WNL SEPARATE ACCOUNT A, 485APOS, 1998-05-26

WNL SEPARATE ACCOUNT A
485APOS, 1998-05-26

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File Nos. 33-86464
811-8862
==============================================================================

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 5 [X]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 8 [X]

(Check appropriate box or boxes.)

AGA Separate Account A
___________________________
(Exact Name of Registrant)

American General Annuity Insurance Company
________________________________________
(Name of Depositor)

2919 Allen Parkway L4-80, Houston, Texas 77019
____________________________________________________ __________
(Address of Depositor's Principal Executive Offices) (Zip Code)

Depositor's Telephone Number, including Area Code (713) 888-7800

Name and Address of Agent for Service
Beverli J. Lee, Associate General Counsel
American General Annuity Insurance Company
2919 Allen Parkway L4-80
Houston, TX 77019

Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866

It is proposed that this filing will become effective:

_____ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ if on (date) pursuant to paragraph (b)of Rule 485
__X__ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485

If appropriate, check the following box:

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

Title of Securities Registered:
Individual Variable Annuity Contracts

CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- --------

<S> <C> <C>
PART A

Item 1. Cover Page Cover Page

Item 2. Definitions Definitions

Item 3. Synopsis Highlights

Item 4. Condensed Financial Information Condensed Financial
- - - - Information

Item 5. General Description of Registrant,
Depositor, and Portfolio Companies The Company; The
Separate Account;
AGA Series Trust

Item 6. Deductions and Expenses Charges and Deductions

Item 7. General Description of Variable
Annuity Contracts The Contracts

Item 8. Annuity Period Annuity Provisions

Item 9. Death Benefit. Proceeds Payable on
Death

Item 10. Purchases and Contract Value Purchase Payments and
Contract Value

Item 11. Redemptions Withdrawals

Item 12. Taxes Federal Tax Status

Item 13. Legal Proceedings Legal Proceedings

Item 14. Table of Contents of the Statement
of Additional Information Table of Contents of the
Statement of Additional
Information
</TABLE>

CROSS REFERENCE SHEET (CONT'D)
(required by Rule 495)
Item No. Location
- -------- --------
PART B
<S> <C> <C>
Item 15. Cover Page Cover Page

Item 16. Table of Contents Table of Contents

Item 17. General Information and History The Company

Item 18. Services Not Applicable

Item 19. Purchase of Securities Being Offered Not Applicable

Item 20. Underwriters Distributor

Item 21. Calculation of Performance Data Performance Information

Item 22. Annuity Payments Annuity Provisions

Item 23. Financial Statements Financial Statements
</TABLE>

PART C

Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.

PART A

AGA SEPARATE ACCOUNT A
(formerly, WNL Separate Account A)

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(formerly, Western National Life Insurance Company)

Supplement dated June 1, 1998

The Prospectus to which this supplement is attached is hereby amended in
the following manner:

<TABLE>
<CAPTION>
<S> <C>
ITEM 1: This Prospectus and SAI are dated June 1, 1998.

ITEM 2: For the period from June 1, 1998, through June 15, 1998, broker-dealers
who sell the Contracts will be paid commissions up to an amount equal
to 10% of Purchase Payments.

ITEM 3: The section entitled "CONDENSED FINANCIAL INFORMATION - ACCUMULATION
UNIT VALUES" is revised as follows: The Separate Account's Financial
Statements have been audited by Ernst & Young LLP, independent certified
public accountants, whose report thereon is included in the SAI.

ITEM 4: The section entitled "The Company" is revised as follows: American
General Annuity Insurance Company, which had $11.7 billion in assets as
of December 31, 1997, develops, markets, and issues annuity products
through niche distribution channels. Effective February 25, 1998,
Western National Corporation became a wholly-owned subsidiary of AGC Life
Insurance Company, a subsidiary of American General Corporation.

ITEM 5: The Table of Contents of the SAI is revised to replace "Experts" with
"Independent Auditors."

ITEM 6: The address of the Executive Office is: 2919 Allen Parkway, Houston,
Texas 77019.

ITEM 7: For Contracts issued on or after June 1, 1998, the Annuity Service
Office address is: 205 E. Tenth Avenue, Amarillo, TX 79105,
1-800-288-4088.
</TABLE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(formerly, Western National Life Insurance Company)

Executive Office: Annuity Service Office:
5555 San Felipe, Suite 900 P.O. Box 290721
Houston, TX 77056 Wethersfield, CT
713-888-7800 06129-0721
1290 Silas Deane Highway
Wethersfield, CT 06109-4303
1-800-910-4455

INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS
WITH FLEXIBLE PURCHASE PAYMENTS
ISSUED BY
AGA SEPARATE ACCOUNT A
(FORMERLY, WNL SEPARATE ACCOUNT A)
AND
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY, WESTERN NATIONAL LIFE INSURANCE COMPANY)

The Individual Fixed and Variable Deferred Annuity Contracts with Flexible
Purchase Payments (the "Contracts") described in this Prospectus provide for
accumulation of Contract Values on a fixed or variable basis and payment of
annuity payments on a fixed and variable basis. The Contracts are designed for
use by individuals in retirement plans on a Qualified or Non-Qualified basis.
(See "Definitions.")

Purchase Payments for the Contracts will be allocated to a segregated investment
account of American General Annuity Insurance Company (the "Company"), which
account has been designated AGA Separate Account A (the "Separate Account"), or
to the Company's General Account. Under certain circumstances, however, Purchase
Payments initially may be allocated to the State Street Global Advisors
Money Market Sub-Account of the Separate Account. (See "Highlights.") The
Separate Account invests in shares of AGA Series Trust (formerly, WNL Series
Trust). (See "AGA Series Trust.") AGA Series Trust is a series fund with
seven Portfolios currently available: Credit Suisse Growth and Income
Portfolio, Credit Suisse International Equity Portfolio, EliteValue
Portfolio, State Street Global Advisors Growth Equity Portfolio, State Street
Global Advisors Money Market Portfolio, Salomon Brothers U.S. Government
Securities Portfolio, and Van Kampen American Capital Emerging Growth Portfolio.
Prior to May 1, 1998, the Credit Suisse Growth and Income Portfolio was known
as the BEA Growth and Income Portfolio, the EliteValue Portfolio was known as
the EliteValue Asset Allocation Portfolio, the State Street Global Advisors
Growth Equity Portfolio was known as the Global Advisors Growth Equity
Portfolio and the State Street Global Advisors Money Market Portfolio was known
as the Global Advisors Money Market Portfolio.

THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY
ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENT IN THE
CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE OWNER'S INVESTMENT
TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED, THE VALUE MAY BE HIGHER OR
LOWER THAN THE PURCHASE PAYMENTS.

This Prospectus concisely sets forth the information for a prospective investor.
Additional information about the Contracts is contained in the Statement of
Additional Information (the "SAI") which is available at no charge. The SAI has
been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated herein by reference. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding registrants that file electronically with the
SEC. The Table of Contents of the SAI can be found on Page 19 of this
Prospectus. For a copy of the SAI, call 1-800-910-4455 or write to the Company's
Annuity Service Office at the address listed above.

INQUIRIES:

Any inquiries can be made by telephone or in writing to the Annuity Service
Office listed above.

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

This Prospectus and the SAI are dated May 1, 1998.

This Prospectus should be kept for future reference.

<TABLE>
<CAPTION>
TABLE OF CONTENTS

Page
<S> <C>
DEFINITIONS
HIGHLIGHTS
FEE TABLE
CONDENSED FINANCIAL INFORMATION
THE COMPANY
THE SEPARATE ACCOUNT
AGA SERIES TRUST
Credit Suisse Growth and Income Portfolio
Credit Suisse International Equity Portfolio
EliteValue Portfolio
State Street Global Advisors Growth Equity Portfolio
State Street Global Advisors Money Market Portfolio
Salomon Brothers U.S. Government Securities Portfolio
Van Kampen American Capital Emerging Growth Portfolio
Voting Rights
Substitution of Securities
CHARGES AND DEDUCTIONS
Deduction for Contingent Deferred Sales Charge (Sales Load)
Reduction or Elimination of the Contingent Deferred Sales Charge
Deduction for Mortality and Expense Risk Charge
Deduction for Enhanced Death Benefit Charge
Deduction for Annual Step-Up Death Benefit Charge
Deduction for Administrative Charge
Deduction for Contract Maintenance Charge
Deduction for Premium and Other Taxes
Deduction for Expenses of the Trust
THE CONTRACTS
Owner
Joint Owners
Annuitant
Assignment
PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments
Allocation of Purchase Payments
Bonus
Dollar Cost Averaging
Contract Value
Accumulation Units
Accumulation Unit Value
TRANSFERS
Transfers Prior to the Annuity Date
Transfers During the Annuity Period
Sweep Account Program
ASSET ALLOCATION PROGRAMS
Asset Allocation - Portfolio Rebalancing
Asset Allocation - Financial Intermediaries
WITHDRAWALS
Systematic Withdrawal Option
Texas Optional Retirement Program
Suspension or Deferral of Payments
PROCEEDS PAYABLE ON DEATH
Death of Owner During the Accumulation Period
Death Benefit Amount During the Accumulation Period
Enhanced Death Benefit Amount During the Accumulation Period
Annual Step-Up Death Benefit Amount During the Accumulation Period
Death Benefit Options During the Accumulation Period
Death of Owner During the Annuity Period
Death of Annuitant
Payment of Death Benefit
Beneficiary
Change of Beneficiary
ANNUITY PROVISIONS
General
Annuity Date
Selection or Change of an Annuity Option
Frequency and Amount of Annuity Payments
Annuity
Fixed Annuity
Variable Annuity
Annuity Options
DISTRIBUTOR
ADMINISTRATION OF THE CONTRACTS
PERFORMANCE INFORMATION
Money Market Sub-Account
Other Sub-Accounts
FEDERAL TAX STATUS
General
Diversification
Multiple Contracts
Contracts Owned by Other than Natural Persons
Tax Treatment of Assignments
Income Tax Withholding
Tax Treatment of Withdrawals - Non-Qualified Contracts
Qualified Plans
Tax Treatment of Withdrawals - Qualified Contracts
Tax-Sheltered Annuities - Withdrawal Limitations
Section 457 - Deferred Compensation Plans
FINANCIAL STATEMENTS
LEGAL PROCEEDINGS
TABLE OF CONTENTS OF THE SAI

</TABLE>

DEFINITIONS

ACCUMULATION PERIOD: The period during which Purchase Payments may be made prior
to the Annuity Date.

ACCUMULATION UNIT: A unit of measure used to determine the value of the Owner's
interest in a Sub-Account of the Separate Account during the Accumulation
Period.

ADJUSTED CONTRACT VALUE: The Contract Value less any applicable premium tax and
Contract Maintenance Charge. This amount is applied to the applicable Annuity
Tables to determine Annuity Payments.

ADMINISTRATIVE CHARGE: A deduction from the Separate Account which equals, on an
annual basis, .15% of the average daily net asset value of the Separate Account.

AGE: The age of any Owner or Annuitant on his/her last birthday.

ANNUITANT: The natural person on whose life Annuity Payments are based. On or
after the Annuity Date, the Annuitant shall also include any Joint Annuitant.

ANNUITY DATE: The date on which Annuity Payments begin.

ANNUITY OPTIONS: Options available for Annuity Payments.

ANNUITY PAYMENTS: The series of payments made to the Owner or any named payee
after the Annuity Date under the Annuity Option selected.

ANNUITY PERIOD: The period of time beginning with the Annuity Date during which
the Annuity Payments are made.

ANNUITY SERVICE OFFICE: The office indicated on the Cover Page of this
Prospectus to which notices and requests must be sent.

ANNUITY UNIT: A unit of measure used to calculate Variable Annuity payments
during the Annuity Period.

BENEFICIARY: The person(s) or entity(ies) who/that will receive the death
benefit.

BONUS: An additional amount paid by the Company, equal to 1% of the initial
Purchase Payment and, as of May 1, 1998, subject to state regulatory approval,
an amount equal to 1% of certain subsequent Purchase Payments. The Bonus will be
paid for subsequent Purchase Payments of at least $5,000 for Non-Qualified
Contracts or $2,000 for Qualified Contracts. The Bonus will not be paid for
subsequent Purchase Payments made prior to May 1, 1998. A Bonus is recapturable
by the Company under certain circumstances. See the discussion of the Bonus in
this Prospectus for more information.

COMPANY: American General Annuity Insurance Company (formerly, Western National
Life Insurance Company).

CONTRACT ANNIVERSARY: An anniversary of the Issue Date.

CONTRACT VALUE: The sum of the Owner's interest in the General Account and the
Sub-Accounts of the Separate Account during the Accumulation Period.

CONTRACT YEAR: The first Contract Year is the annual period which begins on the
Issue Date. Subsequent Contract Years begin on each Contract Anniversary.

FIXED ANNUITY: A series of payments made during the Annuity Period that are
guaranteed as to dollar amount by the Company.

GENERAL ACCOUNT: The Company's general investment account which contains all the
assets of the Company with the exception of the Separate Account and other
segregated asset accounts.

INVESTMENT OPTION: An investment entity into which assets of the Separate
Account will be invested.

ISSUE DATE: The date on which the Contract became effective.

MORTALITY AND EXPENSE RISK CHARGE: An amount deducted by the Company from the
Separate Account each Valuation Period which is equal, on an annual basis, to
1.25% of the average daily net asset value of the Separate Account.

NON-QUALIFIED CONTRACTS: Contracts issued under non-qualified plans which do not
receive favorable tax treatment under Sections 401, 403(b), 408 or 457 of the
Internal Revenue Code of 1986, as amended (the "Code").

OWNER: The person or entity entitled to the ownership rights stated in the
Contract.

PORTFOLIO: A segment of an Investment Option which constitutes a separate and
distinct class of shares.

PURCHASE PAYMENT: A payment made by or on behalf of an Owner with respect to the
Contract.

QUALIFIED CONTRACTS: Contracts issued under Qualified Plans which receive
favorable tax treatment under Sections 401, 403(b), 408 or 457 of the Code.

SEPARATE ACCOUNT: The Company's Separate Account designated as AGA Separate
Account A.

SUB-ACCOUNT: Separate Account assets are divided into Sub-Accounts. Assets of
each Sub-Account will be invested in shares of an Investment Option or a
Portfolio of an Investment Option.

VALUATION DATE: Each day on which the Company and the New York Stock Exchange
("NYSE") are open for business.

VALUATION PERIOD: The period of time beginning at the close of business of the
NYSE on each Valuation Date and ending at the close of business for the next
succeeding Valuation Date.

VARIABLE ANNUITY: An annuity with payments which vary as to dollar amount in
relation to the investment performance of specified Sub-Accounts of the Separate
Account.

WRITTEN REQUEST: A request in writing, in a form satisfactory to the Company,
which is received by the Annuity Service Office, at the address listed above.

HIGHLIGHTS

The Contract may be returned to the Company for any reason within 10 calendar
days after its receipt by the Owner (or, if the Contract is issued in
California, 30 calendar days after the date of receipt if the Owner is 60 years
old as of the Issue Date, or 20 calendar days of the date of receipt with
respect to the circumstances described in (c) below). (See "Right to Examine.")
It may be returned to the Company at its Annuity Service Office, or to the agent
through whom it was purchased. When the Contract is received by the Company at
its Annuity Service Office, it will be voided as if it had never been in force.
Upon its return, the Company will refund the Contract Value, less the Bonus (see
"Bonus" on page 14) next computed after receipt of the Contract by the Company
at its Annuity Service Office, except in the following circumstances: (a) when
the Contract is purchased pursuant to an Individual Retirement Annuity; (b) in
those states which require the Company to refund Purchase Payments, less
withdrawals; or (c) in the case of Contracts which are deemed by certain states
to be replacing an existing annuity or insurance contract and which require the
Company to refund Purchase Payments, less withdrawals. With respect to the
circumstances described in (a), (b), and (c) above, the Company will refund the
greater of Purchase Payments, less any withdrawals, or the Contract Value, less
any Bonus, and will allocate initial Purchase Payments to the State Street
Global Advisors Money Market Sub-Account until the expiration of 15 days from
the Issue Date (or 25 days in the case of Contracts described under (c) above).
Upon the expiration of the 15-day period (or 25-day period with respect to
Contracts described under (c) above), the Sub-Account value of the State Street
Global Advisors Money Market Sub-Account will be allocated to the Separate
Account and the General Account in accordance with the election made by the
Owner in the Application.

An Owner may choose between the Standard Death Benefit, the Enhanced Death
Benefit or, for Contracts issued on or after May 1, 1998, the Annual Step-Up
Death Benefit.

Each Valuation Period, the Company deducts a Mortality and Expense Risk Charge
from the Separate Account which is equal, on an annual basis, to 1.25% of the
average daily net asset value of the Separate Account. This charge compensates
the Company for assuming the mortality and expense risks under the Contracts.
(See "Charges and Deductions - Deduction for Mortality and Expense Risk
Charge.")

If the Owner selects the Enhanced Death Benefit, each Valuation Period prior to
the 75th birthday of the Owner, or oldest Joint Owner, the Company deducts an
Enhanced Death Benefit Charge from the Separate Account which is equal, on an
annual basis, to .05% of the average daily net asset value of the Separate
Account. This charge compensates the Company for assuming the mortality risks
for the Enhanced Death Benefit. (See "Charges and Deductions - Deduction for
Enhanced Death Benefit Charge.")

If the Owner selects the Annual Step-Up Death Benefit, each Valuation Period
prior to the 75th birthday of the Owner, or Oldest Joint Owner, the Company
deducts an Annual Step-Up Death Benefit charge from the Separate Account which
is equal, on an annual basis, to .10% of the average daily net asset value of
the Separate Account. This charge compensates the Company for assuming the
mortality risks for the Annual Step-Up Death Benefit. (See "Charges and
Deductions - Deduction for Annual Step-Up Death Benefit.") This benefit may not
be available in your state. (Check with your registered representative regarding
availability.)

Each Valuation Period, the Company deducts an Administrative Charge from the
Separate Account which is equal, on an annual basis, to .15% of the average
daily net asset value of the Separate Account. This charge compensates the
Company for costs associated with the administration of the Contracts and the
Separate Account. (See "Charges and Deductions - Deduction for Administrative
Charge.")

On each Contract Anniversary, the Company deducts a Contract Maintenance Charge
of $30 from the Contract Value by subtracting values from the General Account
and/or by canceling Accumulation Units from each applicable Sub-Account.
However, during the Accumulation Period, if the Contract Value on the Contract
Anniversary is at least $40,000, then no Contract Maintenance Charge is
deducted. If a total withdrawal is made on other than a Contract Anniversary and
the Contract Value for the Valuation Period during which the total withdrawal is
made is less than $40,000, the full Contract Maintenance Charge will be deducted
at the time of the total withdrawal. The charge will be deducted from the
General Account and the Sub-Accounts in the same proportion that the amount of
Contract Value in the General Account and each Sub-Account bears to the total
Contract Value. During the Annuity Period, the Contract Maintenance Charge will
be deducted pro rata from Annuity Payments regardless of Contract size and will
result in a reduction of each Annuity Payment. (See "Charges and Deductions -
Deduction for Contract Maintenance Charge.")

Premium taxes will be charged against the Contract. Some states assess premium
taxes when Purchase Payments are made. Other states assess premium taxes upon
annuitization. It is the Company's current practice to deduct for premium taxes
when they become due and payable to the states. (See "Charges and Deductions -
Deduction for Premium and Other Taxes.")

The Company will, at the time of the initial Purchase Payment and, as of May 1,
1998 (subject to state regulatory approval), for certain subsequent Purchase
Payments, add an additional amount as a bonus ("Bonus"),equal to 1% of such
Purchase Payment made under the Contract. A Bonus will be paid for subsequent
Purchase Payments of at least $5,000 for Non-Qualified Contracts or $2,000 for
Qualified Contracts. The Bonus will not be paid for subsequent Purchase Payments
made prior to May 1, 1998. Such additional amount will be allocated to the Sub-
Accounts of the Separate Account and/or the General Account in the same manner
as the Purchase Payment. If the Owner makes a withdrawal prior to the seventh
Contract year after any applicable Purchase Payment in excess of (a) 10% of the
Contract Value each Contract Year or (b) the amount permitted under the
Systematic Withdrawal Option (see "Withdrawals - Systematic Withdrawal Option"),
an amount equal to the Bonus allocable to such Purchase Payment withdrawn will
be deducted by the Company from the Contract Value. (See "Purchase Payments and
Contract Value - Bonus.")

There is a 10% federal income tax penalty that may be applied to the income
portion of any distribution from the Contracts. However, under certain
circumstances, the penalty is not imposed. (See "Federal Tax Status - Tax
Treatment of Withdrawals - Non-Qualified Contracts" and "Tax Treatment of
Withdrawals - Qualified Contracts.") For a further discussion of the taxation of
the Contracts, see "Federal Tax Status."

For Contracts purchased in connection with 403(b) plans, withdrawals of amounts
attributable to contributions made pursuant to a salary reduction agreement (as
defined in Section 403(b)(11) of the Internal Revenue Code) are limited to
circumstances only when the Owner: (a) attains age 59 1/2; (b) separates from
service; (c) dies; (d) becomes disabled (within the meaning of Section 72(m)(7)
of the Internal Revenue Code); or (e) in the case of hardship. Withdrawals for
hardship are restricted to the portion of the Owner's Contract Value which
represents contributions made by the Owner and does not include any investment
results. The limitations on withdrawals became effective on January 1, 1989, and
apply only to: (a) salary reduction contributions made after December 31, 1988;
(b) income attributable to such contributions; and (c) income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers or transfers between certain Qualified Plans. Tax penalties may
also apply. (See "Federal Tax Status - Tax Treatment of Withdrawals -
Qualified Contracts.") Owners should consult their own tax counsel or other tax
adviser regarding any distributions. (See "Federal Tax Status - Tax-Sheltered
Annuities - Withdrawal Limitations.")

See "Federal Tax Status - Diversification" for a discussion of owner control
of the underlying investments in a Variable Annuity contract.

Because of certain exemptive and exclusionary provisions, interests in the
General Account are not registered under the Securities Act of 1933 and the
General Account is not registered as an investment company under the Investment
Company Act of 1940, as amended. Accordingly, neither the General Account nor
any interests therein are subject to the provisions of these acts, and the
Company has been advised that the staff of the SEC has not reviewed the
disclosures in the Prospectus relating to the General Account. Disclosures
regarding the General Account may, however, be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.

AGA SEPARATE ACCOUNT A FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES

Contingent Deferred Sales Charge Length of Time Charge
(see Note 2 below) From Purchase Payment (as a percentage of
(Number of Years) the amount withdrawn)
<S> <C> <C>
1 5%
2 5%
3 5%
4 4%
5 3%
6 2%
7 1%
8 or more 0%

Transfer Fee (see Note 3 below) None

Contract Maintenance Charge (see Note 4 below) $30 per Contract per Contract Year
</TABLE>

SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)

<S> <C>
Mortality and Expense Risk Charge 1.25%
Administrative Charge .15%
- - --------------------------------------
Total Separate Account Annual Expenses 1.40%
</TABLE>

OPTIONAL SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)

Enhanced Death Benefit Charge (see Note 5 below) .05%
Annual Step-Up Death Benefit Charge (see Note 5 below) .10%

AGA SERIES TRUST ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)

Management Other Expenses Total Annual
Fees* (after expense Portfolios
reimbursement)** Expenses
<S> <C> <C> <C>
Credit Suisse Growth and Income Portfolio .75% .12% .87%
Credit Suisse International Equity Portfolio .90% .12% 1.02%
EliteValue Portfolio .65% .12% .77%
State Street Global Advisors Growth Equity
Portfolio .61% .12% .73%
State Street Global Advisors Money Market
Portfolio .45% .12% .57%
Salomon Brothers
U.S. Government Securities Portfolio .475% .12% .595%
Van Kampen American Capital
Emerging Growth Portfolio .75% .12% .87%
<FN>
* AGA INVESTMENT ADVISORY SERVICES, INC., THE TRUST'S INVESTMENT ADVISER
("ADVISER"), HAS AGREED TO WAIVE THAT PORTION OF ITS MANAGEMENT FEES WHICH IS IN
EXCESS OF THE AMOUNT PAYABLE BY THE ADVISER TO EACH SUB-ADVISER PURSUANT TO THE
RESPECTIVE SUB-ADVISORY AGREEMENTS FOR EACH PORTFOLIO UNTIL MAY 1, 1998.
THEREAFTER, THE FEES SHOWN IN THE TABLE ABOVE WILL BE CHARGED. (SEE THE TRUST
PROSPECTUS FOR MORE INFORMATION ON ADVISORY AND SUB-ADVISORY FEES.) THE EXAMPLES
BELOW ARE CALCULATED BASED UPON THE DEDUCTION OF THE FULL MANAGEMENT FEES.

** THE COMPANY HAS UNDERTAKEN TO REIMBURSE EACH PORTFOLIO FOR ALL OPERATING
EXPENSES, EXCLUDING MANAGEMENT FEES, THAT EXCEED .12% OF EACH PORTFOLIO'S
AVERAGE DAILY NET ASSETS UNTIL MAY 1, 1999. HAD THE COMPANY NOT REIMBURSED SUCH
EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1997, THE RATIO OF OTHER EXPENSES
(AS A PERCENTAGE OF NET ASSETS OF A PORTFOLIO) WOULD HAVE BEEN:
2.51% FOR THE CREDIT SUISSE GROWTH AND INCOME PORTFOLIO; 4.16% FOR THE CREDIT
SUISSE INTERNATIONAL EQUITY PORTFOLIO; 2.11% FOR THE ELITEVALUE PORTFOLIO; 2.68%
FOR THE STATE STREET GLOBAL ADVISORS GROWTH EQUITY PORTFOLIO; 3.72% FOR THE
STATE STREET GLOBAL ADVISORS MONEY MARKET PORTFOLIO; 4.37% FOR THE SALOMON
BROTHERS U.S. GOVERNMENT SECURITIES PORTFOLIO; AND 4.90% FOR THE VAN KAMPEN
AMERICAN CAPITAL EMERGING GROWTH PORTFOLIO. THE EXAMPLES BELOW ARE CALCULATED
BASED UPON SUCH REIMBURSEMENT OF EXPENSES.
</FN>
</TABLE>

EXAMPLES
CALCULATED WITHOUT ENHANCED DEATH BENEFIT CHARGE OR ANNUAL STEP-UP
BENEFIT CHARGE

A Contract Owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets: (a) if the Contract is surrendered at the
end of each time period or (b) if the Contract is not surrendered or if the
Contract is annuitized.

Time Periods

1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Credit Suisse Growth and Income Sub-Account a)$73.27 $ 121.69 $152.73 $262.76
b) 23.27 71.69 122.73 262.76
Credit Suisse International Equity Sub-Account a)$74.81 $ 126.42 $160.84 $280.12
b) 24.81 76.42 130.84 280.12
EliteValue Sub-Account a)$72.24 $ 118.53 $147.32 $251.18
b) 22.24 68.53 117.32 251.18
State Street Global Advisors Growth Equity
Sub-Account a)$71.83 $ 117.26 $145.16 $246.55
b) 21.83 67.26 115.16 246.55
State Street Global Advisors Money Market
Sub-Account a)$70.19 $ 112.21 $136.51 $228.03
b) 20.19 62.21 106.51 228.03
Salomon Brothers a)$70.45 $ 113.00 $137.86 $230.92
U.S. Government Securities Sub-Account b) 20.45 63.00 107.86 230.92
Van Kampen American Capital a)$73.27 $ 121.69 $152.73 $262.76
Emerging Growth Sub-Account b) 23.27 71.69 122.73 262.76

</TABLE>

CALCULATED WITH ENHANCED DEATH BENEFIT CHARGE

(See "Charges and Deductions - Deduction for Enhanced Death Benefit Charge.")

Time Periods

1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Credit Suisse Growth and Income Sub-Account a)$73.78 $ 123.23 $155.30 $267.91
b) 23.78 73.23 125.30 267.91
Credit Suisse International Equity Sub-Account a)$75.32 $ 127.96 $163.40 $285.23
b) 25.32 77.96 133.40 285.23
EliteValue Sub-Account a)$72.76 $ 120.07 $149.90 $256.36
b) 22.76 70.07 119.90 256.36
State Street Global Advisors Growth Equity
Sub-Account a)$72.35 $ 118.81 $147.74 $251.75
b) 22.35 68.81 117.74 251.75
State Street Global Advisors Money Market
Sub-Account a)$70.71 $ 113.76 $139.10 $233.27
b) 20.71 63.76 109.10 233.27
Salomon Brothers a)$70.96 $ 114.55 $140.45 $236.16
U.S. Government Securities Sub-Account b) 20.96 64.55 110.45 236.16
Van Kampen American Capital a)$73.78 $ 123.23 $155.30 $267.91
Emerging Growth Sub-Account b) 23.78 73.23 125.30 267.91

</TABLE>

CALCULATED WITH ANNUAL STEP-UP DEATH BENEFIT CHARGE

(See "Charges and Deductions - Deduction for Annual Step-Up Death Benefit
Charge.")

<TABLE>
<CAPTION>
Time Periods

1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Credit Suisse Growth and Income Sub-Account a)$74.29 $124.77 $157.87 $273.04
b) 24.29 74.77 127.87 273.04
Credit Suisse International Equity Sub-Account a)$75.83 $129.50 $165.96 $290.32
b) 25.83 79.50 135.96 290.32
EliteValue Sub-Account a)$73.27 $121.61 $152.47 $261.52
b) 23.27 71.61 122.47 261.52
State Street Global Advisors Growth Equity
Sub-Account a)$72.86 $120.35 $150.32 $256.91
b) 22.86 70.35 120.32 256.91
State Street Global Advisors Money Market
Sub-Account a)$71.22 $115.30 $141.68 $238.48
b) 21.22 65.30 111.68 238.48
Salomon Brothers a)$71.47 $116.09 $143.03 $241.36
U.S. Government Securities Sub-Account b) 21.47 66.09 113.03 241.36
Van Kampen American Capital a)$74.29 $124.77 $157.87 $273.04
Emerging Growth Sub-Account b) 24.29 74.77 127.87 273.04

</TABLE>

NOTES TO FEE TABLE AND EXAMPLES

1. The purpose of the Fee Table is to assist Owners in understanding the
various costs and expenses that an Owner will incur directly or indirectly. For
additional information, see "Charges and Deductions" in this Prospectus and the
Prospectus for AGA Series Trust.

2. After the first Contract Anniversary, a withdrawal of up to 10% of the
Contract Value, determined as of the immediately preceding Contract Anniversary,
may be withdrawn once each Contract Year on a non-cumulative basis without the
imposition of the Contingent Deferred Sales Charge. The Systematic Withdrawal
Option may be selected in lieu of the 10% free withdrawal amount. (See
"Withdrawals - Systematic Withdrawal Option.")

3. Currently, no transfer fee is imposed on transfers. The Company reserves
the right to impose such a fee in the future which will not exceed the lesser of
$25 or 2% of the amount transferred.

4. During the Accumulation Period, if the Contract Value on the Contract
Anniversary is at least $40,000, then no Contract Maintenance Charge is
deducted. If a total withdrawal is made on other than a Contract Anniversary and
the Contract Value for the Valuation Period during which the total withdrawal is
made is less than $40,000, the full Contract Maintenance Charge will be deducted
at the time of the total withdrawal. During the Annuity Period, the full charge
will be deducted regardless of Contract size.

5. An Owner may elect one of the following death benefits: the Standard Death
Benefit, the Enhanced Death Benefit or, for Contracts issued on or after May 1,
1998, the Annual Step-Up Death Benefit. There are three sets of Examples above.
One set has been calculated for the Standard Death Benefit, another with the
Enhanced Death Benefit Charge and a third with the Annual Step-Up Death Benefit
Charge. In certain states, the Annual Step-Up Death Benefit may not be
available.

6. Premium taxes are not reflected. Premium taxes may apply. (See "Charges
and Deductions - Deduction for Premium and Other Taxes.")

7. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.

CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES

The following schedule includes Accumulation Unit Values for the periods
indicated. This data has been extracted from the Separate Account's Financial
Statements. The Separate Account's Financial Statements have been audited by
Coopers & Lybrand L.L.P., independent certified public accountants, whose
report thereon is included in the SAI. This information should be read in
conjunction with the Separate Account's Financial Statements and related notes
thereto, which are included in the SAI. Two sets of unit values are presented,
one with the Enhanced Death Benefit Charge of .15%, (which was the charge for
the Enhanced Death Benefit as of December 31, 1995, 1996 and 1997) and one
without the Enhanced Death Benefit Charge. There are no unit values presented
for Contracts with the Annual Step-Up Death Benefit Charge because the Annual
Step-Up Death Benefit first became available under the Contracts on May 1,
1998.

WITHOUT ENHANCED DEATH WITH ENHANCED DEATH
BENEFIT CHARGE BENEFIT CHARGE
<S> <C> <C>
CREDIT SUISSE GROWTH AND INCOME SUB-ACCOUNT
FOR PERIOD ENDED 12/31/95
Unit value at beginning of period (10/20/95) $ 10.00 Not Applicable
Unit value at end of period $ 10.62 Not Applicable
Number of units outstanding at end of period 461.8 Not Applicable
FOR YEAR ENDED 12/31/96
Unit value at beginning of period $ 10.62 $ 10.62
Unit value at end of period $ 11.92 $ 11.90
Number of units outstanding at end of period 48,634.3 $ 11,709.8
FOR YEAR ENDED 12/31/97
Unit value at beginning of period $ 11.92 $ 11.90
Unit value at end of period $ 14.38 $ 14.33
Number of units outstanding at end of period 262,116.1 44,598.0
CREDIT SUISSE INTERNATIONAL EQUITY SUB-ACCOUNT
FOR PERIOD ENDED 12/31/95
Unit value at beginning of period (10/20/95) $ 10.00 Not Applicable
Unit value at end of period $ 10.36 Not Applicable
Number of units outstanding at end of period 430.6 Not Applicable
FOR YEAR ENDED 12/31/96
Unit value at beginning of period $ 10.36 $ 10.36
Unit value at end of period $ 11.90 $ 11.88
Number of units outstanding at end of period 17,186.2 8,510.2
FOR YEAR ENDED 12/31/97
Unit value at beginning of period $ 11.90 $ 11.88
Unit value at end of period $ 12.24 $ 12.20
Number of units outstanding at end of period 126,400.0 19,510.4
ELITEVALUE SUB-ACCOUNT
FOR PERIOD ENDED 12/31/96
Unit value at beginning of period (1/2/96) $ 10.00 $ 10.00
Unit value at end of period $ 12.45 12.43
Number of units outstanding at end of period 69,575.7 13,965.2
FOR YEAR ENDED 12/31/97
Unit value at beginning of period $ 12.45 $ 12.43
Unit value at end of period $ 14.87 $ 14.82
Number of units outstanding at end of period 461,930.1 72,104.8
STATE STREET GLOBAL ADVISORS GROWTH EQUITY SUB-ACCOUNT
FOR PERIOD ENDED 12/31/95
Unit value at beginning of period (10/20/95) $ 10.00 Not Applicable
Unit value at end of period $ 10.33 Not Applicable
Number of units outstanding at end of period 124.2 Not Applicable
FOR YEAR ENDED 12/31/96
Unit value at beginning of period $ 10.33 $ 10.33
Unit value at end of period $ 12.35 $ 12.33
Number of units outstanding at end of period 68,154.9 5,232.7
FOR YEAR ENDED 12/31/97
Unit value at beginning of period $ 12.35 $ 12.33
Unit value at end of period $ 16.04 $ 15.99
Number of units outstanding at end of period 231,208.0 19,281.5
STATE STREET GLOBAL ADVISORS MONEY MARKET SUB-ACCOUNT
FOR PERIOD ENDED 12/31/95
Unit value at beginning of period (10/10/95) $ 10.00 $ 10.00
Unit value at end of period $ 10.09 $ 10.08
Number of units outstanding at end of period 2,464.4 24.9
FOR YEAR ENDED 12/31/96
Unit value at beginning of period $ 10.09 $ 10.08
Unit value at end of period $ 10.46 10.44
Number of units outstanding at end of period 109,837.9 3,403.7
FOR YEAR ENDED 12/31/97
Unit value at beginning of period $ 10.46 $ 10.44
Unit value at end of period $ 10.88 $ 10.84
Number of units outstanding at end of period 444,954.0 13,476.5
SALOMON BROTHERS U.S. GOVERNMENT SECURITIES SUB-ACCOUNT
FOR PERIOD ENDED 12/31/96
Unit value at beginning of period (2/6/96) $ 10.00 $ 10.00
Unit value at end of period $ 10.16 $ 10.14
Number of units outstanding at end of period 15,638.1 11,806.1
FOR YEAR ENDED 12/31/97
Unit value at beginning of period $ 10.16 $ 10.14
Unit value at end of period $ 10.91 $ 10.87
Number of units outstanding at end of period 126,832.5 32,205.2
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH SUB-ACCOUNT
FOR PERIOD ENDED 12/31/96
Unit value at beginning of period (1/2/96) $ 10.00 $ 10.00
Unit value at end of period $ 11.70 11.68
Number of units outstanding at end of period 107,870.9 2,072.6
FOR YEAR ENDED 12/31/97
Unit value at beginning of period $ 11.70 $ 11.68
Unit value at end of period $ 13.90 $ 13.85
Number of units outstanding at end of period 303,011.2 41,160.9
</TABLE>

THE COMPANY

American General Annuity Insurance Company, which had $10.7 billion
in assets as of December 31, 1997, develops, markets, and issues annuity
products through niche distribution channels. The Company markets single-premium
deferred annuities to the savings and retirement markets, flexible-premium
deferred annuities to the tax-qualified retirement market, and single-premium
immediate annuities to the structured settlement and retirement markets. The
Company primarily distributes its annuity products through financial
institutions, general agents, and specialty brokers.

