AGL SEPARATE ACCOUNT VL R, 485BPOS, 2000-04-26

AGL SEPARATE ACCOUNT VL R
485BPOS, 2000-04-26

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<PAGE>

Registration No. 333-89897

As filed with the Securities and Exchange Commission on April 26, 2000

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-6
POST-EFFECTIVE AMENDMENT NO. 1
TO REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2

AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
(Exact Name of Trust)

AMERICAN GENERAL LIFE INSURANCE COMPANY
(Exact Name of Depositor)
2727-A Allen Parkway
Houston, Texas 77019-2191
(Complete Address of Depositor's Principal Executive Offices)

Pauletta P. Cohn, Esq.
Deputy General Counsel
American General Life Companies
2929 Allen Parkway
Houston, Texas 77019
(Name and Complete Address of Agent for Service)

Title and Amount of Securities Being Registered:
An Indefinite Amount of Units of Interest in
American General Life Insurance Company
Separate Account VL-R
Under Variable Life Insurance Policies

Amount of Filing Fee: None required.

It is proposed that this filing will become effective on May 1, 2000 pursuant to
paragraph (b) of Rule 485.

Registrant elects to be governed by Rule 63-e(T)(b)(13)(i)(A) under the
Investment Company Act of 1940, with respect to the Variable Life Insurance
Policies described in the Prospectus.

<PAGE>

AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
RECONCILIATION AND TIE BETWEEN ITEMS IN FORM
N-8B-2 AND THE PROSPECTUS
(PURSUANT TO INSTRUCTION 4 OF FORM S-6)

CROSS REFERENCE SHEET
<TABLE>
<CAPTION>

ITEM NO. OF FORM N-8B-2* PROSPECTUS CAPTION
- ----------------------- -------------------
<S> <C>
1 Additional Information : Separate Account VL-R
2 Additional Information: AGL.
3 Inapplicable.**
4 Additional Information: Distribution of Policies.
5, 6 Additional Information: Separate Account VL-R.
7 Inapplicable.**
8 Inapplicable.**
9 Additional Information: Legal Matters.
10(a) Additional Information: Your Beneficiary, Assigning
Your Policy.
10(b) Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
10(c)(d) Basic Questions You May Have: How can I change
my Policy's insurance coverage? How can I access
my investment in a Policy? Can I choose the form
in which AGL pays out any proceeds from my
Policy?
10(e) Basic Questions You May Have: Must I invest any
minimum amount in a policy?
10(f) Additional Information: Voting Privileges.
10(g)(1), 10(g)(4), 10(h)(3), 10(h)(2) Basic Questions You May Have: To what extent will
AGL vary the terms and conditions of the Policies
in particular cases? Additional Information: Voting
Privileges; Additional Rights That We Have.
10(g)(3), 10(g)(4), 10(h)(3), 10(h)(4) Inapplicable.**
10(i) Additional Information: Separate Account VL-R;Tax
Effects.
11 Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
Additional Information: Separate Account VL-R.
12(a) Front Cover
12(b) Inapplicable.**
12(c), 12(d) Inapplicable.**
12(e) Inapplicable, because the Separate Account did not
commence operations.
13(a) Basic Questions You May Have: What charges will
AGL deduct from my investment in a Policy? What
charges and expenses will the Mutual Funds deduct
from the amounts I invest through my Policy?
Additional Information: More About Policy
Charges.
13(b) Illustrations of Hypothetical Policy Benefits.
13(c) Inapplicable.**
13(d) Basic Questions You May Have: To what extent will
AGL vary the terms and conditions of the Policy in
particular cases?
13(e), 13(f), 13(g) None.
14 Basic Questions You May Have: How can I invest
money in a Policy?
15 Basic Questions You May Have: How can I invest
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
16 money in a Policy? How do I communicate with
AGL?
Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
Additional Information: Separate Account VL-R.

ITEM NO. ADDITIONAL INFORMATION
- -------- ---------------------
17(a), 17(b) Captions referenced under Items 10(c), 10(d), and
10(e).
17(c) Inapplicable.**
18(a) Captions referred to under Item 16.
18(b), 18(d) Inapplicable.**
18(c) Additional Information: Separate Account VL-R.
19 Additional Information: Separate Account VL-R;
Our Reports to Policy Owners.
20(a), 20(b), 20(c), 20(d), 20(e), 20(f) Inapplicable.**
21(a), 21(b) Basic Questions You May Have: How can I access
my investment in a Policy? Additional Information:
Payment of Policy Proceeds.
21(c) Inapplicable.**
22 Additional Information: Payment of Policy Proceeds-
Delay to Challenge Coverage.
23 Inapplicable.**
24 Additional Information. Additional Rights That We
Have.
25 Additional Information: AGL.
26 Inapplicable, because the Separate Account has
not yet commenced operations.
27 Additional Information: AGL.
28 Additional Information: AGL's Management.
29 Additional Information: AGL.
30, 31, 32, 33, 34 Inapplicable, because the Separate Account has not
yet commenced operations .
35 Inapplicable.**
36 Inapplicable.**
37 None.
38, 39 Additional Information: Distribution of the Policies.
40 Inapplicable, because the Separate Account has not
yet commenced operations.
41(a) Additional Information: Distribution of the Policies.
41(b), 41(c) Inapplicable.**
42, 43 Inapplicable, because the Separate Account has not
yet commenced operations or issued any securities.
44(a)(1), 44(a)(2), 44(a)(3) Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
44(a)(4) Additional Information: Tax Effects--Our taxes.
44(a)(5), 44(a)(6) Basic Questions You May Have: What charges will
AGL deduct from my investment in a Policy?
44(b) Inapplicable.**
44(c) Caption referenced in 13(d) above.
45 Inapplicable, because the Separate Account has not
yet commenced operations.
46(a) Captions referenced in 44(a) above.
46(b) Inapplicable.**
47, 48, 49 None.
50 Inapplicable.**
51 Inapplicable.**
52(a), 52(c) Basic Questions You May Have: To what extent can
AGL vary the terms and conditions of the Policy in
particular cases? Additional Information:
</TABLE>

2
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Additional Rights That We Have.
52(b), 52(d) None.
53(a) Additional Information: Tax Effects--Our taxes.
53(b), 54 Inapplicable.**
55 Illustrations of Hypothetical Policy Benefits.
56-59 Inapplicable.**

</TABLE>
* Registrant includes this Reconciliation and Tie in its Registration
Statement in compliance with Instruction 4 as to the Prospectus as set out
in Form S-6. Separate Account VL-R (Account) has previously filed a notice
of registration as an investment company on Form N-8A under the Investment
Company Act of 1940 (Act), and a Form N-8B-2 Registration Statement.
Pursuant to Sections 8 and 30(b)(1) of the Investment Company Act of 1940
("Act"), Rule 30a-1 under the Act, and Forms N-8B-2 and N-SAR under that
Act, the Account will keep its Form N-8B-2 Registration Statement current
through the filing of periodic reports required by the Securities and
Exchange Commission (Commission).

** Not required pursuant to either Instruction 1(a) as to the Prospectus as set
out in Form S-6 or the administrative practice of the Commission and its
staff of adapting the disclosure requirements of the Commission's
registration statement forms in recognition of the differences between
variable life insurance policies and other periodic payment plan
certificates issued by investment companies and between separate accounts
organized as management companies and unit investment trusts.

3
<PAGE>

AG LEGACY PLUS
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY (THE "POLICY") ISSUED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL")

HOME OFFICE:
(Express Delivery) (US Mail)
2727-A Allen Parkway Variable Universal Life
Houston, Texas 77019-2191 Administration
PHONE: 1-888-436-4963 P.O. Box 4880
or 1-713-831-3443 Houston, Texas 77210-4880
or 1-888-436-5258 (Hearing impaired)
FAX: 1-877-445-3098

This booklet is called the "prospectus."

Investment options. You may use AGL's Separate Account VL-R ("Separate
Account") to invest in the following variable investment options and change your
selections from time to time:

<TABLE>
<CAPTION>
<S> <C> <C>
________________________________________________________________________________________________________________________
| MFS VARIABLE INSURANCE TRUST AMERICAN GENERAL SERIES PORTFOLIO PUTNAM VARIABLE TRUST
| COMPANY
|
| . MFS Total Return Series . Stock Index Fund . Putnam VT Diversified Income
| . MFS New Discovery Series . Money Market Fund Fund - Class IB Shares
| . MFS Emerging Growth Series . International Equities Fund . Putnam VT Small Cap Value
| . MidCap Index Fund Fund - Class IB Shares
| . Putnam VT Vista Fund - Class IB
| Shares
| . Putnam VT Voyager Fund
| Massachusetts Financial Services The Variable Annuity Life
| Company* Insurance Company * Putnam Investment Management, Inc.*
|
________________________________________________________________________________________________________________________
|
| OPPENHEIMER VARIABLE ACCOUNT FUNDS FRANKLIN TEMPLETON VARIABLE AMERICAN CENTURY VARIABLE
| INSURANCE PRODUCTS TRUST PORTFOLIOS, INC.
|
| . Oppenheimer High Income Fund/VA . Templeton International Securities . VP Value Fund
| Fund - Class 2/1/
| . Franklin Small Cap Fund - Class 2/2/
| /1/ Templeton Investment Counsel, Inc.*
| /2/ Franklin Advisers, Inc.* American Century Investment
| Oppenheimer Funds, Inc.* Management, Inc.*
|
________________________________________________________________________________________________________________________
| NEUBERGER BERMAN ADVISERS VAN KAMPEN LIFE INVESTMENT TRUST AIM VARIABLE INSURANCE FUNDS
| MANAGEMENT TRUST
| . Emerging Growth Portfolio
| . Partners Portfolio . Government Portfolio . AIM V.I. International Equity
| Fund
| Van Kampen Asset Management
| Neuberger Berman Management Inc.* Inc.* A I M Advisors, Inc.*
________________________________________________________________________________________________________________________
</TABLE>
*The Investment Adviser of the investment option

<PAGE>

SEPARATE PROSPECTUSES CONTAIN MORE INFORMATION ABOUT THE MUTUAL FUNDS ("FUNDS"
OR "MUTUAL FUNDS") IN WHICH WE INVEST THE ACCUMULATION VALUE THAT YOU ALLOCATE
TO ANY OF THE ABOVE-LISTED INVESTMENT OPTIONS. THE FORMAL NAME OF EACH SUCH FUND
IS SET FORTH IN THE CHART THAT APPEARS ON PAGE 1. YOUR INVESTMENT RESULTS IN
ANY SUCH OPTION WILL DEPEND ON THOSE OF THE RELATED FUND. YOU SHOULD BE SURE YOU
ALSO READ THE PROSPECTUS OF THE MUTUAL FUND FOR ANY SUCH INVESTMENT OPTION YOU
MAY BE INTERESTED IN. YOU CAN REQUEST FREE COPIES OF ANY OR ALL OF THE MUTUAL
FUND PROSPECTUSES FROM YOUR AGL REPRESENTATIVE OR FROM US AT OUR HOME OFFICE
LISTED ON PAGE 1.

Other choices you have. During the insured person's lifetime, you may, within
limits: (1) request an increase in the amount of insurance, (2) borrow or
withdraw amounts you have invested, (3) choose when and how much you invest, and
(4) choose whether your accumulation value under your Policy, upon the insured
person's death, will be added to the insurance proceeds we otherwise will pay to
the beneficiary.

Charges and expenses. We deduct charges and expenses from the amounts you
invest. These are described beginning on page 7.

Right to return. If for any reason you are not satisfied with your Policy,
you may return it to us and we will refund you the greater of (i) any premium
payments received by us or (ii) your accumulation value plus any charges that
have been deducted. To exercise your right to return your Policy, you must mail
it directly to the Home Office address shown on the first page of this
prospectus or return it to the AGL representative through whom you purchased the
Policy within 10 days after you receive it. In a few states, this period may be
longer. Because you have this right, we will invest your initial net premium
payment in the money market investment option from the date your investment
performance begins until the first business day that is at least 15 days later.
Then we will automatically allocate your investment among the above-listed
investment options as you have chosen. Any additional premium we receive during
the 15-day period will also be invested in the money market division and
allocated to the investment options at the same time as your initial net
premium.

