ADMINISTRATIVE SERVICES AGREEMENT

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

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

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

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

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

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

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

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

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

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

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


2.   Rate of Payment for the Services.

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

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

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

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

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

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

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

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

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

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

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

12.  Miscellaneous.

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

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

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

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

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

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

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

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

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

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



<PAGE>



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

                                             THE AAL MUTUAL FUNDS


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



                                             AID ASSOCIATION FOR LUTHERANS


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



<PAGE>



                                   SCHEDULE A

         Services to be performed by AAL:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



<PAGE>

                                   SCHEDULE B

                            Effective January 1, 1999



                           The AAL Capital Growth Fund

                                The AAL Bond Fund

                           The AAL Municipal Bond Fund

                            The AAL Money Market Fund

                           The AAL Mid Cap Stock Fund

                          The AAL Small Cap Stock Fund

                           The AAL International Fund

                           The AAL Equity Income Fund

                              The AAL Balanced Fund

                            The High Yield Bond Fund

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

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



<PAGE>



                                   SCHEDULE C

                              CONTRACT FEE SCHEDULE

                            EFFECTIVE JANUARY 1, 1999





The AAL Capital Growth Fund                                      $40,000

The AAL Bond Fund                                                $40,000

The AAL Municipal Bond Fund                                      $40,000

The AAL Money Market Fund                                        $40,000

The AAL Mid Cap Stock Fund                                       $40,000

The AAL Small Cap Stock Fund                                     $40,000

The AAL International Fund                                       $45,000

The AAL Equity Income Fund                                       $40,000

The AAL Balanced Fund                                            $40,000

The High Yield Bond Fund                                         $40,000

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

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





                                 AMENDMENT NO. 1
                                       TO
                        ADMINISTRATIVE SERVICES AGREEMENT


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

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

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

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



ATTEST:                                      THE AAL MUTUAL FUNDS


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


ATTEST:                                      AID ASSOCIATION FOR LUTHERANS


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





                                   SCHEDULE B

                                  LIST OF FUNDS

                           EFFECTIVE DECEMBER 31, 1999


1.       The AAL Capital Growth Fund

2.       The AAL Bond Fund

3.       The AAL Municipal Bond Fund

4.       The AAL Money Market Fund

5.       The AAL Mid Cap Stock Fund

6.       The AAL Small Cap Stock Fund

7.       The AAL International Fund

8.       The AAL Equity Income Fund

9.       The AAL Balanced Fund

10.      The AAL High Yield Bond Fund

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

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

13.      The AAL Large Company Index Fund

14.      The AAL Mid Cap Index Fund

15.      The AAL Bond Index Fund




                                   SCHEDULE C

                              CONTRACT FEE SCHEDULE

                           EFFECTIVE DECEMBER 31, 1999


1.       The AAL Capital Growth Fund                                  $40,000

2.       The AAL Bond Fund                                            $40,000

3.       The AAL Municipal Bond Fund                                  $40,000

4.       The AAL Money Market Fund                                    $40,000

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

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

7.       The AAL International Fund                                   $45,000

8.       The AAL Equity Income Fund                                   $40,000

9.       The AAL Balanced Fund                                        $40,000

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

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

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

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

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

15.      The AAL Bond Index Fund                                      $35,000