The Company, which was incorporated in Texas in 1944, is licensed to do business
in 47 states, Puerto Rico and the District of Columbia. It is a wholly- owned
subsidiary of Western National Corporation. Western National Corporation is a
wholly-owned subsidiary of AGC Life Insurance Company, a subsidiary of American
General Corporation. Effective February 25, 1998, the Company changed its name
from Western National Life Insurance Company to American General Annuity
Insurance Company. The Company's executive offices are located at 5555 San
Felipe, Suite 900, Houston, Texas 77056. Its telephone number is 713-888-7800.

THE SEPARATE ACCOUNT

The Board of Directors of the Company adopted a resolution on November 9,
1994, to establish a segregated asset account pursuant to Texas insurance law.
This segregated asset account has been designated AGA Separate Account A (the
"Separate Account"). Prior to May 1, 1998, the Separate Account was known as
WNL Separate Account A. The Company has caused the Separate Account to be
registered with the SEC as a unit investment trust pursuant to the provisions of
the Investment Company Act of 1940.

The assets of the Separate Account are the property of the Company. However, the
assets of the Separate Account, equal to the reserves and other contract
liabilities with respect to the Separate Account, are not chargeable with
liabilities arising out of any other business the Company may conduct. Income,
gains, and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Separate Account without regard to
other income, gains, or losses of the Company. The Company's obligations arising
under the Contracts are general obligations.

The Separate Account meets the definition of a "separate account" under federal
securities laws.

The Separate Account is divided into Sub-Accounts. Each Sub-Account invests in
one Portfolio of the AGA Series Trust. There is no assurance that the investment
objectives of any of the Portfolios will be met. Owners bear the complete
investment risk for Purchase Payments allocated to a Sub-Account. Contract
Values will fluctuate in accordance with the investment performance of the
Sub-Accounts to which Purchase Payments are allocated, and in accordance with
the imposition of the fees and charges assessed under the Contracts.

AGA SERIES TRUST

AGA Series Trust (formerly known as WNL Series Trust) (the "Trust") has
been established to act as the funding vehicle for the Contracts offered. The
Trust is managed by AGA Investment Advisory Services, Inc. (formerly known as
WNL Investment Advisory Services, Inc.) (the "Adviser"), an affiliate of the
Company. The Adviser has retained Sub-Advisers for each Portfolio to make
investment decisions and place orders. The Sub-Advisers for the Portfolios are:
BEA Associates, a subsidiary of Credit Suisse, for the Credit Suisse Growth and
Income Portfolio; Credit Suisse Asset Management Ltd. for the Credit Suisse
International Equity Portfolio; OpCap Advisors for the EliteValue Portfolio;
State Street Global Advisors for the State Street Global Advisors Growth Equity
Portfolio and the State Street Global Advisors Money Market Portfolio; Salomon
Brothers Asset Management Inc for the Salomon Brothers U.S. Government
Securities Portfolio; and Van Kampen American Capital Asset Management, Inc. for
the Van Kampen American Capital Emerging Growth Portfolio. See "Management of
the Trust" in the Trust Prospectus, which accompanies this Prospectus, for
additional information concerning the Adviser and the Sub-Advisers, including a
description of advisory and sub- advisory fees.

Purchasers should read the Prospectus for the Trust which is attached to this
Prospectus carefully before investing. Additional Prospectuses and the SAI can
be obtained by calling or writing the Company at its Annuity Service Office.

The Trust is intended to meet differing investment objectives with its currently
available separate Portfolios.

The following Portfolios are available under the Contracts:

Credit Suisse Growth and Income Portfolio
(formerly, the BEA Growth and Income Portfolio)

Credit Suisse International Equity Portfolio

EliteValue Portfolio (an asset allocation portfolio)
(formerly, the EliteValue Asset Allocation Portfolio)

State Street Global Advisors Growth Equity Portfolio
(formerly, the Global Advisors Growth Equity Portfolio)

State Street Global Advisors Money Market Portfolio
(formerly, the Global Advisors Money Market Portfolio)

Salomon Brothers U.S. Government Securities Portfolio

Van Kampen American Capital Emerging Growth Portfolio

VOTING RIGHTS

In accordance with its view of present applicable law, the Company will
vote the shares of the Trust held in the Separate Account at special meetings of
the shareholders in accordance with instructions received from persons having
the voting interest in the Separate Account. The Company will vote shares for
which it has not received instructions, as well as shares attributable to it, in
the same proportion as it votes shares for which it has received instructions.
The Trust does not hold regular meetings of shareholders.

The number of shares which a person has a right to vote will be determined as of
a date to be chosen by the Company not more than 60 days prior to a shareholder
meeting of the Trust. Voting instructions will be solicited by written
communication at least 10 days prior to the meeting.

SUBSTITUTION OF SECURITIES

If the shares of an Investment Option (or any Portfolio within an
Investment Option or any other Investment Option or Portfolio) are no longer
available for investment by the Separate Account or, if in the judgment of the
Company's Board of Directors, further investment in the shares should become
inappropriate in view of the purpose of the Contracts, the Company may limit
further purchase of such shares or may substitute shares of another Investment
Option or Portfolio for shares already purchased under the Contracts. No
substitution of securities may take place without prior approval of the SEC and
under the requirements it may impose.

CHARGES AND DEDUCTIONS

Various charges and deductions are made from the Contract Value and the
Separate Account. These charges and deductions are:

DEDUCTION FOR CONTINGENT DEFERRED SALES CHARGE (SALES LOAD)

The Contracts do not provide for a front-end sales charge. However, if all
or a portion of the Contract Withdrawal Value (see "Withdrawals") is withdrawn,
a Contingent Deferred Sales Charge (sales load) will be calculated at the time
of each withdrawal and will be deducted from the Contract Value. This charge
reimburses the Company for expenses incurred in connection with the promotion,
sale, and distribution of the Contracts. The Contingent Deferred Sales Charge is
based upon the length of time from when each Purchase Payment was made as
follows:

Length of Time Charge
From Purchase Payment (as a Percentage of
(Number of Years) Amount Withdrawn)
<S> <C>
1 5%
2 5%
3 5%
4 4%
5 3%
6 2%
7 1%
8 or more 0%
</TABLE>

After the first Contract Anniversary, a withdrawal of up to 10% of the
Contract Value, determined as of the immediately preceding Contract Anniversary,
may be withdrawn once each Contract Year on a non-cumulative basis without the
imposition of the Contingent Deferred Sales Charge (the "Free Withdrawal
Amount"). The Systematic Withdrawal Option may be selected in lieu of the Free
Withdrawal Amount. (See "Withdrawals - Systematic Withdrawal Option.")

REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE

The amount of the Contingent Deferred Sales Charge may be reduced or
eliminated when sales of the Contracts are made to individuals or to a group of
individuals in a manner that results in savings of sales expenses. The
entitlement to a reduction of the Contingent Deferred Sales Charge will be
determined by the Company after examination of all the relevant factors, such
as:

1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than for a
smaller group because of the ability to implement large numbers of Contracts
with fewer sales contacts;

2. The total amount of Purchase Payments to be received will be considered.
Per Contract sales expenses are likely to be less on larger Purchase Payments
than on smaller ones;

3. Any prior or existing relationship with the Company will be considered.
Per Contract sales expenses are likely to be less when there is a prior existing
relationship because of the likelihood of implementing the Contract with fewer
sales contacts; and

4. There may be other circumstances, of which the Company is not presently
aware, which could result in reduced sales expenses.

If, after consideration of the foregoing factors, the Company determines
that there will be a reduction in sales expenses, the Company may provide for a
reduction or elimination of the Contingent Deferred Sales Charge.

The Contingent Deferred Sales Charge may be eliminated when the Contracts are
issued to an officer, director, or employee of the Company or any of its
affiliates. In no event will reductions or elimination of the Contingent
Deferred Sales Charge be permitted where reductions or elimination will be
unfairly discriminatory to any person.

DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE

Each Valuation Period, the Company deducts a Mortality and Expense Risk
Charge from the Separate Account which is equal, on an annual basis, to 1.25% of
the average daily net asset value of the Separate Account. The mortality risks
assumed by the Company arise from its contractual obligation to make Annuity
Payments after the Annuity Date (determined in accordance with the Annuity
Option chosen by the Owner), regardless of how long all Annuitants live. This
assures that neither an Annuitant's own longevity, nor an improvement in life
expectancy greater than that anticipated in the mortality tables, will have any
adverse effect on the Annuity Payments the Annuitant will receive under the
Contract. Further, the Company bears a mortality risk in that it guarantees the
annuity purchase rates for the Annuity Options under the Contract, whether for a
Fixed Annuity or a Variable Annuity. Also, the Company bears a mortality risk
with respect to the death benefit and with respect to the waiver of the
Contingent Deferred Sales Charge if Purchase Payments have been held in the
Contract less than seven years. The expense risk assumed by the Company is that
all actual expenses involved in administering the Contracts, including Contract
maintenance costs, administrative costs, mailing costs, data processing costs,
legal fees, accounting fees, filing fees, and the costs of other services, may
exceed the amount recovered from the Contract Maintenance Charge and the
Administrative Charge.

The Mortality and Expense Risk Charge is guaranteed by the Company and cannot be
increased.

DEDUCTION FOR ENHANCED DEATH BENEFIT CHARGE

If the Owner selects the Enhanced Death Benefit, each Valuation Period
prior to the 75th birthday of the Owner or oldest Joint Owner, the Company
deducts an Enhanced Death Benefit Charge from the Separate Account which is
equal, on an annual basis, to .05% of the average daily net asset value of the
Separate Account. This charge compensates the Company for assuming the mortality
risks for the Enhanced Death Benefit. (See "Proceeds Payable on Death - Enhanced
Death Benefit Amount During the Accumulation Period.")

DEDUCTION FOR ANNUAL STEP-UP DEATH BENEFIT CHARGE

For Contracts issued on or after May 1, 1998, an Owner may select the
Annual Step-Up Death Benefit in states where it is available (check with your
registered representative regarding availability). If the Owner selects the
Annual Step-Up Death Benefit, each Valuation Period prior to the 75th birthday
of the Owner or the oldest Joint Owner, the Company deducts an Annual Step-Up
Death Benefit Charge from the Separate Account which is equal, on an annual
basis, to .10% of the average daily net asset value of the Separate Account.
This charge compensates the Company for assuming the mortality risks for the
Annual Step-Up Death Benefit. (See "Proceeds Payable on Death - Annual Step- Up
Death Benefit Amount During the Accumulation Period.")

DEDUCTION FOR ADMINISTRATIVE CHARGE

Each Valuation Period, the Company deducts an Administrative Charge from
the Separate Account which is equal, on an annual basis, to .15% of the average
daily net asset value of the Separate Account. This charge, together with the
Contract Maintenance Charge (see below), is to reimburse the Company for the
expenses it incurs in the establishment and maintenance of the Contracts and the
Separate Account. These expenses include, but are not limited to: preparation of
the Contracts, confirmations, annual reports and statements: maintenance of
Owner records; maintenance of Separate Account records; administrative personnel
costs; mailing costs; data processing costs; legal fees; accounting fees; filing
fees; the costs of other services necessary for Owner servicing; and all
accounting, valuation, regulatory, and reporting requirements.

DEDUCTION FOR CONTRACT MAINTENANCE CHARGE

On each Contract Anniversary, the Company deducts a Contract Maintenance
Charge from the Contract Value by subtracting values from the General Account
and/or by canceling Accumulation Units from each applicable Sub-Account to
reimburse it for expenses relating to maintenance of the Contracts. The Contract
Maintenance Charge is currently $30 each Contract Year. However, during the
Accumulation Period, if the Contract Value on the Contract Anniversary is at
least $40,000, then no Contract Maintenance Charge is deducted. If a total
withdrawal is made on other than a Contract Anniversary and the Contract Value
for the Valuation Period during which the total withdrawal is made is less than
$40,000, the full Contract Maintenance Charge will be deducted at the time of
the total withdrawal. During the Annuity Period, the Contract Maintenance Charge
will be deducted pro rata from Annuity Payments, regardless of Contract size and
will result in a reduction of each Annuity Payment. The Contract Maintenance
Charge will be deducted from the General Account and the Sub-Accounts in the
Separate Account in the same proportion that the amount of the Contract Value in
the General Account and each Sub-Account bears to the total Contract Value.

DEDUCTION FOR PREMIUM AND OTHER TAXES

Any taxes, including any premium taxes, paid to any governmental entity
relating to the Contracts, may be deducted from the Purchase Payments or
Contract Value when incurred. The Company will, in its sole discretion,
determine when taxes have resulted from: the investment experience of the
Separate Account, receipt by the Company of the Purchase Payments, or
commencement of Annuity Payments. The Company may, at its sole discretion, pay
taxes when due and deduct that amount from the Contract Value at a later date.
Payment at an earlier date does not waive any right the Company may have to
deduct amounts at a later date. The Company's current practice is to deduct for
premium taxes when they become due and payable to the states. Premium taxes
generally range from 0% to 4%. While the Company is not currently maintaining a
provision for federal income taxes with respect to the Separate Account, the
Company has reserved the right to establish a provision for income taxes if it
determines, in its sole discretion, that it will incur a tax as a result of the
operation of the Separate Account. The Company will deduct for any income taxes
incurred by it as a result of the operation of the Separate Account, whether or
not there was a provision for taxes and whether or not it was sufficient.

The Company will deduct any withholding taxes required by applicable law.

DEDUCTION FOR EXPENSES OF THE TRUST

There are other deductions from, and expenses (including management fees
paid to the investment adviser and other expenses) paid out of, the assets of
the Trust which are described in the Prospectus for the Trust.

THE CONTRACTS

OWNER

The Owner has all rights and may receive all benefits under the Contract.
The Owner is the person designated as such on the Issue Date, unless changed.
The Company will not issue a Contract to any Owner older than 85 years.

The Owner may change owners at any time prior to the Annuity Date by Written
Request. A change of Owner will automatically revoke any prior designation of
Owner. The change will become effective as of the date the Written Request is
signed. A new designation of Owner will not apply to any payment made or action
taken by the Company prior to the time it was received.

An Owner may make inquiries regarding his or her Contract by telephone or in
writing to the Annuity Service Office listed on the cover page of this
Prospectus.

For Non-Qualified Contracts, in accordance with Code Section 72(u), a deferred
annuity contract held by a corporation or other entity that is not a natural
person is not treated as an annuity contract for tax purposes. Income on the
contract is treated as ordinary income received by the owner during the taxable
year. However, for purposes of Internal Revenue Code (the "Code") Section 72(u),
an annuity contract held by a trust or other entity as agent for a natural
person is considered held by a natural person and treated as an annuity contract
for tax purposes. Tax advice should be sought prior to purchasing a Contract
which is to be owned by a trust or other non-natural person.

JOINT OWNERS

The Contract can be owned by Joint Owners. If Joint Owners are named, any
Joint Owner must be the spouse of the other Owner. Upon the death of either
Owner, the surviving Joint Owner will be the primary Beneficiary. Any other
Beneficiary designation will be treated as a contingent Beneficiary unless
otherwise indicated in a Written Request. Unless otherwise specified, if there
are Joint Owners, both signatures will be required for all Owner transactions
except telephone transfers. If the telephone transfer option is elected and
there are Joint Owners, either Joint Owner can give telephone instructions.

ANNUITANT

The Annuitant is the person on whose life Annuity Payments are based. The
Annuitant is the person designated by the Owner at the Issue Date, unless
changed prior to the Annuity Date. The Annuitant may not be changed in a
Contract which is owned by a non-natural person. Any change of Annuitant is
subject to the Company's underwriting rules then in effect.

ASSIGNMENT

A Written Request specifying the terms of an assignment of the Contract
must be provided to the Annuity Service Office. Until a Written Request is
received, the Company will not be required to take notice of or be responsible
for any transfer of interest in the Contract by assignment, agreement, or
otherwise.

The Company will not be responsible for the validity or tax consequences of any
assignment. Any assignment made after the death benefit has become payable will
be valid only with the Company's consent.

If the Contract is assigned, the Owner's rights may only be exercised with the
consent of the assignee of record.

If the Contract is issued pursuant to a retirement plan which receives favorable
tax treatment under the provisions of Sections 401, 403(b), 408, or 457 of the
Internal Revenue Code, it may not be assigned, pledged, or otherwise transferred
except as may be allowed under applicable law.

PURCHASE PAYMENTS AND CONTRACT VALUE

PURCHASE PAYMENTS

The initial Purchase Payment is due on the Issue Date. The minimum initial
Purchase Payment for Non-Qualified Contracts is $5,000 and for Qualified
Contracts is $2,000 ($50 for Contracts issued in connection with Section 403(b)
plans). The minimum subsequent Purchase Payment for Non-Qualified Contracts is
$1,000, or if the automatic premium check option is elected, $50. The minimum
subsequent Purchase Payment for Qualified Contracts is $50. Subject to the
maximum and minimum Purchase Payments discussed herein, the Owner may make
subsequent Purchase Payments and may increase or decrease or change the
frequency of such payments. The maximum total Purchase Payments the Company will
accept without Company approval is $500,000 for issue Ages up to 75. The maximum
total Purchase Payments the Company will accept without Company approval for
issue Ages 75 and older is $250,000. The Company reserves the right to reject
any application or Purchase Payment.

All Purchase Payments and sums payable to the Company under the Contract are
payable only at the Company's lock box at State Street Bank and Trust Company at
the following addresses: via mail to: American General Annuity Insurance
Company, P.O. Box 5429, Boston, MA 02206-5429; via overnight delivery to:
State Street Bank and Trust Company, Attn: Lock Box A3W, 1776 Heritage Drive,
North Quincy, MA 02171.

ALLOCATION OF PURCHASE PAYMENTS

Purchase Payments are allocated to the General Account and/or the
Sub-Accounts of the Separate Account in accordance with the selection made by
the Owner. The allocation of the initial Purchase Payment is made in accordance
with the selection made by the Owner at the Issue Date. However, the Company
will, under certain circumstances, allocate initial Purchase Payments to the
State Street Global Advisors Money Market Sub-Account until the expiration of
the Right to Examine contract period. (See "Highlights.") Unless otherwise
changed by the Owner, subsequent Purchase Payments are allocated in the same
manner as the initial Purchase Payment. Allocation of the Purchase Payments is
subject to the terms and conditions imposed by the Company. There are currently
no limitations on the number of Sub-Accounts that can be selected by an Owner.
Allocations must be in whole percentages.

For initial Purchase Payments, if the forms required to issue the Contract are
in good order, the Company will apply the Purchase Payment to the Separate
Account and credit the Contract with Accumulation Units and/or to the General
Account and credit the Contract with dollars within two business days of
receipt.

In addition to the underwriting requirements of the Company, good order means
that the Company has received federal funds (monies credited to a bank's account
with its regional Federal Reserve Bank). If the forms required to issue a
Contract are not in good order, the Company will attempt to get them in good
order or the Company will return the forms and the Purchase Payment within five
business days. The Company will not retain the Purchase Payment for more than
five business days while processing incomplete forms, unless it has been so
authorized by the purchaser. For subsequent Purchase Payments, the Company will
apply Purchase Payments to the Separate Account and credit the Contract with
Accumulation Units as of the end of the Valuation Period during which the
Purchase Payment was received in good order.

BONUS

The Company will, at the time of the initial Purchase Payment and, as of
May 1, 1998 (subject to regulatory approval) for certain subsequent Purchase
Payments, add an additional amount, as a Bonus, equal to 1% of such Purchase
Payment made under the Contract. The Bonus will be paid for subsequent Purchase
Payments of at least $5,000 for Non-Qualified Contracts or $2,000 for Qualified
Contracts. The Bonus will not be paid for subsequent Purchase Payments made
prior to May 1, 1998. The Bonus will not be paid for subsequent Purchase
Payments for Contracts issued in New Jersey. The Bonus will be allocated to the
Sub-Accounts of the Separate Account and/or the General Account in the same
manner as the Purchase Payment to which it is attributable. The Company reserves
the right to limit its payment of any Bonus to $5,000.

If the Owner makes a withdrawal prior to the seventh Contract Year after any
applicable Purchase Payment that exceeds the Free Withdrawal Amount or is in
excess of the amount permitted under the Systematic Withdrawal Option, an amount
equal to the Bonus allocated to the Purchase Payment(s) withdrawn will be
deducted by the Company from the Contract Value. (This deduction is not
applicable in New Jersey.) The deduction will be pro rata from the Sub-Accounts
and/or the General Account in the proportion that the amount of Contract Value
in the Sub- Accounts and General Account bears to the total Contract Value. The
Company will not recapture any investment earnings on a Bonus. Investment
earnings are deemed to be withdrawn on a first-in, first-out basis. Owners do
not have a vested interest in the principal amount of a Bonus until seven
Contract Years from the date of each Bonus payment have elapsed; until that
time, the additional amount belongs to the Company.

For purposes of distributions under the Contract, a Bonus payment and any
investment earnings thereon shall be treated as taxable income and not as part
of the cost basis of the Contract. (See "Tax Status - General.")

DOLLAR COST AVERAGING

Dollar Cost Averaging is a program which, if elected, permits an Owner to
systematically transfer amounts on a monthly, quarterly, semi-annual, or annual
basis from the State Street Global Advisors Money Market Sub-Account or
the General Account to one or more Sub-Accounts. By allocating amounts on a
regularly scheduled basis, as opposed to allocating the total amount at one
particular time, an Owner may be less susceptible to the effect of market
fluctuations. The minimum amount which may be transferred is $250 per transfer.
The amount may be specified as a percentage of Contract Values in the source
Sub-Account(s) (in whole percentages) or by dollar amount.

If selected, Dollar Cost Averaging must be for at least 12 months. There is no
current charge for Dollar Cost Averaging. The standard date of the month for
transfers is the date the Owner's request for an enrollment in the program is
received and processed by the Company, and subsequent monthly, quarterly,
semi-annual, or annual anniversaries of that date. The Owner may specify a
different future date. If the Company imposes a transfer fee, transfers made
pursuant to the Dollar Cost Averaging program will not be taken into account in
determining any transfer fee.

CONTRACT VALUE

The Contract Value is the sum of the Owner's interest in the General
Account and the Sub-Accounts of the Separate Account during the Accumulation
Period.

ACCUMULATION UNITS

Accumulation Units will be used to account for all amounts allocated to or
withdrawn from the Sub-Accounts of the Separate Account as a result of Purchase
Payments, withdrawals, transfers, or fees and charges. The Company will
determine the number of Accumulation Units of a Sub-Account purchased or
canceled. This will be done by dividing the amount allocated to (or the amount
withdrawn from) the Sub-Account by the dollar value of one Accumulation Unit of
the Sub-Account as of the end of the Valuation Period during which the request
for the transaction is received at the Annuity Service Office.

ACCUMULATION UNIT VALUE

The Accumulation Unit Value for each Sub-Account was arbitrarily set
initially at $10. The investment performance of the Trust, as well as the
deduction of the charges discussed in this Prospectus, affect Accumulation Unit
Values (see below). Subsequent Accumulation Unit Values for each Sub-Account are
determined by multiplying the Accumulation Unit Value for the immediately
preceding Valuation Period by the Net Investment Factor for the Sub-Account for
the current period.

The Net Investment Factor for each Sub-Account is determined by dividing A by B
and subtracting C where:

A is (i) the net asset value per share of the Investment Option or
Portfolio of an Investment Option held by the Sub-Account
for the current Valuation Period; plus

(ii) any dividend per share declared on behalf of such Investment
Option or Portfolio that has an ex-dividend date within the
current Valuation Period; less

(iii) the cumulative per share charge or credit for taxes reserved
which is determined by the Company to have resulted from the
operation or maintenance of the Sub-Account.

B is the net asset value per share of the Investment Option or
Portfolio of an Investment Option held by the Sub-Account for
the immediately preceding Valuation Period, plus or minus the
cumulative per share charge or credit for taxes reserved for the
immediately preceding Valuation Date.

C is the factor representing the cumulative per share unpaid charges
for the Mortality and Expense Risk Charge, for the
Administrative Charge and for the Enhanced Death Benefit Charge,
if any.

The Accumulation Unit Value may increase or decrease from Valuation Period
to Valuation Period.

TRANSFERS

TRANSFERS PRIOR TO THE ANNUITY DATE

Subject to any limitations imposed by the Company on the number of
transfers that can be made during the Accumulation Period, the Owner may
transfer all or part of the Owner's Contract Value by Written Request without
the imposition of any fee or charge if there have been no more than the number
of free transfers. Currently, there are no restrictions on the number of
transfers that can be made each Contract Year. However, if the Company does
limit the number of transfers in the future, Owners are guaranteed four
transfers per year without a transfer fee during the Accumulation Period. All
transfers are subject to the following:

1. Currently, the Company does not impose a transfer fee. The Company
reserves the right to charge a fee for transfers in the future which will not
exceed the lesser of $25 or 2% of the amount transferred (which will be deducted
from the amount that is transferred). If more than the number of free transfers
have been made in a Contract Year, the Company will deduct a transfer fee for
each subsequent transfer permitted.

2. The minimum amount which can be transferred is $250 (from (i) one or
multiple Sub-Accounts or (ii) the General Account) or the Owner's entire
interest in the Sub-Account or the General Account, if less. The minimum amount
which must remain in a Sub-Account after a transfer is $500 per Sub-Account, or
$0 if the entire amount in the Sub-Account is transferred. The minimum amount
which must remain in the General Account after a transfer is $500, or $0 if the
entire amount in the General Account is transferred.

3. The maximum amount which can be transferred from the General Account to
the Separate Account is 20% of the Owner's Contract Value in the General Account
as of the last Contract Anniversary, except pursuant to a Dollar Cost Averaging
Program. If the Sweep Account option has been elected, any funds transferred
pursuant to that program will not be included in this limitation. (See "Sweep
Account Program," below.)

4. Transfers from any Sub-Account to the General Account may not be made
for the six-month period following any transfer from the General Account into
one or more of the Sub-Accounts.

5. The Company reserves the right, at any time and without prior notice to
any party, to terminate, suspend, or modify the transfer privilege described
above.

Owners can elect to make transfers by telephone. To do so, Owners must
complete a Written Request. The Company will use reasonable procedures to
confirm that instructions communicated by telephone are genuine. If it does not,
the Company may be liable for any losses due to unauthorized or fraudulent
instructions. The Company may tape record all telephone instructions. The
Company will not be liable for any loss, liability, cost, or expense incurred by
the Owner for acting in accordance with such telephone instructions believed to
be genuine. The telephone transfer privilege may be discontinued at any time by
the Company.

If there are Joint Owners, unless the Company is informed to the contrary,
telephone instructions will be accepted from either of the Joint Owners.

Neither the Separate Account nor the Trust is designed for professional market
timing organizations or other entities using programmed and frequent transfers.
A pattern of exchanges that coincides with a "market timing" strategy may be
disruptive to a Portfolio. The Company reserves the right to restrict the
transfer privilege or reject any specific Purchase Payment allocation request
for any person whose transactions seem to follow a timing pattern. Although not
contractually obligated to do so, the Company may, in its sole discretion,
provide prior or contemporaneous notice of restrictions on the transfer
privilege to Owners.

TRANSFERS DURING THE ANNUITY PERIOD

During the Annuity Period, the Owner may make transfers by Written Request,
as follows:

1. The Owner may make transfers of Contract Values between Sub-Accounts,
subject to any limitations imposed by the Company on the number of transfers
that can be made during the Annuity Period. Currently, there are no restrictions
on the number of transfers that can be made. However, if the Company does limit
the number of transfers in the future, Owners are guaranteed four transfers per
year free of any transfer fee during the Annuity Period. Currently, the Company
does not impose a transfer fee. The Company reserves the right to charge a fee
for transfers in the future which will not exceed the lesser of $25 or 2% of the
amount transferred (which will be deducted from the amount which is
transferred).

2. The Owner may, once each Contract Year, make a transfer from one or more
Sub-Accounts to the General Account. The Owner may not make a transfer from the
General Account to the Separate Account.

3. Transfers between Sub-Accounts will be made by converting the number of
Annuity Units being transferred to the number of Annuity Units of the
Sub-Account to which the transfer is made, so that the next Annuity Payment, if
it were made at that time, would be the same amount that it would have been
without the transfer. Thereafter, Annuity Payments will reflect changes in the
value of the new Annuity Units.

The amount transferred to the General Account from a Sub-Account will be
based on the annuity reserves for the Owner in that Sub-Account. Transfers to
the General Account will be made by converting the Annuity Units being
transferred to purchase fixed Annuity Payments under the Annuity Option in
effect and based on the Age of the Annuitant at the time of the transfer.

4. The minimum amount which can be transferred is $250 from one or multiple
Sub-Accounts, or the Owner's entire interest in the Sub-Account, if less. The
minimum amount which must remain in a Sub-Account after a transfer is $500 per
Sub-Account, or $0 if the entire amount in the Sub-Account is transferred.

5. The Company reserves the right, at any time and without prior notice to
any party, to terminate, suspend, or modify the transfer privilege described
above.

If there are Joint Owners, unless the Company is informed to the contrary,
telephone instructions will be accepted from either of the Joint Owners.

SWEEP ACCOUNT PROGRAM

During the Accumulation Period, an Owner may elect to participate in the
Sweep Account Program which permits the Owner to transfer ("sweep") the income
from the General Account to the Sub-Accounts, on a quarterly basis, as long as
the General Account balance is at least $25,000. The transfer will be made on
quarterly anniversaries of the Issue Date of the Contract unless the Owner
specifies a different date.

ASSET ALLOCATION PROGRAMS

ASSET ALLOCATION - PORTFOLIO REBALANCING

From time to time, the Company may make available a program (Asset
Allocation - Portfolio Rebalancing) which provides for periodic pre-authorized
automatic transfers among the Sub-Accounts pursuant to written allocation
instructions from the Owner. Such transfers are made to maintain a particular
percentage allocation among the Portfolios as selected by the Owner. The minimum
allocation is 1% per selection.

An Owner may elect that rebalancing occur on a monthly, quarterly, semi-annual,
or annual basis, and currently, all Portfolios are available investment options
under the Program. The General Account is not an available investment option
under the Program.

ASSET ALLOCATION - FINANCIAL INTERMEDIARIES

In addition, the Company may make available another Asset Allocation
program whereby certain financial intermediaries will make their services
available to Owners to provide advice for the selection of the Sub-Accounts and
the General Account under the Contracts. The Company has recognized the value to
Owners of having available (on a continuous basis) advice for the selection of
the Sub-Accounts and the General Account. An Owner participating in such a
program authorizes the financial intermediary to make transfers of his or her
Contract Values among the Sub-Accounts and/or the General Account. The Company
has not, and will not, make any independent investigation of such financial
intermediaries, their services, or the costs, if any, for such services. The
financial intermediaries will be required to comply with the Company's
administrative systems and rules, including the prohibition against market
timers. A Written Request will be required to participate in such Asset
Allocation programs.

An Owner may enter into an advisory agreement with such financial
intermediaries. If such an agreement is entered into, an Owner will need to
complete certain administrative forms. Compensation, if any, for the services of
the financial intermediaries is a matter between the intermediaries and the
Owners.

THE SELECTION OF FINANCIAL INTERMEDIARIES OR OTHER ADVISERS IS SOLELY THE
RESPONSIBILITY OF THE OWNER. ANY COMPENSATION DUE ANY FINANCIAL INTERMEDIARY OR
OTHER ADVISER, AS A RESULT OF INVESTMENT ADVICE HE OR SHE MAY HAVE RENDERED AN
OWNER IN CONNECTION WITH THE CONTRACTS, IS SOLELY THE OWNER'S RESPONSIBILITY.
THE COMPANY HAS NOT MADE ANY INDEPENDENT INVESTIGATION OF THE FINANCIAL
INTERMEDIARIES OFFERING ANY ASSET ALLOCATION PROGRAMS OR OF THE PROGRAMS THEY
OFFER. THE COMPANY DOES NOT ENDORSE THE FINANCIAL INTERMEDIARIES OFFERING "ASSET
ALLOCATION PROGRAMS."

The above Asset Allocation programs are only available during the Accumulation
Period. Currently, there is no minimum Contract Value required for participants
in such a program. However, the Company reserves the right to require a minimum
Contract Value for Asset Allocation programs. The Company does not currently
charge for enrollment in the programs, but reserves the right to do so. Owners
can terminate their participation in any program by Written Request. If the
Company imposes a transfer fee, transfers made pursuant to an Asset Allocation
program will not be taken into account in determining any transfer fee. The
Company reserves the right to modify, suspend, or terminate either of the Asset
Allocation programs at any time.

WITHDRAWALS

During the Accumulation Period, the Owner may, upon a Written Request, make
a total or partial withdrawal of the Contract Withdrawal Value. The Contract
Withdrawal Value is:

1. The Contract Value as of the end of the Valuation Period during
which a Written Request for a withdrawal is received; less

2. Any applicable taxes not previously deducted; less

3. Any applicable Contingent Deferred Sales Charge; less

4. The Contract Maintenance Charge, if any.

A withdrawal will result in the cancellation of Accumulation Units from
each applicable Sub-Account or a reduction in the Owner's General Account
Contract Value in the ratio that the Owner's interest in the Sub-Account and/or
General Account bears to the total Contract Value. The Owner must specify by
Written Request in advance which Sub-Account Units are to be canceled, if other
than the above method is desired.

The Company will pay the amount of any withdrawal from the Separate Account
within seven days of receipt of a request in good order unless the Suspension or
Deferral of Payments provision is in effect.

Each partial withdrawal must be for at least $500. The minimum Contract Value
which must remain in the Contract after a partial withdrawal is $5,000 for
Non-Qualified Contracts and $2,000 for Qualified Contracts.

Certain tax withdrawal penalties and restrictions may apply to withdrawals from
the Contracts. (See "Federal Tax Status.") For Contracts purchased in
connection with 403(b) plans, the Code limits the withdrawal of amounts
attributable to contributions made pursuant to a salary reduction agreement
(as defined in Section 403(b)(11) of the Code) to circumstances only when the
Owner: (a) attains age 59 1/2; (b) separates from service; (c) dies; (d) becomes
disabled (within the meaning of Section 72(m)(7) of the Code); or (e) incurs a
qualifying hardship.

However, withdrawals for hardship are restricted to the portion of the Owner's
Contract Value which represents contributions made by the Owner and does not
include any investment results. The limitations on withdrawals became effective
on January 1, 1989, and apply only to salary reduction contributions made after
December 31, 1988, to income attributable to such contributions and to income
attributable to amounts held as of December 31, 1988. The limitations on
withdrawals do not affect rollovers or transfers between certain Qualified
Plans. Owners should consult their own tax counsel or other tax adviser
regarding any distributions.

SYSTEMATIC WITHDRAWAL OPTION

The Company permits a systematic withdrawal option which enables an Owner
to pre-authorize a periodic exercise of the contractual withdrawal rights
described above. The total permitted systematic withdrawals in a Contract Year
are limited to not more than 10% of the Contract Value as of the immediately
preceding Contract Anniversary or, if during the first Contract Year, the Issue
Date. The Systematic Withdrawal Option can be exercised at any time including
during the first Contract Year. The exercise of the systematic withdrawal option
in any Contract Year replaces the Free Withdrawal Amount which is allowable once
per Contract Year after the first Contract Anniversary without incurring a
Contingent Deferred Sales Charge.