We have designed this prospectus to provide you with information that you
should have before investing in the Policies. Please read the prospectus
carefully and keep it for future reference.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THE POLICIES ARE NOT AVAILABLE IN ALL STATES.

THE POLICIES ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY. THEY ARE NOT
DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT BANK GUARANTEED. THEY ARE
SUBJECT TO INVESTMENT RISKS AND POSSIBLE LOSS OF PRINCIPAL INVESTED.

THIS PROSPECTUS IS DATED MAY 1, 2000.

2
<PAGE>

GUIDE TO THIS PROSPECTUS

This prospectus contains information that you should know before you purchase
AG Legacy Plus policy ("Policy") or exercise any of your rights or privileges
under a Policy.

Basic Information. Here are the page numbers in this prospectus where you may
find answers to most of your questions:
<TABLE>
<CAPTION>
PAGE TO
SEE IN THIS
PROSPECTUS
-----------
<S> <C>
BASIC QUESTIONS YOU MAY HAVE
- ----------------------------
. How can I invest money in a Policy?..................................................................... 4
. How will the value of my investment in a Policy change over time?....................................... 5
. What is the basic amount of insurance ("death benefit")
that AGL pays when the insured person dies?............................................................. 5
. What charges will AGL deduct from my investment in a Policy?............................................ 7
. What charges and expenses will the Mutual Funds deduct from
amounts I invest through my Policy?..................................................................... 8
. Must I invest any minimum amount in a Policy?........................................................... 10
. How can I change my Policy's investment options?........................................................ 11
. How can I change my Policy's insurance coverage?........................................................ 11
. What additional rider benefits might I select?.......................................................... 12
. How can I access my investment in a Policy?............................................................. 12
. Can I choose the form in which AGL pays out proceeds from my Policy?.................................... 14
. To what extent can AGL vary the terms and conditions of the Policy
in particular cases?.................................................................................... 15
. How will my Policy be treated for income tax purposes?.................................................. 15
. How do I communicate with AGL?.......................................................................... 16
</TABLE>

Illustrations of a hypothetical Policy. Starting on page 17, we have included
some examples of how the values of a sample Policy would change over time, based
on certain assumptions we have made. Because your circumstances may vary
considerably from our assumptions, your AGL representative will also provide you
with a similar sample illustration that is more tailored to your own
circumstances and wishes.

Underwriting. We will issue the Policy using either simplified underwriting
or full underwriting based on our established guidelines. See the discussion
regarding our underwriting process on page 15.

Additional information. You may find the answers to any other questions you
have under "Additional Information" beginning on page 23 or in the form of our
Policy. A table of contents for the "Additional Information" portion of this
prospectus also appears on page 23. You can obtain copies of our form of Policy
from (and direct any other questions to) your AGL representative or our Home
Office (shown on the first page of this prospectus).

Financial statements. We have included certain financial statements of AGL.
These begin on page F-1.

Special words and phrases. If you want more information about any words or
phrases that you read in this prospectus, you may wish to refer to the Index of
Words and Phrases that appears at the back of this prospectus. That index will
tell you on what page you can read more about many of the words and phrases that
we use.

3
<PAGE>

BASIC QUESTIONS YOU MAY HAVE

HOW CAN I INVEST MONEY IN A POLICY?

Premium payments. We call the investments you make in a Policy "premiums" or
"premium payments." The amount we require as your initial premium varies
depending on the specifics of your Policy and the insured person. We can refuse
to accept a subsequent premium payment that is less than $50. Otherwise, with a
few exceptions mentioned below, you can make premium payments at any time and in
any amount. Premium payments we receive after your right to return expires, as
discussed on page 2, will be allocated upon receipt to the available investment
options you have chosen.

Limits on premium payments. Federal tax law limits your ability to make
certain very large amounts of premium payments (relative to the amount of your
Policy's insurance coverage) and may impose penalties on amounts you take out of
your Policy if you do not observe certain additional requirements. We will
monitor your premium payments, however, to be sure that you do not exceed
permitted amounts or inadvertently incur any tax penalties. Also, in certain
limited circumstances (if your Policy is determined to be a "modified endowment
contract" or if additional premiums cause the death benefit to increase more
than the accumulation value), we may refuse to accept an additional premium if
the insured person does not provide us with adequate evidence that he/she
continues to meet our requirements for issuing insurance. These tax law
requirements and a discussion of modified endowment contracts are summarized
further under "Tax Effects" beginning on page 24.

Ways to pay premiums. You may pay premiums by check or money order drawn on a
U.S. bank in U.S. dollars and made payable to "American General Life Insurance
Company," or "AGL." Premiums after the initial premium must be sent directly to
our Home Office. We also accept premium payments by bank draft, wire, or by
exchange from another insurance company. You may obtain further information
about how to make premium payments by any of these methods from your AGL
representative or from our Home Office shown on the first page of this
prospectus.

Dollar cost averaging. Dollar cost averaging is an investment strategy
designed to reduce the risks that result from market fluctuations. The strategy
spreads the allocation of your accumulation value over a period of time. This
allows you to reduce the risk of investing most of your funds at a time when
prices are high. The success of this strategy depends on market trends and is
not guaranteed.

Under dollar cost averaging, we automatically make transfers of your
accumulation value from the money market investment option to one or more of the
other investment options that you choose. You tell us whether you want these
transfers to be made monthly, quarterly, semi-annually or annually. We make the
transfers as of the end of the valuation period that contains the day of the
month that you select other than the 29th, 30th or 31st day of the month. The
term "valuation period" is described on page 32. You must have at least $5,000
of accumulation value to start dollar cost averaging and each transfer under the
program must be at least $100. You cannot participate in dollar cost averaging
while also using automatic rebalancing (discussed below). Dollar cost averaging
ceases upon your request, or if your accumulation value in the money market
option becomes exhausted. We do not charge you for using this service.

4
<PAGE>

Automatic rebalancing. This feature automatically rebalances the proportion of
your accumulation value in each investment option under your Policy to
correspond to your then current premium allocation designation. You tell us
whether you want us to do the rebalancing quarterly, semi-annually or annually.
The date automatic rebalancing occurs will be based on the date of issue of your
Policy. For example, if your Policy is dated January 17, and you have requested
automatic rebalancing on a quarterly basis, automatic rebalancing will start on
April 17, and will occur quarterly thereafter. Automatic rebalancing will occur
as of the end of the valuation period that contains the date of the month your
Policy was issued. You must have a total accumulation value of at least $5,000
to begin automatic rebalancing. You cannot participate in this program while
also participating in dollar cost averaging (discussed above). Rebalancing ends
upon your request. We do not charge you for using this feature.

HOW WILL THE VALUE OF MY INVESTMENT IN A POLICY CHANGE OVER TIME?

Your accumulation value. From each premium payment you make, we deduct the
charges that we describe on page 7 under "Deductions from each premium payment."
We invest the rest in one or more of the investment options listed on the first
page of this prospectus. We call the amount that is at any time invested under
your Policy (including any loan collateral we are holding for your Policy loans)
your "accumulation value."

Your investment options. We invest the accumulation value that you have
allocated to any investment option in shares of a corresponding Mutual Fund.
Over time, your accumulation value in any investment option will increase or
decrease by the same amount as if you had invested in the related Fund's shares
directly (and reinvested all dividends and distributions from the Fund in
additional Fund shares); except that your accumulation value will also be
reduced by certain charges that we deduct. We describe these charges beginning
on page 7 under "What charges will AGL deduct from my investment in a Policy?"

You can review other important information about the Mutual Funds that you can
choose in the separate prospectuses for those Funds. This includes information
about the investment performance that each Fund's investment manager has
achieved. You can request additional free copies of these prospectuses from your
AGL representative or from our Home Office shown on the first page of this
prospectus.

Policies are "non-participating." You will not be entitled to any dividends
from AGL.

WHAT IS THE BASIC AMOUNT OF INSURANCE ("DEATH BENEFIT") THAT AGL PAYS WHEN THE
INSURED PERSON DIES?

Your specified amount of insurance. In your application to buy AG Legacy Plus
Policy, you will tell us how much life insurance coverage you want on the life
of the insured person. We call this the "specified amount" of insurance.

Your death benefit. The basic death benefit we will pay is reduced by any
outstanding Policy loans. You also choose whether the basic death benefit we
will pay is:

5
<PAGE>

. Option 1 - The specified amount on the date of the insured person's death;
or

. Option 2 - The specified amount plus the Policy's accumulation value on the
date of death.

Under Option 2, your death benefit will tend to be higher than under Option 1.
However, the monthly insurance charge we deduct will also be higher to
compensate us for our additional risk. Because of this, your accumulation value
will tend to be higher under Option 1 than under Option 2.

We will automatically pay an alternative basic death benefit if it is higher
than the basic Option 1 or Option 2 death benefit (whichever you have selected).
The alternative basic death benefit is computed by multiplying your Policy's
accumulation value on the insured person's date of death by the following
percentages:

TABLE OF ALTERNATIVE BASIC DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF
POLICY ACCUMULATION VALUE

INSURED'S INSURED'S
AGE ON % OF AGE ON % OF
POLICY ACCUMULATION POLICY ACCUMULATION
ANNIVERSARY* VALUE ANNIVERSARY VALUE
------------ ------------ ----------- ------------

0-40 250 60 130
41 243 61 128
42 236 62 126
43 229 63 124
44 222 64 122
45 215 65 120
46 209 66 119
47 203 67 118
48 197 68 117
49 191 69 116
50 185 70 115
51 178 71 113
52 171 72 111
53 164 73 109
54 157 74 107
55 150 75-90 105
56 146 91 104
57 142 92 103
58 138 93 102
59 134 94 101
95+ 100
- --------------

* Nearest birthday at the beginning of the Policy year in which the insured
person dies.

6
<PAGE>

WHAT CHARGES WILL AGL DEDUCT FROM MY INVESTMENT IN A POLICY?

Deductions from each premium payment. There is currently no deduction from
each premium payment you make. However, we have the right at any time to assess
a charge not to exceed more than 1.5% on all future premium payments for the
costs associated with the issuance of the Policy and administrative services we
perform.

Daily Charge. We will deduct a daily charge based on either the guaranteed
rate or the current rate (if lower than the guaranteed rate) for the costs
associated with the mortality and expense risks we assume under the Policy.

. The guaranteed daily charge will be at an annual effective rate of .90% for
the first 10 Policy Years, .65% for Policy Years 11 - 20 and .40%
thereafter. The guaranteed daily deduction charges are .15% higher than
the current daily charges. The guaranteed daily deduction charges are the
maximums we may charge; we may charge less, but we can never charge more.

. The current daily charge will be at an annual effective rate of .75% of
your accumulation value that is then being invested in any of the
investment options. After a Policy has been in effect for 10 years, we
intend to reduce the rate of the current charge to .50%, and after 20
years, we intend to further reduce the current charge to .25%. We may
change the applicable current charge at any time as long as the charge does
not exceed the guaranteed daily charge.

Monthly insurance charge. Every month we will deduct from your accumulation
value a charge based on the cost of insurance rates applicable to your Policy on
the date of the deduction and our "amount at risk" on that date. Our amount at
risk is the difference between (a) the death benefit that would be payable
before reduction by policy loans if the insured person died on that date and (b)
the then total accumulation value under the Policy. For otherwise identical
Policies, a greater amount at risk results in a higher monthly insurance charge.
The current monthly insurance charge has been designed primarily to provide
funds out of which we can make payments of death benefits under the Policy as
insured persons die.

For otherwise identical Policies, a higher cost of insurance rate also results
in a higher monthly insurance charge. Our cost of insurance rates are guaranteed
not to exceed those that will be specified in your Policy.

We will offer the Policy on a simplified issue method based on our established
guidelines, including that the specified amount of the Policy cannot exceed
$250,000. Our cost of insurance rates will generally be higher for a simplified
issue Policy.

