ADMINISTRATIVE SERVICES AGREEMENT

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

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

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

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

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

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

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

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

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

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

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


2.   Rate of Payment for the Services.

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

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

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

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

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

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

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

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

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

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

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

12.  Miscellaneous.  

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

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

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

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

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

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

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

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

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

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



<PAGE>



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

                                             THE AAL MUTUAL FUNDS



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



                                             AID ASSOCIATION FOR LUTHERANS



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




<PAGE>



                                   SCHEDULE A

     Services to be performed by AAL:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



<PAGE>


                                   SCHEDULE B

                            Effective January 1, 1999



                           The AAL Capital Growth Fund

                                The AAL Bond Fund

                           The AAL Municipal Bond Fund

                            The AAL Money Market Fund

                           The AAL Mid Cap Stock Fund

                          The AAL Small Cap Stock Fund

                           The AAL International Fund

                           The AAL Equity Income Fund

                              The AAL Balanced Fund

                            The High Yield Bond Fund

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

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





<PAGE>


                                   SCHEDULE C

                              Contract Fee Schedule

                            Effective January 1, 1999





The AAL Capital Growth Fund                                           $40,000

The AAL Bond Fund                                                     $40,000

The AAL Municipal Bond Fund                                           $40,000

The AAL Money Market Fund                                             $40,000

The AAL Mid Cap Stock Fund                                            $40,000

The AAL Small Cap Stock Fund                                          $40,000

The AAL International Fund                                            $45,000

The AAL Equity Income Fund                                            $40,000

The AAL Balanced Fund                                                 $40,000

The High Yield Bond Fund                                              $40,000

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

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