Systematic withdrawals for Non-Qualified Contracts where the Owner is under age
59 1/2 may be subject to income tax and certain tax penalties. Other
restrictions may apply to systematic withdrawals from the Contracts. (See
"Federal Tax Status - Tax Treatment of Withdrawals - Qualified Contracts" and
"Tax Treatment of Withdrawals - Non-Qualified Contracts.") Owners entering into
such a program instruct the Company to withdraw an amount specified as a
percentage of Contract Value, or in dollars on a monthly, quarterly, or
semi-annual basis. The minimum withdrawal amount is $100 per payment. The
standard date of the month for withdrawals is the date the Owner's request for
enrollment in the program is received and processed by the Company, and
subsequent monthly (or the payment schedule selected) anniversaries of that
date. The Owner may specify a different future date.

TEXAS OPTIONAL RETIREMENT PROGRAM

A Contract issued to a participant in the Texas Optional Retirement Program
("ORP") will contain an ORP endorsement that will amend the Contract as follows:
(a) if for any reason a second year of ORP participation is not begun, the total
amount of the State of Texas' first-year contribution will be returned to the
appropriate institution of higher education upon its request and (b) no benefits
will be payable, through surrender of the Contract or otherwise, until the
participant dies, accepts retirement, terminates employment in all Texas
institutions of higher education, or attains the age of 70 1/2. The value of the
Contract may, however, be transferred to other contracts or carriers during the
period of ORP participation. A participant in the ORP is required to obtain a
certificate of termination from the participant's employer before the value of a
Contract can be withdrawn.

SUSPENSION OR DEFERRAL OF PAYMENTS

The Company reserves the right to suspend or postpone payments for a
withdrawal or transfer for any period when:

1. The New York Stock Exchange (the "NYSE") is closed (other than customary
weekend and holiday closings);

2. Trading on the NYSE is restricted;

3. An emergency exists as a result of which disposal of securities held in
the Separate Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Separate Account's net assets; or

4. During any other period when the SEC, by order, so permits for the
protection of Owners; provided that applicable rules and regulations of the SEC
will govern as to whether the conditions described in (2) and (3) exist.

The Company reserves the right to defer payment for a withdrawal or
transfer from the General Account for the period permitted by law, but not for
more than six months after written election is received by the Company.

PROCEEDS PAYABLE ON DEATH

DEATH OF OWNER DURING THE ACCUMULATION PERIOD

Upon the death of the Owner or Joint Owner during the Accumulation Period,
the death benefit will be paid to the Beneficiary(ies) designated by the Owner.
Upon the death of a Joint Owner, the surviving Joint Owner, if any, will be
treated as the primary Beneficiary. Any other Beneficiary designation on record
at the time of death will be treated as a contingent Beneficiary.

A Beneficiary may request that the death benefit be paid under one of the Death
Benefit Options below. If the Beneficiary is the spouse of the Owner, he or she
may elect to continue the Contract at the then-current Contract Value in his or
her own name and exercise all the Owner's rights under the Contract.

DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD (STANDARD DEATH BENEFIT)

For a death occurring prior to the 80th birthday of the Owner, or the
oldest Joint Owner, the death benefit during the Accumulation Period will be the
greatest of:

1. The Purchase Payments, less any withdrawals, including any previously
deducted Contingent Deferred Sales Charge; or

2. The Contract Value determined as of the end of the Valuation Period
during which the Company receives, at its Annuity Service Office, both due proof
of death and an election of the payment method; or

3. The highest Step-up Value prior to the date of death. The Step-up Value
is equal to the Contract Value on each seventh Contract Anniversary, plus any
Purchase Payments made after such Contract Anniversary, less any withdrawals and
Contingent Deferred Sales Charge deducted after such Contract Anniversary.

For a death occurring on or after the 80th birthday of the Owner, or the
oldest Joint Owner, the death benefit during the Accumulation Period will be the
Contract Value determined as of the end of the Valuation Period during which the
Company receives, at its Annuity Service Office, both due proof of death and an
election of the payment method.

ENHANCED DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD

If the Owner selects the Enhanced Death Benefit, for a death occurring
prior to the 75th birthday of the Owner, or the oldest Joint Owner, the death
benefit will be the greatest of:

1. The Purchase Payments, less any withdrawals and previously deducted
Contingent Deferred Sales Charge; or

4. The total amount of Purchase Payments compounded up to the date of death
at 3% interest, minus the total withdrawals and previously deducted Contingent
Deferred Sales Charges compounded up to the date of death at 3% interest, not to
exceed 200% of Purchase Payments, less withdrawals and previously deducted
Contingent Deferred Sales Charges.

For a death occurring on or after the 75th birthday and before the 80th
birthday of the Owner, or the oldest Joint Owner, the death benefit during the
Accumulation Period will be the greatest of 1, 2, or 3 above.

For death occurring on or after the 80th birthday of the Owner, or the oldest
Joint Owner, the death benefit during the Accumulation Period will be the
Contract Value determined as of the Valuation Period during which the Company
receives at its Annuity Service Office both due proof of death and an election
of the payment method.

ANNUAL STEP-UP DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD

For Contracts issued on or after May 1, 1998, an Owner may select the
Annual Step-Up Death Benefit. If the Owner selects the Annual Step-Up Death
Benefit, for a death occurring prior to the 75th birthday of the Owner, or the
oldest Joint Owner, the death benefit amount during the Accumulation Period will
be the greater of:

1. The Purchase Payments, less any withdrawals and previously deducted
Contingent Deferred Sales Charge; or

2. The Contract Value determined as of the end of the Valuation Period
during which the Company receives at its Annuity Service Office both due proof
of death and an election of the payment method; or

3. The highest Step-Up Value prior to the date of death. The Step-Up Value
is equal to the Contract Value on any Contract Anniversary plus any Purchase
Payments made after such Contract Anniversary less any withdrawals and
Contingent Deferred Sales Charge deducted after such Contract Anniversary.

For a death occurring on or after the 75th birthday of the Owner, or the oldest
Joint Owner, the death benefit during the Accumulation Period will be the
standard death benefit described above.

IN CERTAIN STATES, THE ANNUAL STEP-UP DEATH BENEFIT MAY NOT BE AVAILABLE (CHECK
WITH YOUR REGISTERED REPRESENTATIVE REGARDING AVAILABILITY.)

OWNERS SHOULD REFER TO THEIR CONTRACT AND ANY ENDORSEMENT FOR THE APPLICABLE
DEATH BENEFIT PROVISION.

DEATH BENEFIT OPTIONS DURING THE ACCUMULATION PERIOD

A non-spousal Beneficiary must elect the death benefit to be paid under one
of the following options in the event of the death of the Owner during the
Accumulation Period:

Option 1 - lump sum payment of the death benefit; or

Option 2 - payment of the entire death benefit within five years of
the date of the death of the Owner; or

Option 3 - payment of the death benefit under an Annuity Option over
the lifetime of the Beneficiary or over a period not
extending beyond the life expectancy of the Beneficiary,
with distribution beginning within one year of
the date of death of the Owner or any Joint Owner.

Any portion of the death benefit not applied under Option 3, within one
year of the date of the Owner's death, must be distributed within five years of
the date of death.

A spousal Beneficiary may elect to continue the Contract in his or her own name
at the then-current Contract Value, elect a lump sum payment of the death
benefit, or apply the death benefit to an Annuity Option.

If a lump sum payment is requested, the amount will be paid within seven days of
receipt of proof of death and the election, unless the Suspension or Deferral of
Payments provision is in effect.

Payment to the Beneficiary, other than in a lump sum, may only be elected during
the 60-day period beginning with the date of receipt of proof of death.

DEATH OF OWNER DURING THE ANNUITY PERIOD

If the Owner or a Joint Owner, who is not the Annuitant, dies during the
Annuity Period, any remaining payments under the Annuity Option elected will
continue at least as rapidly as under the method of distribution in effect at
such Owner's death. Upon the death of the Owner during the Annuity Period, the
Beneficiary becomes the Owner.

DEATH OF ANNUITANT

Upon the death of the Annuitant, who is not the Owner, during the
Accumulation Period, the Owner may designate a new Annuitant, subject to the
Company's underwriting rules then in effect. If no designation is made within 30
days of the death of the Annuitant, the Owner will become the Annuitant. If the
Owner is a non-natural person, the death of the Annuitant will be treated as the
death of the Owner and a new Annuitant may not be designated.

Upon the death of the Annuitant during the Annuity Period, the death benefit, if
any, will be as specified in the Annuity Option elected. Death benefits will be
paid at least as rapidly as under the method of distribution in effect at the
Annuitant's death.

PAYMENT OF DEATH BENEFIT

The Company will require due proof of death before any death benefit is
paid. Due proof of death will be:

1. A certified death certificate;

2. A certified decree of a court of competent jurisdiction as to the
finding of death; or

3. Any other proof satisfactory to the Company.

All death benefits will be paid in accordance with applicable law or
regulations governing death benefit payments.

BENEFICIARY

The Beneficiary designation in effect on the Issue Date will remain in
effect until changed. The Beneficiary is entitled to receive the benefits to be
paid at the death of the Owner. Unless the Owner provides otherwise, the death
benefit will be paid in equal shares to the survivor(s) as follows:

1. To the primary Beneficiary(ies) who survive the Owner's and/or the
Annuitant's death, as applicable; or if there are none,

2. To the contingent Beneficiary(ies) who survive the Owner's and/or the
Annuitant's death, as applicable; or if there are none,

3. To the estate of the Owner.

CHANGE OF BENEFICIARY

Subject to the rights of any irrevocable Beneficiary(ies), the Owner may
change the primary Beneficiary(ies) or contingent Beneficiary(ies). Any change
must be made by Written Request. The change will take effect as of the date the
Written Request is signed. The Company will not be liable for any payment made
or action taken before it records the change.

ANNUITY PROVISIONS

GENERAL

On the Annuity Date, the Adjusted Contract Value will be applied under the
Annuity Option selected by the Owner. Annuity Payments may be made on a fixed or
variable basis, or both.

ANNUITY DATE

The Annuity Date is selected by the Owner on the Issue Date. The Annuity
Date must be the first day of a calendar month and must be at least five years
after the Issue Date. The Annuity Date may not be later than that required under
state law.

Prior to the Annuity Date, the Owner, subject to the above, may change the
Annuity Date by Written Request. Any change must be requested at least 15 days
prior to the new Annuity Date.

SELECTION OR CHANGE OF AN ANNUITY OPTION

An Annuity Option is selected by the Owner at the time the Contract is
issued. If no Annuity Option is selected, Option B, with 120 monthly payments
guaranteed, will automatically be applied. Prior to the Annuity Date, the Owner
can change the Annuity Option selected by Written Request. Any change must be
requested at least 15 days prior to the Annuity Date.

FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS

Annuity Payments are paid in monthly, quarterly, semi-annual, or annual
installments. The Adjusted Contract Value is applied to the Annuity Table for
the Annuity Option selected. If the Adjusted Contract Value to be applied under
an Annuity Option is less than $2,000, the Company reserves the right to make a
lump sum payment in lieu of Annuity Payments. If the Annuity Payment would be or
become less than $200 where only a Fixed Annuity or a Variable Annuity is
selected, or if the Annuity Payment would be or become less than $100 on each
basis when a combination of Fixed and Variable Annuities is selected, the
Company will reduce the frequency of payments to an interval which will result
in each payment being at least $200, or $100 on each basis if a combination of
Fixed and Variable Annuities is selected.

ANNUITY

If the Owner selects a Fixed Annuity, the Adjusted Contract Value is
allocated to the General Account and the Annuity is paid as a Fixed Annuity. If
the Owner selects a Variable Annuity, the Adjusted Contract Value will be
allocated to the Sub-Account(s) of the Separate Account in accordance with the
selection made by the Owner, and the Annuity will be paid as a Variable Annuity.
The Owner can also select a combination of a Fixed and Variable Annuity and the
Adjusted Contract Value will be allocated accordingly. Unless the Owner
specifies otherwise, the payee of the Annuity Payments shall be the Annuitant
and any Joint Annuitant.

The Adjusted Contract Value will be applied to the applicable Annuity Table
contained in the Contract based upon the Annuity Option selected by the Owner.

FIXED ANNUITY

The Owner may elect to have the Adjusted Contract Value applied to provide
a Fixed Annuity. The dollar amount of each Fixed Annuity payment will be
determined in accordance with Annuity Tables contained in the Contract, which
are based on the minimum guaranteed interest rate of 3% per year. After the
initial Fixed Annuity payment, the payments will not change regardless of
investment, mortality, or expense experience.

VARIABLE ANNUITY

Variable Annuity payments reflect the investment performance of the
Separate Account in accordance with the allocation of the Adjusted Contract
Value to the Sub-Accounts during the Annuity Period. Variable Annuity payments
are not guaranteed as to dollar amount. See the SAI regarding how Annuity
Payments and Annuity Units are calculated.

ANNUITY OPTIONS

The following Annuity Options or any other Annuity Option acceptable to the
Company may be selected:

Option A (Life Annuity) - Monthly Annuity Payments during the life of the
Annuitant.

Option B (Life Annuity with Periods Certain of 60, 120, 180, or 240 Months)
- - Monthly Annuity Payments during the lifetime of the Annuitant and in any event
for 60, 120, 180, or 240 months certain as selected.

Option C (Joint and Survivor Annuity) - Monthly Annuity Payments payable
during the joint lifetime of the Annuitant and a Joint Annuitant and then during
the lifetime of the survivor at the percentage (100%, 75%, 66 2/3%, or 50%)
selected.

Annuity Options A, B, and C are available on a Fixed Annuity basis, a
Variable Annuity basis, or a combination of both. Election of a Fixed Annuity or
a Variable Annuity must be made no later than 15 days prior to the Annuity Date.
If no election is made with respect to whether the Annuity Option will be on a
Fixed Annuity basis, Variable Annuity basis, or a combination of both, the
Annuity Option will be paid to reflect the allocation of the Contract Value on
the Annuity Date between the Separate Account and the General Account, if any.

DISTRIBUTOR

AGA Brokerage Services, Inc. (formerly known as WNL Brokerage Services,
Inc.)("AGA Brokerage"), 5555 San Felipe, Suite 900, Houston, Texas 77056, is the
distributor and underwriter of the Contracts. AGA Brokerage is registered as a
broker-dealer with the SEC and is a member of the National Association of
Securities Dealers, Inc. AGA Brokerage and the Company are owned by the same
corporation.

Commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions, up to an amount currently equal to 7%
of Purchase Payments, for promotional or distribution expenses associated with
the marketing of the Contracts.

ADMINISTRATION OF THE CONTRACTS

While the Company has primary responsibility for all administration of the
Contracts, it has retained the services of Financial Administrative Services,
Inc. ("FAS"), pursuant to an Insurance Service Agreement. Such administrative
services include issuance of the Contracts and maintenance of Owners' records.
The Company pays all fees and charges of FAS. FAS serves as the administrator to
various insurance companies. The Company intends to terminate the Insurance
Service Agreement with FAS as of August, 1998, at which time the Company will
assume direct adminstration for the Contracts.

PERFORMANCE INFORMATION

MONEY MARKET SUB-ACCOUNT

From time to time, the Company may advertise the "yield" and "effective
yield" of the State Street Global Advisors Money Market Sub-Account ("Money
Market Sub-Account") of the Separate Account. Both yield figures are based
on historical earnings and are not intended to indicate future performance.
The "yield" of the Money Market Sub-Account refers to the income generated
by Contract Values in the Money Market Sub-Account over a seven-day period
(which period will be stated in the advertisement). This income is "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the Contract Value in the Money Market Sub-Account. The
"effective yield" is calculated similarly. However, when annualized, the
income earned by Contract Value is assumed to be reinvested. This results in the
"effective yield" being slightly higher than the "yield" because of the
compounding effect of the assumed reinvestment. The yield figure will reflect
the deduction of any asset-based charges and any applicable Contract Maintenance
Charge.

OTHER SUB-ACCOUNTS

From time to time, the Company may advertise performance data for the
various other Sub-Accounts under the Contract. Such data will show the
percentage change in the value of an Accumulation Unit based on the performance
of an Investment Option over a period of time, usually a calendar year,
determined by dividing the increase (decrease) in value for that Unit by the
Accumulation Unit value at the beginning of the period. This percentage figure
will reflect the deduction of any asset-based charges and any applicable
Contract Maintenance Charge under the Contracts. It will not reflect the
deduction of the Contingent Deferred Sales Charge, which if applied would reduce
any percentage increase or make greater any percentage decrease.

Any advertisement will also include average annual total return figures
calculated as described in the SAI. The total return figures reflect the
deduction of all charges and deductions under the Contracts and the fees and
expenses of the Portfolios. The Company may also advertise performance
information computed on a different basis.

The Company may make available yield information with respect to some of the
Sub-Accounts. Such yield information will be calculated as described in the SAI.
The yield information will reflect the deduction of all charges and deductions
under the Contracts and the fees and expenses of the Portfolios.

The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.

In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the Sub-Accounts
against established market indexes such as the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average, or other management
investment companies which have investment objectives similar to the underlying
Portfolio being compared. The Standard & Poor's 500 Composite Stock Price Index
is an unmanaged, unweighted average of 500 stocks, the majority of which are
listed on the NYSE. The Dow Jones Industrial Average is an unmanaged, weighted
average of 30 blue chip industrial corporations listed on the NYSE. Both the
Standard & Poor's 500 Composite Stock Price Index and the Dow Jones Industrial
Average assume quarterly reinvestment of dividends.

In addition, the Company may, as appropriate, compare each Sub-Account's
performance to that of other types of investments such as certificates of
deposit, savings accounts, and U.S. Treasuries, or to certain interest rate and
inflation indexes, such as the Consumer Price Index, which is published by the
U.S. Department of Labor and measures the average change in prices over time of
a fixed "market basket" of certain specified goods and services. Similar
comparisons of Sub-Account performance may also be made with appropriate indexes
measuring the performance of a defined group of securities widely recognized by
investors as representing a particular segment of the securities markets. For
example, Sub-Account performance may be compared with Donoghue Money Market
Institutional Averages (money market rates), Lehman Brothers Corporate Bond
Index (corporate bond interest rates), or Lehman Brothers Government Bond Index
(long-term U.S. government obligation interest rates).

The Company may also distribute sales literature which compares the performance
of the Accumulation Unit values of the Contracts issued through the Separate
Account with the unit values of variable annuities issued through the separate
accounts of other insurance companies. Such information will be derived from the
Lipper Variable Insurance Products Performance Analysis Service, the VARDS
Report, or from Morningstar.

The Lipper Variable Insurance Products Performance Analysis Service is published
by Lipper Analytical Services, Inc., a publisher of statistical data which
currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.

The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Georgia and published by Financial
Planning Resources, Inc. The VARDS Report rankings may or may not reflect the
deduction of asset-based insurance charges. Where the charges have not been
deducted, the sales literature will indicate that if the charges had been
deducted, the rankings might have been lower.

Morningstar rates a variable annuity Sub-Account against its peers with similar
investment objectives. Morningstar does not rate any Sub-Account that has less
than three years of performance data. The Morningstar rankings may or may not
reflect the deduction of charges. Where the charges have not been deducted, the
sales literature will indicate that if the charges had been deducted, the
rankings might have been lower.

FEDERAL TAX STATUS

GENERAL

NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED IN THIS PROSPECTUS MAY BE APPLICABLE IN CERTAIN SITUATIONS.
MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX
LAWS.

Section 72 of the Code governs taxation of annuities in general. An Owner
is not taxed on increases in the value of a Contract until distribution occurs,
either in the form of a lump sum payment or as Annuity Payments under the
Annuity Option selected. For a lump sum payment received as a total withdrawal
(total surrender), the recipient is taxed on the portion of the payment that
exceeds the cost basis of the Contract. For Non-Qualified Contracts, this cost
basis is generally the Purchase Payments, while for Qualified Contracts there
may be no cost basis. The taxable portion of the lump sum payment is taxed at
ordinary income tax rates.

For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
Fixed Annuity Option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period certain or refund
feature) bears to the expected return under the Contract. The exclusion amount
for payments based on a Variable Annuity Option is determined by dividing the
cost basis of the Contract (adjusted for any period certain or refund guarantee)
by the number of years over which the annuity is expected to be paid. Payments
received after the investment in the Contract has been recovered (i.e., when the
total of the excludible amounts equals the investment in the Contract) are fully
taxable. The taxable portion is taxed at ordinary income tax rates. For certain
types of Qualified Plans, there may be no cost basis in the Contract within the
meaning of Section 72 of the Code. Owners, Annuitants, and Beneficiaries under
the Contracts should seek competent financial advice about the tax consequences
of any distributions.

The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company, and its operations form a part of the Company.

DIVERSIFICATION

Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the U.S. Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in imposition of federal income tax
to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company,
and no more than 55% of the total assets consist of cash, cash items, U.S.
government securities, and securities of other regulated investment companies.

On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (a) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (b) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (c) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (d) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.

The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."

The Company intends that all Portfolios of the Trust underlying the Contracts
will be managed by the Adviser for the Trust in such a manner as to comply with
these diversification requirements.

The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time, it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.

The amount of Owner control which may be exercised under the Contract is
different, in some respects, from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policyowner
was not the owner of the assets of the Separate Account. It is unknown whether
these differences, such as the Owner's ability to transfer among investment
choices or the number and type of investment choices available, would cause the
Owner to be considered as the owner of the assets of the Separate Account,
resulting in the imposition of federal income tax to the Owner with respect to
earnings allocable to the Contract, prior to receipt of payments under the
Contract.

In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively, resulting in the Owner being
retroactively determined to be the Owner of the assets of the Separate Account.

Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.

MULTIPLE CONTRACTS

The Code provides that multiple non-qualified annuity contracts, which are
issued within a calendar year to the same contract owner by one company or its
affiliates, are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences, including more rapid taxation of the distributed amounts from such
combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.

CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS

Under Section 72(u) of the Code, the investment earnings on premiums for
the Contracts will be taxed currently to the Owner, if the Owner is a
non-natural person (e.g., a corporation or certain other entities). Such
Contracts generally will not be treated as annuities for federal income tax
purposes. However, this treatment is not applied to Contracts held by a trust or
other entity, as an agent for a natural person, nor to Contracts held by certain
Qualified Plans. Purchasers should consult their own tax counsel or other tax
adviser before purchasing a Contract to be owned by a non-natural person.

TAX TREATMENT OF ASSIGNMENTS

An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult a competent tax adviser should they wish to assign or pledge
their Contracts.

INCOME TAX WITHHOLDING

All distributions, or the portion thereof which is includible in the gross
income of the Owner, are subject to federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at the
rate of 10% from non-periodic payments. However, the Owner, in most cases, may
elect not to have taxes withheld or to have withholding done at a different
rate.

Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
(a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary, or distributions for a specified
period of 10 years or more; or (b) distributions which are required minimum
distributions; or (c) the portion of the distributions not includible in gross
income (i.e., returns of after-tax contributions). Participants under such plans
should consult their own tax counsel or other tax adviser regarding withholding
requirements.

TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS

Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the contract value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a 10% penalty will apply to the income portion of any
distribution. However, the penalty is not imposed on amounts received: (a) after
the taxpayer reaches age 59 1/2; (b) after the death of the Owner; (c) if the
taxpayer is totally disabled (for this purpose disability is as defined in
Section 72(m)(7) of the Code); (d) in a series of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the taxpayer, or for the joint lives (or joint life expectancies)
of the taxpayer and his or her Beneficiary; (e) under an immediate annuity; or
(f) which are allocable to purchase payments made prior to August 14, 1982.

The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts," below.)

QUALIFIED PLANS

The Contracts offered by this Prospectus are designed to be suitable for
use under various types of qualified plans. Taxation of participants in each
qualified plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants, and Beneficiaries are cautioned that benefits
under a Qualified Plan may be subject to the terms and conditions of the plan,
regardless of the terms and conditions of the Contracts issued pursuant to the
plan. Some retirement plans are subject to distribution and other requirements
that are not incorporated into the Company's administrative procedures. Owners,
participants, and Beneficiaries are responsible for determining that
contributions, distributions, and other transactions, with respect to the
Contracts, comply with applicable law. Following are general descriptions of the
types of qualified plans with which the Contracts may be used. Such descriptions
are not exhaustive and are for general informational purposes only. The tax
rules regarding qualified plans are very complex and will have differing
applications, depending on individual facts and circumstances. Each purchaser
should obtain competent tax advice prior to purchasing a Contract issued under a
Qualified Plan.

Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described in
this Prospectus. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts," below.)

On July 6, 1983, the Supreme Court decided, in Arizona Governing Committee v.
Norris, that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company, in connection
with certain Qualified Plans, will utilize annuity tables which do not
differentiate on the basis of sex. Such annuity tables will also be available
for use in connection with certain non-qualified deferred compensation plans.

A. KEOGH PLANS

Section 401 of the Code permits self-employed individuals to establish Qualified
Plans for themselves and their employees, commonly referred to as "H.R. 10" or
"Keogh" plans. Contributions made to the plan for the benefit of the employees
will not be included in the gross income of the employees until distributed from
the plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations and restrictions on
all Plans, including on such items as: amount of allowable contributions; form,
manner, and timing of distributions; transferability of benefits; vesting and
non-forfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals, and
surrenders. (See "Tax Treatment of Withdrawals - - Qualified Contracts," below.)
Purchasers of Contracts for use with a Keogh plan should obtain competent tax
advice as to the tax treatment and suitability of such an investment.

B. TAX-SHELTERED ANNUITIES

Section 403(b) of the Code permits the purchase of "tax-sheltered annuities" by
public schools and certain charitable, educational, and scientific organizations
described in Section 501(c)(3) of the Code. These qualifying employers may make
contributions to the Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the employees until the
employees receive distributions from the Contracts. The amount of contributions
to the tax-sheltered annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions governing such items as
transferability, distributions, nondiscrimination, and withdrawals. (See "Tax
Treatment of Withdrawals - Qualified Contracts" and "Tax-Sheltered Annuities -
Withdrawal Limitations," below.) Any employee should obtain competent tax advice
as to the tax treatment and suitability of such an investment.

C. INDIVIDUAL RETIREMENT ANNUITIES

Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity ("IRA").
Under applicable limitations, certain amounts may be contributed to an IRA which
will be deductible from the individual's gross income. These IRAs are subject to
limitations on eligibility, contributions, transferability, and distributions.
(See "Tax Treatment of Withdrawals - Qualified Contracts," below.) Under certain
conditions, distributions from other IRAs and other Qualified Plans may be
rolled over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by the
Code, including the requirement that certain informational disclosures be given
to persons desiring to establish an IRA. Purchasers of Contracts to be qualified
as an IRA should obtain competent tax advice as to the tax treatment and
suitability of such an investment.

ROTH IRAs

Beginning in 1998, individuals may purchase a new type of non-deductible IRA,
known as a Roth IRA. Purchase payments for a Roth IRA are limited to a maximum
of $2,000 per year. Lower maximum limitations apply to individuals with
adjusted gross incomes between $95,000 and $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers
filing joint returns, and between $0 and $10,000 in the case of married
taxpayers filing separately. An overall $2,000 annual limitation continues
to apply to all of a taxpayer's IRA contributions, including Roth IRA and
non-Roth IRAs.

Qualified distributions from Roth IRAs are free from federal income tax. A
qualified distribution requires that an individual has held the Roth IRA for at
least five years and, in addition, that the distribution is made either
after the individual reaches age 59 1/2, on the individual's death or
disability, or as a qualified first-time home purchase, subject to a $10,000
lifetime maximum, for the individual, a spouse, child, grandchild, or ancestor.
Any distribution which is not a qualified distribution is taxable to the
extent of earnings in the disribution. Distributions are treated as made
from contributions first and therefore no distributions are taxable until
distributions exceed the amount of contributions to the Roth IRA. The 10%
penalty tax and the regular IRA exceptions to the 10% penalty tax apply to
taxable distributions from a Roth IRA.

Amounts may be rolled over from one Roth IRA to another Roth IRA. Furthermore,
an individual may make a rollover contribution from a non- Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. However, for rollovers in 1998, the
individual may pay that tax ratably over the four taxable year periods beginning
with tax year 1998.

Purchasers of Contracts to be qualified as a Roth IRA should obtain competent
tax advice as to the tax treatment and suitability of such an investment.

D. CORPORATE PENSION AND PROFIT SHARING PLANS

Sections 401(a) and 401(k) of the Code permit corporate employers to establish
various types of retirement plans for employees. These retirement plans may
permit the purchase of the Contracts to provide benefits under the Plan.
Contributions to the Plan for the benefit of employees will not be includible in
the gross income of the employees until distributed from the Plan. The tax
consequences to participants may vary, depending upon the particular plan
design. However, the Code places limitations and restrictions on all plans,
including on such items as: amount of allowable contributions; form, manner, and
timing of distributions; transferability of benefits; vesting and
non-forfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals, and
surrenders. (See "Tax Treatment of Withdrawals - Qualified Contracts," below.)
Purchasers of Contracts for use with Corporate Pension or Profit Sharing Plans
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.

TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS

In the case of a withdrawal under a Qualified Contract, a ratable portion
of the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including Contracts issued and qualified under Code Sections 401 (Keogh and
Corporate Pension and Profit Sharing Plans), 403(b) (Tax-Sheltered Annuities),
and 408A (Individual Retirement Annuities). To the extent amounts are not
includible in gross income because they have been rolled over to an IRA or
another eligible qualified plan, no tax penalty will be imposed. The tax penalty
will not apply to the following distributions: (a) if distribution is made on or
after the date on which the Owner or Annuitant (as applicable) reaches age 59
1/2; (b) distributions following the death or disability of the Owner or
Annuitant (as applicable) (for this purpose disability is as defined in Section
72(m)(7) of the Code); (c) after separation from service, distributions that are
part of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the Owner or Annuitant (as
applicable), or the joint lives (or joint life expectancies) of such Owner or
Annuitant (as applicable) and his or her designated Beneficiary; (d)
distributions to an Owner or Annuitant (as applicable) who has separated from
service after he has attained age 55; (e) distributions made to the Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the Owner or Annuitant
(as applicable) for amounts paid during the taxable year for medical care; (f)
distributions made to an alternate payee, pursuant to a qualified domestic
relations order; (g) distributions from an Individual Retirement Annuity for the
purchase of medical insurance (as described in Section 213(d) (1) (D) of the
Code) for the Contract Owner or Annuitant (as applicable) and his or her spouse
and dependents if the Contract Owner or Annuitant (as applicable) has received
unemployment compensation for at least 12 weeks (this exception will no longer
apply after the Contract Owner or Annuitant (as applicable) has been re-employed
for at least 60 days); (h) distributions from an Individual Retirement Annuity
made to the Owner or Annuitant (as applicable) to the extent such distributions
do not exceed the qualified higher education expenses (as defined in Section
72(t)(7) of the Code) of the Owner or Annuitant (as applicable)for the taxable
year; and (i) distributions from an Individual Retirement Annuity made to the
Owner or Annuitant (as applicable) which are qualified first-time home buyer
distributions (as defined in Section 72(t)(8) of the Code). The exceptions
stated in (d) and (f) above do not apply in the case of an Individual Retirement
Annuity. The exception stated in (c) above applies to an Individual Retirement
Annuity without the requirement that there be a separation from service.

Generally, distributions from a qualified plan must commence no later than April
1 of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2, or (b) the calendar year in which the employee
retires. The date set forth in (b) above does not apply to an Individual
Retirement Annuity. Required distributions must be over a period not exceeding
the life expectancy of the individual or the joint lives or life expectancies of
the individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.

TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS

The Code limits the withdrawal of amounts attributable to contributions
made pursuant to a salary reduction agreement (as defined in Section 403(b)(11)
of the Code) to circumstances only when the Owner: (a) attains age 59 1/2; (b)
separates from service; (c) dies; (d) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (e) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989, and apply only to salary reduction contributions made after December
31, 1988, to income attributable to such contributions and to income
attributable to amounts held as of December 31, 1988. The limitations on
withdrawals do not affect rollovers or transfers between certain qualified
plans. Owners should consult their own tax counsel or other tax adviser
regarding any distributions.

SECTION 457 - DEFERRED COMPENSATION PLANS

Under Section 457 of the Code, governmental and certain other tax-exempt
employers may establish deferred compensation plans for the benefit of their
employees who may invest in annuity contracts. The Code, as in the case of
qualified plans, establishes limitations and restrictions on eligibility,
contributions, and distributions. Under these Plans, contributions made for the
benefit of the employees will not be includible in the employee's gross income
until distributed from the Plan. Under a Section 457 Plan, all the Plan assets
remain solely the property of the employer, subject only to the claims of the
employer's general creditors until such time as made available to the
participant or beneficiary. However, for Plans established after August 20,
1996, it is required that Plan assets be held in trust for the benefit of plan
participants and are not subject to the claims of the general creditors of the
employer. Furthermore, this requirement must be met for all Plans no later than
January 1, 1999.

FINANCIAL STATEMENTS

Financial Statements of the Company and the Separate Account have been
included in the SAI.

LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Separate
Account, the Distributor, or the Company is a party.

TABLE OF CONTENTS
OF THE STATEMENT OF ADDITIONAL INFORMATION

Page
<S> <C>
COMPANY
EXPERTS
LEGAL OPINIONS
DISTRIBUTOR
YIELD CALCULATION FOR THE STATE STREET GLOBAL ADVISORS MONEY MARKET SUB-ACCOUNT
PERFORMANCE INFORMATION
ANNUITY PROVISIONS
FINANCIAL STATEMENTS
</TABLE>

PART B

STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS
WITH FLEXIBLE PURCHASE PAYMENTS
ISSUED BY
AGA SEPARATE ACCOUNT A
AND
AMERICAN GENERAL ANNUITY INSURANCE COMPANY

THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION (THE "SAI")
SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED JUNE 1, 1998, FOR THE
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS WITH FLEXIBLE PURCHASE
PAYMENTS WHICH ARE REFERRED TO HEREIN.

THE PROSPECTUS CONCISELY SETS FORTH INFORMATION FOR A PROSPECTIVE INVESTOR. FOR
A COPY OF THE PROSPECTUS, CALL 1-800-910-4555, OR WRITE THE COMPANY AT P.O. BOX
290721, WETHERSFIELD, CT 06129-0721 OR 205 E. TENTH AVENUE, AMARILLO, TEXAS
79105. THIS SAI IS DATED JUNE 1, 1998.

TABLE OF CONTENTS

Page
<S> <C>

Company 3
Independent Auditors 3
Legal Opinions 3
Distributor 3
Yield Calculation For The State Street Global Advisors
Money Market Sub-Account 3
Performance Information 4
Annuity Provisions 5
Annuity Unit 6
Financial Statements 6
</TABLE>

COMPANY

Information regarding American General Annuity Insurance Company
(the "Company") and its ownership is contained in the Prospectus. Effective
February 25, 1998, the Company changed its name from Western National Life
Insurance Company to its present name.

The Company contributed the initial capital to the AGA Separate Account A (the
"Separate Account"). As of December 31, 1997, the initial capital contributed by
the Company represented approximately 31% of the total assets of the Separate
Account. The Company currently intends to remove these assets from the Separate
Account on a pro rata basis in proportion to money invested in the Separate
Account by Owners.

INDEPENDENT AUDITORS

The balance sheet of the Company as of December 31, 1997 and the related
statements of operations, shareholders' equity and cash flows for the year then
ended and the statement of assets and liabilities of the Separate Account as of
December 31, 1997, and the related statement of operations for the year ended
December 31, 1997, and the statement of changes in net assets for the year ended
December 31, 1997, all of which are included in the SAI, have been included
herein in reliance on the reports of Ernst & Young LLP, independent auditors
given on the authority of that firm as experts in accounting and auditing.

The balance sheet of the Company as of December 31, 1996 and the related
statements of operations, shareholders' equity and cash flows for each of the
two years in the period ended December 31, 1996, and the statement of
changes in net assets of the Separate Account for the year ended December 31,
1996, all of which are included in the SAI, have been included herein in
reliance on the reports of Coopers & Lybrand, L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.

LEGAL OPINIONS

Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.

DISTRIBUTOR

AGA Brokerage Services, Inc. ("AGA Brokerage"), (formerly known as WNL
Brokerage Services, Inc.) acts as the distributor. AGA Brokerage is an
affiliate of the Company. The offering is on a continuous basis.

YIELD CALCULATION FOR
THE STATE STREET GLOBAL ADVISORS MONEY MARKET SUB-ACCOUNT

The State Street Global Advisors Money Market Sub-Account of the Separate
Account will calculate its current yield based upon the seven days ended
on the date of calculation. For the seven calendar days ending December
31, 1997, the annualized effective yield for the State Street Global Advisors
Money Market Sub-Account was 3.86% and the yield was 3.79%.

The current yield of the State Street Global Advisors Money Market Sub-Account
is computed by determining the net change (exclusive of capital changes) in
the value of a hypothetical pre-existing Owner account having a balance of one
Accumulation Unit of the Sub-Account at the beginning of the period,
subtracting the Mortality and Expense Risk Charge, the Administrative Charge,
and the Contract Maintenance Charge, dividing the difference by the value of
the account at the beginning of the same period to obtain the base period
return, and multiplying the result by (365/7). The calculation does not take
into account any applicable Enhanced Death Benefit Charge or Annual Step-Up
Death Benefit Charge.