In general, our cost of insurance rates increase with the insured person's
age. The longer you own your Policy, the higher the cost of insurance rate will
be. Also our cost of insurance rates will generally be lower if the insured
person is a female than if a male (except in Montana where such costs cannot be
based on gender).

Similarly, our current cost of insurance rates are generally lower for non-
smokers than smokers. Insured persons who present particular health,
occupational or non-work related risks may be charged higher cost of

7
<PAGE>

insurance rates and other additional charges based on the specified amount of
insurance coverage under their Policy.

Our cost of insurance rates also are generally higher under a Policy that has
been in force for some period of time than they would be under an otherwise
identical Policy purchased more recently on the same insured person.

Transaction Fee. The fee for each partial surrender you make will be the
lesser of 2% of the amount withdrawn or $25 to cover administrative services.
This charge will be deducted from the remaining accumulation value in the
investment options in the same ratio as the requested partial surrender.

Charge for taxes. We can make a charge in the future for federal or state
taxes we incur or reserves we set aside for taxes in connection with the
Policies. This would reduce the investment experience of your accumulation
value.

Allocation of charges. You may choose the investment options from which we
deduct all monthly charges. If you do not have enough accumulation value in the
investment options you have chosen, we will deduct these charges in proportion
to the amount of accumulation value you then have in each investment option.

For a further discussion regarding the charges we will deduct from your
investment in a Policy, see "More About Policy Charges" on page 30.

WHAT CHARGES AND EXPENSES WILL THE MUTUAL FUNDS DEDUCT FROM AMOUNTS I INVEST
THROUGH MY POLICY?

Each Mutual Fund pays its investment management fees and other operating
expenses. Because they reduce the investment return of a Fund, these fees and
expenses also will reduce the return you will earn on any accumulation value
that you have invested in that Fund. These charges and expenses are as follows:

The Mutual Funds' Annual Expenses (as a percentage of average net assets).

The following fund of
AIM VARIABLE INSURANCE FUNDS/1/
AIM V.I. International Equity Fund... 0.75% 0.22% 0.97%

The following funds of
AMERICAN GENERAL SERIES PORTFOLIO
COMPANY/1/
Stock Index Fund..................... 0.26% 0.06% 0.32%
Money Market Fund.................... 0.50% 0.07% 0.57%
International Equities Fund.......... 0.35% 0.08% 0.43%
MidCap Index Fund.................... 0.31% 0.07% 0.38%

(footnotes are on page 10)
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
FUND OTHER FUND TOTAL FUND
MANAGEMENT OPERATING OPERATING
FEES (AFTER EXPENSES( AFTER EXPENSES (AFTER
EXPENSE EXPENSE EXPENSE
NAME OF FUND REIMBURSEMENT) 12B-1 REIMBURSEMENT) REIMBURSEMENT)
------------ -------------- ------- ---------------- ----------------
<S> <C> <C> <C> <C>
The following fund of
NEUBERGER BERMAN ADVISERS MANAGEMENT
TRUST
Partners Portfolio......................... 0.80% 0.07% 0.87%

The following funds of
PUTNAM VARIABLE TRUST
Putnam VT Diversified Income
Fund - Class IB Shares/3/................ 0.68% 0.15% 0.10% 0.93%
Putnam VT Small Cap Value Fund -
Class IB Shares/3/....................... 0.53% 0.15% 0.76% 1.44%
Putnam VT Vista Fund - Class IB Shares/3/.. 0.65% 0.15% 0.10% 0.90%
Putnam VT Voyager Fund/3/.................. 0.53% 0.15% 0.04% 0.72%

The following fund of
OPPENHEIMER VARIABLE ACCOUNT FUNDS/1/
Oppenheimer High Income Fund/VA............ 0.74% 0.01% 0.75%

The following fund of
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC./1/
VP Value Fund.............................. 1.00% 0.00% 1.00%

The following funds of
MFS VARIABLE INSURANCE TRUST/1/
MFS Total Return Series /2/................ 0.75% 0.14% 0.89%
MFS New Discovery Series /2/............... 0.90% 0.15% 1.05%
MFS Emerging Growth Series /2/............. 0.75% 0.08% 0.83%

The following funds of
VAN KAMPEN LIFE INVESTMENT TRUST/1/
Emerging Growth Portfolio/2/............... 0.67% 0.18% 0.85%
Government Portfolio /2/................... 0.36% 0.24% 0.60%

The following funds of
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST/1/
Franklin Small Cap Fund - Class 2/4,5/..... 0.55% 0.25% 0.27% 1.07%
Templeton International Securities
Fund - Class 2/4,6/...................... 0.69% 0.25% 0.19% 1.13%
</TABLE>
(footnotes on next page)

9
<PAGE>

/(1)/ The Mutual Funds' advisors, administrators or distributors have entered
into arrangements under which they pay certain amounts to AGL. The fees do not
have a direct relationship to the Mutual Funds' Annual Expenses, and do not
increase the amount of charges you pay under your Policy. (See "Miscellaneous"
under "More About Policy Charges.")

/(2)/ For the Funds indicated, management fees and other expenses as shown for
fiscal year 1999 would have been the percentages shown below without certain
voluntary expense reimbursements from the investment advisor. Current and
future fees and expenses may vary from the fiscal year 1999 fees and expenses.

OTHER TOTAL
FUND FUND FUND
MANAGEMENT OPERATING OPERATING
NAME OF FUND FEES EXPENSES EXPENSES
------------ ---------- ---------- ---------

MFS Variable Insurance Trust
Total Return Series 0.75% 0.15% 0.90%
New Discovery Series 0.90% 1.59% 2.49%
Emerging Growth Series 0.75% 0.09% 0.84%
Van Kampen Life Investment Trust
Emerging Growth Portfolio 0.70% 0.18% 0.88%
Government Portfolio 0.50% 0.24% 0.74%

No other Funds received any such reimbursements.

/(3)/ The prospectus for Putnam Variable Trust under "Distribution Plan"
discusses this fund's 12b-1 fee.

/(4)/ The fund's class 2 distribution plan or "rule 12b-1 plan" is described in
the fund's prospectus.

/(5)/ On February 8, 2000, shareholders of the Franklin Small Cap Fund approved
a merger and reorganization that combined the Franklin Small Cap Fund with the
Franklin Small Cap Investments Fund, effective May 1, 2000. The table on page 9
shows restated total expenses for the Franklin Small Cap Fund based on the new
fund fees and the assets of the Franklin Small Cap Fund as of December 31, 1999,
and not the assets of the combined fund. However, if the table reflected both
the new fund fees and the fund's combined assets, the fund's expenses after
May 1, 2000 would be estimated as: Fund Management Fees 0.55%, 12b-1 Fees 0.25%,
Other Fund Operating Expenses 0.27%, and Total Fund Operating Expenses 1.07%.

/(6)/ On February 8, 2000, shareholders of the Templeton International Fund
approved a merger and reorganization that combined the Templeton International
Fund with the Templeton International Equity Fund, effective May 1, 2000. At the
same time as the merger, the Templeton International Fund changed its name to
the Templeton International Securities Fund. The table shows restated total
expenses for the Templeton International Securities Fund based on the new fund
fees and the assets of the Templeton International Fund as of December 31, 1999,
and not the assets of the combined fund. However, if the table on page 9
reflected both the new fund fees and the fund's combined assets, the fund's
expenses after May 1, 2000 would be estimated as: Fund Management Fees 0.65%,
12b-1 Fees 0.25%, Other Fund Operating Expenses 0.20%, and Total Fund Operating
Expenses 1.10%.

MUST I INVEST ANY MINIMUM AMOUNT IN A POLICY?

Planned periodic premiums. Page 3 of your Policy will specify a "Planned
Periodic Premium." This is the amount that you (within limits) choose to have us
bill you. Our current practice is to bill quarterly, semi-annually or annually.
However, payment of these or any other specific amounts of premiums is not
mandatory. After payment of your initial premium, you need only invest enough to
ensure your Policy's cash surrender value stays above zero. The less you invest,
the more likely it is that your Policy's cash

10
<PAGE>

surrender value could fall to zero, as a result of the deductions we
periodically make from your accumulation value.

Policy lapse and reinstatement. If your Policy's cash surrender value does
fall to zero, we will notify you and give you a grace period of 61 days to pay
at least the amount we estimate is necessary to keep your Policy in force for a
reasonable time. If we do not receive your payment by the end of the grace
period, your Policy will end without value and all coverage under your Policy
will cease. Although you can apply to have your Policy "reinstated," you must do
this within 5 years (or, if earlier, before the Policy's maturity date), and you
must present evidence that the insured person still meets our requirements for
issuing coverage. Also, you will have to pay enough premium to keep your Policy
in force for two months as well as pay or reinstate any indebtedness. In the
Policy, you will find additional information about the values and terms of a
Policy after it is reinstated.

HOW CAN I CHANGE MY POLICY'S INVESTMENT OPTIONS?

Future premium payments. You may at any time change the investment options in
which future premiums you pay will be invested. Your allocation must, however,
be in whole percentages that total 100%.

Transfers of existing accumulation value. You may also transfer your existing
accumulation value from one investment option under the Policy to another free
of charge. You may make transfers at any time. Unless you are transferring the
entire amount you have in an investment option, each transfer must be at least
$500. See "Additional Rights That We Have" on page 36.

Market Timing. The Policy is not designed for professional market timing
organizations or other entities using programmed and frequent transfers. We
reserve the right at any time and without prior notice to any party to
terminate, suspend, or modify our policies or procedures regarding telephone
requests or to stop permitting telephone requests altogether.

HOW CAN I CHANGE MY POLICY'S INSURANCE COVERAGE?

Increase in coverage. You may at any time request an increase in the specified
amount of coverage under your Policy. You must, however, provide us with
satisfactory evidence that the insured person continues to meet our requirements
for issuing insurance coverage.

We treat an increase in specified amount in many respects as if it were the
issuance of a new Policy. The monthly insurance charge for the increase will be
based on the age and risk class of the insured person at the time of the
increase.

Decrease in Coverage. After the first Policy year, you may request a
reduction in the specified amount of coverage, but not below certain minimums.
After any decrease, the death benefit amount cannot be less than the greater of
(i) $50,000, and (ii) any death benefit amount which, upon comparing such
amounts to the sums already paid, would result in an excess of premium payments.

Change of death benefit option. You may at any time request us to change your
coverage from death benefit Option 1 to 2 or vice-versa.

11
<PAGE>

. If you change from Option 1 to 2, we also automatically reduce your
Policy's specified amount of insurance by the amount of your Policy's
accumulation value (but not below zero) at the time of the change.

. If you change from Option 2 to 1, we automatically increase your Policy's
specified amount by the amount of your Policy's accumulation value.

Tax consequences of changes in insurance coverage. Please read "Tax Effects"
starting on page 24 of this prospectus to learn about possible tax consequences
of changing your insurance coverage under your Policy.

WHAT ADDITIONAL RIDER BENEFITS MIGHT I SELECT?

You can request that your Policy include the maturity extension rider benefit
described below. Eligibility for and changes in this benefit are subject to our
rules and procedures as in effect from time to time. More details are included
in the form of the rider, which we suggest that you review if you choose this
benefit.

Maturity Extension Rider
------------------------

. This rider permits you to extend the Policy's maturity date beyond what it
otherwise would be. The rider provides for a death benefit after the
original maturity date that is equal to the accumulation value on the date
of death. With this rider, all accumulation value that is in the separate
account can remain there.

. In this rider, only the insurance coverage associated with the base policy
will be extended beyond the original maturity date. No additional premium
payments, new loans, monthly insurance charge, or changes in specified
amount will be allowed after the original maturity date. There is no
charge for this rider except for a flat monthly charge of no more than $10
each month after the original maturity date.

. Extension of the maturity date beyond the insured person's age 100 may
result in the current taxation of increases in your Policy's accumulation
value as a result of interest or investment experience after that time.
You should consult a qualified tax adviser before making such an extension.

