such execution, delivery and
performance will not violate and applicable law, rule, regulation, governing
document, contract or other material agreement binding upon the Adviser

         The Sub-Adviser is expressly authorized to rely upon any and all
instructions, approvals and notices given on behalf of the Fund whose names,
titles and specimen signatures appear in Exhibit B attached hereto. The Adviser
may amend such Exhibit B from time to time by written notice to the Sub-adviser.
The Sub-Adviser shall continue to rely upon these instructions until notified by
the Adviser to the contrary.

         This Agreement shall be governed by the laws of the State of Wisconsin.

         This Agreement shall be executed in two counterparts, each of which
shall be considered to be an original.

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

                                     THE AAL MUTUAL FUNDS

                                     /s/Robert G. Same
                                     -----------------------------------
                                     Robert G. Same, President


                                     AAL CAPITAL MANAGEMENT CORPORATION

                                     /s/Robert G. Same
                                     ------------------------------------
                                     Robert G. Same, President


                                     PACIFIC INVESTMENT MANAGEMENT COMPANY

                                     /s/William R. Benz II
                                     -------------------------------------
                                     William R. Benz II, Managing Director






  EXHIBIT A TO THE AAL MUTUAL FUNDS SUB-ADVISORY AGREEMENT (Dated June 12)

     1.   The AAL High Yield Bond Fund

     The  management  fee for The AAL  High  Yield  Bond  Fund,  payable  to the
Sub-Adviser by the Adviser, calculated in accordance with paragraph 6 of The AAL
Mutual Funds  Sub-Advisory  Agreement,  shall be at the annual rate of: 25 basis
points.




<PAGE>


 EXHIBIT B TO THE AAL MUTUAL FUNDS SUB-ADVISORY AGREEMENT (Dated June 12)

         The Adviser authorizes the following person to convey instructions,
approvals and notices to the Sub-Adviser on behalf of the Adviser:


Robert G. Same, President                    /s/Robert G. Same
                                             ----------------------------------

James H. Abitz, Sr. Vice President           /s/James H. Abitz
                                             ----------------------------------

Reginald L. Pfeifer, AAL Fixed Income        /s/Reginald L. Pfeifer
                                             ----------------------------------

Frederick D. Kelsven, Secretary              /s/Frederick D. Kelsven
                                             ----------------------------------

Charles D. Gariboldi, Treasurer              /s/Charles D. Gariboldi
                                             ----------------------------------