For the seven calendar days ended December 31, 1997, the annualized effective
yield and yield for the State Street Global Advisors Money Market Sub-Account
calculated with the applicable Enhanced Death Benefit Charge was 3.70%
and 3.64%, respectively. There is no yield information for the State Street
Global Advisors Money Market Sub-Account calculated with the applicable Annual
Step-Up Death Benefit Charge because the Annual Step-Up Death Benefit was not
available until May 1, 1998.

The State Street Global Advisors Money Market Sub-Account computes its effective
compound yield according to the method prescribed by the Securities and Exchange
Commission (the "SEC"). The effective yield reflects the reinvestment of net
income earned daily on State Street Global Advisors Money Market Sub-Account
assets.

Net investment income for yield quotation purposes will not include either
realized capital gains and losses or unrealized appreciation and depreciation,
whether reinvested or not.

The yields quoted should not be considered a representation of the yield of the
State Street Global Advisors Money Market Sub-Account in the future since the
yield is not fixed. Actual yields will depend not only on the type, quality, and
maturities of the investments held by the State Street Global Advisors Money
Market Sub-Account and changes in the interest rates on such investments, but
also on changes in the State Street Global Advisors Money Market Sub-Account's
expenses during the period.

Yield information may be useful in reviewing the performance of the State
Street Global Advisors Money Market Sub-Account and for providing a basis for
comparison with other investment alternatives. However, the State Street
Global Advisors Money Market Sub-Account's yield fluctuates, unlike bank
deposits or other investments which typically pay a fixed yield for a stated
period of time.

PERFORMANCE INFORMATION

From time to time, the Company may advertise performance data as described in
the Prospectus. Any such advertisement will include three sets of total return
figures for the time periods indicated in the advertisement. One set of such
total return figures will reflect the deduction of a 1.25% Mortality and Expense
Risk Charge, a .15% Administrative Charge, the investment advisory fee and
expenses for the underlying Portfolio being advertised, and any applicable
Contract Maintenance Charge. A second set of such total return figures will
reflect the same deductions mentioned plus the deduction of a .05% Enhanced
Death Benefit Charge. A third set of such total return figures will reflect the
same deductions mentioned plus the deduction of .10% Annual Step-Up Death
Benefit Charge.

The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charge to arrive at the ending hypothetical value. The
average annual total return is then determined by computing the fixed interest
rate that a $1,000 purchase payment would have to earn annually, compounded
annually, to grow to the hypothetical value at the end of the time periods
described. The formula used in these calculations is:

n
P (1 + T ) = ERV
Where:
P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value at the end of the time periods used (or
fractional portion thereof) of a hypothetical $1,000 payment
made at the beginning of the time periods used.

In addition to total return data, the Company may include yield information in
its advertisements. Each Sub-Account (other than the State Street Global
Advisors Money Market Sub-Account) for which the Company will advertise yield,
will show a yield quotation based on a 30-day (or one-month) period ended on the
date of the most recent balance sheet of the Separate Account included in the
registration statement, computed by dividing the net investment income per
Accumulation Unit earned during the period by the maximum offering price per
Unit on the last day of the period, according to the following formula:

a-b
---
Yield = 2 [( cd + 1)6 - 1]
Where:
a = Net investment income earned during the period by the Trust
attributable to shares owned by the Sub-Account.
b = Expenses accrued for the period (net of reimbursements).
c = The average daily number of Accumulation Units outstanding during
the period.
d = The maximum offering price per Accumulation Unit on the last day
of the period.

The Company may also advertise performance data which will be computed on a
different basis.

Investment operations for the Sub-Accounts which invest in Portfolios of the AGA
Series Trust (the "Trust") depicted in the chart below commenced on the
following dates:

Portfolio Inception Date
- - -------------------------------------------- --------------
<S> <C>

Credit Suisse Growth and Income Portfolio 10/20/95
Credit Suisse International Equity Portfolio 10/20/95
EliteValue Portfolio 01/02/96
State Street Global Advisors Growth Equity
Portfolio 10/20/95
State Street Global Advisors Money Market
Portfolio 10/10/95
Salomon Brothers U.S. Government
Securities Portfolio 02/06/96
Van Kampen American Capital Emerging
Growth Portfolio 01/02/96
</TABLE>

Chart 1 below shows performance figures which reflect the deduction of all
charges and deductions (except the Enhanced Death Benefit Charge or Annual
Step-Up Death Benefit Charge) under the Contracts (see "Charges and Deductions"
in the Prospectus) and also reflect the actual fees and expenses paid by the
underlying Portfolios. Chart 2 below is identical to Chart 1 except that it
also reflects the deduction of the Enhanced Death Benefit Charge, where
applicable.

AVERAGE TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>

Chart 1
- --------

Sub-Accounts One Year From Inception
- -------------------------------------------- --------- ---------------
<S> <C> <C>

Credit Suisse Growth and Income Portfolio 15.73% 13.02%
Credit Suisse International Equity Portfolio (2.30)% 4.58%
EliteValue Portfolio 14.48% 17.26%
State Street Global Advisors Growth Equity
Portfolio 25.07% 19.10%
State Street Global Advisors Money Market
Portfolio (1.10)% (1.27)%
Salomon Brothers U.S. Government
Securities Portfolio 2.29% (0.18)%
Van Kampen American Capital Emerging
Growth Portfolio 13.85% 13.15%
</TABLE>

Chart 2
- --------

Sub-Accounts One Year From Inception
- -------------------------------------------- --------- ---------------
<S> <C> <C>
Credit Suisse Growth and Income Portfolio 15.58% 12.87%
Credit Suisse International Equity Portfolio (2.45)% 4.43%
EliteValue Portfolio 14.33% 17.11%
State Street Global Advisors Growth Equity
Portfolio 24.92% 18.95%
State Street Global Advisors Money Market
Portfolio (1.25)% (1.42)%
Salomon Brothers U.S. Government
Securities Portfolio 2.14% (0.33)%
Van Kampen American Capital Emerging
Growth Portfolio 13.70% 13.00%
</TABLE>

Owners should note that the investment results of each Sub-Account will
fluctuate over time, and any presentation of the Sub-Account's total return or
yield for any period should not be considered a representation of what an
investment may earn or what an Owner's total return or yield may be in any
future period.

ANNUITY PROVISIONS

A Variable Annuity is an annuity with payments which: (a) are not predetermined
as to dollar amount and (b) will vary in amount with the net investment results
of the applicable Sub-Accounts of the Separate Account. Annuity Payments also
depend upon the Age of the Annuitant and any Joint Annuitant and the assumed
interest factor utilized. The Annuity Table used will depend upon the Annuity
Option chosen. The dollar amount of Annuity Payments after the first is
determined as follows:

1. The dollar amount of the first Variable Annuity Payment is divided by the
value of an Annuity Unit for each applicable Sub-Account as of the Annuity Date.
This sets the number of Annuity Units for each monthly payment for the
applicable Sub-Account. The number of Annuity Units remains fixed during the
Annuity Period.

2. The fixed number of Annuity Units per payment in each Sub-Account is
multiplied by the Annuity Unit Value for that Sub-Account for the last Valuation
Period of the month preceding the month for which the payment is due. This
result is the dollar amount of the payment for each applicable Sub-Account.

The total dollar amount of each Variable Annuity Payment is the sum of all
Sub-Account Variable Annuity Payments reduced by the applicable portion of the
Contract Maintenance Charge.

The dollar amount of the first Variable Annuity payment is determined in
accordance with the description above.

ANNUITY UNIT

The value of any Annuity Unit for each Sub-Account of the Separate Account was
set initially at $10. The Sub-Account Annuity Unit value at the end of any
subsequent Valuation Period is determined as follows:

1. The Net Investment Factor for the current Valuation Period is multiplied by
the value of the Annuity Unit for the Sub-Account for the immediately preceding
Valuation Period.

2. The result in (1) is then divided by the Assumed Investment Rate Factor,
which equals 1.00, plus the Assumed Investment Rate for the number of days since
the preceding Valuation Date. The Assumed Investment Rate is equal on an annual
rate to 3%.

The value of an Annuity Unit may increase or decrease from Valuation Period to
Valuation Period.

FINANCIAL STATEMENTS

The financial statements of the Company included herein should be considered
only as bearing upon the ability of the Company to meet its obligations under
the Contracts.

<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS

PAGE
----
<S> <C>
Reports of Independent Auditors F-2
Balance Sheet as of December 31, 1997 and 1996 F-4
Statement of Operations for the years ended December 31, 1997, 1996 and 1995 F-5
Statement of Shareholder's Equity for the years ended December 31, 1997,
1996 and 1995 F-6
Statement of Cash Flows for the years ended December 31, 1997,
1996 and 1995 F-7
Notes to Financial Statements F-8
Report of Independent Auditors on Financial Statement Schedule F-29
Financial Statement Schedule:
Schedule VI-Reinsurance for the years ended December 31, 1997,
1996 and 1995 F-30
</TABLE>

F-1
<PAGE>

Report of Independent Auditors

To the Board of Directors of
American General Annuity Insurance Company

We have audited the accompanying balance sheet of American General Annuity
Insurance Company (formerly known as Western National Life Insurance Company) as
of December 31, 1997, and the related statements of Operations, shareholders
equity, and cash flows for the year ended December 31, 1997. Our audit also
included the financial statement schedule listed in the Index on page F-1 of
this Form N-4. These financial statements and schedule are the responsibility of
the Company=s management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
and those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American General Annuity
Insurance Company at December 31, 1997, and the consolidated results of its
operations and its cash flows for the year ended December 31, 1997, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

ERNST & YOUNG LLP

Houston, Texas
May 12, 1998

F-2
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
American General Annuity Insurance Company

We have audited the accompanying balance sheet of American General Annuity
Insurance Company, formerly known as Western National Life Insurance Company, as
of December 31, 1996, and the related statements of operations, shareholder's
equity, and cash flows for each of the two years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American General Annuity
Insurance Company as of December 31, 1996, and the results of its operations and
its cash flows for each of the two years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Houston, Texas
February 5, 1997

F-3
<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY

BALANCE SHEET

DECEMBER 31, 1997 AND 1996
(DOLLARS IN MILLIONS)

ASSETS 1997 1996
--------- --------- ---------
<S> <C> <C>
Investments:
Fixed maturitiesCactively managed at fair value (amortized cost:
1997C$9,635.1; 1996C$8,738.4). . . . . . . . . . . . . . . . . . . . . $ 9,989.2 $ 8,842.5
Equity securities at fair value (cost: 1997C$10.1; 1996-$0.0). . . . . 10.4 -
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.5 122.7
Credit-tenant loans. . . . . . . . . . . . . . . . . . . . . . . . . . 217.0 208.5
Policy loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.8 66.8
Other invested assets. . . . . . . . . . . . . . . . . . . . . . . . . 33.4 24.5
Receivable for securities. . . . . . . . . . . . . . . . . . . . . . . 3.4 0.4
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . 475.6 105.4
--------- ---------
Total investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 10,893.3 9,370.8

Accrued investment income. . . . . . . . . . . . . . . . . . . . . . . 161.7 156.6
Funds held by reinsurer and reinsurance receivables. . . . . . . . . . 220.8 98.0
Cost of policies purchased . . . . . . . . . . . . . . . . . . . . . . 7.7 50.4
Cost of policies produced. . . . . . . . . . . . . . . . . . . . . . . 418.0 380.2
Current income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 -
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.8 9.7
Separate account assets. . . . . . . . . . . . . . . . . . . . . . . . 29.6 6.0
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,753.1 $10,071.7
========= =========

LIABILITIES AND SHAREHOLDER'S EQUITY
-------------------------------------
Liabilities:
Insurance liabilities. . . . . . . . . . . . . . . . . . . . . . . . . $ 9,801.0 $ 8,679.9
Investment borrowings and payable for securities . . . . . . . . . . . 434.6 156.3
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . 153.8 96.4
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 23.2 38.1
Separate account liability . . . . . . . . . . . . . . . . . . . . . . 29.6 6.0
--------- ---------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 10,442.2 8,976.7
--------- ---------

Shareholder's equity:
Common stock and additional paid-in capital (par value $50 per share;
100,000 shares authorized; 50,000 issued and outstanding). . . . . . . 458.5 448.5
Unrealized appreciation of investments, net. . . . . . . . . . . . . . 129.9 39.1
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . 722.5 607.4
--------- ---------
Total shareholder's equity . . . . . . . . . . . . . . . . . . . . . . 1,310.9 1,095.0
--------- ---------
Total liabilities and shareholder's equity . . . . . . . . . . . . . . $11,753.1 $10,071.7
========= =========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-4
<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Revenues:
Insurance policy income. . . . . . . . . . . . . . . . . $126.9 $ 91.0 $ 26.4
Net investment income. . . . . . . . . . . . . . . . . . 807.0 703.1 662.2
Equity in earnings of partnerships investments . . . . . 0.3 7.0 3.8
Net realized losses. . . . . . . . . . . . . . . . . . . (22.7) (2.3) (126.2)
------- ------- --------
Total revenues . . . . . . . . . . . . . . . . . . . . 911.5 798.8 566.2
------- ------- --------

Benefits and expenses:
Insurance policy benefits. . . . . . . . . . . . . . . . 108.8 109.6 108.3
Change in future policy benefits and other liabilities . 114.2 74.6 14.1
Interest expense on annuities and financial products . . 425.9 381.7 364.9
Interest expense on investment borrowing . . . . . . . . 17.8 8.1 8.6
Amortization related to operations . . . . . . . . . . . 48.3 41.6 37.1
Amortization and change in future policy benefits related
to realized gains (losses) . . . . . . . . . . . . . . (4.0) 0.6 (29.8)
Other operating costs and expenses . . . . . . . . . . . 20.3 13.5 41.3
------- ------- --------
Total benefits and expenses. . . . . . . . . . . . . . 731.3 629.7 544.5
------- ------- --------
Income before income taxes . . . . . . . . . . . . . . 180.2 169.1 21.7
Income tax expense . . . . . . . . . . . . . . . . . . . . 64.9 59.1 6.3
------- ------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . $115.3 $110.0 $ 15.4
======= ======= ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-5
<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- -------
<S> <C> <C> <C>
Common stock and additional paid-in capital:
Balance, beginning of year. . . . . . . . . . . . . . . . 448.5 $ 322.6 $ 322.6
Capital contribution. . . . . . . . . . . . . . . . . . 10.0 125.9 -
--------- -------- ---------
Balance, end of year. . . . . . . . . . . . . . . . . . . 458.5 448.5 $ 322.6
========= ======== =========

Unrealized appreciation (depreciation) of investments, net:
Balance, beginning of year. . . . . . . . . . . . . . . . $ 39.1 $ 125.2 $ (322.1)
Change in unrealized appreciation (depreciation), net . 90.8 (86.1) 447.3
--------- -------- ---------
Balance, end of year. . . . . . . . . . . . . . . . . . . $ 129.9 $ 39.1 $ 125.2
========= ======== =========
Retained earnings:
Balance, beginning of year. . . . . . . . . . . . . . . . $ 607.4 $ 496.9 $ 481.5
Beginning balance for WNL Investment
Advisory Services, Inc. . . . . . . . . . . . . . . . - 0.5 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . (0.2) - -
Net income. . . . . . . . . . . . . . . . . . . . . . . 115.3 110.0 15.4
--------- ------- ----------
Balance, end of year. . . . . . . . . . . . . . . . . . . $ 722.5 $ 607.4 $ 496.9
========= ======= ==========

Total shareholder's equity. . . . . . . . . . . . . . . $1,310.9 $1,095.0 $ 944.7
========= ========= ==========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-6
<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 115.3 $ 110.0 $ 15.4
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization and depreciation. . . . . . . . . . . . . . 44.9 42.6 7.3
Realized (gains) losses on investments, net. . . . . . . 16.2 (2.6) 119.4
Income taxes . . . . . . . . . . . . . . . . . . . . . . (11.6) 50.4 60.7
Increase in insurance liabilities. . . . . . . . . . . . 57.3 8.2 116.0
Interest credited to insurance liabilities . . . . . . . 438.4 391.8 370.2
Fees charged to insurance liabilities. . . . . . . . . . (6.9) (4.4) (4.2)
Amortization (accrual) of investment income, net . . . . (10.5) (27.3) 3.7
Deferral of cost of policies produced. . . . . . . . . . (147.6) (120.7) (62.2)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . (15.1) (9.3) (0.4)
---------- ---------- ----------
Net cash provided by operating activities. . . . . . . 480.4 438.7 625.9
---------- ---------- ----------

Cash flows from investing activities:
Sales of investments . . . . . . . . . . . . . . . . . . 3,091.0 3,086.8 3,151.9
Maturities and redemptions of investments. . . . . . . . 581.2 431.0 376.3
Purchases of investments . . . . . . . . . . . . . . . . (4,593.1) (4,571.8) (3,686.4)
---------- ---------- ----------
Net cash used in investing activities. . . . . . . . . (920.9) (1,054.0) (158.2)
---------- ---------- ----------

Cash flows from financing activities:
Deposits to insurance liabilities. . . . . . . . . . . . 1,949.6 1,711.3 747.2
Withdrawals from insurance liabilities . . . . . . . . . (1,440.0) (1,402.7) (1,052.5)
Capital contributions from parent. . . . . . . . . . . . 10.0 125.9 -
Advances to affiliates . . . . . . . . . . . . . . . . . 6.0 - -
Investment borrowings, net . . . . . . . . . . . . . . . 285.1 (128.6) 226.6
---------- ---------- ----------
Net cash provided by (used in) financing activities. . . 810.7 305.9 (78.7)
---------- ---------- ----------
Net increase (decrease) in short-term investments. . . 370.2 (309.4) 389.0

Short-term investmentsCbeginning of year . . . . . . . . 105.4 414.8 25.8
---------- ---------- ----------
Short-term investmentsCend of year . . . . . . . . . . . $ 475.6 $ 105.4 $ 414.8
========== ========== ==========

Supplemental cash flow disclosure:
Income taxes (refunded) paid, net. . . . . . . . . . . . $ 75.1 $ (25.4) $ (4.7)
========== ========== ==========

Interest paid on investment borrowings . . . . . . . . . $ 17.8 $ 8.4 $ 8.0
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-7
<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)

NOTES TO FINANCIAL STATEMENTS
-------------

1. SIGNIFICANT ACCOUNTING POLICIES:

ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION

American General Annuity Insurance Company (the "Company") is a State of
Texas domiciled life insurance company that was founded in 1944. The Company is
a wholly-owned subsidiary of Western National Corporation ("Western National").
In February 1994, Conseco, Inc. (AConseco@) transferred ownership of the Company
to Western National, an insurance holding company formed by Conseco. The
transactions were approved by the Texas Department of Insurance. Western
National completed an initial public offering of its common stock in February
1994 whereby Conseco retained approximately 40% ownership of Western National's
common stock. On December 23, 1994, AGC Life Insurance Company (AAGC Life@), a
Missouri-domiciled life insurer, purchased the remaining shares of common stock
held by Conseco. AGC Life is a wholly-owned subsidiary of American General
Corporation, a Texas corporation (AAGC@). References to AAmerican General@ are
references to AGC and its direct and indirect majority controlled subsidiaries.
As of December 31, 1996, American General owned approximately a 46% equity
interest in Western National. The increase in American General=s equity
interest was the result of Western National issuing preferred stock to American
General in September 1996. On February 25, 1998, with the approval of the Texas
Department of Insurance and the shareholders of Western National, American
General acquired the remaining 54% of the outstanding common stock of Western
National for consideration valued at approximately $1.2 billion. The financial
statements are presented on an historical basis of accounting and do not reflect
any of the push down of purchase accounting adjustments that will occur upon the
acquisition.

WNL Investment Advisory Services, Inc. ("WNLIAS") was formed primarily to
manage the Company=s investment portfolio and to own certain investments of the
Company. On March 27, 1998, WNLIAS changed its name to AGA Investment Advisory
Services, Inc ("AGAIAS"). AGAIAS is an investment subsidiary as defined by the
National Association of Insurance Commissioners. The Company and AGAIAS are
subsidiaries of Western National and are under common management control. The
accompanying financial statements include the accounts of WNLIAS as of and for
the years ended December 31, 1997 and 1996. The Company=s investment in WNLIAS
preferred stock, intercompany investment advisory fees, and other intercompany
accounts have been eliminated.

The Company develops, markets and issues annuity products through niche
distribution channels. The Company sells deferred annuities, including its
proprietary fixed annuities, to the savings and retirement markets through
financial institutions (primarily banks and thrifts), and sells deferred
annuities to both tax-qualified and nonqualified retirement markets through
personal producing general agents ("PPGAs"). The Company also sells deferred
annuities through its direct sales operations. Under a joint marketing
arrangement with American General Life Insurance Company ("AGLIC"), the Company
markets and coinsures single premium immediate annuities ("SPIAs") through
specialty brokers to the structured settlement market. The Company also sells
SPIAs (other than structured settlement SPIAs) through its financial institution
and PPGA distribution channels. The Company commenced sales of its first
variable annuity product in fourth quarter 1995. Sales of deferred annuities
through financial institutions comprised 81%, 82% and 68% of net premiums
collected in 1997, 1996 and 1995, respectively. Sales through a single
financial institution comprised 40% of net premiums collected in 1997.

OVERALL EFFECT OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-8
<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

INVESTMENTS

Fixed maturity investments ("fixed maturities") are debt securities that
have original maturities greater than one year and are comprised of investments
such as U.S. Treasury securities, mortgage-backed securities, corporate bonds,
asset-backed securities and redeemable preferred stocks. Equity securities
include common and non-redeemable preferred stocks. The Company follows the
provisions of Statement of Financial Accounting Standards No. 115, ACCOUNTING
FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES (ASFAS 115"), and,
accordingly, classifies its fixed maturities and equity securities into the
following categories:

- Actively managed fixed maturities and equity securities are securities
that may be sold prior to maturity due to changes that might occur in
market interest rates, changes in prepayment risk, the Company's
management of its income tax position, general liquidity needs,
increase in loan demand, the need to increase regulatory capital or
similar factors. Actively managed securities are carried at estimated
fair value and the net unrealized gains (losses) are recorded as a
component of shareholder's equity, net of tax and related adjustments
described below. All of the Company's fixed maturities and equity
securities were classified as actively managed as of December 31, 1997
and 1996.

- Held to maturity securities are those debt securities which the
Company has the ability and positive intent to hold to maturity, and
are carried at amortized cost. The Company may dispose of such
securities under certain unforeseen circumstances, such as issuer
credit deterioration or changes in regulatory requirements. The
Company had no held to maturity securities in 1997 and 1996.

- Trading account securities are fixed maturity and equity securities
that are bought and held primarily for the purpose of selling them in
the near term. Trading account securities are carried at estimated
fair value and the net unrealized gains (losses) are included as a
component of net trading income. The Company had no trading account
activities in 1997 or 1996.

Changes in interest rates have a direct, inverse impact on the market value
of fixed-income investments. It is reasonably possible that changes in interest
rates will occur in the near term and, as a result of SFAS 115, such changes
will have a material impact on the carrying value of actively managed fixed
maturity and equity securities, with an offsetting effect to stockholder's
equity, net of the related effects on cost of policies purchased and produced
and deferred income taxes.

Anticipated returns, including realized gains and losses, from the
investment of policyholder balances are considered in determining the
amortization of the cost of policies purchased and the cost of policies
produced. When actively managed fixed maturity and equity securities are stated
at fair value, an adjustment is made to the cost of policies purchased and the
cost of policies produced equal to the change in amortization that would have
been recorded if such securities had been sold at their fair value and the
proceeds reinvested at current yields. Furthermore, if future yields expected to
be earned on such securities decline, it may be necessary to increase certain
insurance liabilities. Adjustments to such liabilities are required when their
balances, in addition to future net cash flows including investment income, are
insufficient to cover future benefits and expenses.

Mortgage loans and credit-tenant loans are carried at amortized cost.
Policy loans are carried at their current unpaid principal balance. Fees
received and costs incurred in connection with the Company's origination of
these loans are deferred and amortized as yield adjustments over the loan=s
remaining contractual lives in accordance with SFAS 91. Short-term investments,
which principally include commercial paper, cash and other financial instruments
with original maturities of 90 days or less, are carried at amortized cost.

Discounts and premiums of investment securities to par are amortized as
yield adjustments over the contractual lives of the underlying securities and
callable corporate bonds. Principal prepayments can alter the cash flow pattern
and yield of prepayment-sensitive investments such as mortgage-backed securities
("MBS") and callable bonds. The accretion

F-9
<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

of discount and amortization of premium takes into consideration actual and
estimated principal prepayments. In the case of MBS, the Company utilizes
estimated prepayment speed information obtained from published sources or from
estimates developed internally. The effects on the yield of a security from
changes in principal prepayments are recognized retrospectively, except for
interest only or residual interests in structured securities which are
recognized prospectively. The degree to which a security is susceptible to yield
adjustments is influenced by the difference between its carrying value and par,
the relative sensitivity of the underlying assets backing the securities to
changing interest rates, and the repayment priority of the securities in the
overall securitization structure. Prepayments may also reduce future yield to
the extent that proceeds are reinvested in a lower rate environment.

The Company manages the extent of these risks by (i) principally purchasing
securities which are backed by collateral with lower prepayment sensitivity
(such as MBS priced at or near par value that are highly seasoned), (ii)
avoiding securities with values heavily influenced by changes in prepayments
(such as interest-only and principal-only securities), and (iii) purchasing
securities with prepayment protected structures.

The specific identification method is used to account for the disposition
of investments. The differences between the sales proceeds and the carrying
values are reported as gains (losses), or in the case of prepayments, as
adjustments to investment income. Declines in values of investments which are
considered other than temporary are recognized as realized losses. Subsequent
recoveries in value are recognized only when the investments are sold.

The Company occasionally uses derivative financial instruments to alter interest
rate exposure arising from mismatches between assets and liabilities. Certain of
the Company's fixed maturity investments are floating-rate instruments. In an
effort to reasonably closely match the average duration of assets and
liabilities, the Company has entered into interest rate swap contracts that
effectively convert the floating-rate securities to fixed-rate instruments.
Specifically, the Company contracts with counterparties to exchange, at
specified intervals, the difference between fixed-rate and floating-rate
interest amounts calculated by reference to an agreed notional amount. The
Company pays the floating rate and receives the fixed rate, with the net
difference charged or credited as an adjustment to investment income. The
Company's investment guidelines provide that all swap contracts must be either
(i) with parties rated "A" or better by a nationally recognized statistical
rating service, and/or (ii) secured by collateral approved by the Company's
Investment Committee.

The Company occasionally enters into mortgage dollar roll and reverse
repurchase transactions (collectively, "dollar rolls") when earnings enhancement
opportunities arise. Dollar rolls are agreements with an outside source,
usually broker/dealers, to sell mortgage-backed securities and then, at a
predetermined date, to buy back "substantially the same securities". The
securities Arolled@ are agency pass-throughs [i.e., have been issued, assumed or
guaranteed by the Government National Mortgage Association ("GNMA"), the Federal
National Mortgage Association ("FNMA"), or the Federal Home Loan Mortgage
Corporation ("FHLMC")].

The Company enters into dollar rolls whenever a positive spread can be
realized from the implicit interest cost of the investment borrowings and the
reinvestment of the proceeds in short-term financial instruments. Because both
sides of the transaction are entered into on the basis of short-term,
money-market rates, dollar rolls involve relatively little duration risk while
providing an enhancement to investment income. The Company's dollar rolls are
accounted for as short-term investment borrowings.

Other invested assets include investments in limited partnerships. The
Company follows the equity method of accounting for these investments. Limited
partnerships investments are likely to result in a higher degree of volatility
in reported earnings than is typically the case with fixed income investments,
and present a greater risk of loss, as they reflect claims on an issuer=s
capital structure junior to that of most fixed-income investments.

F-10
<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

COST OF POLICIES PURCHASED

The cost of policies purchased represents the portion of Conseco's cost of
acquiring the Company in 1987 that was attributable to the value of the right to
receive future cash flows from insurance contracts existing at the date of
acquisition. The value of the cost of policies purchased is the actuarially
determined present value of the projected future cash flows from the acquired
policies.

Expected future cash flows used in determining the cost of policies
purchased are based on actuarially determined projections of future premium
collection, mortality, surrenders, benefit payments, operating expenses, changes
in insurance liabilities, investment yields on the assets held to back such
policy liabilities and other factors. These projections take into account all
factors known or expected at the valuation date based on the collective judgment
of the management of the Company. Actual experience on purchased business may
vary from projections due to differences in renewal premiums collected,
investment spread, investment gains (losses), mortality and morbidity costs and
other factors. These variances from original projections, whether positive or
negative, are included in net income as they occur. To the extent that these
variances indicate that future cash flows will differ from those reflected in
the scheduled amortization of the cost of policies purchased, current and future
amortization is adjusted. Therefore, when the Company sells fixed maturities and
recognizes a gain (loss) it also reduces (increases) the future investment
spread because the proceeds from the sale of investments are reinvested at a
lower (higher) earnings rate and amortization is increased (decreased) to
reflect the change in the incidence of cash flows. The discount rate used to
determine such value is the current rate of return the Company would require to
justify the investment.

The cost of policies purchased is amortized (with interest at the same rate used
to determine the discounted value of the asset) based on the incidence of the
expected cash flows. Recoverability of the cost of policies purchased is
evaluated regularly by comparing the current estimate of expected future cash
flows (discounted at the rate of interest that accrues to the policies) to the
unamortized asset balance by line of insurance business. If such current
estimate indicates that the existing insurance liabilities, together with the
present value of future net cash flows from the business, will not be sufficient
to recover the cost of policies purchased, the difference is charged to expense.
Amortization is also adjusted for the current and future years to reflect (i)
the revised estimate of future cash flows and (ii) the revised interest rate
(but not greater than the rate initially used and not lower than the rate of
interest earned on invested assets) at which the discounted present value of
such expected future profits equals the unamortized asset balance. Expected
future cash flows used in determining the amortization pattern and
recoverability of cost of policies purchased is based on historical gross
profits and management's estimates and assumptions regarding future investment
spreads, maintenance expenses, and persistency of the block of business. The
accuracy of the estimates and assumptions are impacted by several factors,
including factors outside the control of management such as movements in
interest rates and competition from other investment alternatives. It is
reasonably possible that conditions impacting the estimates and assumptions will
change and that such changes will result in future adjustments to cost of
policies purchased.

COST OF POLICIES PRODUCED

Costs of producing new business (primarily commissions and certain costs of
policy issuance and underwriting) which vary with and are primarily related to
the production of new business, are deferred to the extent recoverable from
future profits. Such costs are amortized with interest as follows:

- For universal life-type contracts and investment-type contracts, in
relation to the present value of expected gross profits from these
contracts, discounted using the interest rate credited to the policy;

- For immediate annuities with mortality risks, in relation to the
present value of benefits to be paid;

- For traditional life contracts, in relation to future anticipated
premium revenue using the same assumptions that are used in
calculating the insurance liabilities.

F-11

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

Recoverability of the unamortized balance of the cost of policies produced
is evaluated regularly. For universal life-type contracts and investment-type
contracts, the accumulated amortization is adjusted (whether an increase or a
decrease) whenever there is a material change in the estimated gross profits
expected over the life of a block of business in order to maintain a constant
relationship between cumulative amortization and the present value (discounted
at the rate of interest that accrues to the policies) of expected gross profits.
For most other contracts, the unamortized asset balance is reduced by a charge
to income only when the sum of the present value of future cash flows and the
policy liabilities is not sufficient to cover such asset balance. Expected
gross profits used in determining the amortization pattern and recoverability of
cost of policies produced is based on historical gross profits and management's
estimates and assumptions regarding future investment spreads, maintenance
expenses, and persistency of the block of business. The accuracy of the
estimates and assumptions are impacted by several factors, including factors
outside the control of management such as movements in interest rates and
competition from other investment alternatives. It is reasonably possible that
conditions impacting the estimates and assumptions will change and that such
changes will result in future adjustments to cost of policies produced.

INSURANCE LIABILITIES, RECOGNITION OF INSURANCE POLICY INCOME AND RELATED
BENEFITS AND EXPENSES

Reserves for universal life-type and investment-type contracts are based on
the contract account balance, if future benefit payments in excess of the
account balance are not guaranteed, or on the present value of future benefit
payments when such payments are guaranteed. Additional increases to insurance
liabilities are made, or deferred acquisition costs are written off, if future
cash flows, including investment income, are insufficient to cover future
benefits and expenses.

For investment contracts without mortality risk (such as deferred annuities
and immediate annuities with benefits paid for a period certain) and for
contracts that permit the Company or the insured to make changes in the contract
terms (such as single premium whole life and universal life), premium deposits
and benefit payments are recorded as increases or decreases in a liability
account rather than as revenue and expense. Amounts charged against the
liability account for the cost of insurance, policy administration and surrender
penalties are recorded as revenues. Interest credited to the liability account
and benefit payments made in excess of the contract liability account balance
are charged to expense.

Reserves for traditional and limited-payment contracts are generally
calculated using the net level premium method and assumptions as to investment
yields, mortality, withdrawals and dividends. The assumptions are based on
projections of past experience and include provisions for possible adverse
deviation. These assumptions are made at the time the contract is issued or, in
the case of contracts acquired by purchase, at the purchase date.

For traditional insurance contracts, premiums are recognized as income when
due. Benefits and expenses are associated with earned premiums so as to result
in their recognition over the premium-paying period of the contracts. Such
recognition is accomplished through the provision for future policy benefits and
the amortization of deferred policy acquisition costs.

For contracts with mortality risk, but with premiums paid for only a
limited period (such as single premium immediate annuities with benefits paid
for the life of the annuitant), the accounting treatment is similar to
traditional contracts. However, the excess of the gross premium over the net
premium is deferred and recognized in relation to the present value of expected
future benefit payments.

Liabilities for incurred claims are determined using historical experience
and represent an estimate of the present value of the ultimate net cost of all
reported and unreported claims. Management believes these estimates are
adequate. Such estimates are periodically reviewed and any adjustments are
reflected in current operations.

INCOME TAXES

Pursuant to a tax sharing agreement, the Company was included in Conseco's
consolidated tax return beginning January 1, 1993. Under the agreements, income
taxes were allocated based upon separate return calculations with certain

F-12

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

adjustments. Commencing with the income tax reporting period ended December 31,
1994, the Company has filed separate life insurance company tax returns. WNLIAS
is included in the consolidated tax return of Western National. Income taxes
are allocated to WNLIAS on a separate return basis.

Deferred income taxes are provided for the future tax effects of temporary
differences between the tax bases of assets and liabilities and their financial
reporting amounts, measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse. The Company provides a
valuation allowance, if necessary, to reduce deferred tax assets, if any, to
their estimated realizable value.