HOW CAN I ACCESS MY INVESTMENT IN A POLICY?

Full surrender. You may at any time, without charge, surrender your Policy in
full. If you do, we will pay you the accumulation value, less any Policy loans.
We call this amount your "cash surrender value."

Partial surrender. You may, at any time after the first Policy year, make a
partial surrender of your Policy's cash surrender value. A partial surrender
must be at least $500. If the Option 1 death benefit is then in effect, we will
also automatically reduce your Policy's specified amount of insurance by the
amount of your withdrawal and any related charges.

12
<PAGE>

You may choose the investment option or options from which money that you
withdraw will be taken. Otherwise, we will allocate the withdrawal in the same
proportions as then apply for deducting monthly charges under your Policy or, if
that is not possible, in proportion to the amount of accumulation value you then
have in each investment option.

Exchange of Policy in Certain States. Certain states require that a policy
owner be given the right to exchange the Policy for a fixed benefit life
insurance policy, within either 18 or 24 months from the date of issue. This
right is subject to various conditions imposed by the states and us. In such
states, this right has been more fully described in your Policy or related
endorsements to comply with the applicable state requirements.

Policy loans. You may at any time borrow from us an amount equal to your
Policy's cash surrender value less the interest that will be payable on your
loan through your next Policy anniversary. This rule is not applicable in all
states. The minimum amount of each loan is $500.

We remove from your investment options an amount equal to your loan and hold
that amount as additional collateral for the loan. We will credit your Policy
with interest on this collateral amount at an effective annual rate of 4%
(rather than any amount you could otherwise earn in one of our investment
options), and we will charge you interest on your loan at an effective annual
rate of 4.75%. Loan interest is payable annually, on the Policy anniversary, in
advance, at a rate of 4.54%. Any amount not paid by its due date will
automatically be added to the loan balance as an additional loan. Interest you
pay on Policy loans will not, in most cases, be deductible on your tax returns.

You may choose which of your investment options the loan will be taken from.
If you do not so specify, we will allocate the loan in the same way that charges
under your Policy are being allocated. If this is not possible, we will make the
loan pro-rata from each investment option that you then are using.

You may repay all or part (but not less than $500) of your loan at any time
before the death of the insured while the Policy is in force. You must designate
any loan repayment as such. Otherwise, we will treat it as a premium payment
instead. We will invest any additional loan repayments you make in the
investment options you request. In the absence of such a request we will invest
the repayment in the same proportion as you then have selected for premium
payments that we receive from you. Any unpaid loan will be deducted from the
proceeds we pay following the insured person's death.

Preferred loan interest rate. We will credit a higher interest rate, but not
more than 4.75%, on an amount of the collateral securing Policy loans taken out
after the first 10 Policy years. The maximum amount of new loans that will
receive this preferred loan interest rate for any year is:

. 10% of your Policy's accumulation value (including any loan collateral we
are holding for your Policy loans) at the beginning of the Policy year; or

. if less, your Policy's maximum remaining loan value at that anniversary.

13
<PAGE>

We intend to set the rate of interest we credit to your preferred collateral
amount equal to the loan interest rate you are paying, resulting in a zero net
cost of borrowing for that amount. We have full discretion to vary the preferred
rate, provided that it will always be greater than the rate we are then
crediting in connection with regular Policy loans, and will never be less than
an effective annual rate of 4.5%. Because we first offered the Policies in 2000,
we have not yet applied the preferred loan interest rate to any Policy loan
amounts.

Maturity of your Policy. If the insured person is still living on the
"Maturity Date" shown on page 3 of your Policy, we will automatically pay you
the cash surrender value of the Policy, and the Policy will end. The maturity
date is the Policy anniversary nearest the insured person's 100th birthday.

CAN I CHOOSE THE FORM IN WHICH AGL PAYS OUT THE PROCEEDS FROM MY POLICY?

Choosing a payment option. You may choose to receive the full proceeds from
the Policy as a single sum. This includes proceeds that become payable upon the
death of the insured person, full surrender or the maturity date. Alternatively,
you may elect that all or part of such proceeds be applied to one or more of the
following payment options:

. Option 1 - Equal monthly payments for a specified period of time.

. Option 2 - Equal monthly payments of a specified amount until all amounts
are paid out.

. Option 3 - Equal monthly payments for the payee's life, but with payments
guaranteed for a specified number of years. These payments are based on
annuity rates that are set forth in the Policy or, at the payee's request,
the annuity rates that we then are using.

. Option 4 - Proceeds left to accumulate with interest.

Additional payment options may also be available with our consent. We have the
right to veto any payment option, if the payee is a corporation or other entity.
You can read more about each of these options in our Policy form and in the
separate form of payment contract that we issue when any such option takes
effect.

Within 60 days after the insured person's death, any payee entitled to receive
proceeds as a single sum may elect one or more payment options.

Interest rates that we credit under each option will be at least 3%.

Change of payment option. You may change any payment option you have elected
at any time while the Policy is in force and before the start date of the
payment option.

Tax impact. If a payment option is chosen, you or your beneficiary may have
tax consequences. You should consult with a qualified tax adviser before
deciding whether to elect one or more payment options.

14
<PAGE>

TO WHAT EXTENT CAN AGL VARY THE TERMS AND CONDITIONS OF THE POLICY IN PARTICULAR
CASES?

Listed below are some variations we may make in the terms and conditions of a
Policy. Any variations will be made only in accordance with uniform rules that
we establish.

Underwriting. We use two underwriting methods to issue a Policy, simplified
underwriting and full underwriting, which are described below. We reserve the
right to request additional information or reject an application for any reason
under either underwriting procedure.

. Simplified Underwriting - Any Policy with a specified amount of $250,000 or
lower must be issued based on simplified underwriting. Our guidelines
include that the proposed insured must answer limited health questions and
certain medical records are required. The Policy specified amount is
limited to $250,000, and any requested increases in specified amount are
considered under full underwriting only. Additionally, a proposed insured
who is rejected under simplified underwriting cannot be considered for full
underwriting.

. Full Underwriting - Any Policy that has a specified amount of over $250,000
must be issued based on full underwriting. Our guidelines include medical
exams or tests and other satisfactory evidence of insurability.

Policies purchased through "internal rollovers." We maintain published rules
that describe the procedures necessary to replace the other life insurance we
issue with a Policy. Not all types of other insurance we issue are eligible to
be replaced with a Policy. Our published rules may be changed from time to time,
but are evenly applied to all our customers.

Policies purchased through term life conversions. We maintain rules about how
to convert term insurance to AG Legacy Plus Policy. This is referred to as a
term conversion. Term conversions are available to owners of term life insurance
we have issued. Any right to a term conversion is stated in the term life
insurance policy. Again, our published rules about term conversions may be
changed from time to time, but are evenly applied to all our customers.

State law requirements. AGL is subject to the insurance laws and regulations
in every jurisdiction in which AG Legacy Plus Policies are sold. As a result,
various time periods and other terms and conditions described in this prospectus
may vary depending on where you reside. These variations will be reflected in
your Policy and related endorsements.

Variations in expenses or risks. AGL may vary the charges and other terms of
the Policy where special circumstances result in sales, administrative or other
expenses, mortality risks or other risks that are different from those normally
associated with the Policy.

HOW WILL MY POLICY BE TREATED FOR INCOME TAX PURPOSES?

Generally, death benefits paid under a Policy are not subject to income tax,
and earnings on your accumulation value are not subject to income tax as long as
we do not pay them out to you. If we do pay any amount of your Policy's
accumulation value upon surrender, partial surrender, or maturity of your

15
<PAGE>

Policy, all or part of that distribution may be treated as a return of the
premiums you paid, which is not subject to income tax.

Amounts you receive as Policy loans are not taxable to you, unless you have
paid such a large amount of premiums that your Policy becomes what the tax law
calls a "modified endowment contract." In that case, the loan will be taxed as
if it were a partial surrender. Furthermore, loans, partial surrenders and other
distributions from a modified endowment contract may require you to pay
additional taxes and penalties that otherwise would not apply. If your Policy
lapses, you may have to pay income tax on a portion of any outstanding loan.

For further information about the tax consequences of owning a Policy, please
read "Tax Effects" starting on page 24.

HOW DO I COMMUNICATE WITH AGL?

When we refer to "you," we mean the person who is authorized to take any
action with respect to a Policy. Generally, this is the owner named in the
Policy. Where a Policy has more than one owner, each owner generally must join
in any requested action, except for transfers and changes in the allocation of
future premiums or changes among the investment options.

General. You should mail or express checks and money orders for premium
payments and loan repayments directly to our Home Office.

The following requests must be made in writing and signed by you:

. transfer of accumulation value;

. loan;

. full surrender;

. partial surrender;

. change of beneficiary or contingent beneficiary;

. change of allocation percentages for premium payments;

. loan repayments or charges;

. change of death benefit option or manner of death benefit payment;

. changes in specified amount;

16
<PAGE>

. addition or cancellation of, or other action with respect to, election of a
payment option for Policy proceeds;

. tax withholding elections; and

. telephone transaction privileges.

You should mail or express these requests to our Home Office at the appropriate
address shown on the first page of this prospectus. You should also communicate
notice of the insured person's death, and related documentation, to our Home
Office.

We have special forms which should be used for loans, assignments, partial and
full surrenders, changes of owner or beneficiary, and all other contractual
changes. You will be asked to return your Policy when you request a full
surrender. You may obtain these forms from our Home Office or from your AGL
representative. Each communication must include your name, Policy number and, if
you are not the insured person, that person's name. We cannot process any
requested action that does not include all required information.

Telephone transactions. If you have a completed telephone authorization form
on file with us, you may make transfers, or change the allocation of future
premium payments or deduction of charges, by telephone, subject to the terms of
the form. We will honor telephone instructions from any person who provides the
correct information, so there is a risk of possible loss to you if unauthorized
persons use this service in your name. Our current procedure is that only the
owner or your AGL representative may make a transfer request by phone. We are
not liable for any acts or omissions based upon instructions that we reasonably
believe to be genuine. Our procedures include verification of the Policy number,
the identity of the caller, both the insured person's and owner's names, and a
form of personal identification from the caller. We will mail you a prompt
written confirmation of the transaction. If (a) many people seek to make
telephone requests at or about the same time, or (b) our recording equipment
malfunctions, it may be impossible for you to make a telephone request at the
time you wish. You should submit a written request if you cannot make a
telephone transfer. Also, if, due to malfunction or other circumstances, the
recording of your telephone request is incomplete or not fully comprehensible,
we will not process the transaction. The phone number for telephone requests is
1-888-436-4963.

ILLUSTRATIONS OF HYPOTHETICAL POLICY BENEFITS

To help explain how our Policy works, we have prepared the following tables:
<TABLE>
<CAPTION>

PAGE TO
SEE IN THIS
PROSPECTUS
-----------
<S> <C>
Death Benefit Option 1 - Simplified Underwriting/Current Charges.............. 19
Death Benefit Option 1 - Full Underwriting/Current Charges.................... 20
Death Benefit Option 1 - Simplified Underwriting/Guaranteed Maximum Charges... 21
Death Benefit Option 1 - Full Underwriting/Guaranteed Maximum Charges......... 22
</TABLE>

The tables show how death benefits, accumulation values, and cash surrender
values ("Policy benefits") under a sample AG Legacy Plus Policy would change
over time if the investment options had

17
<PAGE>

constant hypothetical gross annual investment returns of 0%, 6% or 12% over the
years covered by each table. The tables are for a 45 year-old male non-tobacco
user. A single premium payment of $56,279 for an initial $250,000 or $250,001 of
specified amount of coverage is assumed to be paid at issue. The illustrations
assume no Policy loan has been taken. As illustrated, this Policy would be
classified as a modified endowment contract (See "Tax Effects" in Additional
Information for further discussion).

Although the tables below do not include an example of a Policy with an
Option 2 death benefit, such a Policy would have higher death benefits and
lower cash surrender values.