2. INVESTMENTS:

The amortized cost, gross unrealized gains and losses, estimated fair value
and carrying value of actively managed and held to maturity fixed maturities
were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------- ------------------ ------------ ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Actively managed:
U.S. Treasury securities and obligations of U.S. .
government corporations and agencies . . . . . .$ 130.1 $ 1.0 $ - $ 131.1
Obligations of states and political subdivisions 185.7 9.4 (5.3) 189.8
Public utility securities. . . . . . . . . . . . . 1,015.2 37.3 (14.6) 1,037.9
Other corporate securities . . . . . . . . . . . . 5,030.8 258.3 (32.9) 5,256.2
Asset-backed securities. . . . . . . . . . . . . . 479.6 19.0 (0.9) 497.7
Mortgage-backed securities . . . . . . . . . . . . 2,793.7 88.4 (5.6) 2,876.5
---------------------- ------------------ ------------ ----------
Total actively managed . . . . . . . . . . . .$ 9,635.1 $ 413.4 $ (59.3) $ 9,989.2
====================== ================== ============ ==========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------------------- ------------------ ---------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Actively managed:
U.S. Treasury securities and obligations of U.S. .
government corporations and agencies . . . . . .$ 20.8 $ 0.6 $ - $ 21.4
Obligations of states and political subdivisions . 224.1 2.6 (4.7) 222.0
Public utility securities. . . . . . . . . . . . . 1,251.6 21.0 (30.4) 1,242.2
Other corporate securities . . . . . . . . . . . . 4,583.6 140.0 (36.2) 4,687.4
Asset-backed securities. . . . . . . . . . . . . . 349.3 5.2 (2.6) 351.9
Mortgage-backed securities . . . . . . . . . . . . 2,309.0 28.4 (19.8) 2,317.6
---------------------- ------------------ ------------ ----------
Total actively managed . . . . . . . . . . . .$ 8,738.4 $ 197.8 $ (93.7) $ 8,842.5
====================== ================== ============ ==========
</TABLE>

F-13
<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

The following table sets forth the amortized cost and estimated fair value of
fixed maturities as of December 31, 1997, based upon the source of the estimated
fair value:
<TABLE>
<CAPTION>

ESTIMATED
AMORTIZED FAIR
COST VALUE
--------- ----------
(DOLLARS IN MILLIONS)

<S> <C> <C>
Nationally recognized pricing services $ 8,335.3 $ 8,663.1
Broker-dealer market makers. . . . . . 757.4 782.9
Internally developed methods . . . . . 542.4 543.2
-------- --------
Total fixed maturities. . . . . . $ 9,635.1 $ 9,989.2
======== =========
</TABLE>

The following table sets forth the quality of total fixed maturities as of
December 31, 1997, classified in accordance with the highest rating by a
nationally recognized statistical rating organization or, as to $220.3 million
of fixed maturities not commercially rated, then based on ratings assigned by
the NAIC as follows (for purposes of the table, and only for fixed maturities
not commercially rated: NAIC Class 1 securities would be included in the "A"
rating; Class 2, "BBBC"; Class 3, "BBC"; and Classes 4-6, "B" and below):

<TABLE>
<CAPTION>
FAIR VALUE
-------------------------------------
AS A % OF AS A % OF AS A % OF
AMORTIZED FAIR FIXED AMORTIZED TOTAL
COMMERCIAL RATING COST VALUE MATURITIES COST INVESTMENTS
- ---------------------------- ---------------- -------- ----------- ---------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
AAA. . . . . . . . . . . . . . $ 3,075.4 $3,163.4 31.7% 102.9% 29.0%
AA . . . . . . . . . . . . . . 787.1 813.4 8.1 103.3 7.5
A. . . . . . . . . . . . . . . 2,275.1 2,382.7 23.8 104.7 21.8
BBB+ . . . . . . . . . . . . . 773.8 808.5 8.1 104.5 7.4
BBB. . . . . . . . . . . . . . 1,170.1 1,219.0 12.2 104.2 11.2
BBBC . . . . . . . . . . . . . 844.3 876.3 8.8 103.8 8.0
---------------- -------- ----------- ---------- ------------
Total investment grade . . . 8,925.8 9,263.3 92.7 103.8 84.9
---------------- -------- ----------- ---------- ------------
BB+. . . . . . . . . . . . . . 229.2 231.4 2.3 101.0 2.1
BB . . . . . . . . . . . . . . 93.6 96.9 1.0 103.5 0.9
BBC. . . . . . . . . . . . . . 130.7 137.1 1.4 104.9 1.3
B and below. . . . . . . . . . 255.8 260.5 2.6 101.8 2.4
---------------- -------- ----------- ---------- ------------
Total below investment grade 709.3 725.9 7.3 102.4 6.7
---------------- -------- ----------- ---------- ------------
Total fixed maturities . . . $ 9,635.1 $9,989.2 100.0% 103.7% 91.6%
================ ======== =========== ========== ============
</TABLE>

F-14

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

The amortized cost and estimated fair value of fixed maturities by contractual
maturity as of December 31, 1997 were as follows:

<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
---------- ---------
(DOLLARS IN MILLIONS)

<S> <C> <C>
Due in one year or less. . . . . . . . $ 143.4 $ 148.2
Due after one year through five years. 673.5 690.4
Due after five years through ten years 2,547.9 2,619.1
Due after ten years. . . . . . . . . . 3,476.7 3,655.1
---------- --------
Subtotal . . . . . . . . . . . . . . . 6,841.5 7,112.8
Mortgage-backed securities . . . . . . 2,793.6 2,876.4
---------- --------
Total fixed maturities . . . . . . . . $ 9,635.1 $ 9,989.2
========== =========
</TABLE>

Actual maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations, with or without call or
prepayment penalties, and because most mortgage-backed securities provide for
periodic payments throughout their lives.

F-15

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

Net investment income consisted of the following:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(DOLLARS IN MILLIONS)

<S> <C> <C> <C>
Fixed maturities . . . . . . . . . . . . . . $746.2 $656.8 $610.1
Equity securities. . . . . . . . . . . . . . 0.4 0.8 0.2
Mortgage loans . . . . . . . . . . . . . . . 7.9 9.7 9.4
Credit-tenant loans. . . . . . . . . . . . . 17.7 19.8 23.9
Policy loans . . . . . . . . . . . . . . . . 3.9 4.1 4.4
Equity in earnings of partnership investment 0.3 7.0 3.8
Other invested assets. . . . . . . . . . . . 16.6 8.3 6.0
Short-term investments . . . . . . . . . . . 18.6 6.8 12.8
------- ------- -------
Gross investment income. . . . . . . . . . . 811.6 713.3 670.6
Investment expenses. . . . . . . . . . . . . (4.3) (3.2) (4.6)
------- ------- -------
Net investment income and equity in earnings
of partnership investments . . . . . . . . . $807.3 $710.1 $666.0
======= ======= =======
</TABLE>

The Company had no investments on nonaccrual status nor any fixed
maturities in default as to the payment of principal or interest at December 31,
1997 and 1996. No credit impairment write-downs were necessitated in 1997,
compared to $5.6 million in 1996 and $6.4 million in 1995.

The proceeds from sales of actively managed fixed maturities were $3.1
billion, $3.1 billion, and $3.2 billion for the years ended December 31, 1997,
1996 and 1995, respectively.

Net realized gains (losses) were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------ --------
(DOLLARS IN MILLIONS)

<S> <C> <C> <C>
Fixed maturities:
Gross realized gains . . . . . . . . . . . . . . $ 29.9 $ 34.0 $ 17.8
Gross realized losses. . . . . . . . . . . . . . (47.5) (25.6) (128.6)
Decline in net realizable value that is other than
temporary. . . . . . . . . . . . . . . . . . . - (5.6) (6.4)
------- ------- --------
(17.6) 2.8 (117.2)
Equity securities. . . . . . . . . . . . . . . . . - - 0.8
Mortgages loans. . . . . . . . . . . . . . . . . . - (0.2) -
Other 1.4 - (3.0)
------- -------- --------
Net realized gains (losses) before expenses. . . (16.2) 2.6 (119.4)
Investment expenses. . . . . . . . . . . . . . . . (6.5) (4.9) (6.8)
------- ------- --------
Net realized losses. . . . . . . . . . . . . . . $(22.7) $ (2.3) $(126.2)
======= ======= ========
</TABLE>

F-16
<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

Changes in unrealized appreciation (depreciation) on investments carried at
estimated fair value, net of the effects on other balance sheet accounts, were
as follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(DOLLARS IN MILLIONS)

<S> <C> <C> <C>
Investments carried at estimated fair value:
Actively managed fixed maturities . . . . . . . . . . . $ 250.0 $(238.1) $ 947.5
Equity securities . . . . . . . . . . . . . . . . . . . 0.3 - 0.4
Other . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 (10.1) 11.0
------- -------- --------
Change in unrealized appreciation (depreciation), gross 251.6 (248.2) 958.9
Less effect on other balance sheet accounts:
Cost of policies purchased. . . . . . . . . . . . . . . (37.7) 18.9 (63.7)
Cost of policies produced . . . . . . . . . . . . . . . (71.0) 68.3 (196.7)
Insurance liabilities . . . . . . . . . . . . . . . . . - 36.3 (36.3)
Other liabilities . . . . . . . . . . . . . . . . . . . (3.3) (7.8) 25.8
Deferred income taxes . . . . . . . . . . . . . . . . . (48.8) 46.4 (240.7)
-------- -------- --------
Change in unrealized appreciation (depreciation), net . $ 90.8 $ (86.1) $ 447.3
======== ======== ========
</TABLE>

At December 31, 1997, the aggregate carrying value of the Company's MBS
portfolio was approximately $2.9 billion, or 26.4% of total invested assets. The
following table sets forth the carrying value of the Company=s MBS portfolio by
structural type and underlying collateral coupon class as of December 31, 1997:

<TABLE>
<CAPTION>
COLLATERAL COUPON CLASS
-------------------------------------------
7% AND 7.01- 8.01- 9.01%
MBS TYPE BELOW 8.00% 9.00% AND ABOVE TOTAL
--------- -------- ----- ----- --------- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Agency pass-throughs $ 865.2 $ 764.9 $ 23.9 $ 8.4 $1,662.4

Commercial MBS 34.9 61.2 1.1 - 97.2

CMOs:
PACs, TACs and VADMs 271.3 141.9 6.2 - 419.4
Sequentials 118.3 167.1 80.1 42.7 408.2
Supports and other 21.4 11.9 - - 33.3
Mezzanines and subordinates 24.5 9.4 - - 33.9
Z-tranches 29.2 5.8 30.5 - 65.5
ARMs and floaters (a) (a) (a) (a) 156.5
--------
Total CMOs 1,116.8
--------
Total MBS $2,876.4
========
<FN>
- ---------
(a) The collateral coupon rates are not meaningful as they reset
periodically in accordance with changes in market interest rates.
</TABLE>

Asset-backed securities (AABS@) are securitized pools of assets, such as
manufactured housing loans and credit card receivables, that are collateralized
by the underlying loans. ABS are typically structured similarly to CMOs or MBS
pass-throughs, but are usually not subject to as much prepayment risk as MBS.
Senior-tranche ABS contain credit enhancement features that raise the quality of
the ABS above that of the underlying loans. At December 31, 1997, the aggregate
carrying value of the Company=s ABS portfolio was $497.7 million, or 4.6% of
total invested assets. The following table sets forth the carrying value of the
Company=s ABS portfolio by collateral type as of December 31, 1997:

F-17
<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

<TABLE>
<CAPTION>
<S> <C> <C>
Carrying Value
---------------
(Dollars in
Collateral Type . . . . . . . As a Millions) Percent
- ----------------------------- --------------- ---------
Manufactured housing loans $ 214.9 43.2%
Home equity loans . . . . . . 133.8 26.9
Emerging markets debt . . . . 30.9 6.2
Credit card receivables . . . 28.3 5.7
Automobile loans. . . . . . . 28.0 5.6
Commercial loans. . . . . . . 25.0 5.0
Airplane leases . . . . . . . 14.4 2.9
Home improvement loans. . . . 11.8 2.4
All other . . . . . . . . . . 10.6 2.1
--------------- ---------
Total asset-backed securities $ 497.7 100.0%
=============== =========

</TABLE>

At December 31, 1997, the Company had total mortgage loans of $102.5
million, or 0.9% of total invested assets, consisting of $72.7 million of
commercial mortgages and $29.8 million of mortgage investments in junior and
residual interest of CMOs (ACMO residuals@). Total mortgage loans at year-end
1997 decreased by $20.2 million from $122.7 million at year-end 1996. This
decrease reflects payoffs of $14.4 million and paydowns of $5.8 million received
during 1997. There were no commercial mortgage loan originations in 1997.
Approximately 71% of the commercial mortgages were on properties located in
three states - Florida (29%), Texas (24%), and North Carolina (18%),
respectively. No other state comprised greater than 8% of the total commercial
mortgage loan balance.

The CMO residuals entitle the Company to the excess cash flows arising from
the difference between (i) the cash flows required to make principal and
interest payments on the other tranches of the CMO and (ii) the actual cash
flows received on the mortgage loan assets backing the CMO. If prepayments or
credit losses on the underlying mortgage loan assets vary from projections, the
total cash flows to the Company could differ from projections. Changes in
projected cash flows which impact the yields of the CMO residuals are recognized
in investment income prospectively. The average yield of the Company=s CMO
residuals was 9.5% at December 31, 1997.

During 1996 the Company recognized $0.2 million of realized losses on
mortgage loans, compared with none in 1997 and 1995. The Company had no
nonperforming mortgage loans as of December 31, 1997 and 1996.

At December 31, 1997, the Company held $217.0 million, or 2.0% of total
invested assets, of credit-tenant loans ("CTLs") compared to $208.5 million at
year-end 1996. CTLs are mortgage loans for commercial properties which require,
as stipulated by the Company's underwriting guidelines, (i) the lease of the
principal tenant to be assigned to the Company (including the direct receipt by
the Company of the tenant's lease payments) and to produce adequate cash flow to
fund the requirements of the loan and (ii) the principal tenant (or the
guarantor of such tenant's obligations) to have a credit rating of generally at
least "BBB" or its equivalent. The underwriting guidelines take into account
such factors as the lease terms on the subject property; the borrower's
management ability, including business experience, property management
capabilities and financial soundness; and such economic, demographic or other
factors that may affect the income generated by the property or its value. The
underwriting guidelines also require a loan-to-value ratio of 75% or less.
Because CTLs are principally underwritten on the basis of the creditworthiness
of the tenant rather than on the value of the underlying property, they are
classified as a separate class of securities for financial reporting purposes.
As with commercial mortgage loans, CTLs are additionally secured by liens on the
underlying property.

As part of its investment strategy, the Company enters into mortgage dollar
roll and reverse repurchase transactions principally to increase investment
earnings and to improve liquidity. These transactions are typically terminable
after 30 days and are accounted for as short-term investment borrowings, with
the proceeds of such borrowings typically reinvested in short-term financial
instruments. The dollar rolls are collateralized by mortgage-backed agency
pass-throughs with fair values approximating the underlying loan value. Such
borrowings were $419.7 million and

F-18

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

$134.6 million at December 31, 1997 and 1996, respectively. At December 31, 1997
and 1996, the weighted average interest rate approximated 5.5% and 5.0%,
respectively.

At December 31, 1997, the Company had outstanding interest rate swap
agreements with total notional contract amounts of $230.0 million, compared to
$330.0 million at December 31, 1996. The $100.0 million decrease resulted from
several contracts expiring in 1997. The remaining contracts expire at various
dates in 1998 and 1999. At December 31, 1997 and 1996, the average contractual
floating-pay rates approximated 5.9% and 5.7%, respectively, and the average
fixed-receipt rates approximated 7.2% and 7.3%, respectively. The Company's
interest rate swaps had an estimated fair value of a positive $1.1 million and
$4.4 million at year-end 1997 and 1996, respectively.

Excluding investments issued, assumed or guaranteed by the U. S.
government or U.S. government agencies, the Company had no investments in any
entity in excess of 10% of shareholder's equity or $131.1 million as of December
31, 1997. The Company=s twenty non-U.S. government issuer concentrations were
as follows:

Estimated
Amortized Fair
Collateral Type Cost Value
---------------- --------- ---------
(Dollars in millions)
1. British Columbia Hydro & Power $ 93.7 $ 88.7
2. Occidental Petroleum 81.4 89.0
3. Time Warner, Inc. 77.3 85.6
4. Paine Webber Group 76.0 80.8
5. American Airlines 74.6 85.0
6. Federal Express 68.1 73.6
7. USX Corp. 67.1 71.9
8. May Department Stores 60.9 62.4
9. Ford Motor Co./ Ford Capital 60.8 63.6
10. Lehman Brothers 58.4 61.6
11. Phillips Petroleum 57.6 66.1
12. Long Island Lighting 56.9 57.0
13. Continental Cablevision, Inc. 56.7 59.6
14. Freeport-McMoran 55.2 51.3
15. BankAmerica Corp. 54.1 55.1
16. Salomon, Inc. 52.4 54.7
17. McDonnell Douglas 50.8 58.6
18. Wal-Mart Stores 50.7 51.2
19. Northern Indiana Public Service 50.4 52.4
20. United Airlines 50.2 54.0
--------- ---------
$ 1,253.3 $ 1,322.2
========= =========

F-19

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

3. INSURANCE LIABILITIES:

Insurance liabilities consisted of the following:
<TABLE>
<CAPTION>
INTEREST
WITHDRAWAL MORTALITY RATE DECEMBER 31,
---------------------
ASSUMPTION ASSUMPTION ASSUMPTION 1997 1996
---------- ----------- ----------- --------- ----------

(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Future policy benefits:
Investment contracts N/A N/A (d) $ 8,294.2 $ 7,274.3
Limited-payment contracts None (b) 4%-11% 1,418.8 1,328.1
Traditional life insurance contracts (a) (c) (e) 32.5 32.5
Universal life-type contracts N/A N/A N/A 36.7 43.5
Claims payable and other policyholders' funds N/A N/A N/A 18.8 1.5
--------- --------
Total insurance liabilities $ 9,801.0 $ 8,679.9
========= ==========
</TABLE>

(a) Company experience.
(b) Principally the 1984 United States Population Table.
(c) Principally modifications of the 1965C70 Basic, Select and Ultimate
Tables.
(d) In 1997 and 1996, approximately 95% of this liability represented
account balances where future benefits were not guaranteed and 5% represented
the present value of guaranteed future benefits determined using interest rates
ranging from 3% to 12%.
(e) Various, ranging from 3% to 6% in 1997 and 1996.

Realized gains on fixed maturities during 1994 reduced the expected future
yields on the investment of policyholder balances to the extent that future cash
flows on certain products were insufficient to cover future benefits and
expenses. No additions to liabilities were required in 1997 and 1996.

4. REINSURANCE:

In the normal course of business, the Company seeks to limit its exposure
to loss on any single policy and to recover a portion of benefits paid by ceding
reinsurance to other insurance enterprises or reinsurers under excess coverage
contracts. The Company has set its retention limit for acceptance of risk on
life insurance policies at various levels up to $0.8 million. To the extent that
reinsuring companies are unable to meet obligations under these agreements, the
Company remains contingently liable. The Company evaluates the financial
condition of its reinsurers to minimize its exposure to significant losses from
reinsurer insolvencies. Assets and liabilities relating to reinsurance contracts
are reported gross of the effects of reinsurance. Reinsurance receivables and
prepaid reinsurance premiums, including amounts related to insurance
liabilities, are reported as assets.

Direct and assumed life insurance in force totaled $495.8 million, $561.5
million and $628.6 million at December 31, 1997, 1996 and 1995, respectively and
ceded life insurance in force totaled $212.8 million, $247.6 million and $286.1
million at December 31, 1997, 1996 and 1995, respectively.

The cost of ceded policies containing mortality risks totaled $1.2 million
in 1997, $1.5 million in 1996, and $1.3 million in 1995, and was deducted from
insurance premium revenue. Reinsurance recoveries netted against insurance
policy benefits totaled $1.5 million, $1.4 million and $4.5 million in 1997,
1996 and 1995, respectively.

Effective October 1, 1995, the Company recaptured certain annuity business
with assets approximately equal to insurance liabilities of $72.8 million that
had previously been ceded.

F-20

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

In October 1995, the Company and American General Life Insurance Company
(AAG Life@) entered into a modified coinsurance agreement. Under the agreement,
AG Life issues the SPIAs, and 50% of each risk is reinsured to the Company.
Under this arrangement, the Company reports its pro rata share of premiums and
shares in its pro rata portion of the gain or loss on policies sold. Pursuant
to this arrangement, the Company assumed premiums of $126.3 million and $90.9
million for the years ended December 31, 1997 and 1996, respectively. The
arrangement resulted in $126.8 million and $91.3 million of revenues and
expenses for the Company in 1997 and 1996, respectively. As of December 31,
1997 and 1996, the funds held by reinsurer and the insurance liabilities
resulting from this agreement were $219.5 million and $96.6 million,
respectively.

Since 1994, the Company has been a party to a standby reinsurance agreement
for new SPDA sales through selected financial institutions, which becomes
effective only if the Company=s risk-based capital ratio falls below a
prescribed level. No reinsurance pursuant to this agreement has become
effective.

5. INCOME TAXES:

The components of income tax included in the balance sheet are as follows:

DECEMBER 31,
-------------
1997 1996
------------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Deferred income tax liabilities:
Investments $ 20.0 $ 21.1
Cost of policies produced and purchased 176.0 143.6
Unrealized appreciation of investments 69.9 21.1
------------- ------
Gross deferred income tax liabilities 265.9 185.8
Deferred income tax assets:
Insurance liabilities 105.4 80.6
Other 6.7 8.8
------------- ------
Gross deferred income tax assets 112.1 89.4
------------- ------
Net deferred income tax liabilities $ 153.8 $ 96.4
============= ======

Income tax expense was as follows:
1997 1996 1995
------------- ------ -------
(DOLLARS IN MILLIONS)

Current tax provision (benefit) $ 55.8 $ 31.6 $(23.0)
Deferred tax provision 9.1 27.5 29.3
------------- ------ -------
Income tax expense $ 64.9 $ 59.1 $ 6.3
============= ====== =======
</TABLE>

F-21

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

Income tax expense differed from that computed at the applicable federal
statutory rate (35% during 1997, 1996 and 1995) for the following reasons:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Federal tax on income before income taxes at statutory rates $ 63.1 $59.1 $ 7.6
State taxes 1.4 0.3 0.5
Various adjustments 0.4 (0.3) (1.8)
------ ------ ------
Income tax expense $ 64.9 $59.1 $ 6.3
====== ====== ======
</TABLE>

During 1995, the Company assigned its right to tax benefits related to
realized investment losses generated during 1995 to an affiliate in return for
cash payments equal to the tax benefits. During 1995, the Company received
$36.9 million and at December 31, 1995, $9.7 million, included in other assets,
related to the remaining 1995 tax benefits receivable from the affiliate.

6. FAIR VALUE OF FINANCIAL INSTRUMENTS:

Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Values of Financial Instruments ("SFAS 107") requires disclosures of fair value
information about financial instruments, and includes assets and liabilities
recognized or not recognized in the balance sheet, for which it is practicable
to estimate their fair value. In cases where quoted market prices are not
available, fair values are based on estimates using discounted cash flow or
other valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rates and estimates of the amount and
timing of future cash flows. SFAS 107 excludes certain insurance liabilities and
other non-financial instruments from its disclosure requirements, such as the
amount for the value associated with customer or agent relationships, the
expected interest margin (interest earnings over interest credited) to be earned
in the future on investment-type products, or other intangible items.
Accordingly, the aggregate fair value amounts presented herein do not
necessarily represent the underlying value of the Company; likewise, care should
be exercised in deriving conclusions about the Company's business or financial
condition based on the fair value information presented herein.

The following methods and assumptions were used by the Company in
determining estimated fair values of financial instruments:

Fixed maturities and equity securities: The estimated fair values for
actively traded fixed maturities and equities are based on quoted market
prices. For fixed maturities and equities not actively traded, the
estimated fair values are determined using values obtained from independent
pricing services or, in the case of private placements, by discounting
expected future cash flows using a current market rate commensurate with
the credit quality, prepayment optionality and maturity of the respective
securities.

Short-term investments: The carrying values approximate estimated fair
value.

Mortgage loans, credit-tenant loans, and policy loans: The estimated fair
values for mortgage loans, CTLs and policy loans are determined by
discounting future expected cash flows using interest rates currently being
offered for similar loans to borrowers with similar credit ratings.

Other invested assets: The estimated fair values are determined using
quoted market prices for similar instruments.

Insurance liabilities for investment contracts: The estimated fair values
are determined using discounted cash flow calculations based on interest
rates currently being offered for similar contracts with maturities
consistent with those remaining for the contracts being valued. The
estimated fair values of the insurance liabilities for investment contracts
were approximately equal to the carrying values as of December 31, 1997 and
1996, because interest rates credited on the vast majority of account
balances approximate current rates paid on similar investments and are not

F-22

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

generally guaranteed beyond one year. Fair values for the Company's
insurance liabilities other than those for investment-type insurance
contracts are not required to be disclosed. However, the estimated fair
values of liabilities for all insurance contracts are taken into
consideration in the Company's overall management of interest rate risk,
which minimizes exposure to changing interest rates through the matching of
investment maturities with amounts due under insurance contracts.

Investment borrowings: The carrying values approximate estimated fair
value.

The estimated fair values and carrying values of the Company's financial
instruments were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1997 1996
-------------------- -------------------
FAIR CARRYING FAIR CARRYING
VALUE VALUE VALUE VALUE
- ----------------------------------------------------- ---------- -------- --------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Assets:
Fixed maturities and equity securities $ 9,999.6 $9,999.6 $ 8,842.5 $8,842.5
Mortgage loans, credit-tenant loans and policy loans 387.2 381.3 396.2 398.0
Other invested assets 33.4 33.4 24.5 24.5
Short-term investments 475.6 475.6 105.8 105.8
Liabilities:
Insurance liabilities for investment contracts 8,294.2 8,294.2 7,274.3 7,274.3
Investment borrowings 434.6 434.6 156.3 156.3
</TABLE>

7. SHAREHOLDER'S EQUITY:

Generally, dividends that can be paid by the Company during any
twelve-month period cannot exceed the greater of statutory net gain from
operations (excluding realized gains on investments) for the preceding year or
10% of statutory surplus at the end of the preceding year. In 1998, the Company
can pay dividends of up to $76.3 million.

F-23

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

The components of the balance sheet caption "unrealized appreciation of
investments, net" in shareholder's equity are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
---------------------- -------------------
EFFECT OF EFFECT OF
COST FAIR VALUE CARRYING COST FAIR VALUE CARRYING
BASIS ADJUSTMENTS VALUE BASIS ADJUSTMENTS VALUE
---------------------- ------------------- ---------- --------- ------------- ----------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
INVESTMENTS:
Actively managed fixed maturities $ 9,635.1 $ 354.1 $ 9,989.2 $8,738.4 $ 104.1 $ 8,842.5
Equity securities 10.1 0.3 10.4 - - -
Other invested assets 31.2 2.2 33.4 23.6 0.9 24.5
---------------------- ------------------- ---------- --------- ------------- ----------
9,676.4 356.6 10,033.0 8,762.0 105.0 8,867.0
OTHER BALANCE SHEET ITEMS:
Cost of policies purchased 66.5 (58.8) 7.7 71.5 (21.1) 50.4
Cost of policies produced 517.1 (99.1) 418.0 408.3 (28.1) 380.2
Other liabilities (53.9) 1.1 (52.8) (34.7) 4.4 (44.1)
Deferred income taxes (83.9) (69.9) (153.8) (75.3) (21.1) (96.4)
---------------------- ------------------- ---------- --------- ------------- ----------
Unrealized appreciation
of investments, net $ 129.9 $ 39.1
========== ==========
</TABLE>

In September 1996, Western National generated net proceeds of $125.9
million from the issuance of preferred stocks to American General. Such net
proceeds were contributed to the Company.

8. COMMITMENTS AND CONTINGENCIES:

COMMITMENTS

The Company leases office space and equipment under noncancellable
operating leases. The approximate future minimum lease rental commitments under
such leases as of December 31, 1997 are as follows (dollars in thousands):

YEAR ENDING DECEMBER 31,
- ---------------------------
<S> <C>
1998 1,123
1999 1,112
2000 1,028
2001 581
2002 581
Thereafter 823
-----
5,248
=======
</TABLE>

Rent expense was $946,000, $1,018,000 and $752,000 in 1997, 1996, and 1995,
respectively.

Until May 1, 1998, the Company is committed to reimburse the AGA Series
Trust (formerly WNL Series Trust) for administrative expenses in excess of .12%
of the market value of investments related to variable annuity policies issued
by the Company. During 1997 and 1996, the Company incurred approximately $0.9
million and $0.6 million, respectively, related to this commitment.

CONTINGENCIES

F-24

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

Assessments are levied on the Company from time to time by guaranty fund
associations of states in which it is licensed to provide for payment of covered
claims or to meet other insurance obligations, subject to prescribed limits, of
insolvent insurance enterprises. Assessments are allocated to an insurer based
on the ratio of premiums written by an insurer to total premiums written in the
state. The terms of the assessments depend on how each guaranty fund
association elects to fund its obligations. Assessments levied by certain
states may be recoverable through a reduction in future premium taxes. The
Company provides a liability, net of discount and estimated premium tax offsets,
for estimated future assessments of known insolvencies. Included in other
liabilities is a reserve for guaranty fund assessments of $16.6 million, $22.1
million, and $29.2 million in 1997, 1996, and 1995, respectively. The Company
determines guaranty fund liabilities by utilizing a report prepared annually by
the National Organization of Life and Health Insurance Guaranty Associations
which provides estimates of assessments by insolvency. Although management
believes the provision for guaranty fund assessments is adequate for all known
insolvencies, and does not currently anticipate the need for any material
additions to the reserve for known insolvencies. However, it is reasonably
possible that the estimates on which the provision is based will change and that
such changes will result in future adjustments.

From time to time, the Company is involved in lawsuits which are related to
its operations. In most cases, such lawsuits involve claims under insurance
policies or other contracts of the Company. None of the lawsuits currently
pending, either individually or in the aggregate, is expected to have a material
effect on the Company's financial condition or results of operations.

9. EMPLOYEE BENEFIT PLAN:

Prior to January 1, 1998, Western National sponsored a qualified defined
contribution plan (the "Plan") covering all full-time employees. The Plan
provided for the Company to match, with equivalent value of Western National
stock, 50% of a participant's voluntary contributions up to 4% of a
participant's compensation (subject to certain Internal Revenue Code
limitations). The Company could also elect to make additional discretionary
contributions to the Plan. For 1996 and 1995, the Company made a matching
contribution in an amount equal to 65% and 50%, respectively, of each
participant's elective contributions, up to 6% of annual compensation (subject
to Internal Revenue Code limitations). During 1997 the Company=s matching
contribution was increased to 75% for 1997 contributions. The Company's
Supplemental Plan is an unfunded, nonqualified plan that provided to certain
employees similar benefits that could not be provided by a qualified defined
contribution plan due to Internal Revenue Code limitations. Prior to January 1,
1998, participants could defer additional amounts of salary and bonus under the
Supplemental Plan, but there was no employer match for such additional
contributions. Expense recorded related to the Company's matching contributions
under both plans was approximately $480,000, $451,000 and $247,000 in 1997,
1996, and 1995, respectively.

On December 31, 1997, active employees of the Company who were plan
participants became 100% vested under the Plan. Effective March 1, 1998, the
Plan will be merged with the American General Employees= Thrift and Incentive
Plan. As of December 31, 1997, no additional contributions may be made to the
Plan or the Supplemental Plan.

10. RELATED PARTY TRANSACTIONS:

See Note 4 for a description of the modified coinsurance agreement with AG
Life.

F-25

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

11. OTHER OPERATING STATEMENT DATA:

Insurance policy income consisted of the following:

<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- --------
(DOLLARS IN MILLIONS)

<S> <C> <C> <C>
Premiums collected $ 2,051.1 $ 1,625.5 $ 720.4
Reinsurance ceded (1.2) (1.5) (0.9)
---------- ---------- --------
Premiums collected, net 2,049.9 1,624.0 719.5
Less premiums on universal life and
investment contracts without mortality
risk which are recorded as additions to
insurance liabilities (2,040.8) (1,613.4) (697.8)
---------- ---------- --------
Premiums on products with mortality
risk, recorded as insurance policy income 9.1 10.6 21.7
Reinsurance assumed 109.4 71.1 0.0
Amortization of deferred revenue 0.6 0.5 0.5
Fees and surrender charges 6.9 4.4 4.2
Other 0.9 4.4 0.0
---------- ---------- --------
Insurance policy income $ 126.9 $ 91.0 $ 26.4
========== ========== ========
</TABLE>

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(DOLLARS IN MILLIONS)

<S> <C> <C> <C>
Balance, beginning of year before effect of
fair value adjustments of actively managed
fixed maturities $ 71.5 $ 75.8 $ 80.5
Scheduled amortization (5.0) (4.3) (4.7)
------- ------- -------
Balance, end of year before effect of fair value
adjustments of actively managed fixed
maturities 66.5 71.5 75.8
Effect of fair value adjustment of actively
managed fixed maturities (58.8) (21.1) (40.0)
------- ------- -------
Balance, end of year $ 7.7 $ 50.4 $ 35.8
======= ======= =======
</TABLE>

F-26

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

The changes in the cost of policies produced were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year before effect of
fair value adjustments of actively managed
fixed maturities $408.3 $325.1 $265.0
Acquisition costs incurred 147.6 120.6 62.2
Scheduled amortization (43.4) (37.3) (34.0)
Amortization related to realized gains and losses 4.0 (0.6) 29.8
Amortization of deferred revenue 0.6 0.5 0.5
Effects of reinsurance 0.0 0.0 1.6
------- ------- -------
Balance, end of year before effect of fair value
adjustments of actively managed fixed
maturities 517.1 408.3 325.1
Effect of fair value adjustment of actively
managed fixed maturities (99.1) (28.1) (96.4)
------- ------- -------
Balance, end of year $418.0 $380.2 $228.7
======= ======= =======
</TABLE>

Based on current conditions and assumptions as to future events on all
policies in force, approximately 6% to 7% of the cost of policies purchased as
of December 31, 1997, excluding the effect of fair value adjustments for
actively managed fixed maturities, is expected to be amortized in each of the
next five years. The average discount rate for the cost of policies purchased
was approximately 19% for the year ended December 31, 1997.

12. STATUTORY INFORMATION:

Statutory accounting practices prescribed or permitted for the Company by
regulatory authorities differ from generally accepted accounting principles. The
Company reported the following amounts to regulatory agencies:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
(DOLLARS IN MILLIONS)

<S> <C> <C>
Statutory capital and surplus $ 638.7 $ 572.4
Asset valuation reserve 116.4 109.0
Interest maintenance reserve 105.4 104.4
------- -------
Total $ 860.5 $ 785.8
======= =======
</TABLE>

Statutory accounting practices require that certain investment-related
portions of surplus, called the asset valuation reserve ("AVR") and the interest
maintenance reserve ("IMR"), be appropriated and reported as liabilities. The
purpose of these reserves is to stabilize statutory surplus against fluctuations
in the market value of investments. The AVR captures realized and unrealized
investment gains and losses related to changes in creditworthiness. The IMR
captures realized investment gains and losses on debt instruments resulting from
changes in interest rates and provides for subsequent amortization of such
amounts into statutory net income on a basis reflecting the remaining life of
the assets sold.

F-27

<PAGE>

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
- --------------------------------------------

The following table compares the pre-tax income determined on a statutory
accounting basis with such income reported herein in accordance with generally
accepted accounting principles:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Pre-tax statutory net gain from operations $121.6 $ 65.3 $ 51.6
IMR amortization (12.6) (8.7) (8.7)
Realized gains (losses) 12.3 15.1 (118.2)
------- ------- --------
Pre-tax statutory income before transfers to
and from and amortization of tax IMR 121.3 71.7 (75.3)
Net effect of adjustments for generally accepted
accounting principles 58.9 97.4 97.0
------- ------- --------
Pre-tax income, generally accepted
accounting principles $180.2 $169.1 $ 21.7
======= ======= ========
</TABLE>

13. YEAR 2000 CONTINGENCY (UNAUDITED)

Management has been engaged in a program to render the Company=s computer
systems (hardware and mainframe and personal applications software) Year 2000
compliant. The Company will incur internal staff costs as well as third-party
vendor and other expenses to prepare the systems for Year 2000. The cost of
testing and conversion of systems applications has not had, and is not expected
to have, a material adverse effect on the Company=s results of operations or
financial condition. However, risks and uncertainties exist in most significant
systems development projects. If conversion of the Company=s systems is not
completed on a timely basis, due to nonperformance by third-party vendors or
other unforeseen circumstances, the Year 2000 problem could have a material
adverse impact on the operations of the Company.

F-28

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of
American General Annuity Insurance Company

Our report on the financial statements of American General Annuity
Insurance Company, formerly known as Western National Life Insurance Company,
is included on page F-3 of this Form N-4. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in the index on page F-1 of this Form N-4.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

COOPERS & LYBRAND L.L.P.

Houston, Texas
February 5, 1997

F-29

<PAGE>
WESTERN NATIONAL LIFE INSURANCE COMPANY

SCHEDULE VI

REINSURANCE

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

(DOLLARS IN MILLIONS)

1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Life insurance in force:
Direct $ 494.1 $ 559.3 $ 626.0
Assumed 1.8 2.2 2.6
Ceded (212.8) (247.6) (286.1)
-------- -------- --------
Net insurance in force $ 283.1 $ 313.9 $ 342.5
======== ======== ========
Percentage of assumed to net 0.6% 0.7% 0.7%

Premiums recorded as revenue for generally
accepted accounting principles:
Direct $ 10.3 $ 12.1 $ 23.0
Assumed 109.4 71.1 -
Ceded (1.2) (1.5) (1.3)
-------- -------- --------
Net premiums $ 118.5 $ 81.7 $ 21.7
======== ======== ========
Percentage of assumed to net 92.3% 87.0% 0.0%
</TABLE>

F-30

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our report dated May 12, 1998, as to American
General Annuity Insurance Company, and our Report dated May 12, as to AGA
Separate Account A, in Amendment No. 5 to the Registration Statement under the
Investment Company Act of 1940 on Form N-4 of AGA Separate Account A.

ERNST & YOUNG LLP

Houston, Texas
May 18, 1998

<PAGE>

FINANCIAL STATEMENTS

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
AGA SEPARATE ACCOUNT A

YEARS ENDED DECEMBER 31, 1997 AND 1996

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Financial Statements

Years ended December 31, 1997 and 1996

CONTENTS

Report of Independent Auditors 1

Audited Financial Statements

Statement of Assets and Liabilities 2
Statement of Operations 4
Statement of Changes in Net Assets 6
Notes to Financial Statements 10

<PAGE>

Report of Independent Auditors

Board of Directors and Stockholders
American General Annuity Insurance Company

We have audited the accompanying statement of assets and liabilities of AGA
Separate Account A (the "Company"), formerly known as WNL Separate Account A, as
of December 31, 1997, and the related statements of operations and changes in
net assets for the year ended December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform our audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of shares owned as of December 31, 1997, by correspondence with AGA
Series Trust, formerly known as WNL Series Trust. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AGA Separate Account A as of
December 31, 1997, the results of its operations, and the changes in its net
assets for the year ended December 31, 1997 and 1996, in conformity with
generally accepted accounting principles.

Houston, Texas ERNST & YOUNG LLP
May 12, 1998

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
Western National Life Insurance Company
Houston, Texas

We have audited the accompanying statement of changes in net assets of WNL
Separate Account A for the year ended December 31, 1996. This financial
statement is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of securities owned as of December 31, 1996, by correspondence with
WNL Series Trust. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly, in
all material respects, the change in net assets of WNL Separate Account A for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles.

Houston, Texas
February 20, 1997

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Statement of Assets and Liabilities

December 31, 1997

<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN SALOMON
CAPITAL BROTHERS U.S. ELITE VALUE
EMERGING GOVERNMENT ASSET
GROWTH SECURITIES ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO
----------- -------------- ------------
<S> <C> <C> <C>
ASSETS
Investments:
Net asset value per share $ 13.87 $ 10.07 $ 14.38
Number of shares 396,522 395,899 658,676
Identified cost $ 4,916,092 $ 3,968,605 $ 8,759,846
=========== ============== ============
Market value $ 5,498,597 $ 3,985,899 $ 9,470,619
=========== ============== ============
Net assets $ 5,498,597 $ 3,985,899 $ 9,470,619

Net assets attributable to:
Contract owners $ 4,781,451 $ 1,734,114 $ 7,936,388

American General Annuity Insurance Company (Note 7) 717,146 2,251,785 1,534,231
----------- -------------- ------------
$ 5,498,597 $ 3,985,899 $ 9,470,619
=========== ============== ============

Accumulation units of contract owners:
Standard benefit units 303,011.2 126,832.5 461,930.1
Enhanced benefit units 41,160.9 32,205.2 72,104.8

Accumulation value per unit:
Standard benefit units $ 13.90 $ 10.91 $ 14.87
Enhanced benefit units $ 13.85 $ 10.87 $ 14.82
</TABLE>

See accompanying notes.

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Statement of Operations

Year ended December 31, 1997

Mortality and expense risk and administrative fees 40,568 32,350 31,908 14,538
---------------- ---------------- ----------- ------------------
Net investment income 119,221 37,441 107,086 111,322

Realized and unrealized gain (loss) on investments:

Net realized gain on sale of Trust shares - 130,354 100,916 13,670

Net unrealized gain (loss) on Trust shares - 531,795 480,921 (288,014)

Capital gain distributions from the Trust - 636,692 237,747 174,638

Net realized and unrealized gain (loss) on investments - 1,298,841 819,584 (99,706)
---------------- ---------------- ----------- ------------------

Increase in net assets resulting from operations $ 119,221 $ 1,336,282 $ 926,670 $ 11,616
================ ================ =========== ==================
</TABLE>

See accompanying notes.

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Statement of Operations (continued)

Year ended December 31, 1997`

Mortality and expense risk and administrative fees 41,734 7,886 6,091 58,704
------------ -------------- ----------- -----------------
Net investment income (loss) (33,852) 191,902 153,971 28,057

Realized and unrealized gain (loss) on investments:

Net realized gain on sale of Trust shares 20,833 49,882 3,525 205,487

Net unrealized gain on Trust shares 581,783 62,853 58,319 403,870

Capital gain distributions from the Trust - 28,519 - 213,790

Net realized and unrealized gain on investments 602,616 141,254 61,844 823,147
------------ -------------- ----------- -----------------

Increase in net assets resulting from operations $ 568,764 $ 333,156 $ 215,815 $ 851,204
============ ============== =========== =================
</TABLE>

See accompanying notes.

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Statement of Changes in Net Assets

Year ended December 31, 1997

<TABLE>
<CAPTION>
GLOBAL ADVISORS GLOBAL ADVISORS BEA GROWTH CREDIT SUISSE
MONEY MARKET GROWTH EQUITY AND INCOME INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO EQUITY PORTFOLIO
----------------- ----------------- ------------ ------------------
<S> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income $ 119,221 $ 37,441 $ 107,086 $ 111,322
Net realized gain on investments - 130,354 100,916 13,670
Net unrealized gain (loss) on investments - 531,795 480,921 (288,014)
Realized gain distributions reinvested - 636,692 237,747 174,638
----------------- ----------------- ------------ ------------------
Increase in net assets from operations 119,221 1,336,282 926,670 11,616

Increase (decrease) in net assets from
variable annuity contract transactions:
Contract purchase payments 21,397,097 542,144 862,564 357,394
Surrenders and withdrawals (777,511) (76,995) (81,416) (67,495)
Death benefit payments - (18,871) - -
Transfers (to) from general account (2,621,752) 2,689 (10,270) 2,524
Intra-portfolio transfers (14,307,815) 2,121,299 2,545,350 1,279,304
----------------- ----------------- ------------ ------------------
Increase (decrease) in net assets from
variable annuity contract transactions 3,690,019 2,570,266 3,316,228 1,571,727

Capital distribution to American General
Annuity Insurance Company: - - - -
----------------- ----------------- ------------ ------------------
Total increase (decrease) in net assets 3,809,240 3,906,548 4,242,898 1,583,343
Net assets at beginning of year 1,291,024 3,420,466 3,145,099 2,726,982
Net assets at end of year $ 5,100,264 $ 7,327,014 $ 7,387,997 $ 4,310,325
================= ================= ============ ==================
</TABLE>

See accompanying notes.

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Statement of Changes in Net Assets (continued)

Year ended December 31, 1997

<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN
CAPITAL SALOMON
EMERGING BLACKROCK BROTHERS U.S. ELITE VALUE
GROWTH MANAGED BOND GOVERNMENT SECURITIES ASSET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ -------------- ----------------------- ------------------
<S> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) $ (33,852) $ 191,902 $ 153,971 $ 28,057
Net realized gain on investments 20,833 49,882 3,525 205,487
Net unrealized gain on investments 581,783 62,853 58,319 403,870
Realized gain distributions reinvested - 28,519 - 213,790
------------ -------------- ----------------------- ------------------
Increase in net assets from operations 568,764 333,156 215,815 851,204

Increase (decrease) in net assets from
variable annuity contract transactions:
Contract purchase payments 867,637 250,628 92,161 1,260,185
Surrenders and withdrawals (60,234) (38,350) (40,812) (171,166)
Death benefit payments (16,672) - - -
Transfers to general account (21,657) - - (8,947)
Intra-portfolio transfers 2,278,922 (521,383) 1,372,018 5,232,305
------------ -------------- ----------------------- ------------------
Increase (decrease) in net assets from
variable annuity contract transactions 3,047,996 (309,105) 1,423,367 6,312,377

Capital distribution to American General
Annuity Insurance Company: - (3,400,169) - -
------------ -------------- ----------------------- ------------------
Total increase (decrease) in net assets 3,616,760 (3,376,118) 1,639,182 7,163,581
Net assets at beginning of year 1,881,837 3,376,118 2,346,717 2,307,038
Net assets at end of year $ 5,498,597 $ - $ 3,985,899 $ 9,470,619
============ ============== ======================= ==================
</TABLE>

See accompanying notes.

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Statement of Changes in Net Assets (continued)

Year ended December 31, 1996

<TABLE>
<CAPTION>
GLOBAL ADVISORS GLOBAL ADVISORS BEA GROWTH CREDIT SUISSE
MONEY MARKET GROWTH EQUITY AND INCOME INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO EQUITY PORTFOLIO
----------------- ----------------- ------------ ------------------
<S> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) $ 28,527 $ 42,344 $ 115,002 $ 85,456
Net realized gain (loss) on investments - 2,446 649 3,291
Net unrealized gain (loss) on investments - 345,342 118,099 48,275
Realized gain distributions reinvested - 123,806 102,803 223,678
----------------- ----------------- ------------ ------------------
Increase in net assets from operations 28,527 513,938 336,553 360,700

Increase (decrease) in net assets from
variable annuity contract transactions:
Contract purchase payments 5,880,850 65,850 65,642 12,334
Surrenders and withdrawals (3,961) (2,169) (3,500) (9,327)
Death benefit payments - - - -
Transfers to general account (483,232) - - -
Intra-portfolio transfers (4,257,439) 770,208 610,085 280,251
----------------- ----------------- ------------ ------------------
Increase in net assets from variable annuity
contract transactions 1,136,218 833,889 672,227 283,258

Capital distribution from American General
Annuity Insurance Company: - - - -
----------------- ----------------- ------------ ------------------
Total increase in net assets 1,164,745 1,347,827 1,008,780 643,958
Net assets at beginning of year 126,279 2,072,639 2,136,319 2,083,024
Net assets at end of year $ 1,291,024 $ 3,420,466 $ 3,145,099 $ 2,726,982
================= ================= ============ ==================
</TABLE>

See accompanying notes.
<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Statement of Changes in Net Assets (continued)

Year ended December 31, 1996

<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN SALOMON
CAPITAL BROTHERS U.S.
EMERGING BLACKROCK GOVERNMENT ELITE VALUE
GROWTH MANAGED BOND SECURITIES ASSET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------------- ------------ ------------------
<S> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) $(4,773) $187,081 $119,192 $20,518
Net realized gain (loss) on investments 83,267 (116) (225) 2,490
Net unrealized gain (loss) on investments 622 (62,846) (41,021) 306,894
Realized gain distributions reinvested 49,696 - - 28,615
------------ --------------- ------------ ------------------
Increase in net assets from operations 128,812 124,119 77,946 358,517

Increase (decrease) in net assets from
variable annuity contract transactions:
Contract purchase payments 122,596 1,882 400 31,419
Surrenders and withdrawals (4,606) (915) (10,042) (12,454)
Death benefit payments - - - -
Transfers to general account - - - -
Intra-portfolio transfers 1,135,035 251,032 278,413 929,556
------------ --------------- ------------ ------------------
Increase in net assets from variable annuity
contract transactions 1,253,025 251,999 268,771 948,521

Capital distribution from American General
Annuity Insurance Company: 500,000 3,000,000 2,000,000 1,000,000
------------ --------------- ------------ ------------------
Total increase in net assets 1,881,837 3,376,118 2,346,717 2,307,038
Net assets at beginning of year - - - -
Net assets at end of year $1,881,837 $3,376,118 $2,346,717 $2,307,038
============ =============== ============ ==================
</TABLE>

See accompanying notes.

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements

December 31, 1997

1. ORGANIZATION

AGA Separate Account A (the "Separate Account"), formerly known as WNL Separate
Account A, was established by American General Annuity Insurance Company (the
"Company"), formerly known as Western National Life Insurance Company, to fund
variable annuity insurance contracts issued by the Company. The Separate Account
is registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940, as
amended.

The Separate Account is divided into seven sub-accounts. Each sub-account
invests in one portfolio of AGA Series Trust (the "Trust"), formerly known as
WNL Series Trust. The Trust is managed by AGA Investment Advisory Services, Inc.
(the "Adviser"), formerly known as WNL Investment Advisory Services, Inc., an
affiliate of the Company. As of December 31, 1997, the Trust portfolios
available to contract holders through the various sub-accounts ("Portfolios")
are as follows:

AGA Series Trust:
Global Advisors Money Market Portfolio
Global Advisors Growth Equity Portfolio
BEA Growth and Income Portfolio
Credit Suisse International Equity Portfolio
Van Kampen American Capital Emerging Growth Portfolio (formerly American
Capital Emerging Growth Portfolio)
Salomon Brothers U.S. Government Securities Portfolio
Elite Value Asset Allocation Portfolio (formerly Quest for Value Asset
Allocation Portfolio)

In addition to the seven sub-accounts above, a contract owner may allocate
contract funds to a fixed account, which is part of the Company's general
account. Contract owners should refer to the "ElitePlus Bonus Variable Annuity
Prospectus" for a complete description of the Trust portfolios.

During 1997, the BlackRock Managed Bond sub-account was eliminated as one of the
investment options of the contract owners. Contract owners were given the
opportunity to transfer their BlackRock Managed Bond sub-account value to any
other sub-account

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (continued)

1. ORGANIZATION (CONTINUED)

without limitation or changes prior to December 17, 1997. Thereafter, shares of
the Salomon Brothers U.S. Government Securities Portfolio were substituted for
shares of the BlackRock Managed Bond Portfolio.

Net premiums from the contracts are allocated to the sub-accounts and invested
in the Portfolios in accordance with contract owner instructions and are
recorded as variable annuity contract transactions in the statement of changes
in net assets. There is no assurance that the investment objectives of any of
the Portfolios will be met. Contract owners bear the complete investment risk
for purchase payments allocated to a sub-account.

2. SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements of the Separate Account have been prepared
on the basis of generally accepted accounting principles. The accounting
principles followed by the Separate Account and the methods of applying those
principles are presented below or in the footnotes which follow.

INVESTMENT VALUATION

The investment shares of the Portfolios are valued at the closing net asset
value (market) per share as determined by the fund on the day of measurement.
Changes in the economic environment have a direct impact on the net asset value
per share of a portfolio. It is reasonably possible that changes in the economic
environment will occur in the near term and that such changes will have a
material effect on the net asset value per share of the Portfolios included in
the Trust.

INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME

Investment transactions are accounted for on the date the order to buy or sell
is executed (trade date). Dividend income and distributions of capital gains are
recorded on the ex-dividend date. Realized gains and losses from investment
transactions are reported on the basis of first-in, first-out for financial
reporting and federal income tax purposes.

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A
Notes to Financial Statements (continued)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ANNUITY RESERVES

At December 31, 1997, the Separate Account did not have contracts in the annuity
pay-out phase; therefore, no future policy benefit reserve was required.

FEDERAL INCOME TAXES

The Company is taxed as a life insurance company and includes the operations of
the Separate Account in its federal income tax return. As a result, the Separate
Account is not taxed as a "Regulated Investment Company" under subchapter M of
the Internal Revenue Code. Under existing laws, taxes are not currently payable
on the investment income on the realized gains of the Separate Account. The
Company reserves the right to allocate to the Separate Account any federal,
state, or other tax liability that may result in the future from maintenance of
the Separate Account.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of income and expenses during the period. Actual results could differ from those
estimates.

3. CONTRACT CHARGES

Deductions for the administrative expenses and mortality and expense risks
assumed by the Company are calculated daily, at an annual rate, on the average
daily net asset value of the Portfolios attributable to the contract owners and
are paid to the Company. The annual rate for administrative expenses is .15% and
the annual rate for the mortality and expense risks is 1.25%. The annual rate
for enhanced death benefit option is .15%. For the year ended December 31, 1997,
deductions for administrative expenses and mortality and expense risk charges
were $24,727 and $209,050, respectively.

An annual maintenance charge of $30 per contract is assessed on the contract
anniversary during the accumulation period for the maintenance of the contract.
The maintenance charge is not assessed if the contract value on the contract
anniversary equals or exceeds $40,000. Maintenance charges totaled $7,212 for
the year ended December 31, 1997.

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (continued)

3. CONTRACT CHARGES (CONTINUED)

A contingent deferred sales charge is applicable to certain contract withdrawals
pursuant to the contract and is payable to the Company. For the year ended
December 31, 1997, deferred sales charges totaled $20,229 and are included as a
component of surrenders and withdrawals on the statement of changes in net
assets.

There are other deductions from and expenses (including management fees paid to
the investment adviser as other expenses) paid out of the assets of the Trust.
As full compensation for its services under the Investment Advisory Agreement,
the Adviser receives a monthly fee from the Trust based on annual rates which
range from .45% to .90% based on the average daily net assets of each Portfolio.
The Adviser has waived that portion of its management fee which is in excess of
the amount payable by the Adviser to each sub-adviser pursuant to the respective
subadvisory agreements for each Portfolio through May 1, 1998. In addition, the
Company reimbursed each Portfolio for all operating expenses, excluding
management fees, that exceeded .12% of each Portfolio's average daily net assets
through May 1, 1998.

For the year ended December 31, 1997, the Adviser waived advisory fees and the
Company reimbursed operating expenses as follows:

<TABLE>
<CAPTION>
ADVISORY EXPENSES
FEES WAIVED REIMBURSED
------------ -----------
<S> <C> <C>

Global Advisors Money Market Portfolio $7,387 $106,355
Global Advisors Growth Equity Portfolio $13,030 $133,368
BEA Growth and Income Portfolio $12,263 $117,412
Credit Suisse International Equity Portfolio $9,113 $147,213
Van Kampen American Capital Emerging Growth
Portfolio $8,943 $170,896
Salomon Brothers U.S. Government Securities Portfolio $6,395 $104,434
Elite Value Asset Allocation Portfolio $13,732 $109,560
</TABLE>

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (continued)

4. PURCHASE AND SALE OF INVESTMENTS

Portfolio shares are purchased at net asset value with net contract payments
(contract purchase payments less surrenders) and with reinvestment of dividend
and capital distributions made by the Portfolios. The aggregate cost of
purchases and proceeds from sales of investment in the Trust shares for the year
ended December 31, 1997 was $40,050,074 and $19,281,037, respectively, and
$21,165,690 and $7,804,034, respectively, for the year ended December 31, 1996.
The cost of total investments in Trust shares owned at December 31, 1997 and
1996 was the same for financial reporting and federal income tax purposes. At
December 31, 1997, gross unrealized appreciation and depreciation on Trust
shares was $2,940,777 and $172,712, respectively.

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (continued)

5. NET INCREASE (DECREASE) IN ACCUMULATION UNITS

The Company offers owners standard and enhanced death benefit contracts, which
differ in the calculation of death benefits and related charges.

The increase (decrease) in accumulation units for the years ended December 31,
1997 and 1996 are as follows:

For the year ended December 31, 1997:

Standard benefit units:
Outstanding at beginning of year 109,837.9 68,154.9 48,634.3 17,186.2
Increase for payments received 1,748,815.9 35,404.8 60,968.9 26,594.6
Decrease for surrendered
contracts (62,967.4) (4,923.2) (5,242.9) (2,943.8)
Decrease for death claims - (1,202.5) - -
Change for net interfund
exchanges (1,350,732.4) 133,774.0 157,755.8 85,563.0
Outstanding at end of period 444,954.0 231,208.0 262,116.1 126,400.0
================ ================ =========== =================

Enhanced benefit units:
Outstanding at beginning of year 3,403.7 5,232.7 11,709.8 8,510.2
Increase for payments received 254,399.5 225.9 658.6 88.1
Decrease for surrendered
contracts (10,056.9) (312.5) (845.4) (2,159.1)
Decrease for death claims - - - -
Change for net interfund
exchanges (234,269.8) 14,135.4 33,075.0 13,071.2
Outstanding at end of period 13,476.5 19,281.5 44,598.0 19,510.4
================ ================ =========== =================
</TABLE>

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (continued)

5. NET INCREASE (DECREASE) IN ACCUMULATION UNITS (CONTINUED)

<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN SALOMON
CAPITAL BROTHERS U.S.
EMERGING BLACKROCK GOVERNMENT ELITE VALUE
GROWTH MANAGED BOND SECURITIES ASSET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- -------------- ----------- -----------------
<S> <C> <C> <C> <C>
Standard benefit units:
Outstanding at beginning of year 107,870.9 14,436.2 15,638.1 69,575.7
Increase for payments received 61,310.8 23,328.7 8,598.5 84,615.1
Decrease for surrendered
contracts (4,703.4) (2,641.1) (674.1) (8,707.2)
Decrease for death claims (1,147.7) - - -
Change for net interfund
exchanges 139,680.6 (35,123.8) 103,270.0 316,446.5
Outstanding at end of period 303,011.2 - 126,832.5 461,930.1
=========== ============== =========== =================

Enhanced benefit units:
Outstanding at beginning of year 2,072.6 11,399.4 11,806.1 13,965.2
Increase for payments received 2,711.6 - - 272.4
Decrease for surrendered
contracts (5.8) (933.2) (3,245.5) (3,424.9)
Decrease for death claims - - - -
Change for net interfund
exchanges 36,382.5 (10,466.2) 23,644.6 61,292.1
Outstanding at end of period 41,160.9 - 32,205.2 72,104.8
=========== ============== =========== =================
</TABLE>

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (continued)

5. NET INCREASE (DECREASE) IN ACCUMULATION UNITS (CONTINUED)

For the year ended December 31, 1996:
<TABLE>
<CAPTION>
GLOBAL ADVISORS GLOBAL ADVISORS BEA GROWTH CREDIT SUISSE
MONEY MARKET GROWTH EQUITY AND INCOME INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO EQUITY PORTFOLIO
---------------- ---------------- ----------- -----------------
<S> <C> <C> <C> <C>
Standard benefit units:
Outstanding at beginning of year 2,464.4 124.2 461.8 430.6
Increase for payments received 500,186.2 5,781.3 4,927.3 978.8
Decrease for surrendered
contracts (386.1) (193.0) (308.2) (497.1)
Change for net interfund
exchanges (392,426.6) 62,442.4 43,553.4 16,273.9
Outstanding at end of period 109,837.9 68,154.9 48,634.3 17,186.2
================ ================ =========== =================

Enhanced benefit units:
Outstanding at beginning of year 24.9 - - -
Increase for payments received 71,973.9 3.6 933.4 108.1
Decrease for surrendered
contracts - - (2.5) (629.8)
Change for net interfund
exchanges (68,595.1) 5,229.1 10,778.9 9,031.9
Outstanding at end of period 3,403.7 5,232.7 11,709.8 8,510.2
================ ================ =========== =================
</TABLE>

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (continued)

5. Net Increase (Decrease) in Accumulation Units (continued)

<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN SALOMON
CAPITAL BROTHERS U.S.
EMERGING BLACKROCK GOVERNMENT ELITE VALUE
GROWTH MANAGED BOND SECURITIES ASSET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- -------------- ----------- -----------------
<S> <C> <C> <C> <C>
Standard benefit units:
Outstanding at beginning of year - - - -
Increase for payments received 10,902.4 154.5 - 2,570.1
Decrease for surrendered
contracts (387.3) (94.3) (155.7) (357.2)
Change for net interfund
exchanges 97,355.8 14,376.0 15,793.8 67,362.8
Outstanding at end of period 107,870.9 14,436.2 15,638.1 69,575.7
=========== ============== =========== =================

Enhanced benefit units:
Outstanding at beginning of year - - - -
Increase for payments received - 41.6 41.4 237.0
Decrease for surrendered
contracts - - (855.9) (769.0)
Change for net interfund
exchanges 2,072.6 11,357.8 12,620.6 14,497.2
Outstanding at end of period 2,072.6 11,399.4 11,806.1 13,965.2
=========== ============== =========== =================
</TABLE>

6. DISTRIBUTION AGREEMENT

AGA Brokerage Services, Inc. ("AGA Brokerage"), formerly WNL Brokerage Services,
Inc., a wholly owned subsidiary of WNL Holding Corp., acts as the principal
underwriter of the contracts funded by the Separate Account. AGA Brokerage is
registered as a broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc. The contracts are
sold by registered representatives of the Company, who are also insurance agents
under state law.

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (continued)

7. RELATED PARTIES

Total capital contributed by the Company to the Separate Account was $9,600,000
as of December 31, 1997. The capital was contributed to provide diversification
and to enhance investment performance. The capital will be removed as the funds
grow large enough to meet the diversification requirements without the
additional capital. During 1997, the Company received a capital distribution
from the Separate Account of $3,400,169 due to the elimination of the BlackRock
Managed Bond Portfolio as one of the available investment options to contract
owners. Dividends, realized gain distributions, and unrealized gains related to
the contributed capital as of and for the year ended December 31, 1997 were
$517,091, $573,091, and $2,149,932, respectively.

8. SUBSEQUENT EVENT

On February 25, 1998, the Company's parent, Western National Corporation, was
acquired by American General Corporation.

<PAGE>

FINANCIAL STATEMENTS (UNAUDITED)
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
AGA SEPARATE ACCOUNT A
THREE-MONTH PERIOD ENDED MARCH 31, 1998

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Financial Statements (Unaudited)

Three-month period ended March 31, 1998

CONTENTS

Financial Statements (Unaudited)

Statement of Assets and Liabilities (Unaudited) 1
Statement of Operations (Unaudited) 3
Statement of Changes in Net Assets (Unaudited) 5
Notes to Financial Statements (Unaudited) 7

<PAGE>
American General Annuity Insurance Company
AGA Separate Account A

Statement of Assets and Liabilities (Unaudited)

March 31, 1998

<TABLE>
<CAPTION>
GLOBAL
GLOBAL ADVISORS CREDIT SUISSE
ADVISORS GROWTH BEA GROWTH INTERNATIONAL
MONEY MARKET EQUITY AND INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
Net asset value per share $ 1.00 $ 16.01 $ 13.55 $ 11.10
Number of shares 5,654,407 589,223 691,608 458,700
Identified cost $ 5,654,407 $7,436,612 $ 8,176,177 $ 4,929,327
============= ========== ============== ==============
Market value $ 5,654,407 $9,431,059 $ 9,373,531 $ 5,090,009
============= ========== ============== ==============
Net assets $ 5,654,407 $9,431,059 $ 9,373,531 $ 5,090,009
============= ========== ============== ==============

Net assets attributable to:
Contract owners $ 5,540,237 $5,655,627 $ 6,182,051 $ 2,381,159
American General Annuity
Insurance Company (Note 7) 114,170 3,775,432 3,191,480 2,708,850
------------- ---------- -------------- --------------
$ 5,654,407 $9,431,059 $ 9,373,531 $ 5,090,009
============= ========== ============== ==============

Accumulation units of contract
owners:
Standard benefit units 486,106.7 288,645.9 354,475.5 162,155.7
Enhanced benefit units 18,037.2 21,711.0 48,429.1 19,938.4

Accumulation value per unit:
Standard benefit units $ 10.99 $ 18.23 $ 15.35 $ 13.08
Enhanced benefit units $ 10.95 $ 18.16 $ 15.29 $ 13.03
</TABLE>

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Statement of Assets and Liabilities (Unaudited) (continued)

March 31, 1998

<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN SALOMON
CAPITAL BROTHERS U.S. ELITE VALUE
EMERGING GOVERNMENT ASSET
GROWTH SECURITIES ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO
----------- -------------- ------------
<S> <C> <C> <C>
ASSETS
Investments:
Net asset value per share $ 16.08 $ 10.08 $ 15.76
Number of shares 442,456 454,872 802,953
Identified cost $ 5,614,137 $ 4,575,533 $ 10,986,054
=========== ============== ============
Market value $ 7,113,033 $ 4,585,323 $ 12,657,844
=========== ============== ============
Net assets $ 7,113,033 $ 4,585,323 $ 12,657,844

Net assets attributable to:
Contract owners $ 6,281,009 $ 2,299,149 $ 10,966,042
American General Annuity Insurance
Company (Note 7) 832,024 2,286,174 1,691,802
----------- -------------- ------------
$ 7,113,033 $ 4,585,323 $ 12,657,844
=========== ============== ============

Accumulation units of contract owners:
Standard benefit units 351,441.3 176,501.1 596,618.9
Enhanced benefit units 39,861.7 31,886.2 74,882.6

Accumulation value per unit:
Standard benefit units $ 16.06 $ 11.04 $ 16.34
Enhanced benefit units $ 16.00 $ 11.06 $ 16.28
</TABLE>

See accompanying notes.
.
<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Statement of Operations (Unaudited)

For the three-month period ended March 31, 1998

<TABLE>
<CAPTION>
GLOBAL ADVISORS GLOBAL ADVISORS BEA GROWTH CREDIT SUISSE
MONEY MARKET GROWTH EQUITY AND INCOME INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO EQUITY PORTFOLIO
---------------- ---------------- ----------- ------------------
<S> <C> <C> <C> <C>
Investment income:
Income:
Dividends $ 73,266 $ 22,371 $ 52,498 $ -
Expenses:
Mortality and expense risk and
administrative fees 18,466 16,085 17,890 6,877
---------------- ---------------- ----------- ------------------
Net investment income 54,800 6,286 34,608 (6,877)

Realized and unrealized gain (loss) on
investments:
Net realized gain (loss) on sale
of Trust shares - 7,320 9,764 (2,717)
Net unrealized gain (loss) on
Trust shares - 1,060,979 505,618 333,395
Net realized and unrealized gain (loss)
on investments - 1,068,299 515,382 330,678
---------------- ---------------- ----------- ------------------
Increase in net assets resulting from
operations $ 54,800 $ 1,074,585 $ 549,990 $ 323,801
</TABLE>

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Statement of Operations (Unaudited) (continued)

For the three-month period ended March 31, 1998

<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN SALOMON
CAPITAL BROTHERS U.S.
EMERGING GOVERNMENT ELITE VALUE
GROWTH SECURITIES ASSET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------------- -----------------
<S> <C> <C> <C>
Investment income:
Income:
Dividends $ 481 $ 62,827 $ 70,865
Expenses:
Mortality and expense risk and
administrative fees 18,647 6,964 31,656
------------ --------------- -----------------
Net investment income (18,166) 55,863 39,209

Realized and unrealized gain (loss) on
investments:
Net realized gain (loss) on sale of Trust
shares 11,930 7,106 14,790
Net unrealized gain (loss) on Trust shares 916,390 (7,505) 961,017
Net realized and unrealized gain (loss) on
investments 928,320 (399) 975,807
------------ --------------- -----------------
Increase in net assets resulting from operations $ 910,154 $ 55,464 $ 1,015,016
============ =============== =================
</TABLE>

See accompanying notes.

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Statement of Changes in Net Assets (Unaudited)

For the three-month period ended March 31, 1998

<TABLE>
<CAPTION>
GLOBAL ADVISORS GLOBAL ADVISORS BEA GROWTH CREDIT SUISSE
MONEY MARKET GROWTH EQUITY AND INCOME INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO EQUITY PORTFOLIO
----------------- ----------------- ------------ ------------------
<S> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) $ 54,800 $ 6,286 $ 34,608 $ (6,877)
Net realized gain (loss) on investments - 7,320 9,764 (2,717)
Net unrealized gain (loss) on investments - 1,060,979 505,618 333,395
----------------- ----------------- ------------ ------------------
Increase in net assets from operations 54,800 1,074,585 549,990 323,801

Increase (decrease) in net assets from
variable annuity contract transactions:
Contract purchase payments 7,088,444 295,872 380,029 106,016
Surrenders and withdrawals (443,800) (52,478) (43,810) (18,376)
Death benefit payments - - - -
Transfers (to) from general account (1,862,367) 5,584 26,174 1,603
Intra-portfolio transfers (4,282,933) 780,482 1,073,151 366,640
Increase in net assets from variable annuity
contract transactions 499,344 1,029,460 1,435,544 455,883
----------------- ----------------- ------------ ------------------

Total increase in net assets 554,143 2,104,045 1,985,534 779,684
Net assets at beginning of period 5,100,264 7,327,014 7,387,997 4,310,325
Net assets at end of period $ 5,654,407 $ 9,431,059 $ 9,373,531 $ 5,090,009
----------------- ----------------- ------------ ------------------
</TABLE>

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Statement of Changes in Net Assets (Unaudited) (continued)

For the three-month period ended March 31, 1998

<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN SALOMON
CAPITAL BROTHERS U.S.
EMERGING GOVERNMENT ELITE VALUE
GROWTH SECURITIES ASSET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO
------------ --------------- ------------------
<S> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) $ (18,166) $ 55,863 $ 39,209
Net realized gain (loss) on investments 11,930 7,106 14,790
Net unrealized gain (loss) on investments 916,390 (7,505) 961,017
------------ --------------- ------------------
Increase in net assets from operations 910,154 55,464 1,015,016

Increase (decrease) in net assets from variable
annuity contract transactions:
Contract purchase payments 230,587 517,783 449,054
Surrenders and withdrawals (60,801) (55,473) (74,276)
Death benefit payments (50,736) - (761)
Transfers (to) from general account 1,338 - 4,763
Intra-portfolio transfers 583,894 81,649 1,793,429
Increase in net assets from variable annuity
contract transactions 704,282 543,959 2,172,209
------------ --------------- ------------------

Total increase in net assets 1,614,436 599,423 3,187,225
Net assets at beginning of period 5,498,597 3,985,900 9,470,619
Net assets at end of period $ 7,113,033 $ 4,585,323 $ 12,657,844
============ =============== ==================
</TABLE>

See accompanying notes.

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (Unaudited)

March 31, 1998

1. ORGANIZATION

AGA Separate Account A (the "Separate Account") was established by American
General Annuity Insurance Company (the "Company") to fund variable annuity
insurance contracts issued by the Company. The Separate Account is registered
with the Securities and Exchange Commission as a unit investment trust pursuant
to the provisions of the Investment Company Act of 1940, as amended.
The Separate Account is divided into seven sub-accounts. Each sub-account
invests in one portfolio of AGA Series Trust (the "Trust"). The Trust is managed
by AGA Investment Advisory Services, Inc. (the "Adviser"), an affiliate of the
Company. As of March 31, 1998, the Trust portfolios available to contract
holders through the various sub-accounts ("Portfolios") are as follows:

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (Unaudited) (Continued)

2. SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATION

INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME

ANNUITY RESERVES

At March 31, 1998, the Separate Account did not have contracts in the annuity
pay-out phase; therefore, no future policy benefit reserve was required.

FEDERAL INCOME TAXES

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (Unaudited) (Continued)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of income and expenses during the period. Actual results could differ from those
estimates.

3. CONTRACT CHARGES

Deductions for the administrative expenses and mortality and expense risks
assumed by the Company are calculated daily, at an annual rate, on the average
daily net asset value of the Portfolios attributable to the contract owners and
are paid to the Company. The annual rate for administrative expenses is .15% and
the annual rate for the mortality and expense risks is 1.25%. The annual rate
for enhanced death benefit option is .15%. For the three-month period ended
March 31, 1998, deductions for administrative expenses and mortality and expense
risk charges were $12,478 and $103,983, respectively.

A contingent deferred sales charge is applicable to certain contract withdrawals
pursuant to the contract and is payable to the Company. For the three-month
period ended March 31, 1998, deferred sales charges totaled $25,495 and are
included as a component of surrenders and withdrawals on the statement of
changes in net assets.

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (Unaudited) (Continued)

3. CONTRACT CHARGES (CONTINUED)

through May 1, 1998. In addition, the Company reimbursed each Portfolio for all
operating expenses, excluding management fees, that exceeded .12% of each
Portfolio's average daily net assets through May 1, 1998.

For the three-month period ended March 31, 1998, the Adviser waived advisory
fees and the Company reimbursed operating expenses as follows:

<TABLE>
<CAPTION>
ADVISORY FEES WAIVED EXPENSES REIMBURSED
--------------------- --------------------
<S> <C> <C>
Global Advisors Money Market Portfolio $ 3,317 $ 26,946
Global Advisors Growth Equity Portfolio $ 4,956 $ 29,083
BEA Growth and Income Portfolio $ 4,989 $ 30,867
Credit Suisse International Equity Portfolio $ 2,769 $ 34,799
Van Kampen American Capital Emerging Growth
Portfolio $ 3,722 $ 36,704
Salomon Brothers U.S. Government Securities Portfolio $ 2,611 $ 26,455
Elite Value Asset Allocation Portfolio $ 6,493 $ 25,147
</TABLE>

4. PURCHASE AND SALE OF INVESTMENTS

Portfolio shares are purchased at net asset value with net contract payments
(contract purchase payments less surrenders) and with reinvestment of dividend
and capital distributions made by the Portfolios. The aggregate cost of
purchases and proceeds from sales of investment in the Trust shares for the
three-month period ended March 31, 1998 was $10,989,570 and $3,983,164,
respectively. The cost of total investments in Trust shares owned at March 31,
1998 was the same for financial reporting and federal income tax purposes. At
March 31, 1998, gross unrealized appreciation on Trust shares was $6,537,960.

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (Unaudited) (Continued)

5. NET INCREASE (DECREASE) IN ACCUMULATION UNITS

The Company offers owners standard and enhanced death benefit contracts, which
differ in the calculation of death benefits and related charges.