Separate tables are included to show both current and guaranteed maximum
charges under both simplified underwriting and full underwriting. We have used
the maximum specified amount of $250,000 for the simplified underwriting table
and the minimum specified amount of $250,001 for the full underwriting table to
show the applicable investment results.

. The charges assumed in the current charge tables include a daily charge at
an annual effective rate of .75% for the first 10 Policy years, .50% for
Policy years 11 - 20, and .25% thereafter and current monthly insurance
charges.

. The guaranteed maximum charge tables assume that these charges will include
a daily charge at an annual effective rate of .90% for the first 10 Policy
years, .65% for Policy years 11 - 20, and .40% thereafter, and an
additional charge of 1.5% of every premium and guaranteed maximum insurance
charges.

The charges assumed by both the current and guaranteed maximum charge tables
also include Mutual Fund expenses equal to .83% of aggregate Mutual Fund assets,
which is the arithmetic average of the advisory fees payable with respect to
each Mutual Fund, after all reimbursements, plus the arithmetic average of all
other operating expenses of each such Fund after all reimbursements, as
reflected on pages 8 - 10 of this prospectus. We expect the reimbursement
arrangements to continue in the future. If the reimbursement arrangements were
not currently in effect, the arithmetic average of Mutual Fund expenses would
equal .91% of aggregate Mutual Fund assets.

Individual illustrations. On request, we will furnish you with a comparable
illustration based on your Policy's characteristics. If you request
illustrations more than once in any Policy year, we may charge $25 for the
illustration.

18
<PAGE>

AG LEGACY PLUS

SINGLE PREMIUM $56,279 INITIAL SPECIFIED AMOUNT $250,000
DEATH BENEFIT OPTION 1

MALE AGE 45
SIMPLIFIED UNDERWRITING
NONSMOKER
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCUMULATION VALUE CASH SURRENDER VALUE
END OF ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 250,000 250,000 250,000 54,549 57,880 61,212 54,549 57,880 61,212
2 250,000 250,000 250,000 52,735 59,454 66,573 52,735 59,454 66,573
3 250,000 250,000 250,000 50,869 61,034 72,448 50,869 61,034 72,448
4 250,000 250,000 250,000 49,034 62,703 78,976 49,034 62,703 78,976
5 250,000 250,000 250,000 47,145 64,385 86,151 47,145 64,385 86,151
6 250,000 250,000 250,000 45,231 66,108 94,076 45,231 66,108 94,076
7 250,000 250,000 250,000 43,235 67,826 102,791 43,235 67,826 102,791
8 250,000 250,000 250,000 41,315 69,680 112,510 41,315 69,680 112,510
9 250,000 250,000 250,000 39,386 71,604 123,280 39,386 71,604 123,280
10 250,000 250,000 200,000 37,424 73,579 135,205 37,424 73,579 135,205
15 250,000 250,000 295,062 28,164 86,069 220,195 28,164 86,069 220,195
20 250,000 250,000 439,874 16,589 100,281 360,552 16,589 100,281 360,552
</TABLE>
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.

THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN.

19
<PAGE>

<TABLE>
<CAPTION>
AG LEGACY PLUS

SINGLE PREMIUM $ 56,279 INITIAL SPECIFIED AMOUNT $250,001
DEATH BENEFIT OPTION 1

MALE AGE 45
FULL UNDERWRITING
NONSMOKER
ASSUMING CURRENT CHARGES

DEATH BENEFIT ACCUMULATION VALUE CASH SURRENDER VALUE
END OF ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 250,001 250,001 250,001 55,034 58,376 61,719 55,034 58,376 61,719
2 250,001 250,001 250,001 53,702 60,466 67,629 53,702 60,466 67,629
3 250,001 250,001 250,001 52,425 62,688 74,201 52,425 62,688 74,201
4 250,001 250,001 250,001 51,088 64,938 81,397 51,088 64,938 81,397
5 250,001 250,001 250,001 49,703 67,231 89,300 49,703 67,231 89,300
6 250,001 250,001 250,001 48,280 69,578 97,999 48,280 69,578 97,999
7 250,001 250,001 250,001 46,821 71,988 107,587 46,821 71,988 107,587
8 250,001 250,001 250,001 45,324 74,462 118,163 45,324 74,462 118,163
9 250,001 250,001 250,001 43,775 76,994 129,831 43,775 76,994 129,831
10 250,001 250,001 250,001 42,149 79,564 142,702 42,149 79,564 142,702
15 250,001 250,001 312,452 33,385 94,482 233,173 33,385 94,482 233,173
20 250,001 250,001 465,799 21,694 111,315 381,803 21,694 111,315 381,803
</TABLE>
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.

THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN.

20
<PAGE>

AG LEGACY PLUS
<TABLE>
<CAPTION>

SINGLE PREMIUM $ 56,279 INITIAL SPECIFIED AMOUNT $250,000
DEATH BENEFIT OPTION 1
MALE AGE 45
SIMPLIFIED UNDERWRITING
NONSMOKER
ASSUMING GUARANTEED CHARGES

DEATH BENEFIT ACCUMULATION VALUE CASH SURRENDER VALUE
END OF ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 250,000 250,000 250,000 53,599 56,873 60,148 53,599 56,873 60,148
2 250,000 250,000 250,000 51,716 58,309 65,295 51,716 58,309 65,295
3 250,000 250,000 250,000 49,785 59,742 70,923 49,785 59,742 70,923
4 250,000 250,000 250,000 47,782 61,151 77,068 47,782 61,151 77,068
5 250,000 250,000 250,000 45,704 62,534 83,790 45,704 62,534 83,790
6 250,000 250,000 250,000 43,552 63,894 91,160 43,552 63,894 91,160
7 250,000 250,000 250,000 41,299 65,206 99,236 41,299 65,206 99,236
8 250,000 250,000 250,000 38,918 66,447 108,087 38,918 66,447 108,087
9 250,000 250,000 250,000 36,407 67,617 117,812 36,407 67,617 117,812
10 250,000 250,000 250,000 33,738 68,689 128,508 33,738 68,689 128,508
15 250,000 250,000 273,273 17,625 72,975 203,935 17,625 72,975 203,935
20 0 250,000 398,788 0 71,575 326,875 0 71,575 326,875

</TABLE>
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.

THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN.

21
<PAGE>

AG LEGACY PLUS
<TABLE>
<CAPTION>

SINGLE PREMIUM $ 56,279 INITIAL SPECIFIED AMOUNT $250,001
DEATH BENEFIT OPTION 1

MALE AGE 45
FULL UNDERWRITING
NONSMOKER
ASSUMING GUARANTEED CHARGES

DEATH BENEFIT ACCUMULATION VALUE CASH SURRENDER VALUE
END OF ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 250,001 250,001 250,001 53,599 56,873 60,149 53,599 56,873 60,149
2 250,001 250,001 250,001 51,716 58,309 65,295 51,716 58,309 65,295
3 250,001 250,001 250,001 49,785 59,742 70,923 49,785 59,742 70,923
4 250,001 250,001 250,001 47,782 61,151 77,068 47,782 61,151 77,068
5 250,001 250,001 250,001 45,704 62,535 83,790 45,704 62,535 83,790
6 250,001 250,001 250,001 43,552 63,894 91,160 43,552 63,894 91,160
7 250,001 250,001 250,001 41,299 65,206 99,236 41,299 65,206 99,236
8 250,001 250,001 250,001 38,918 66,448 108,087 38,918 66,448 108,087
9 250,001 250,001 250,001 36,407 67,617 117,813 36,407 67,617 117,813
10 250,001 250,001 250,001 33,738 68,689 128,508 33,738 68,689 128,508
15 250,001 250,001 273,274 17,625 72,976 203,936 17,625 72,976 203,936
20 0 250,001 398,790 0 71,576 326,877 0 71,576 326,877
</TABLE>

THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.

THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN.

22
<PAGE>

ADDITIONAL INFORMATION

A general overview of the Policy appears at pages 1 - 22. The additional
information that follows gives more details, but generally does not repeat what
is set forth above.

PAGE TO
SEE IN THIS
CONTENTS OF ADDITIONAL INFORMATION PROSPECTUS
- ---------------------------------- -----------

AGL................................................. 23
Separate Account VL-R............................... 24
Tax Effects......................................... 24
Voting Privileges................................... 29
Your Beneficiary.................................... 30
Assigning Your Policy............................... 30
More About Policy Charges........................... 30
Effective Date of Policy and Related Transactions... 32
Distribution of the Policies........................ 33
Payment of Policy Proceeds.......................... 34
Adjustments to Death Benefit........................ 35
Additional Rights That We Have...................... 36
Performance Information............................. 36
Our Reports to Policy Owners........................ 37
AGL's Management.................................... 37
Principal Underwriter's Management.................. 40
Legal Matters....................................... 41
Independent Auditors................................ 41
Actuarial Expert.................................... 41
Services Agreement.................................. 41
Certain Potential Conflicts......................... 42
Year 2000 Considerations............................ 42

Special words and phrases. If you want more information about any words or
phrases that you read in this prospectus, you may wish to refer to the Index of
Words and Phrases that appears at the end of this prospectus (page 44, which
follows all of the financial pages). That index will tell you on what page you
can read more about many of the words and phrases that we use.

AGL

We are American General Life Insurance Company ("AGL"). AGL is a stock life
insurance company organized under the laws of Texas. AGL is a successor in
interest to a company originally organized under the laws of Delaware on January
10, 1917. AGL is an indirect, wholly-owned subsidiary of American General
Corporation (formerly American General Insurance Company), a diversified
financial services holding company engaged primarily in the insurance business.
American General Financial Group is the marketing name for American General
Corporation and its subsidiaries. The commitments under the Policies are AGL's,
and American General Corporation has no legal obligation to back those
commitments.

23
<PAGE>

AGL is a member of the Insurance Marketplace Standards Association ("IMSA").
IMSA is a voluntary membership organization created by the life insurance
industry to promote ethical market conduct for individual life insurance and
annuity products. AGL's membership in IMSA applies only to AGL and not its
products.

SEPARATE ACCOUNT VL-R

We hold the Mutual Fund shares in which any of your accumulation value is
invested in Separate Account VL-R. Separate Account VL-R is a "separate
account," as defined by the SEC and is registered as a unit investment trust
with the SEC under the Investment Company Act of 1940, as amended. We created
the separate account on May 6, 1997 under Texas law.

For record keeping and financial reporting purposes, Separate Account VL-R is
divided into 42 separate "divisions," 19 of which correspond to the 19 variable
investment options available since the inception of the Policy. The remaining
23 divisions, and some of these 19 divisions, represent investment options
available under other variable life policies we offer. We hold the Mutual Fund
shares in which we invest your accumulation value for an investment option in
the division that corresponds to that investment option.

The assets in Separate Account VL-R are our property. The assets in Separate
Account VL-R would be available only to satisfy the claims of owners of the
Policies, to the extent they have allocated their accumulation value to Separate
Account VL-R. Our other creditors could reach only those Separate Account VL-R
assets (if any) that are in excess of the amount of our reserves and other
contract liabilities under the Policies with respect to Separate Account VL-R.

TAX EFFECTS

This discussion is based on current federal income tax law and interpretations.
It assumes that the policy owner is a natural person who is a U.S. citizen and
resident. The tax effects on corporate taxpayers, non-U.S. residents or non-U.S.
citizens, may be different. This discussion is general in nature, and should not
be considered tax advice, for which you should consult a qualified tax adviser.

General. The AG Legacy Plus Policy will be treated as "life insurance" for
federal income tax purposes (a) if it meets the definition of life insurance
under Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code")
and (b) for as long as the investments made by the underlying Mutual Funds
satisfy certain investment diversification requirements under Section 817(h) of
the Code. We believe that the Policy will meet these requirements and that:

. the death benefit received by the beneficiary under your Policy will not be
subject to federal income tax; and

. increases in your Policy's accumulation value as a result of interest or
investment experience will not be subject to federal income tax unless and
until there is a distribution from your Policy, such as a surrender or a
partial surrender.

24
<PAGE>

The federal income tax consequences of a distribution from your Policy can be
affected by whether your Policy is determined to be a "modified endowment
contract" (which is discussed below). In all cases, however, the character of
all income that is described below as taxable to the payee will be ordinary
income (as opposed to capital gain).

Testing for modified endowment contract status. Your Policy will be a
"modified endowment contract" if, at any time during the first seven Policy
years, you have paid a cumulative amount of premiums that exceeds the premiums
that would have been paid by that time under a similar fixed-benefit insurance
policy that was designed (based on certain assumptions mandated under the Code)
to provide for paid-up future benefits after the payment of seven level annual
premiums. This is called the "seven-pay" test.

Whenever there is a "material change" under a policy, the policy will
generally be (a) treated as a new contract for purposes of determining whether
the policy is a modified endowment contract and (b) subjected to a new seven-pay
period and a new seven-pay limit. The new seven-pay limit would be determined
taking into account, under a prescribed formula, the accumulation value of the
policy at the time of such change. A materially changed policy would be
considered a modified endowment contract if it failed to satisfy the new seven-
pay limit. A material change for these purposes could occur as a result of a
change in death benefit option. A material change will occur as a result of an
increase in your Policy's specified amount of coverage, and certain other
changes.

If your Policy's benefits are reduced during the first seven Policy years (or
within seven years after a material change), the calculated seven-pay premium
limit will be redetermined based on the reduced level of benefits and applied
retroactively for purposes of the seven-pay test. (Such a reduction in benefits
could include, for example, a decrease in the specified amount resulting from a
partial surrender). If the premiums previously paid are greater than the
recalculated seven-payment premium level limit, the Policy will become a
modified endowment contract. A life insurance policy that is received in
exchange for a modified endowment contract will also be considered a modified
endowment contract.

Other effects of Policy changes. Changes made to your Policy (for example, a
decrease in benefits or a lapse or reinstatement of your Policy) may also have
other effects on your Policy. Such effects may include impacting the maximum
amount of premiums that can be paid under your Policy, as well as the maximum
amount of accumulation value that may be maintained under your Policy.

Taxation of pre-death distributions if your Policy is not a modified endowment
contract. As long as your Policy remains in force during the insured person's
lifetime and not as a modified endowment contract, a Policy loan will be treated
as indebtedness, and no part of the loan proceeds will be subject to current
federal income tax. Interest on the Policy loan generally will not be tax
deductible.

After the first 15 Policy years, the proceeds from a partial surrender will
not be subject to federal income tax except to the extent such proceeds exceed
your "basis" in your Policy. (Your basis generally will equal the premiums you
have paid, less the amount of any previous distributions from your Policy that
were not taxable.) During the first 15 Policy years, the proceeds from a partial
surrender could be subject to federal income tax, under a complex formula, to
the extent that your accumulation value exceeds your basis in your Policy.

25
<PAGE>

On the maturity date or upon full surrender, any excess in the amount of
proceeds we pay (including amounts we use to discharge any Policy loan) over
your basis in the Policy, will be subject to federal income tax. In addition, if
a Policy ends after a grace period while there is a policy loan, the
cancellation of such loan and accrued loan interest will be treated as a
distribution and could be subject to tax under the above rules. Finally, if you
make an assignment of rights or benefits under your Policy you may be deemed to
have received a distribution from your Policy, all or part of which may be
taxable.

Taxation of pre-death distributions if your Policy is a modified endowment
contract. If your Policy is a modified endowment contract, any distribution from
your Policy during the insured person's lifetime will be taxed on an "income-
first" basis. Distributions for this purpose include a loan (including any
increase in the loan amount to pay interest on an existing loan or an assignment
or a pledge to secure a loan) or a partial surrender. Any such distributions
will be considered taxable income to you to the extent your accumulation value
exceeds your basis in the Policy. For modified endowment contracts, your basis
is similar to the basis described above for other policies, except that your
basis would be increased by the amount of any prior loan under your Policy that
was considered taxable income to you. For purposes of determining the taxable
portion of any distribution, all modified endowment contracts issued by the same
insurer (or its affiliate) to the same owner (excluding certain qualified plans)
during any calendar year are aggregated. The Treasury Department has authority
to prescribe additional rules to prevent avoidance of "income-first" taxation on
distributions from modified endowment contracts.

A 10% penalty tax also will apply to the taxable portion of most distributions
from a policy that is a modified endowment contract. The penalty tax will not,
however, apply to distributions:

. to taxpayers 59 1/2 years of age or older;

. in the case of a disability (as defined in the Code); or

. received as part of a series of substantially equal periodic annuity
payments for the life (or life expectancy) of the taxpayer or the joint
lives (or joint life expectancies) of the taxpayer and his or her
beneficiary.

If your Policy ends after a grace period while there is a Policy loan, the
cancellation of the loan will be treated as a distribution to the extent not
previously treated as such and could be subject to tax, including the 10%
penalty tax, as described above. In addition, on the maturity date or upon a
full surrender, any excess of the proceeds we pay (including any amounts we use
to discharge any Policy loan) over your basis in the Policy, will be subject to
federal income tax and, unless an exception applies, the 10% penalty tax.

Distributions that occur during a Policy year in which your Policy becomes a
modified endowment contract, and during any subsequent Policy years, will be
taxed as described in the two preceding paragraphs. In addition, distributions
from a policy within two years before it becomes a modified endowment contract
also will be subject to tax in this manner. This means that a distribution made
from a policy that is not a modified endowment contract could later become
taxable as a distribution from a modified endowment contract. The Treasury
Department has been authorized to prescribe rules which would treat similarly
other distributions made in anticipation of a policy becoming a modified
endowment contract.

26
<PAGE>

Policy lapses and reinstatements. A Policy which has lapsed may have the tax
consequences described above, even though you may be able to reinstate that
Policy. For tax purposes, some reinstatements may be treated as the purchase of
a new insurance contract.

Diversification. Under Section 817(h) of the Code, the Treasury Department has
issued regulations that implement investment diversification requirements. Our
failure to comply with these regulations would disqualify your Policy as a life
insurance policy under Section 7702 of the Code. If this were to occur, you
would be subject to federal income tax on the income under the Policy for the
period of the disqualification and for subsequent periods. Also, if the insured
died during such period of disqualification or subsequent periods, a portion of
the death benefit proceeds would be taxable to the beneficiary. Separate Account
VL-R, through the Mutual Funds, intends to comply with these requirements.
Although we do not have direct control over the investments or activities of the
Mutual Funds, we will enter into agreements with them requiring the Mutual Funds
to comply with the diversification requirements of the Section 817(h) Treasury
Regulations.

In connection with the issuance of then temporary diversification regulations,
the Treasury Department stated that it anticipated the issuance of guidelines
prescribing the circumstances in which the ability of a policy owner to direct
his or her investment to particular Mutual Funds within Separate Account VL-R
may cause the policy owner, rather than the insurance company, to be treated as
the owner of the assets in the account. Due to the lack of specific guidance on
investor control, there is some uncertainty about when a policy owner is
considered the owner of the assets for tax purposes. If you were considered the
owner of the assets of Separate Account VL-R, income and gains from the account
would be included in your gross income for federal income tax purposes. Under
current law, however, we believe that AGL, and not the owner of a Policy, would
be considered the owner of the assets of Separate Account VL-R.

Estate and generation skipping taxes. If the insured person is the Policy's
owner, the death benefit under the AG Legacy Plus Policy will generally be
includable in the owner's estate for purposes of federal estate tax. If the
owner is not the insured person, under certain conditions, only an amount
approximately equal to the cash surrender value of the Policy would be
includable. The federal estate tax is integrated with the federal gift tax
under a unified rate schedule and unified credit. The Taxpayer Relief Act of
1997 gradually raises the value of the credit over the next seven years to
$1,000,000. In addition, an unlimited marital deduction may be available for
federal estate tax purposes.

As a general rule, if a "transfer" is made to a person two or more generations
younger than the Policy's owner, a generation skipping tax may be payable at
rates similar to the maximum estate tax rate in effect at the time. The
generation skipping tax provisions generally apply to "transfers" that would be
subject to the gift and estate tax rules. Individuals are generally allowed an
aggregate generation skipping tax exemption of $1 million. Because these rules
are complex, you should consult with a qualified tax adviser for specific
information, especially where benefits are passing to younger generations.

The particular situation of each policy owner, insured person or beneficiary
will determine how ownership or receipt of Policy proceeds will be treated for
purposes of federal estate and generation skipping taxes, as well as state and
local estate, inheritance and other taxes.

27
<PAGE>

Life Insurance in Split Dollar Arrangements. The Internal Revenue Service
("IRS") has released a technical advice memorandum ("TAM") on the taxability of
the insurance policies used in certain split dollar arrangements. A TAM
provides advice as to the internal revenue laws, regulations, and related
statutes with respect to a specific set of facts and a specific taxpayer. In
the TAM, among other things, the IRS concluded that an employee was subject to
current taxation on the excess of the cash surrender value of the policy over
the premiums to be returned to the employer. Purchasers of life insurance
policies to be used in split dollar arrangements are strongly advised to consult
with a qualified tax adviser to determine the tax treatment resulting from such
an arrangement.

Pension and profit-sharing plans. If a life insurance policy is purchased by a
trust or other entity that forms part of a pension or profit-sharing plan
qualified under Section 401(a) of the Code for the benefit of participants
covered under the plan, the federal income tax treatment of such policies will
be somewhat different from that described above.

The reasonable net premium cost for such amount of insurance that is purchased
as part of a pension or profit-sharing plan is required to be included annually
in the plan participant's gross income. This cost (generally referred to as the
"P.S. 58" cost) is reported to the participant annually. If the plan participant
dies while covered by the plan and the policy proceeds are paid to the
participant's beneficiary, then the excess of the death benefit over the
policy's accumulation value will not be subject to federal income tax. However,
the policy's accumulation value will generally be taxable to the extent it
exceeds the participant's cost basis in the policy. The participant's cost basis
will generally include the costs of insurance previously reported as income to
the participant. Special rules may apply if the participant had borrowed from
the policy or was an owner-employee under the plan.

There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased by
a tax qualified plan. You should consult a qualified tax adviser.

Other employee benefit programs. Complex rules may also apply when a policy is
held by an employer or a trust, or acquired by an employee, in connection with
the provision of other employee benefits. These policy owners must consider
whether the policy was applied for by or issued to a person having an insurable
interest under applicable state law and with the insured person's consent. The
lack of an insurable interest or consent may, among other things, affect the
qualification of the policy as life insurance for federal income tax purposes
and the right of the beneficiary to receive a death benefit.

ERISA. Employers and employer-created trusts may be subject to reporting,
disclosure and fiduciary obligations under the Employee Retirement Income
Security Act of 1974, as amended. You should consult a qualified legal adviser.

Our taxes. We report the operations of Separate Account VL-R in our federal
income tax return, but we currently pay no income tax on Separate Account VL-R's
investment income and capital gains, because these items are, for tax purposes,
reflected in our variable life insurance policy reserves. We currently make no
charge to any Separate Account VL-R division for taxes. We reserve the right to
make a charge in the future for taxes incurred; for example, a charge to
Separate Account VL-R for income taxes we incur that are allocable to the
Policy.

28
<PAGE>

We may have to pay state, local or other taxes in addition to applicable taxes
based on premiums. At present, these taxes are not substantial. If they
increase, we may make charges for such taxes when they are attributable to
Separate Account VL-R or allocable to the Policy.

Certain Mutual Funds in which your accumulation value is invested may elect to
pass through to AGL taxes withheld by foreign taxing jurisdictions on foreign
source income. Such an election will result in additional taxable income and
income tax to AGL. The amount of additional income tax, however, may be more
than offset by credits for the foreign taxes withheld which are also passed
through. These credits may provide a benefit to AGL.

When we withhold income taxes. Generally, unless you provide us with an
election to the contrary before we make the distribution, we are required to
withhold income tax from any proceeds we distribute as part of a taxable
transaction under your Policy. In some cases, where generation skipping taxes
may apply, we may also be required to withhold for such taxes unless we are
provided satisfactory written notification that no such taxes are due.