The increase (decrease) in accumulation units for the three-month period ended
March 31, 1998 is as follows:

<TABLE>
<CAPTION>
GLOBAL ADVISORS GLOBAL ADVISORS BEA GROWTH CREDIT SUISSE
MONEY MARKET GROWTH EQUITY AND INCOME INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO EQUITY PORTFOLIO
---------------- ---------------- ----------- -----------------
<S> <C> <C> <C> <C>
Standard benefit units:
Outstanding at beginning of
period 444,954.0 231,208.0 262,116.1 126,400.0
Increase for payments received 628,066.8 17,170.9 23,928.5 8,416.1
Decrease for surrendered
contracts (40,502.2) (3,006.4) (2,735.6) (1,488.7)
Decrease for death claims - - - -
Change for net interfund
exchanges (546,411.9) 43,273.4 71,166.5 28,828.3
Outstanding at end of period 486,106.7 288,645.9 354,475.5 162,155.7
================ ================ =========== =================

Enhanced benefit units:
Outstanding at beginning of
period 13,476.5 19,281.5 44,598.0 19,510.4
Increase for payments received 19,076.2 104.3 1,676.2 76.1
Decrease for surrendered
contracts (3.3) (96.0) (245.7) (9.5)
Decrease for death claims - - - -
Change for net interfund
exchanges (14,512.2) 2,421.2 2,400.6 361.4
Outstanding at end of period 18,037.2 21,711.0 48,429.1 19,938.4
================ ================ =========== =================
</TABLE>

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (Unaudited) (Continued)

5. NET INCREASE (DECREASE) IN ACCUMULATION UNITS (CONTINUED)

<TABLE>
<CAPTION>
VAN KAMPEN
AMERICAN SALOMON
CAPITAL BROTHERS U.S. ELITE VALUE
EMERGING GOVERNMENT
GROWTH SECURITIES ASSET ALLOCATION
PORTFOLIO PORTFOLIO PORTFOLIO
----------- -------------- -----------------
<S> <C> <C> <C>
Standard benefit units:
Outstanding at beginning of period 303,011.2 126,832.5 461,930.1
Increase for payments received 15,462.0 43,285.7 28,574.0
Decrease for surrendered contracts (4,035.9) (880.6) (4,514.6)
Decrease for death claims - - (46.5)
Change for net interfund exchanges 37,004.0 7,263.5 110,675.9
Outstanding at end of period 351,441.3 176,501.1 596,618.9
=========== ============== =================

Enhanced benefit units:
Outstanding at beginning of period 41,160.9 32,205.2 72,104.8
Increase for payments received 97.0 3,729.2 183.3
Decrease for surrendered contracts (15.4) (4,179.2) (257.4)
Decrease for death claims (3,536.2) - -
Change for net interfund exchanges 2,155.4 131.0 2,851.9
Outstanding at end of period 39,861.7 31,886.2 74,882.6
----------- -------------- -----------------
</TABLE>

6. DISTRIBUTION AGREEMENT

AGA Brokerage Services, Inc. ("AGA Brokerage"), a wholly owned subsidiary of WNL
Holding Corp., acts as the principal underwriter of the contracts funded by the
Separate Account. AGA Brokerage is registered as a broker-dealer under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. The contracts are sold by registered representatives of
the Company, who are also insurance agents under state law.

<PAGE>

American General Annuity Insurance Company
AGA Separate Account A

Notes to Financial Statements (Unaudited) (Continued)

7. RELATED PARTIES

Total capital contributed by the Company to the Separate Account was $9,600,000
as of March 31, 1998. The capital was contributed to provide diversification and
to enhance investment performance. The capital will be removed as the funds grow
large enough to meet the diversification requirements without the additional
capital. Dividends, realized gain distributions, and unrealized gains related to
the contributed capital for the three-month period ended March 31, 1998 were
$70,881.

<PAGE>

PART C
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

A. FINANCIAL STATEMENTS

The financial statements of the Separate Account and the Company are
included in Part B hereof.

B. EXHIBITS

1. Resolution of Board of Directors of the Company authorizing the
establishment of the Separate Account.*
2. Not applicable.
3. (a) Form of Principal Underwriter's Agreement.*
4. (i) Individual Fixed and Variable Deferred Annuity Contract.*
(ii) Annual Step-Up Death Benefit Endorsement.
(iii) Persistency Bonus Endorsement.**
5. Application Form.
6. (i) Copy of Amended and Restated Articles of Incorporation of
the Company.
(ii) Copy of the Restated Bylaws of the Company.
7. Not applicable.
8. Not applicable.
9. Opinion and Consent of Counsel.
10. Consent of Independent Auditors.
11. Not applicable.
12. Not applicable.
13. Calculation of Performance Information.
14. Not applicable.
15. Company Organizational Chart.
27. Not applicable.

*Incorporated by reference to Registrant's Form N-4 as filed on November 11,
1994 (File No. 33-86464).

**Incorporated by reference to Registrant's Post-Effective Amendment No. 3 to
Form N-4 as electronically filed on March 2, 1998.

ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR

The following are the Officers and Directors of the Company who
are engaged directly or indirectly in activities relating to the Registrant or
the Contracts offered by the Registrant:

NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS* WITH DEPOSITOR
- --------------------------- -------------------------------------------
<S> <C>

James S. D'Agostino, Jr. Senior Chairman of the Board and Director

Jon P. Newton Vice Chairman of the Board and Director

Thomas L. West, Jr. Chairman of the Board, Director and
Chief Executive Officer

Craig R. Rodby Vice Chairman of the Board, Director and
Chief Financial Officer

John A. Graf President and Director

Bruce R. Abrams Executive Vice President-Marketing and
Director

Michael G. Atnip Executive Vice President-Administration
and Information Systems and Director

Joe C. Osborne Executive Vice President-Marketing and
Director

Patrick E. Grady Senior Vice President, Treasurer and
Director

Brent C. Nelson Senior Vice President, Controller and
Director

Richard W. Scott Vice President, Chief Investment Officer
and Director

Micahel J. Akers Executive Vice President

Dwight L. Cramer Senior Vice President-Specialty Markets

Stephen G. Kellison Senior Vice President and Chief Actuary

Charles D. Robinson Senior Vice President-Institutional Marketing

Donald L. Sharps Senior Vice President-Systems

Cynthia A. Toles Vice President, Secretary and Acting General
Counsel

Robert M. Devlin Director

Franklin H. Rogers, Jr. Senior Vice President, Amarillo Operations
</TABLE>

The principal business address is 2919 Allen Parkway, Houston, Texas 77019.

ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT

The Company organizational chart is included as Exhibit 15.

ITEM 27. NUMBER OF CONTRACT OWNERS

As of March 31, 1998, there were 836 Qualified Contract Owners and
516 Non-Qualified Contract Owners.

ITEM 28. INDEMNIFICATION

The Bylaws (Article VI - Section 1) of the Company provide that:

The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative, or investigative,
by reason of the fact that he is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (collectively, "Agent") against expenses
(including attorneys' fees), judgments, fines, penalties, court costs and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement (whether with or
without court approval), conviction or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself, create a presumption that the Agent did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. If several claims, issues or matters are involved, an
Agent may be entitled to indemnification as to some matters even though he is
not entitled as to other matters. Any director or officer of the Corporation
serving in any capacity of another corporation, of which a majority of the
shares entitled to vote in the election of its directors is held, directly or
indirectly, by the Corporation, shall be deemed to be doing so at the request of
the Corporation.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company 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 29. PRINCIPAL UNDERWRITERS

(a) Not Applicable.

(b) AGA Brokerage Services, Inc. ("AGA Brokerage") is the principal
underwriter for the Contracts. The following persons are the officers and
directors of AGA Brokerage.

Name and Principal Position and Offices
Business Address* with Underwriter
- --------------------------- -----------------------------------------------
<S> <C>
Kurt R. Fredland President, Chief Executive Officer and Director

Kent W. Lamb Assistant Treasurer

Beverli J. Lee Vice President, Chief Compliance Officer,
Chief Legal Officer, Assistant Secretary
and Director

Terry L. Swenson Director

Patrick E. Grady Vice President, Chief Financial Officer
and Treasurer

Dwight L. Cramer Vice President and Secretary

Debra M. Green Assistant Secretary

</TABLE>
The principal business address is 2919 Allen Parkway, Houston, Texas 77019.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

Persons maintaining physical possession of the accounts, books or documents of
the Separate Account required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules promulgated thereunder include
Kent W. Lamb, Vice President and Assistant Controller of the Company,
whose address is 5555 San Felipe, Houston, Texas 77056. In addition, certain
required records are maintained by the third party administrator, Financial
Advisory Services, Inc., whose address is 1290 Silas Deane Highway,
Wethersfield, CT 06109-4303.

ITEM 31. MANAGEMENT SERVICES

Not Applicable.

ITEM 32. UNDERTAKINGS

a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.

b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.

c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under this
Form promptly upon written or oral request.

d. American General Annuity Insurance Company ("Company"), hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.

REPRESENTATIONS

(1) The Company hereby represents that it is relying upon Investment Company Act
Rule 6c-7. The Company further represents that paragraphs (a)-(d) of Rule 6c-7
have been complied with.

(2) The Company hereby represents that it is relying upon a No-Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:

1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;

2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;

3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential participants;

4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment alternatives
available under the employer's Section 403(b) arrangement to which the
participant may elect to transfer his contract value.

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it has caused this Registration Statement to
be signed on its behalf, in the City of Houston, and State of Texas on this 22nd
day of May, 1998.

AGA SEPARATE ACCOUNT A
--------------------------
Registrant

By: AMERICAN GENERAL ANNUITY INSURANCE COMPANY
--------------------------------------------------

By: /s/BEVERLI J. LEE
------------------------------

By: AMERICAN GENERAL ANNUITY INSURANCE COMPANY
--------------------------------------------------
Depositor

By: /s/BEVERLI J. LEE
---------------------------------------

As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.

Senior Chairman of the Board and
- ------------------------- Director -------
James S. D'Agostino, Jr. Date

Vice Chairman of the Board and
- ---------------------- Director -------
Jon P. Newton Date

ROBERT M. DEVLIN* 5/22/98
- ------------------------ Director ------
Robert M. Devlin Date

THOMAS L. WEST, JR.* Chairman of the Board, Director and 5/22/98
- ------------------------- Chief Exective Officer -------
Thomas L. West, Jr. Date

CRAIG R. RODBY* Vice Chairman of the Board, Director 5/22/98
- ------------------------- and Chief Financial Officer -------
Craig R. Rodby Date

JOHN A. GRAF* President and Director 5/22/98
- ------------------------- -------
John A. Graf Date

- ------------------------- Executive Vice President and Director -------
Bruce R. Abrams Date

MICHAEL G. ATNIP* 5/22/98
- ------------------------- Executive Vice President and Director -------
Michael G. Atnip Date

- ------------------------- Executive Vice President and Director -------
Joe C. Osborne Date

PATRICK E. GRADY* 5/22/98
- ------------------------- Senior Vice President, Treasurer and -------
Patrick E. Grady Director Date

BRENT C. NELSON* 5/22/98
- ------------------------- Senior Vice President, Controller and ------
Brent C. Nelson Director Date

RICHARD W. SCOTT* 5/22/98
- ------------------------- Vice President, Chief Investment Officer -----
Richard W. Scott and Director Date

*By: /s/CYNTHIA A. TOLES
---------------------------------------
Cynthia A. Toles, Power of Attorney

EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 5
TO
FORM N-4
FOR
AGA SEPARATE ACCOUNT A
OF
AMERICAN GENERAL ANNUITY INSURANCE COMPANY

INDEX TO EXHIBITS

EXHIBIT PAGE
- ------- ----

99.B4(ii) Annual Step-Up Death Benefit Endorsement
99.B6(i) Amended and Restated Articles of Incorporation
99.B6(ii) Restated By-Laws
99.B9 Opinion and Consent of Counsel
99.B10 Consent of Independent Accountants
99.B13 Calculation of Performance Information
99.B15 Company Organizational Chart

AMERICAN GENERAL ANNUITY INSURANCE COMPANY
HOME OFFICE: 205 E. 10TH AVENUE, AMARILLO, TEXAS 79101
TELEPHONE: (800) 424-4990
ANNUAL STEP-UP DEATH BENEFIT ENDORSEMENT

This Endorsement modifies the Contract to which it is attached. The effective
date of the Endorsement is the Issue Date shown on the Contract Schedule. The
Charge for this benefit is shown on the Contract Schedule. In case of conflict
with any provision in the Contract, the provisions of this Endorsement will
control. The following hereby amends and supersedes the section of the Contract
captioned "Proceeds Payable on Death - Death Benefit Amount During the
Accumulation Period":

PROCEEDS PAYABLE ON DEATH
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD

DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD: For a death occurring prior
to the 75th birthday of the Owner, or the oldest Joint Owner, the death benefit
during the Accumulation Period will be the greater of:

1. The Purchase Payments, less any withdrawals and previously deducted
Contingent Deferred Sales Charge; or

For a death occurring on or after the 75th birthday of the Owner, or the oldest
Joint Owner, the death benefit during the Accumulation Period will be
as provided in the Contract to which this endorsement is attached.

Effective Date:

Signed for American General Annuity Insurance Company by:

/s/ Cynthia A. Toles /s/ John A. Graf
- ------------------------------ --------------------------
SECRETARY PRESIDENT

R352-98

AMENDED AND RESTATED ARTICLES OF INCORPORATION

WESTERN NATIONAL LIFE INSURANCE COMPANY

ARTICLE ONE

Western National Life Insurance Company (the "Corporation"), pursuant
to the provisions of Article 4.07 of the Texas Business Corporation Act and the
Texas Insurance Code, hereby adopts Restated Articles of Incorporation which
accurately copy the Articles of Incorporation and all amendments thereto that
are in effect to date and as further amended by such Restated Articles of
Incorporation as hereinafter set forth and which contain no other change in any
provision thereof.

ARTICLE TWO

The Articles of Incorporation of the Corporation are amended by the
Restated Articles of Incorporation as follows:

a. The amendment changes Article I of the Amended Articles of
Incorporation to read as follows:

"ARTICLE I

The name of the corporation is American General Annuity Insurance Company."

ARTICLE THREE

Each such amendment made by the Restated Articles of Incorporation has
been effected in conformity with the provisions of the Texas Business
Corporation Act and the Texas Insurance Code, and such Restated Articles of
Incorporation and each such amendment made by the Restated Articles of
Incorporation were duly adopted by a consent of the sole shareholder of the
corporation on the _____ day of December, 1997.

ARTICLE FOUR

The number of shares outstanding at the time of these amendments and
restatement was 50,000, and the number of shares entitled to vote on the
Restated Articles of Incorporation as so amended was 50,000, the holder of all
such 50,000 shares has signed a written consent to the adoption of such
amendments and Restated Articles of Incorporation as so amended.

ARTICLE FIVE

The Articles of Incorporation and all amendments and supplements
thereto are hereby superseded by the following Articles of Incorporation, which
accurately copy the entire text thereof including the amendment as above set
forth:

AMENDED AND RESTATED ARTICLES OF INCORPORATION

AMERICAN GENERAL ANNUITY INSURANCE COMPANY

(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)

ARTICLE I

The name of the corporation is American General Annuity Insurance Company.

ARTICLE II

The purpose for which the Corporation is formed is to transact the
business of a life, health and accident insurance company, to write and issue
policies of insurance contracting for the payment of money or other things of
value, conditioned on the continuance or cessation of human life, or conditioned
upon injury, disablement or death of persons resulting from traveling or general
accidents by land or water, or conditioned upon loss by reason of disability due
to sickness or ill health, and to write and issue policies of insurance
insuring, guaranteeing, contracting or pledging for the payment of endowments or
annuities, as such insurance business is now or thereafter permitted and
authorized under Chapter 3 of the Texas Insurance Code, or other laws of the
State of Texas, or any state, nation, country, territory, possession,
principality or the District of Columbia, in which the Company is authorized to
do business; and to reinsure any such insurance risk or any part thereof ceded
to it by other insurance companies.

ARTICLE III

The principal office and place where the business of the corporation is
to be transacted is Amarillo, Potter County, Texas.

ARTICLE IV

The period of duration of the Corporation shall be perpetual.

ARTICLE V

The number of Directors shall be no less than five (5) nor more than
fifteen (15) and those persons elected as directors shall serve as directors
until the next meeting of the shareholders or until their successors are elected
and qualified.

ARTICLE VI

The amount of authorized capital is Five Million Dollars ($5,000,000.00).
The number of authorized shares of capital stock is One Hundred Thousand
(100,000) shares with a par value of Fifty Dollars ($50.00) each. Fifty Thousand
(50,000) shares, representing at least fifty person (50%) of such authorized
capital stock shares, have been in good faith subscribed and fully paid for. All
such authorized shares shall be common shares of the same class, shall have one
vote per share at all shareholde meetings, and shall be equal in all respects.
Shares may be redeemed by the Corporation and canceled only as authorized by the
laws of this State.

ARTICLE VII

A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for an act or omission in
such director's capacity as a director, except for liability for (i) breach of a
director's duty of loyalty to the Corporation or its shareholders; (ii) an act
or omission not in good faith or that involves intentional misconduct or a
knowing violation of the law; (iii) a transaction from which a director received
an improper benefit whether or not the benefit resulted from an action taken
within the scope of the director's office; (iv) an act or omission for which the
liability of a director is expressly provided by statute; or (v) an act related
to an unlawful stock repurchase or payment of a dividend. If the laws of the
State of Texas are hereafter amended to authorize corporate action further
eliminating or limiting the personal liability of a director of the Corporation,
then the liability of a director of the Corporation shall thereupon
automatically be eliminated or limited to the fullest extent permitted by such
laws. Any repeal or modification of this Article VII by the shareholders of the
Corporation shall not adversely affect any right or protection of a director
existing at the time of such appeal or modification with respect to events or
circumstances occurring or existing prior to such time.

Dated this _____ day of December, 1997.

AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
Formerly WESTERN NATIONAL LIFE INSURANCE COMPANY

By: ______________________________
John A. Graf, President

and: ______________________________
Evelyn M. Curran, Secretary

STATE OF TEXAS ss.
ss.

COUNTY OF HARRIS ss.

BEFORE ME, the undersigned authority, on this ______ day of December,
1997, personally appeared John A. Graf and Evelyn M. Curran, who being by me
first duly sworn, declared that they are the President and Secretary,
respectively, of American General Annuity Insurance Company, (formerly Western
National Life Insurance Company, as of the Effective Time), and that they signed
the foregoing document as President and Secretary of such Corporation, and that
the statements contained therein are true an correct.

Given under my hand and seal of office.

---------------------------------
Notary Public, State of Texas

SEAL

My commission expires: _____________

RESTATED BY-LAWS

AMERICAN GENERAL ANNUITY INSURANCE COMPANY

(formerly WESTERN NATIONAL LIFE INSURANCE COMPANY)

January ____, 1998

<TABLE>
<CAPTION>
TABLE OF CONTENTS

Page
<S> <C> <C>
ARTICLE I Identification.........................................................................1
- --------- --------------
Section 1. Name...................................................................................1
Section 2. Registered Office and Registered Agent.................................................1
Section 3. Principal Office.......................................................................1
Section 4. Other Offices..........................................................................1
Section 5. Seal...................................................................................1
Section 6. Fiscal Year............................................................................1

ARTICLE II Shareholders...........................................................................2
- ---------- ------------
Section 1. Place of Meetings......................................................................2
Section 2. Annual Meetings........................................................................2
Section 3. Special Meetings.......................................................................2
Section 4. Notice of Meetings.....................................................................2
Section 5. Waiver of Notice.......................................................................2
Section 6. Voting at Meetings.....................................................................3
(a) Voting Rights.....................................................................3
(b) Record Date.......................................................................3
(c) Proxies...........................................................................3
(d) Quorum............................................................................3
(e) Adjournments......................................................................3
Section 7. List of Shareholders...................................................................4
Section 8. Action by Written Consent..............................................................4
Section 9. Meeting by Telephone or Similar Communications Equipment...............................4

ARTICLE III Directors..............................................................................5
- ----------- ---------
Section 1. Duties.................................................................................5
Section 2. Number of Directors....................................................................5
Section 3. Election and Term......................................................................5
Section 4. Resignation............................................................................5
Section 5. Vacancies..............................................................................5
Section 6. Annual Meeting.........................................................................5
Section 7. Regular Meetings.......................................................................5
Section 8. Special Meetings.......................................................................6
Section 9. Notice.................................................................................6
Section 10. Waiver of Notice.......................................................................6
Section 11. Business to be Transacted..............................................................6
Section 12. Quorum - Adjournment if Quorum is Not Present..........................................6
Section 13. Presumption of Assent..................................................................6
Section 14. Action by Written Consent..............................................................7
Section 15. Committees.............................................................................7
Section 16. Meeting by Telephone or Similar Communication Equipment................................7

ARTICLE IV

Section 1. Principal Officers.....................................................................8
Section 2. Election and Terms.....................................................................8
Section 3. Resignation and Removal................................................................8
Section 4. Vacancies..............................................................................8
Section 5. Powers and Duties of Officers..........................................................8
Section 6. Chairman of the Board..................................................................8
Section 7. President..............................................................................9
Section 8. Vice Chairman of the Board.............................................................9
Section 9. Vice President.........................................................................9
Section 10. Secretary..............................................................................9
Section 11. Treasurer.............................................................................10
Section 12. Assistant Secretaries.................................................................10
Section 13. Assistant Treasurers..................................................................10
Section 14. Delegation of Authority...............................................................10
Section 15. Securities of Other Corporations......................................................10

ARTICLE V Directors' Services, Limitation of Liability
and Reliance on Corporate Records, and
Interest of Directors in Contracts

Section 1. Services..............................................................................11
Section 2. General Limitation of Liability.......................................................11
Section 3. Reliance on Corporate Records and Other Information...................................11
Section 4. Interest of Directors in Contracts....................................................11

ARTICLE VI Indemnification

Section 1. Indemnification Against Underlying Liability..........................................12
Section 2. Successful Defense....................................................................13
Section 3. Determination of Conduct..............................................................13
Section 4. Payment of Expenses in Advance........................................................13
Section 5. Indemnity Not Exclusive...............................................................14
Section 6. Insurance Indemnification.............................................................14
Section 7. Employee Benefit Plans................................................................14
Section 8. Application of Indemnification and Advancement of Expenses............................14
Section 9. Indemnification Payments..............................................................14

ARTICLE VII Shares................................................................................15
- ----------- ------
Section 1. Share Certificates....................................................................15
Section 2. Transfer of Shares....................................................................15
Section 3. Registered Holders....................................................................15
Section 4. Lost, Stolen, Destroyed or Mutilated Certificates.....................................15
Section 5. Consideration for Shares..............................................................16
Section 6. Payment for Shares....................................................................16
Section 7. Distributions to Shareholders.........................................................16
Section 8. Regulations...........................................................................16

ARTICLE VIII Corporate Books and Reports

Section 1. Place of Keeping Corporate Books and Records..........................................16
Section 2. Place of Keeping Certain Corporate Books and Records..................................16
Section 3. Permanent Records.....................................................................17
Section 4. Shareholder Records...................................................................17
Section 5. Shareholder Rights of Inspection......................................................17
Section 6. Additional Rights of Inspection.......................................................17

ARTICLE IX Miscellaneous

Section 1. Notice and Waiver of Notice...........................................................18
Section 2. Depositories..........................................................................18
Section 3. Signing of Checks, Notes, etc.........................................................18
Section 4. Gender and Number.....................................................................18
Section 5. Laws..................................................................................18
Section 6. Headings..............................................................................19
Section 7. Securities of Other Corporations......................................................19

ARTICLE X Amendments............................................................................19
- --------- ----------

ARTICLE XI The Texas Business Corporation Act....................................................19
- ---------- ----------------------------------
</TABLE>

RESTATED BY-LAWS

AMERICAN GENERAL ANNUITY INSURANCE COMPANY

(Formerly WESTERN NATIONAL LIFE INSURANCE COMPANY)

ARTICLE I

Identification

Section 1. Name. The name of the Corporation is American General Annuity
Insurance Company (hereinafter referred to as the "Corporation").

Section 2. Registered Office and Registered Agent. The street address of
the Registered Office of the Corporation is 5555 San Felipe, Suite 900, Houston,
Texas 77056, which such office is the executive office of the Corporation; and
the Registered Agent located at such office shall be the Secretary of the
Corporation.

Section 3. Principal Office. The Principal office of the Corporation shall
be located in Amarillo, Texas. The Principal Office of the Corporation need not
be the principal executive and administrative offices of the Corporation, and
such Principal Office may be changed from time to time by the Board of Directors
in the manner provided by law and as is consistent with the Articles of
Incorporation and need not be the same as the Registered Office of the
Corporation.

Section 4. Other Offices. The Corporation may also have offices at such
other places or locations, within or without the State of Texas, as the Board of
Directors may determine or the business of the Corporation may require.

Section 5. Seal. The Corporation need not use a seal. If one is used, it
shall be circular in form and mounted upon a metal die suitable for impressing
the same upon paper. About the upper periphery of the seal shall appear the
words "American General Annuity Insurance Company" and about the lower periphery
thereof the word "Texas". In the center of the seal shall appear the word
"Seal". The seal may be altered by the Board of Directors at its pleasure and
may be used by causing it or a facsimile thereof to be impressed, affixed,
printed or otherwise reproduced.

Section 6. Fiscal Year. The fiscal year of the Corporation shall begin at
the beginning of the first day of January in each year and end at the close of
the last day of December next succeeding.

ARTICLE II

Shareholders

Section 1. Place of Meetings. All meetings of the shareholders of the
Corporation shall be held at such place, within or without the State of Texas,
as may be determined by the President or Board of Directors and specified in the
notices or waivers of notice thereof or proxies to represent shareholders at
such meetings.

Section 2. Annual Meetings. An annual meeting of shareholders shall be held
each year on such date and at such time as may be determined by the President or
Board of Directors. The failure to hold an annual meeting at the designated time
shall not affect the validity of any corporate action. Any and all business of
any nature or character may be transacted, and action may be taken thereon, at
any annual meeting, except as otherwise provided by law or by these By-laws.

Section 3. Special Meetings. A special meeting of shareholders shall be
held: (a) on call of the Board of Directors or the President; or (b) if the
holders of at least twenty-five percent (25%) of all the votes entitled to be
cast on any issue proposed to be considered at the proposed special meeting
sign, date and deliver to the Secretary one (1) or more written demands for the
meeting describing the purpose or purposes for which it is to be held. At any
special meeting of the shareholders, only business within the purpose or
purposes described in the notice of the meeting may be conducted.

Section 4. Notice of Meetings. Written or printed notice stating the date,
time and place of a meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered or mailed by the
Secretary, or by the officers or persons calling the meeting, to each
shareholder of record of the Corporation entitled to vote at the meeting, at
such address as appears upon the records of the Corporation, no fewer than ten
(10) days nor more than sixty (60) days, before the meeting date. If mailed,
such notice shall be effective when mailed if correctly addressed to the
shareholder's address shown in the Corporation's current record of shareholders.

Section 5. Waiver of Notice. A shareholder may waive any notice required by
law, the Articles of Incorporation or these By-laws before or after the date and
time stated in the notice. The waiver by the shareholder entitled to the notice
must be in writing and be delivered to the Corporation for inclusion in the
minutes or filing with the corporate records. A shareholder's attendance at a
meeting, in person or by proxy: (a) waives objection to lack of notice or
defective notice of the meeting, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business at the meeting;
and (b) waives objection to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the matter when it is presented.

Section 6. Voting at Meetings.

(a) Voting Rights. At each meeting of the shareholders, each outstanding
share, regardless of class, is entitled to one (1) vote on each matter voted on
at such meeting, except to the extent cumulative voting is allowed by the
Articles of Incorporation. Only shares are entitled to vote.

(b) Record Date. The record date for purposes of determining shareholders
entitled to vote at any meeting shall be ten (10) days prior to the date of such
meeting or such different date not more than seventy (70) days prior to such
meeting as may be fixed by the Board of Directors.

(1) A shareholder may vote the shareholder's shares in person or by proxy.

(2) A shareholder may appoint a proxy to vote or otherwise act for the
shareholder by executing in writing an appointment form, either personally or by
the shareholder's attorney-in-fact. For purposes of this Section, a proxy
appointed by telegram, telex, telecopy or other document transmitted
electronically for or by a shareholder shall be deemed "executed in writing" by
the shareholder.

(3) An appointment of a proxy is effective when received by the Secretary
or other officer or agent authorized to tabulate votes. An appointment is valid
for eleven (11) months, unless a longer period is expressly provided in the
appointment form.

(4) An appointment of a proxy is revocable by the shareholder, unless the
appointment form conspicuously states that it is irrevocable and the appointment
is coupled with an interest.

(d) Quorum. At all meetings of shareholders, a majority of the votes
entitled to be cast on a particular matter constitutes a quorum on that matter.
If a quorum exists, action on a matter (other than the election of directors) is
approved if the votes cast favoring the action exceed the votes cast opposing
the action, unless the Articles of Incorporation or law require a greater number
of affirmative votes.

(e) Adjournments. Any meeting of shareholders, including both annual and
special meetings and any adjournments thereof, may be adjourned to a different
date, time or place. Notice need not be given of the new date, time or place if
the new date, time or place is announced at the meeting before adjournment, even
though less than a quorum is present. At any such adjourned meeting at which a
quorum is present, in person or by proxy, any business may be transacted which
might have been transacted at the meeting as originally notified or called.

Section 7. List of Shareholders.

(a) After a record date has been fixed for a meeting of shareholders, the
Secretary shall prepare or cause to be prepared an alphabetical list of the
names of the shareholders of the Corporation who are entitled to vote at such
meeting. The list shall show the address of and number of shares held by each
shareholder.

(b) The shareholders' list must be available for inspection by any
shareholder entitled to vote at the meeting, beginning five (5) business days
before the date of the meeting for which the list was prepared and continuing
through the meeting, at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held.
Subject to the restrictions of applicable law, a shareholder, or the
shareholder's agent or attorney authorized in writing, is entitled on written
demand to inspect and to copy the list, during regular business hours and at the
shareholder's expense, during the period it is available for inspection.

(c) The Corporation shall make the shareholders' list available at the
meeting, and any shareholder, or the shareholder's agent or attorney authorized
in writing, is entitled to inspect the list at any time during the meeting or
any adjournment.

Section 8. Action by Written Consent. Any action required or permitted to
be taken at any meeting of shareholders may be taken without a meeting if the
action is taken by all the shareholders entitled to vote on the action. The
action must be evidenced by one or more written consents describing the action
taken, signed by all the shareholders entitled to vote on the action, and
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. Such action is effective when the last shareholder signs the
consent, unless the consent specifies a different prior or subsequent effective
date. Such consent shall have the same force and effect as a unanimous vote at a
meeting of the shareholders, and may be described as such in any document or
instrument.

Section 9. Meeting by Telephone or Similar Communications Equipment. Any or
all shareholders may participate in and hold a meeting of shareholders by, or
through the use of , any means of conference telephone or other similar
communications equipment by which all persons participating in the meeting may
simultaneously hear each other during the meeting. Participation in a meeting
pursuant to this Section shall constitute presence in person at such meeting,
except where a person participates in the meeting for the express purposes of:
(a) objecting to holding the meeting or transacting business at the meeting on
the ground that the meeting is not lawfully called or convened; or (b) objecting
to the consideration of a particular matter that is not within the purpose or
purposes described in the meeting notice.

ARTICLE III

Directors

Section 1. Duties. The business, property and affairs of the Corporation
shall be managed and controlled by the Board of Directors and, subject to such
restrictions, if any, as may be imposed by law the Articles of Incorporation or
by these By-laws, the Board of Directors may, and are fully authorized to, do
all such lawful acts and things as may be done by the Corporation which are not
directed or required to be exercised or done by the shareholders. Directors need
not be residents of the State of Texas or shareholders of the Corporation.

Section 2. Number of Directors. The number of Directors shall be no less
than five (5) nor more than fifteen (15) and those persons elected as directors
shall serve as directors until the next meeting of the shareholders or until
their successors are elected and qualified."

Section 3. Election and Term. Except as otherwise provided in Section 5 of
this Article, the directors shall be elected each year at the annual meeting of
the shareholders, or at any special meeting of the shareholders. Each such
director shall hold office, unless he is removed in accordance with the
provisions of these By-laws or he resigns or dies or becomes so incapacitated he
can no longer perform any of his duties as a director, for the term for which he
is elected and until his successor shall have been elected and qualified. Each
director shall qualify by accepting his election to office either expressly or
by acting as a director. The shareholders or directors may remove any director,
with or without cause, and elect a successor at a meeting called expressly for
such purpose.

Section 4. Resignation. Any director may resign at any time by delivering
written notice to the Board of Directors, the President, or the Secretary of the
Corporation. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. The acceptance of a resignation shall
not be necessary to make it effective, unless expressly so provided in the
resignation.

Section 5. Vacancies. Vacancies occurring in the membership of the Board of
Directors caused by resignation, death or other incapacity, or increase in the
number of directors shall be filled by a majority vote of the remaining members
of the Board, and each director so elected shall serve until the next meeting of
the shareholders, or until a successor shall have been duly elected and
qualified.

Section 6. Annual Meeting. The Board of Directors shall meeting annually,
without notice, immediately following, and at the same place as, the annual
meeting of the shareholders.

Section 7. Regular Meetings. Regular meetings shall be held at such times
and places, either within or without the State of Texas, as may be determined by
the President or the Board of Directors.

Section 8. Special Meetings. Special meetings of the Board of Directors may
be called by the President or by two (2) or more members of the Board of
Directors, at any place within or without the State of Texas, upon twenty-four
(24) hours' notice, specifying the time, place and general purposes of the
meeting, given to each director personally, by telephone, telegraph, teletype,
or other form of wire or wireless communication; or notice may be given by mail
if mailed at least three (3) days before such meeting.

Section 9. Notice. The Secretary or an Assistant Secretary shall give
notice of each special meeting, and of the date, time and place of the
particular meeting, in person or by mail, or by telephone, telegraph, teletype,
or other form of wire or wireless communication, and in the event of the absence
of the Secretary or an Assistant Secretary or the failure inability, refusal or
omission on the part of the Secretary or an Assistant Secretary so to do, any
other officer of the Corporation may give said notice.

Section 10. Waiver of Notice. A director may waive any notice required by
law, the Articles of Incorporation, or these By-laws before or after the date
and time stated in the notice. Except as otherwise provided in this Section, the
waiver by the director must be in writing, signed by the director entitled to
the notice, and included in the minutes or filed with the corporate records. A
director's attendance at or participation in a meeting waives any required
notice to the director of the meeting unless the director at the beginning of
the meeting (or promptly upon the director's arrival) objects to holding the
meeting or transacting business at the meeting and does not thereafter vote for
or assent to action taken at the meeting.

Section 11. Business to be Transacted. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or any waiver of notice of such
meeting. Any and all business of any nature or character whatsoever may be
transacted and action may be taken thereon at any meeting, regular or special,
of the Board of Directors.

Section 12. Quorum - Adjournment if Quorum is Not Present. A majority of
the number of directors fixed by, or in the manner provided in, the Articles of
Incorporation or these By-laws shall constitute a quorum for the transaction of
any and all business, unless a greater number is required by law or Articles of
Incorporation or these By-laws. At any meeting, regular or special, of the Board
of Directors, if there be less than a quorum present, a majority of those
present, or if only one director be present, then such director, may adjourn the
meeting from time to time without notice until the transaction of any and all
business submitted or proposed to be submitted to such meeting or any
adjournment thereof shall have been completed. In the event of such adjournment,
written, telegraphic or telephonic announcement of the time and place at which
the meeting will reconvene must be provided to all directors. The act of the
majority of the directors present at any meeting of the Board of Directors at
which a quorum is present shall constitute the act of the Board of Directors,
unless the act of a greater number is required by law or the Articles of
Incorporation or these By-laws.

Section 13. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent or abstention shall be entered in the minutes of the meeting or
unless he shall file his written dissent or abstention to such action with the
presiding officer of the meeting before the adjournment thereof or to the
Secretary of the Corporation immediately after the adjournment of the meeting.
Such right to dissent or abstain shall not apply to a director who voted in
favor of such action.

Section 14. Action by Written Consent. Any action required or permitted to
be taken at a meeting of the Board of Directors or any committee thereof may be
taken without a meeting if the action is taken by all the members of the Board
of directors or committee, as the case may be. The action must be evidenced by
one or more written consents describing the action taken, signed by each
director or committee member, and included in the minutes or filed with the
corporate records reflecting the action taken. Such action is effective when the
last director or committee member signs the consent, unless the consent
specifies a different prior or subsequent effective date. Such consent shall
have the same force and effect as a unanimous vote at a meeting, and may be
described as such in any document or instrument.