In the case of non-resident aliens who own a policy, the withholding rules may
be different. With respect to distributions from modified endowment contracts,
nonresident aliens are generally subject to federal income tax withholding at a
statutory rate of 30% of the distributed amount. In some cases, the non-
resident alien may be subject to lower or even no withholding if the United
States has entered into a tax treaty with his or her country of residence.

Tax changes. The U.S. Congress frequently considers legislation that, if
enacted, could change the tax treatment of life insurance policies. In addition,
the Treasury Department may amend existing regulations, issue regulations on the
qualification of life insurance and modified endowment contracts, or adopt new
interpretations of existing law. State and local tax law or, if you are not a
U.S. citizen and resident, foreign tax law, may also affect the tax consequences
to you, the insured person or your beneficiary, and are subject to change. Any
changes in federal, state, local or foreign tax law or interpretation could have
a retroactive effect. We suggest you consult a qualified tax adviser.

VOTING PRIVILEGES

We are the legal owner of the Funds' shares held in Separate Account VL-R.
However, you may be asked to instruct us how to vote the Fund shares held in the
various Mutual Funds and attributable to your Policy at meetings of shareholders
of the Funds. The number of votes for which you may give directions will be
determined as of the record date for the meeting. The number of votes that you
may direct related to a particular Fund is equal to (a) your accumulation value
invested in that Fund divided by (b) the net asset value of one share of that
Fund. Fractional votes will be recognized.

We will vote all shares of each Fund that we hold of record, including any
shares we own on our own behalf, in the same proportions as those shares for
which we have received instructions from owners participating in that Fund
through Separate Account VL-R.

If you are asked to give us voting instructions, we will send you the proxy
material and a form for providing such instructions. Should we determine that we
are no longer required to send the owner such materials, we will vote the shares
as we determine in our sole discretion.

29
<PAGE>

In certain cases, we may disregard instructions relating to changes in a
Fund's investment manager or its investment policies. We will advise you if we
do and explain the reasons in our next report to policy owners. AGL reserves the
right to modify these procedures in any manner that the laws in effect from time
to time allow.

YOUR BENEFICIARY

You name your beneficiary when you apply for a Policy. The beneficiary is
entitled to the insurance benefits of the Policy. You may change the beneficiary
during the insured person's lifetime. We also require the consent of any
irrevocably named beneficiary. A new beneficiary designation is effective as of
the date you sign it, but will not affect any payments we may make before we
receive it. If no beneficiary is living when the insured person dies, we will
pay the insurance proceeds to the owner or the owner's estate.

ASSIGNING YOUR POLICY

You may assign (transfer) your rights in a Policy to someone else as
collateral for a loan or for some other reason. We will not be bound by an
assignment unless it is received in writing. You must provide us with two copies
of the assignment. We are not responsible for any payment we make or any action
taken before we receive a complete notice of the assignment in good order. We
are also not responsible for the validity of the assignment. An absolute
assignment is a change of ownership. Because there may be unfavorable tax
consequences, including recognition of taxable income and the loss of income
tax-free treatment for any death benefit payable to the beneficiary, you should
consult a qualified tax adviser before making an assignment.

MORE ABOUT POLICY CHARGES

Purpose of our charges. The charges under the Policy are designed to cover, in
total, our direct and indirect costs of selling, administering and providing
benefits under the Policy. They are also designed, in total, to compensate us
for the risks we assume and services that we provide under the Policy. These
include:

. mortality risks (such as the risk that insured persons will, on average,
die before we expect, thereby increasing the amount of claims we must pay);

. investment risks (such as the risk that adverse investment performance will
make it more difficult for us to reduce the amount of our daily charge for
revenues below what we anticipate);

. sales risks (such as the risk that the number of Policies we sell and the
premiums we receive net of withdrawals, are less than we expect, thereby
depriving us of expected economies of scale);

. regulatory risks (such as the risk that tax or other regulations may be
changed in ways adverse to issuers of variable life insurance policies);
and

. expense risks (such as the risk that the costs of administrative services
that the Policy requires us to provide will exceed what we currently
project).

30
<PAGE>

If the charges that we collect from the Policy exceed our total costs in
connection with the Policy, we will earn a profit. Otherwise we will incur a
loss.

The current monthly insurance charge has been designed primarily to provide
funds out of which we can make payments of death benefits under the Policy as
insured persons die.

Any excess from the charges discussed above is primarily intended to:

. offset other expenses in connection with the Policies (such as the costs of
processing applications for Policies and other unreimbursed administrative
expenses, costs of paying marketing and distribution expenses for the
Policies, and costs of paying death claims if the mortality experience of
insured persons is worse than we expect);

. compensate us for the risk we assume under the Policies; or

. otherwise be retained by us as profit.

Although the paragraphs above describe the primary purposes for which charges
under the Policies have been designed, these purposes are subject to
considerable change over the life of a Policy. We can retain or use the revenues
from any charge or charge increase for any purpose.

Change of tobacco use. If the person insured under your Policy is a tobacco
user, you may apply to us for an improved risk class if the insured person meets
our then applicable requirements for demonstrating that he or she has stopped
tobacco use for a sufficient period.

Gender neutral Policy. Our cost of insurance charge rates in Montana will not
be greater than the comparable male rates illustrated in this prospectus.

Congress and the legislatures of various states have from time to time
considered legislation that would require insurance rates to be the same for
males and females of the same age, rating class and tobacco user status. In
addition, employers and employee organizations should consider, in consultation
with counsel, the impact of Title VII of the Civil Rights Act of 1964 on the
purchase of life insurance policies in connection with an employment-related
insurance or benefit plan. In a 1983 decision, the United States Supreme Court
held that, under Title VII, optional annuity benefits under a deferred
compensation plan could not vary on the basis of gender.

Cost of insurance rates. Because of specified amount increases, different cost
of insurance rates may apply to different increments of specified amount under
your Policy. If so, we attribute your accumulation value first to the oldest
increments of specified amount to compute our net amount at risk at each cost of
insurance rate. See "Monthly Insurance Charge" beginning on page 7.

Miscellaneous. Certain of the distributors or advisers of the Mutual Funds
listed on pages 8 and 9 of this prospectus reimburse us, on a quarterly basis,
for certain administrative, Policy, and policy owner support expenses. These
reimbursements will be reasonable for the services performed and are not
designed to result in a profit. These reimbursements are paid by the
distributors or the advisers, and will

31
<PAGE>

not be paid by the Mutual Funds, the divisions or the owners. No payments have
yet been made under these arrangements, because the number of Policies issued
does not require a payment.

EFFECTIVE DATE OF POLICY AND RELATED TRANSACTIONS

Valuation dates, times, and periods. We compute values under a Policy on each
day that the New York Stock Exchange is open for business. We call each such
day a "valuation date."

We compute policy values as of 3:00 p.m., Central time, on each valuation
date. We call this our "close of business." We call the time from the close of
business on one valuation date to the close of business of the next valuation
date a "valuation period."

Date of receipt. Generally we consider that we have received a premium payment
or another communication from you on the day we actually receive it in full and
proper order at our Home Office. If we receive it after the close of business on
any valuation date, however, we consider that we have received it on the day
following that valuation date.

Commencement of insurance coverage. After you apply for a Policy, it can
sometimes take up to several weeks for us to gather and evaluate all the
information we need to decide whether to issue a Policy to you and, if so, what
the insured person's insurance rate class should be. We will not pay a death
benefit under a Policy unless (a) it has been delivered to and accepted by the
owner and at least the initial premium has been paid, and (b) at the time of
such delivery and payment, there have been no adverse developments in the
insured person's health or risk of death. However, if you pay at least the
minimum first premium payment with your application for a Policy, we will
provide temporary coverage of up to $500,000 provided the insured person meets
certain medical and risk requirements. The terms and conditions of this
coverage are described in our "Limited Temporary Life Insurance Agreement." You
can obtain a copy from our Home Office by writing to the address shown on the
first page of this prospectus or from your AGL representative.

Date of issue; Policy months and years. We prepare the Policy only after we
approve an application for a Policy and assign an appropriate insurance rate
class. The day we begin to deduct charges will appear on page 3 of your Policy
and is called the "date of issue." Policy months and years are measured from the
date of issue. To preserve a younger age at issue for the insured person, we may
assign a date of issue to a Policy that is up to 6 months earlier than otherwise
would apply.

Monthly deduction days. Each charge that we deduct monthly is assessed against
your accumulation value at the close of business on the date of issue and at the
end of each subsequent valuation period that includes the first day of a Policy
month. We call these "monthly deduction days."

Commencement of investment performance. We begin to credit an investment
return to the accumulation value resulting from your initial premium payment on
the later of (a) the date of issue, or (b) the date all requirements needed to
place the Policy in force have been satisfied, including underwriting approval
and receipt in the Home Office of the necessary premium. In the case of a back-
dated Policy, we do not credit an investment return to the accumulation value
resulting from your initial premium payment until the date stated in (b) above.

32
<PAGE>

Effective date of other premium payments and requests that you make. Premium
payments (after the first) and transactions made in response to your requests
and elections are generally effected at the end of the valuation period in which
we receive the payment, request or election and based on prices and values
computed as of that same time. Exceptions to this general rule are as follows:

. Increases you request in the specified amount of insurance, and
reinstatements of a Policy that has lapsed take effect on the Policy's
monthly deduction day on or next following our approval of the transaction;

. We may return premium payments if we determine that such premiums would
cause your Policy to become a modified endowment contract or to cease to
qualify as life insurance under federal income tax law or exceed the
maximum net amount at risk;

. If you exercise the right to return your Policy described on the second
page of this prospectus, your coverage will end when you mail us your
Policy or deliver it to your AGL representative; and

. If you pay a premium in connection with a request which requires our
approval, your payment will be applied when received rather than following
the effective date of the change requested so long as your coverage is in
force and the amount paid will not cause you to exceed premium limitations
under the Code. If we do not approve your request, no premium will be
refunded to you except to the extent necessary to cure any violation of the
maximum premium limitations under the Code. We will not apply this
procedure to premiums you pay in connection with reinstatement requests.

DISTRIBUTION OF THE POLICIES

American General Securities Incorporated ("AGSI") is the principal underwriter
of the Policies. AGSI is a wholly-owned subsidiary of AGL. AGL, in turn, is a
wholly-owned subsidiary of American General Corporation ("American General").
AGSI's principal office is at 2727 Allen Parkway, Houston, Texas 77019. AGSI
was organized as a Texas corporation on March 8, 1983 and is a registered
broker-dealer under the Securities Exchange Act of 1934, as amended ("1934
Act") and is a member of the National Association of Securities Dealers, Inc.
("NASD"). AGSI is also the principal underwriter for AGL's Separate Accounts A
and D, and Separate Account E of American General Life Insurance Company of New
York, which is a wholly-owned subsidiary of AGL. These separate accounts are
registered investment companies. AGSI, as the principal underwriter, is not
paid any fees on the Policies.

We and AGSI have sales agreements with various broker-dealers and banks under
which the Policies will be sold by registered representatives of the broker-
dealers or employees of the banks. These registered representatives and
employees are also required to be authorized under applicable state regulations
as life insurance agents to sell variable life insurance. The broker-dealers
are ordinarily required to be registered with the SEC and must be members of the
NASD.

We pay compensation directly to broker-dealers and banks for the promotion and
sales of the Policies. AGSI also has its own registered representatives who will
sell the Policies, and we will pay compensation to AGSI for these sales. The
compensation payable to broker-dealers or banks for the sales of the Policies
may vary with the sales agreement, but is generally not expected to exceed the
amounts described below:

33
<PAGE>

A. For a Policy issued based on simplified underwriting:

. 1.05% annually of the Policy's accumulation value (reduced by any
outstanding loan) in Policy years 1 through 10; and

. .85% annually of the Policy's accumulation value (reduced by any
outstanding loan) in Policy years 11 through 15.