Section 15. Committees. The Board of Directors, by resolution adopted by a
majority of the Board of Directors, may designate from among its members an
executive committee and one or more other committees, each of which, to the
extent provided in such resolution or in the Articles of Incorporation or in
these By-laws of the Corporation, shall have and may exercise such authority of
the Board of Directors as shall be expressly delegated by the Board from time to
time; except that no such committee shall have the authority of the Board of
Directors in reference to (a) amending the Articles of Incorporation; (b)
approving a plan of merger even if the plan does not require shareholder
approval; (c) authorizing dividends or distributions, except a committee may
authorize or approve a reacquisition of shares, if done according to a formula
or method prescribed by the Board of Directors; (d) approving or proposing to
shareholders action that requires shareholder approval; (e) amending, altering
or repealing the By-laws of the Corporation or adopting new By-laws for the
Corporation; (f) filling vacancies in the Board of Directors or in any of its
committees; or (g) electing or removing officers or members of any such
committee. A majority of all the members of any such committee may determine its
action and fix the time and place of its meetings, unless the Board of Directors
shall otherwise provide. The Board of Directors shall have power at any time to
change the number and members of any such committee, to fill vacancies and to
discharge any such committee. The designation of such committee and the
delegation thereto of authority shall not alone constitute compliance by the
Board of Directors, or any member thereof, with the standard of conduct imposed
upon it or him by the Texas Business Corporation Act, as the same way, form time
to time, be amended.

Section 16. Meeting by Telephone or Similar Communication Equipment. Any or
all directors may participate in and hold a regular or special meeting of the
Board of Directors or any committee thereof by, or through the use of, any means
of conference telephone or other similar communications equipment by which all
directors participating in the meeting any simultaneously hear each other during
the meeting. Participation in a meeting pursuant to this Section shall
constitute presence in person at such meeting, except where a director
participates in the meeting for the express purpose of objecting to holding the
meeting or transacting business at the meeting on the ground that the meeting is
not lawfully called or convened.

ARTICLE IV

Officers

Section 1. Principal Officers. The officers of the Corporation shall be a
President, one or more Vice Presidents, a Secretary and a Treasurer. The
Corporation also may have, at the discretion of the Board of Directors, a
Chairman, one or more Vice Chairmen, and such Assistant Secretaries, Assistant
Treasurers or other officers or agents as may be elected or appointed by the
Board of Directors. Any two or more offices may be held by the same person
unless the Certificate of Incorporation or these By-laws provide otherwise.

Section 2. Election and Terms. Each officer shall be elected by the Board
of Directors at the annual meeting thereof and shall hold office until the next
annual meeting of the Board or until his or her successor shall have been
elected and qualified or until his or her death, resignation or removal. The
election of an officer shall not of itself create contract rights.

Section 3. Resignation and Removal. An officer may resign at any time by
delivering notice to the Board of Directors, its President or the Secretary of
the Corporation. A resignation is effective when the notice is delivered unless
the notice specifies a later effective date. If an officer's resignation is made
effective at a later date and the Corporation accepts the future effective date,
the Board of Directors may fill the pending vacancy before the effective date,
if the Board of Directors provides that the successor does not take office until
the effective date. The acceptance of a resignation shall not be necessary to
make it effective, unless expressly provided in the resignation. An officer's
resignation does not affect the Corporation's contract rights, if any, with the
officer. Any officer may be removed at any time, with or without cause, by vote
of a majority of the whole Board. Such removal shall not affect the contract
rights, if any, of the officer so removed.

Section 4. Vacancies. Whenever any vacancy shall occur in any office by
death, resignation, increase in the number of officers of the Corporation, or
otherwise, the same shall be filled by the Board of Directors, and the officer
so elected shall hold office until the next annual meeting of the Board or until
his or her successor shall have been elected and qualified.

Section 5. Powers and Duties of Officers. The officers so chosen shall
perform the duties and exercise the powers expressly conferred or provided for
in these By-laws, as well as the usual duties and powers incident to such
office, respectively, and such other duties and powers as may be assigned to
them by the Board of Directors or by the President.

Section 6. Chairman of the Board. The Chairman of the Board shall be the
Chief Executive Officer of the Corporation and shall have general charge of, and
supervision and authority over, all of the affairs and business of the
Corporation. He shall have general supervision of and direct all officers,
agents and employees of the Corporation; shall see that all orders and
resolutions of the Board are carried into effect; and in general, shall exercise
all powers and perform all duties incident to his office and such other powers
and duties as may from time to time be assigned to him by the Board.

Section 7. President. The President shall be the Chief Operating Officer of
the Corporation and shall have general charge of, and supervision and authority
over, its operations. He shall have the authority to sign, with the Secretary or
an Assistant Secretary, any and all certificates for shares of the capital stock
of the Corporation, and shall have the authority to sign singly deeds, bonds,
mortgages, contracts, or other instruments to which the Corporation is a party
(except in cases where the signing and execution thereof shall be expressly
delegated by the Board or by these Bylaws, or by law to some other officer or
agent of the Corporation); and, in the absence, disability or refusal to act of
the Chairman of the Board, shall preside at meetings of the shareholders and of
the Board of Directors and shall possess all of the powers and perform all of
the duties of the Chairman of the Board. He shall also serve the Corporation in
such other capacities and perform such other duties and have such additional
authority and powers as are incident to his office or as may be defined in these
By-laws or delegated to him from time to time by the Board of Directors or by
the Chairman of the Board.

Section 8. Vice Chairman of the Board. In the absence of the Chairman of
the Board and the President, a Vice Chairman of the Board shall preside at all
meetings of the shareholders and the Board of Directors; shall have authority to
execute all legal instruments necessary for the transaction of the Corporation's
business; and shall have such other powers and duties as may be delegated to him
by the Board of Directors or the Chief Executive Officer. A Vice Chairman may,
but not need be, a member of the Board of Directors.

Section 9. Vice President. The Board may elect one or more vice presidents.
Such vice presidents may, but need not be, designated in the following grades,
each of which shall rank subordinate to those set forth prior to it: executive
vice president, senior vice president, vice president second vice president,
assistant vice president. The Vice Presidents shall assist the President and
shall perform such duties as may be assigned to them by the Board of Directors
or the President. Unless otherwise provided by the Board, in the absence or
inability of the President, the vice president most senior in rank shall execute
the powers and perform the duties of the President. In the event, there is more
than one vice president of the same rank, the vice president first named as such
by the Board of Directors at its most recent meeting at which Vice Presidents
were elected shall execute the powers and perform the duties of the President.
Any action taken by a Vice President in the performance of the duties of the
President shall be conclusive evidence of the absence or inability to act of the
President at the time such action was taken.

Section 10. Secretary. The Secretary (a) shall keep the minutes of all
meetings of the Board of Directors and the minutes of all meetings of the
shareholders in books provided for that purpose; (b) shall attend to the giving
and serving of all notices; (c) when required, may sign with the President or a
Vice President in the name of the Corporation, and may attest the signature of
any other officers of the Corporation to all contracts, conveyances, transfers,
assignments, encumbrances, authorizations and all other instruments, documents
and papers, of any and every description whatsoever, of or executed for or on
behalf of the Corporation and affix the seal of the Corporation thereto; (d) may
sign with the President or a Vice President all certificates for shares of the
capital stock of the Corporation and affix the corporate seal of the Corporation
thereto; (e) shall have charge of and maintain and keep or supervise and control
the maintenance and keeping of the stock certificate books, transfer books and
stock ledgers and such other books and papers as the Board of Directors may
authorize, direct or provide for, all of which shall at all reasonable times be
open to the inspection of any director, upon request, at the office of the
Corporation during business hours; (f) shall, in general, perform all the duties
incident to the office of Secretary; and (g) shall have such other powers and
duties as may be conferred upon or assigned to him by the Board of Directors.

Section 11. Treasurer. The Treasurer shall have custody of all the funds
and securities of the Corporation which come into his hands. When necessary or
proper, he may endorse on behalf of the Corporation, for collection, checks,
notes and other obligations, and shall deposit the same to the credit of the
Corporation in such banks or depositories as shall be selected or designated by
or in the manner prescribed by the Board of Directors. He may sign all receipts
and vouchers for payments made to the Corporation, either alone or jointly with
such officer as may be designated by the Board of Directors. Whenever required
by the Board of Directors, he shall render a statement of his cash account. He
shall enter or cause to be entered punctually and regularly, on the books of the
Corporation, to be kept by him or under his supervision or direction for that
purpose, full and accurate accounts of all moneys received and paid out by, for
or on account of the Corporation. He shall at all reasonable times exhibit his
books and accounts and other financial records to any director of the
Corporation during business hours. He shall have such other powers and duties as
may be conferred upon or assigned to him by the Board of Directors. The
Treasurer shall perform all acts incident to the position of Treasurer, subject
always to the control of the Board of Directors He shall, if required by the
Board of Directors, give such bond for the faithful discharge of his duties in
such form and amount as the Board of Directors may require.

Section 12. Assistant Secretaries. The Assistant Secretaries shall assist
the Secretary in the performance of his or her duties. In the absence of the
Secretary, any Assistant Secretary shall exercise the powers and perform the
duties of the Secretary. The Assistant Secretary shall exercise such other
powers and perform such other duties as may from time to time be assigned to
them by the Board, the President, or the Secretary.

Section 13. Assistant Treasurers. The Assistant Treasurers shall assist the
Treasurer in the performance of his or her duties. Any Assistant Treasurer
shall, in the absence or disability of the Treasurer, exercise the powers and
perform the duties of the Treasurer. The Assistant Treasurers shall exercise
such other duties as may from time to time be assigned to them by the Board, the
President, or the Treasurer.

Section 14. Delegation of Authority. In the case of the absence of any
officer of the Corporation, or for any reason that the Board may deem
sufficient, a majority of the entire Board may transfer or delegate the powers
or duties of any officer to any other officer or officers for such length of
time as the Board may determine.

Section 15. Securities of Other Corporations. The President or any Vice
President or Secretary or Treasurer of the Corporation shall have power and
authority to transfer, endorse for transfer, vote, consent or take any other
action with respect to any securities of another issuer which may be held or
owned by the Corporation and to make, execute and deliver any waiver, proxy or
consent with respect to any such securities.

ARTICLE V

Directors' Services, Limitation of Liability

and Reliance on Corporate Records, and

Interest of Directors in Contracts

Section 1. Services. No director of this Corporation who is not an officer
or employee of this Corporation shall be required to devote his time or any
particular portion of this time or render services or any particular services
exclusively to this Corporation. Every director of this Corporation shall be
entirely free to engage, participate and invest in any and all such businesses,
enterprises and activities, either similar or dissimilar to the business,
enterprise and activities of this Corporation, without breach of duty of this
Corporation or to its shareholders and without accountability or liability to
this Corporation or to its shareholders.

Every director of this Corporation shall be entirely free to act for, serve
and represent any other corporation, any entity or any person, in any capacity,
and be or become a director or officer, or both, of any other corporation or any
entity, irrespective of whether or not the business, purposes, enterprises and
activities, or any of them thereof, be similar or dissimilar to the business,
purposes, enterprises and activities, or any of them, of this Corporation,
without breach of duty to this Corporation or to its shareholders and without
accountability or liability of any character or description to this Corporation
or to its shareholders.

Section 2. General Limitation of Liability. A director shall, based on
facts then known to the director, discharge the duties as a director, including
the director's duties as a member of a committee, in good faith, with the care
an ordinarily prudent person in a like position would exercise under similar
circumstances, and in a manner the director reasonably believes to be in the
best interests of the Corporation. A director is not liable to the Corporation
for any action taken as a director, or any failure to take any action, unless:
(a) the director has breached or failed to perform the duties of the director's
office in accordance with the standard of care set forth above; and (b) the
breach or failure to perform constitutes willful misconduct or recklessness.

Section 3. Reliance on Corporate Records and Other Information. Any person
acting as a director of the Corporation shall be fully protected, and shall be
deemed to have complied with the standard of care set forth in Section 2 of this
Article, in relying in good faith upon any information, opinions, reports or
statements, including financial statements and other financial data, if prepared
or presented by (a) one or more officers or employees of the Corporation whom
such person reasonably believes to be reliable and competent in the matters
presented; (b) legal counsel, public accountants, or other persons as to matters
such person reasonably believes are within the person's professional or expert
competence; or (c) a committee of the Board of Directors of which such person is
not a member, if such person reasonably believes the committee merits
confidence; provided, however, that such person shall not be considered to be
acting in good faith if such person has knowledge concerning the matter in
question that would cause such reliance to be unwarranted.

Section 4. Interest of Directors in Contracts. Any contract or other
transaction between the Corporation and (a) any director, or (b) any
corporation, unincorporated association, business trust, estate, partnership,
trust, joint venture, individual or other legal entity (1) in which any director
has a material financial interest or is a general partner, or (2) of which any
director is a director, officer, or trustee, shall be valid for all purposes, if
the material facts of the contract or transaction and the director's interest
were disclosed or known to the Board of Directors, a committee of the Board of
Directors with authority to act thereon, or the shareholders entitled to vote
thereon, and the Board of Directors, such committee or such shareholders
authorized, approved or ratified the contract or transaction. Such a contract or
transaction is authorized, approved or ratified: (i) by the Board of Directors
or such committee, if it receives the affirmative vote of a majority of the
directors who have no interest in the contract or transaction, notwithstanding
the fact that such majority may not constitute a quorum or a majority of the
directors present at the meeting, and notwithstanding the presence or vote of
any director who does have such interest; provided, however, that no such
contract or transaction may be authorized, approved or ratified by a single
director; and (ii) by such shareholders, if it receives the vote of a majority
of the shares entitled to be counted, in which vote shares owned by or voted
under the control of any director who, or of any corporation, unincorporated
association, business trust, estate, partnership, trust, joint venture,
individual or other legal entity that, has an interest in the contract or
transaction may be counted; provided, however, that a majority of such shares,
whether or not present, shall constitute a quorum for the purpose of
authorizing, approving or ratifying such a contract or transaction. This Section
shall not be construed to require authorization, ratification or approval by the
shareholder of any such contract or transaction, or to invalidate any such
contract or transaction that is fair to the Corporation or would otherwise be
valid under the common and statutory law applicable thereto.

ARTICLE VI

Indemnification

Section 1. Indemnification Against Underlying Liability. The Corporation
shall indemnify any person who was or is a party, or is threatened to be made a
party, to any threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative, by reason of the fact
that he is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(collectively, "Agent") against expenses (including attorneys' fees), judgments,
fines, penalties, court costs and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit, or proceeding by judgment,
order, settlement (whether with or without court approval), conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Agent did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to a criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. If several claims,
issues or matters are involved, an Agent may be entitled to indemnification as
to some matters even though he is not entitled as to other matters. Any director
or officer of the Corporation serving in any capacity of another corporation, of
which a majority of the shares entitled to vote in the election of its directors
is held, directly or indirectly, by the Corporation, shall be deemed to be doing
so at the request of the Corporation.

Section 2. Successful Defense. To the extent that an Agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1 of this Article, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.

Section 3. Determination of Conduct. Subject to any rights under any
contract between the Corporation and any Agent, any indemnification against
underlying liability provided for in Section 1 of this Article (unless ordered
by a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the Agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Section. Such determination shall be made (a) by the Board of Directors by
a majority vote of a quorum consisting of directors not at the time parties to
the proceeding; (b) if such an independent quorum is not obtainable, by majority
vote of a committee duly designated by the full Board of Directors (in which
designation directors who are parties may participate), consisting solely of one
or more directors not at the time parties to the proceeding; (c) by special
legal counsel (1) selected by the independent quorum of the Board of Directors
(or the independent committee thereof if no such quorum can be obtained), or (2)
if no such independent quorum or committee thereof can be obtained, selected by
majority vote of the full Board of Directors (in which selection directors who
are parties may participate); or (d) by the shareholders, but shares owned by or
voted under the control of directors who are at the time parties to the
proceeding may not be voted on the determination. Notwithstanding the foregoing,
an Agent shall be able to contest any determination that the Agent has not met
the applicable standard of conduct by petitioning a court of appropriate
jurisdiction.

Section 4. Payment of Expenses in Advance. Expenses incurred in defending
or settling a civil, criminal, administrative or investigative action, suit or
proceeding by an Agent who may be entitled to indemnification pursuant to
Section 1 of this Article shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of a written
affirmation by the Agent of his good faith belief that he has met the applicable
standard of conduct set forth in Section 1 of this Article and a written
undertaking by or on behalf of the Agent to repay such amount if it is
ultimately determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article. Notwithstanding the foregoing, such
expenses shall not be advanced if the Corporation conducts the determination of
conduct procedure referred to in Section 3 of this Article and it is determined
from the facts then known that the Agent will be precluded from indemnification
against underlying liability because he has failed to meet the applicable
standard of conduct set forth in Section 1 of this Article. The full Board of
Directors (including directors who are parties) may authorize the Corporation to
implement the determination of conduct procedure, but such procedure is not
required for the advancement of expenses. The full Board of Directors (including
directors who are parties) may authorize the Corporation to assume the Agent's
defense where appropriate, rather than to advance expenses for such defense.

Section 5. Indemnity Not Exclusive. The indemnification against underlying
liability, and advancement of expenses provided by, or granted pursuant to, this
Article shall not be deemed exclusive of, and shall be subject to, any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any By-law, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.

Section 6. Insurance Indemnification. The Corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was an
Agent of the Corporation, or is or was serving at the request of the Corporation
as an Agent against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.

Section 7. Employee Benefit Plans. For purposes of this Article, references
to "other enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with respect to any
employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to any employee benefit plan,
its participants or beneficiaries. A person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article.

Section 8. Application of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article shall, unless otherwise provided when authorized or ratified, be
applicable to claims, actions, suits or proceedings made or commenced after the
adoption thereof, whether arising from acts or omissions to act during, before
or after the adoption hereof, and shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person. The right of any
person to indemnification and advancement of expenses shall vest at the time of
occurrence or performance of any event, act or omission giving rise to any
action, suit or proceeding of the nature referred to in Section 1 of this
Article and, once vested, shall not later be impaired as a result of any
amendment, repeal, alteration or other modification of any or all of these
provisions.

Section 9. Indemnification Payments. Any payments made to any indemnified
party under this Article or under any other right to indemnification shall be
deemed to be an ordinary and necessary business expense of the Corporation, and
payment thereof shall not subject any person responsible for the payment, or the
Board of Directors, to any action for corporate waste or to any similar action.
Such payments shall be reported to the shareholders of the Corporation before or
with the notice of the next shareholders' meeting.

ARTICLE VII

Section 1. Share Certificates. The certificate for shares of the
Corporation shall be in such form as shall be approved by the Board of
Directors. Each share certificate shall state on its face the name and state of
organization of the Corporation, the name of the person to whom the certificate
is issued, and the number and class of shares the certificate represents. Share
certificates shall be consecutively numbered and shall be entered in the books
of the Corporation as they are issued. Every certificate for shares of the
Corporation shall be signed (either manually or in facsimile) by, or in the name
of, the Corporation by the Chairman of the Board or President and either the
Secretary or an Assistant Secretary of the Corporation, with the seal of the
Corporation, if any, or a facsimile thereof impressed or printed thereon. If the
person who signed (either manually or in facsimile) a share certificate no
longer holds office when the certificate is issued, the certificate is
nevertheless valid.

Section 2. Transfer of Shares. Except as otherwise provided by law,
transfers of shares of the capital stock of the Corporation, whether part paid
or fully paid, shall be made only on the books of the Corporation by the owner
thereof in person or by duly authorized attorney, on payment of all taxes
thereon and surrender for cancellation of the certificate or certificates for
such shares (except as hereinafter provided in the case of loss, destruction or
mutilation of certificate) properly endorsed by the holder thereof or
accompanied by the proper evidence of succession, assignment or authority to
transfer, and delivered to the Secretary or an Assistant Secretary.

Section 3. Registered Holders. The Corporation shall be entitled to treat
the person in whose name any share of stock or any warrant, right or option is
registered as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to, or interest in, such share, warrant,
right or option on the part of any other person, whether or not the Corporation
shall have notice thereof, save as may be expressly provided otherwise by the
laws of the State of Texas, the Articles of Incorporation of the Corporation or
these By-laws. In no event shall any transferee of shares of the Corporation
become a shareholder of the Corporation until express notice of the transfer
shall have been received by the Corporation.

Section 4. Lost, Stolen, Destroyed or Mutilated Certificates. The holder of
any share certificate of the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of the certificate, and the
Board may, in its discretion, cause to be issued to such holder of shares a new
certificate or certificates of shares of capital stock, upon the surrender of
the mutilated certificate, or, in the case of loss or destruction, upon the
furnishing of an affidavit or satisfactory proof of such loss or destruction.
The board may, in its discretion, require the owner of the lost or destroyed
certificate or such owner's legal representative to give the Corporation a bond
in such sum and in such form, and with such surety or sureties as it may direct,
to indemnify the Corporation, its transfer agents and registrars, if any,
against any claim that may be made against them or any of them with respect to
the certificate or certificates alleged to have been lost or destroyed, but the
Board may, in its discretion refuse to issue a new certificate or new
certificates, save upon the order of a court having jurisdiction in such
matters.

Section 5. Consideration for Shares. The Corporation may issue shares for
such consideration received or to be received as the Board of Directors
determines to be adequate. That determination by the Board of Directors is
conclusive insofar as the adequacy of consideration for the issuance of shares
relates to whether the shares are validly issued, fully paid and nonassessable.
When the Corporation receives the consideration for which the Board of Directors
authorized the issuance of shares, the shares issued therefor are fully paid and
nonassessable.

Section 6. Payment for Shares. The Board of Directors may authorize shares
to be issued for consideration consisting of any tangible or intangible property
or benefit to the Corporation, including cash, promissory notes, services
performed, contracts for services to be performed, or other securities of the
Corporation. If shares are authorized to be issued for promissory notes or for
promises to render services in the future, the Corporation must report in
writing to the shareholders the number of shares authorized to be so issued
before or with the notice of the next shareholders' meeting.

Section 7. Distributions to Shareholders. The Board of Directors may
authorize and the Corporation may make distributions to the shareholders subject
to any restrictions set forth in the Articles of Incorporation of the
Corporation and any limitations in the Texas Business Corporation Act, as
amended.

Section 8. Regulations. The Board of Directors shall have power and
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer and registration or the replacement of
certificates for shares of the Corporation.

ARTICLE VIII

Corporate Books and Reports

Section 1. Place of Keeping Corporate Books and Records. Except as
expressly provided otherwise in this Article, the books of account, records,
documents and papers of the Corporation shall be kept at anyplace or places,
within or without the State of Texas, as directed by the Board of Directors. In
the absence of a direction, the books of account, records, documents and papers
shall be kept at the executive office of the Corporation.

Section 2. Place of Keeping Certain Corporate Books and Records. The
Corporation shall keep a copy of the following records at its executive office:

(1) Its Articles or restated Articles of Incorporation and all amendments
to them currently in effect;

(2) Its By-laws or restated By-laws and all amendments to them currently in
effect;

(3) Resolutions adopted by the Board of Directors with respect to one or
more classes or series of shares and fixing their relative rights, preferences
and limitations, if shares issued pursuant to those resolutions are outstanding;

(4) The minutes of all shareholders' meetings and records of all action
taken by shareholders without a meeting, for the past three (3) years;

(5) All written communication to shareholders generally within the past
three (3) years, including financial statements furnished to shareholders;

(6) A list of the names and business address of its current directors and
officers; and

(7) The Corporation's most recent annual report.

Section 3. Permanent Records. The Corporation shall keep as permanent
records minutes of all meetings of its shareholders and Board of Directors, a
record of all actions taken by the shareholders or Board of Directors without a
meeting, and a record of all actions taken by a committee of the Board of
Directors in place of the Board of Directors on behalf of the Corporation.

The Corporation shall also maintain appropriate accounting records.

Section 4. Shareholder Records. The Corporation shall maintain a record of
its shareholders, in a form that permits preparation of a list of the names and
addresses of all shareholders, in alphabetical order by class of shares showing
the number and class of shares held by each.

Section 5. Shareholder Rights of Inspection. The records designated in
Section 2 of this Article may be inspected and copied by shareholders of record,
during regular business hours at the Corporation's principal office, provided
that the shareholder gives the Corporation written notice of the shareholder's
demand at least five (5) business days before the date on which the shareholder
wishes to inspect and copy. A shareholder's agent or attorney, if authorized in
writing, has the same inspection and copying rights as the shareholder
represented. The Corporation may impose a reasonable charge, covering the costs
of labor and material, for copies of any documents provided to the shareholder.

Section 6. Additional Rights of Inspection. Shareholder rights enumerated
in Section 5 of this Article may also apply to the following corporate records,
provided that the notice requirements of Section 5 are met, the shareholder's
demand is made in good faith and for a proper purpose, the shareholder describes
with reasonable particularity the shareholder's purpose and the records the
shareholder desires to inspect, and the records are directly connected with the
shareholder's purpose: excerpts from minutes of any meeting of the Board of
Directors, records of any action of a committee of the Board of Directors while
acting in place of the Board of Directors on behalf of the Corporation, minutes
of any meeting of the shareholders, and records of action taken by the
shareholders or Board of Directors without a meeting, to the extent not subject
to inspection under Section 5 of this Article, as well as accounting records of
the Corporation and the records of shareholders. Such inspection and copying is
to be done during regular business hours at a reasonable location specified by
the Corporation. The Corporation may impose a reasonable charge, covering the
costs of labor and material, for copies of any documents provided to the
shareholder.

ARTICLE IX

Miscellaneous

Section 1. Notice and Waiver of Notice. Subject to the specific and express
notice requirements set forth in other provisions of these By-laws, the Articles
of Incorporation, and the Texas Business Corporation Act, as the same may, from
time to time, be amended, notice may be communicated to any shareholder or
director in person, by telephone, telegraph, teletype, or other form of wire or
wireless communication, or by mail. If the foregoing forms of personal notice
are deemed to be impracticable, notice may be communicated in a newspaper of
general circulation in the area where published or by radio, television, or
other form of public broadcast communication. Subject to Section 4 of Article II
of these By-laws, written notice is effective at the earliest of the following:
(a) when received; (b) if correctly addressed to the address listed in the most
current records of the Corporation, five days after its mailing, as evidenced by
the postmark or private carrier receipt; or (c) if sent by registered or
certified United States mail, return receipt requested, on the date shown on the
return receipt which is signed by or on behalf of the addressee. Oral notice is
effective when communicated. A written waive of notice, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be equivalent to the giving of such notice.

Section 2. Depositories. Funds of the Corporation not otherwise employed
shall be deposited in such banks or other depositories as the Board of
Directors, the President or the Treasurer may select or approve.

Section 3. Signing of Checks, Notes, etc. In addition to and cumulative of,
but in no way limiting or restricting, any other provision of these By-laws
which confers any authority relative thereto, all checks, drafts and other
orders for the payment of money out of funds of the Corporation and all notes
and other evidence of indebtedness of the Corporation may be signed on behalf of
the Corporation, in such manner, and by such officer or person as shall be
determined or designated by the Board of Directors; provided, however, that if,
when, after and as authorized or provided for by the Board of Directors, the
signature of any such officer or person may be a facsimile or engraved or
printed, and shall have the same force and effect and bind the Corporation as
though such officer or person had signed the same personally; and, in the event
of the death, disability, removal or resignation of any such officer or person,
if the Board of Directors shall so determine or provide, as though and with the
same effect as if such death, disability, removal or resignation had not
occurred.

Section 4. Gender and Number. Wherever used or appearing in these By-laws,
pronouns of the masculine gender shall include the female gender and the neuter
gender, and the singular shall include the plural wherever appropriate.

Section 5. Laws. Wherever used or appearing in these By-laws, the words
"law" or "laws" shall mean and refer to laws of the State of Texas, to the
extent only that such are expressly applicable, except where otherwise expressly
stated or the context requires that such words not be so limited.

Section 6. Headings. The headings of the Certificate and Sections of these
By-laws are inserted for convenience of reference only and shall not be deemed
to be a part thereof or used in the construction or interpretation thereof.

Section 7. Securities of Other Corporations. The President, any Executive
Vice President or any other officer or agent of the Corporation so designated by
resolution of the Board of Directors, shall have power and authority to
transfer, endorse for transfer, vote or consent to or take any other action with
respect to any securities of another issuer which may be held or owned by the
Corporation and to make, execute, and deliver any waiver, proxy, or consent with
respect to any such securities.

ARTICLE X

Amendments

These By-laws may, from time to time, be added to, changed, altered,
amended or repealed or new By-laws may be made or adopted by a majority vote of
the whole Board of Directors at any meeting of the Board of Directors, if the
notice or waiver of notice of such meeting shall have stated that the By-laws
are to amended, altered or repealed at such meeting, or if all directors at the
time are present at such meeting, have waived notice of such meeting, or have
consented to such action in writing.

ARTICLE XI

The Texas Business Corporation Act

The provisions of the Texas Business Corporation Act, as the same may, from
time to time, be amended, applicable to any of the matters not herein
specifically covered by these By-laws, are hereby incorporated by reference in
and made a part of these By-laws.

Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866

May 22, 1998

Board of Directors
American General Annuity Insurance Company
5555 San Felipe, Suite 900
Houston, TX 77056

Re: Opinion and Consent of Counsel - AGA Separate Account A

Dear Sir or Madam:

You have requested our Opinion of Counsel in connection with the filing with
the Securities and Exchange Commission of a Post-Effective Amendment to the
Registration Statement on Form N-4 for the Individual Fixed and Variable
Deferred Annuity Contracts with Flexible Contributions (the "Contracts") to
be issued by American General Annuity Insurance Company and its separate
account, AGA Separate Account A.

We are of the following opinions:

1. AGA Separate Account A is a unit investment trust as that term is
defined in Section 4(2) of the Investment Company Act of 1940 (the "Act"),
and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the Act.

2. Upon the acceptance of purchase payments made by an Owner pursuant to a
Contract issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such an
Owner will have a legally-issued, fully-paid, non-assessable contractual
interest in such Contract.

You may use this opinion letter, or copy hereof, as an exhibit to the
Registration Statement.

We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of
the Registration Statement.

Sincerely,

BLAZZARD, GRODD & HASENAUER, P.C.

By:/s/LYNN KORMAN STONE
--------------------------
Lynn Korman Stone

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our report dated May 12, 1998, as to American
General Annuity Insurance Company, and our Report dated May 12, 1998, as to
AGA Separate Account A, in Amendment No. 5 to the Registration Statement under
the Investment Company Act of 1940 on Form N-4 of AGA Separate Account A.

/s/ERNST & YOUNG LLP

ERNST & YOUNG LLP

Houston, Texas
May 18, 1998

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in Post-Effective Amendment No. 5 to the
Registration Statement of AGA Separate Account A, formerly WNL Separate
Account A, (File No. 33-86464) of our reports dated February 5, 1997 and
February 20, 1997 on our audits of the financial statements and financial
statement schedule of Western National Life Insurance Company and WNL
Separate Account A, respectively. We also consent to the reference to our
firm under the caption "Independent Auditors".

/s/COOPERS & LYBRAND L.L.P.

Houston, Texas
May 22, 1998

AGA SEPARATE ACCOUNT A
SCHEDULE OF COMPUTATION OF PERFORMANCE QUOTATIONS

AVERAGE TOTAL ANNUAL RETURNS

ENDING REDEEMABLE VALUE (ERV) =P(1+t)^n

Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV= Ending redeemable value of $1,000
at beginning of period

SEC STANDARDIZED RETURN *

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Inception to 12/31/97
- --------------------------------------------------------------------------------
Inception
Separate Account Date n T ERV
- ---------------- ---- - - ---
<S> <C> <C> <C> <C> <C>
Credit Suisse Growth and Income 10/20/95 2.200 12.87% $1,305.19
Credit Suisse International Equity 10/20/95 2.200 4.43 1,100.06
EliteValue 1/2/96 1.997 17.11 1,370.88
State Street Global Advisors Growth Equity 10/20/95 2.200 18.95 1,464.88
State Street Global Advisors Money Market 10/10/95 2.227 (1.42) 968.65
Salomon Brothers U.S. Government Securities 2/6/96 1.901 (0.33) 993.73
Van Kampen American Capital Emerging Growth 1/2/96 1.997 13.00 1,276.47
</TABLE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Twelve Months ended 12/31/97
- --------------------------------------------------------------------------------
Inception
Sub Account Date n T ERV
- ----------- ---- - - ---
<S> <C> <C> <C> <C> <C>
Credit Suisse Growth and Income 10/20/95 1.000 15.58% $1,155.80
Credit Suisse International Equity 10/20/95 1.000 (2.45) 975.50
EliteValue 1/2/96 1.000 14.33 1,143.30
State Street Global Advisors Growth Equity 10/20/95 1.000 24.92 1,249.20
State Street Global Advisors Money Market 10/10/95 1.000 (1.25) 987.50
Salomon Brothers U.S. Government Securities 2/6/96 1.000 2.14 1,021.40
Van Kampen American Capital Emerging Growth 1/2/96 1.000 13.70 1,137.00
</TABLE>

* Underlying AGA Series Trust Portfolio net asset value total return less all
separate account charges, including: M&E, Administration, Enhanced Death
Benefit charge, $30.00 contract charge, and 5.00% Contingent Deferred
Deferred Surrender Charge.

EXHIBIT 13

AGA SEPARATE ACCOUNT A
SCHEDULE OF COMPUTATION OF PERFORMANCE QUOTATIONS

AVERAGE TOTAL ANNUAL RETURNS

ENDING REDEEMABLE VALUE (ERV) =P(1+t)^n

Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV= Ending redeemable value of $1,000
at beginning of period

NON STANDARDIZED RETURN *

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Inception to 12/31/97
- --------------------------------------------------------------------------------
Inception
Portfolio Date n T ERV
- --------- ---- - - ---
<S> <C> <C> <C> <C> <C>
Credit Suisse Growth and Income 10/20/95 2.200 18.22% $1,445.17
Credit Suisse International Equity 10/20/95 2.200 9.78 1,227.87
EliteValue 1/2/96 1.997 22.46 1,498.81
State Street Global Advisors Growth Equity 10/20/95 2.200 24.30 1,613.75
State Street Global Advisors Money Market 10/10/95 2.227 3.93 1,089.65
Salomon Brothers U.S. Govvernment Securities 2/6/96 1.901 5.02 1,097.60
Van Kampen American Capital Emerging Growth 1/2/96 1.997 18.35 1,400.03
</TABLE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Twelve Months ended 12/31/97
- --------------------------------------------------------------------------------
Inception
Portfolio Date n T ERV
- --------- ---- - - ---
<S> <C> <C> <C> <C> <C>
Credit Suisse Growth and Income 10/20/95 1.000 20.93% $1,209.30
Credit Suisse International Equity 10/20/95 1.000 2.90 1,029.00
EliteValue 1/2/96 1.000 19.68 1,196.80
State Street Global Advisors Growth Equity 10/20/95 1.000 30.27 1,302.70
State Street Global Advisors Money Market 10/10/95 1.000 4.10 1,041.00
Salomon Brothers U.S. Govvernment Securities 2/6/96 1.000 7.49 1,074.90
Van Kampen American Capital Emerging Growth 1/2/96 1.000 19.05 1,190.50
</TABLE>

* Non Standardized Total Return excludes the effect of the optional Enhanced
Death Benefit charge, the $30.00 contract charge, and the Contingent
Deferred Surrender charge.

EXHIBIT 13

AGA SEPARATE ACCOUNT A
SCHEDULE OF COMPUTATION OF PERFORMANCE QUOTATIONS

MONEY MARKET YIELD
FOR THE WEEK ENDED DECEMBER 31, 1997
State Street Global Advisors Money Market SubAccount

7 Day Yield= ((ab)/c)*(365/7)

7 Day Effective Yield= (((ab)/c)+1)^(365/7)1

Where: a = Interest earned during period
b = Expense accrued for the period (net of reimbursement)
c = Average value of units outstanding during the period that were
entitled to dividends

Standard Death Enhanced Death
Benefit Benefit
------- -------
Where: a = $5,510.00 $5,510.00
b = $1,853.60 $1,998.50
c = $ 5,037,002.00 $5,037,002.000

7 Day Yield= 3.79% 3.64%

7 Day Effective Yield= 3.86% 3.70%

The following companies are subsidiaries of WNL Holding Corp.:
American General Annuity Insurance Company
AGA Brokerage Services, Inc.
AGA investment Advisory Services, Inc.
American General Assignment Corporation
Independent Advantage Financial & Insurance Services, Inc.
Western National Financial Institution Group, Inc.
WNL Insurance Services, Inc.

WNL Holding Corp. is a subsidiary of Western National Corporation,
which is a subsidiary of AGC Life Insurance Company, which is a
subsidiary of American General Corporation.