B. For a Policy issued based on full underwriting:

. 2.5% of the Policy's accumulation value (reduced by any outstanding
loan) in Policy year 1;

. 1.0% annually of the Policy's accumulation value (reduced by any
outstanding loan) in Policy years 2 through 10;

. 0.50% annually of the Policy's accumulation value (reduced by any
outstanding loan) in Policy years 11 through 20; and

. 0.25% annually of the Policy's accumulation value (reduced by any
outstanding loan) after Policy year 20.

The maximum value of any alternative amounts we may pay for sales of the
Policies is expected to be equivalent over time to the amounts described above.
For example, we may pay a broker-dealer compensation in a lump sum which will
not exceed the aggregate compensation described above.

We pay a comparable amount of compensation to the broker-dealers or banks with
respect to any increase in the specified amount of coverage that you request.
In addition, we may pay the broker-dealers or banks expense allowances, bonuses,
wholesaler fees and training allowances.

We pay the compensation directly to AGSI or any other selling broker-dealer
firm or bank. We pay the compensation from our own resources which does not
result in any additional charge to you that is not described on page 7 of the
prospectus. Each broker-dealer or bank, in turn, may compensate its registered
representative or employee who acts as agent in selling you a Policy.

PAYMENT OF POLICY PROCEEDS

General. We will pay any death benefit, maturity benefit, cash surrender value
or loan proceeds within seven days after we receive the last required form or
request (and any other documents that may be required for payment of a death
benefit). If we do not have information about the desired manner of payment
within 60 days after the date we receive notification of the insured person's
death, we will pay the proceeds as a single sum, normally within seven days
thereafter.

Delay for check clearance. We reserve the right to defer payment of that
portion of your accumulation value that is attributable to a premium payment
made by check for a reasonable period of time (not to exceed 15 days) to allow
the check to clear the banking system.

34
<PAGE>

Delay of Separate Account VL-R proceeds. We reserve the right to defer payment
of any death benefit, loan or other distribution that comes from that portion of
your accumulation value that is allocated to Separate Account VL-R, if:

. the New York Stock Exchange is closed other than customary weekend and
holiday closings, or trading on the New York Stock Exchange is restricted;

. an emergency exists, as a result of which disposal of securities is not
reasonably practicable or it is not reasonably practicable to fairly
determine the accumulation value; or

. the SEC by order permits the delay for the protection of owners.

Transfers and allocations of accumulation value among the investment options may
also be postponed under these circumstances. If we need to defer calculation of
Separate Account VL-R values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.

Delay to challenge coverage. We may challenge the validity of your insurance
Policy based on any material misstatements in your application and any
application for a change in coverage. However,

. We cannot challenge the Policy after it has been in effect, during the
insured person's lifetime, for two years from the date the Policy was
issued or restored after termination. (Some states may require that we
measure this time in some other way.)

. We cannot challenge any Policy change that requires evidence of
insurability (such as an increase in specified amount) after the change has
been in effect for two years during the insured person's lifetime.

ADJUSTMENTS TO DEATH BENEFIT

Suicide. If the insured person commits suicide within two years after the date
on which the Policy was issued, the death benefit will be limited to the total
of all premiums that have been paid to the time of death minus any outstanding
Policy loans and any partial surrenders. If the insured person commits suicide
within two years after the effective date of an increase in specified amount
that you requested, we will pay the death benefit based on the specified amount
which was in effect before the increase, plus the monthly insurance deductions
for the increase. Some states require that we compute differently these periods
for non-contestability following a suicide.

Wrong age or gender. If the age or gender of the insured person was misstated
on your application for a Policy (or for any increase in benefits), we will
adjust any death benefit to be what the monthly insurance charge deducted for
the current month would have purchased based on the correct information.

Death during grace period. If the insured person dies during the Policy's
grace period, we will deduct any overdue monthly charges from the insurance
proceeds.

35
<PAGE>

ADDITIONAL RIGHTS THAT WE HAVE

We have the right at any time to:

. transfer the entire balance in an investment option in accordance with any
transfer request you make that would reduce your accumulation value for
that option to below $500;

. transfer the entire balance in proportion to any other investment options
you then are using, if the accumulation value in an investment option is
below $500 for any other reason;

. end the automatic rebalancing feature if your accumulation value falls
below $5,000;

. change the underlying Mutual Fund that any investment option uses;

. add, delete or limit investment options, combine two or more investment
options, or withdraw assets relating to AG Legacy Plus from one investment
option and put them into another;

. operate Separate Account VL-R under the direction of a committee or
discharge such a committee at any time;

. change our guidelines for the simplified and full underwriting methods;

. operate Separate Account VL-R, or one or more investment options, in any
other form the law allows, including a form that allows us to make direct
investments. Separate Account VL-R may be charged an advisory fee if its
investments are made directly rather than through another investment
company. In that case, we may make any legal investments we wish; or

. make other changes in the Policy that in our judgment are necessary or
appropriate to ensure that the Policy continues to qualify for tax
treatment as life insurance, or that do not reduce any cash surrender
value, death benefit, accumulation value, or other accrued rights or
benefits.

You will be notified as required by law if there are any material changes in
the underlying investments of an investment option that you are using. We intend
to comply with all applicable laws in making any changes and, if necessary, we
will seek policy owner approval.

PERFORMANCE INFORMATION

From time to time, we may quote performance information for the divisions
of Separate Account VL-R in advertisements, sales literature, or reports to
owners or prospective investors.

We may quote performance information in any manner permitted under applicable
law. We may, for example, present such information as a change in a hypothetical
owner's cash value or death benefit. We also may present the yield or total
return of the division based on a hypothetical investment in a Policy. The
performance information shown may cover various periods of time, including
periods beginning with the commencement of the operations of the division or the
Mutual Funds in which it invests. The performance information shown may reflect
the deduction of one or more charges, such as the premium

36
<PAGE>

charge, and we generally expect to exclude costs of insurance charges because of
the individual nature of these charges.

We may compare a division's performance to that of other variable life
separate accounts or investment products, as well as to generally accepted
indices or analyses, such as those provided by research firms and rating
services. In addition, we may use performance ratings that may be reported
periodically in financial publications, such as Money Magazine, Forbes, Business
Week, Fortune, Financial Planning and The Wall Street Journal. We also may
advertise ratings of AGL's financial strength or claims-paying ability as
determined by firms that analyze and rate insurance companies and by nationally
recognized statistical rating organizations.

Performance information for any division reflects the performance of a
hypothetical Policy and are not illustrative of how actual investment
performance would affect the benefits under your Policy. You should not consider
such performance information to be an estimate or guarantee of future
performance.

OUR REPORTS TO POLICY OWNERS

Shortly after the end of each Policy year, we will mail you a report that
includes information about your Policy's current death benefit, accumulation
value, cash surrender value and policy loans. We will send you notices to
confirm premium payments, transfers and certain other Policy transactions. We
will mail to you at your last known address of record, these and any other
reports and communications required by law. You should give us prompt written
notice of any address change.

AGL'S MANAGEMENT

The directors, executive officers, and (to the extent responsible for variable
life operations) the other principal officers of AGL are listed below.

NAME BUSINESS EXPERIENCE WITHIN PAST FIVE YEARS
- --------------------------------------------------------------------------------

Rodney O. Martin, Jr. Director of American General Life Insurance Company since
August 1996. Chairman of the Board and CEO of American
General Life Insurance Company since April 2000.
President and CEO (August 1996-July 1998). President of
American General Life Insurance Company of New York
(November 1995-August 1996). Vice President Agencies,
with Connecticut Mutual Life Insurance Company, Hartford,
Connecticut (1990-1995).

Donald W. Britton Director of the Board of American General Life Insurance
Company since April 1999. President of American General
Life Insurance Company since April 2000. President of
First Colony Life, Lynchburg, Virginia (1996 - April
1999) and Executive Vice President of First Colony Life
(1992 - 1996).

37
<PAGE>

David A. Fravel Director of American General Life Insurance Company since
November 1996. Elected Executive Vice President in April
1998. Previously held position of Senior Vice President
of American General Life Insurance Company since November
1996. Senior Vice President of Massachusetts Mutual,
Springfield, Missouri (March 1996-June 1996); Vice
President, New Business, Connecticut Mutual Life
Insurance Company, Hartford, Connecticut (December 1978-
March 1996).

David L. Herzog Director, Executive Vice President and Chief Financial
Officer of American General Life Insurance Company since
March 2000. Vice President of General American, St.
Louis, Missouri (June 1991 -February 2000).

John V. LaGrasse Director of American General Life Insurance Company since
August 1996. Chief Technology Officer of American General
Life Insurance Company since April, 2000. Elected
Executive Vice President in July 1998. Previously held
position of Senior Vice President of American General
Life Insurance Company since August 1996. Director of
Citicorp Insurance Services, Inc., Dover, Delaware (1986-
1996).

Paul L. Mistretta Executive Vice President of American General Life
Insurance Company since July 1999. Senior Vice President
of First Colony Life Insurance, Lynchburg, Virginia
(1992 - July 1999).

Brian D. Murphy Executive Vice President of American General Life
Insurance Company since July 1999. Previously held
position of Senior Vice President-Insurance Operations of
American General Life Insurance Company since April 1998.
Vice President-Sales, Phoenix Home Life, Hartford, CT
(January 1997-April 1998). Vice President of Underwriting
and Issue, Phoenix Home Life (July 1994-January 1997).
Various positions with Mutual of New York, Syracuse, NY,
including Agent, Agency Manager, Marketing Life and
Disability Income Underwriting Management, (1978-July
1994).

Don M. Ward Executive Vice President of American General Life
Insurance Company since April 2000. Senior Vice President
of American General Life Insurance Company since February
1998. Vice President of Pacific Life Insurance Company,
Newport Beach, CA (1991-February 1998).

Thomas M. Zurek Director and Executive Vice President of American General
Life Insurance Company since April 1999. Elected General
Counsel in December 1998. Previously held various
positions with American General Life Insurance Company
including Senior Vice President since December 1998 and
Vice President since October 1998. In February 1998 named
as Senior Vice President and Deputy General Counsel of
American General Corporation. Attorney Shareholder with
Nyemaster,

38
<PAGE>

Goode, Voigts, West, Hansell & O'Brien, Des Moines, Iowa
(June 1992 -February 1998).

Wayne A. Barnard Senior Vice President of American General Life Insurance
Company since November 1997. Previously held various
positions with American General Life Insurance Company
including Vice President since February 1991.

Robert M. Beuerlein Senior Vice President and Chief Actuary of American
General Life Insurance Company since September 1999.
Previously held position of Vice President of American
General Life Insurance Company since December 1998.
Director, Senior Vice President and Chief Actuary of The
Franklin Life Insurance Company, Springfield, Illinois
(January 1991 - June 1999).

William Guterding Senior Vice President of American General Life Insurance
Company since April 1999. Senior Vice President and Chief
Underwriting Officer of The United States Life Insurance
Company in the City of New York since October, 1980.

Robert F. Herbert, Jr. Senior Vice President and Treasurer of American General
Life Insurance Company since May 1996, and Controller
since February 1991.

Simon J. Leech Senior Vice President for American General Life Insurance
Company since July 1997. Previously held various
positions with American General Life Insurance Company
since 1981, including Director of Policy Owners' Service
Department in 1993, and Vice President-Policy
Administration in 1995.

Royce G. Imhoff, II Director for American General Life Insurance Company
since November 1997. Previously held various positions
with American General Life Insurance Company including
Vice President since August 1996 and Regional Director
since 1992.

The principal business address of each person listed above is our Home
Office; except that the street number for Messrs. Fravel, LaGrasse, Martin,
Herzog, Britton, Mistretta, Barnard and Zurek is 2929 Allen Parkway, the street
number for Mr. Ward is 2727 Allen Parkway, the street number for Mr.Guterding
is 125 Maiden Lane, New York, New York.

39
<PAGE>

PRINCIPAL UNDERWRITER'S MANAGEMENT

The directors and principal officers of the principal underwriter are:

Position and Offices
with Underwriter,
Name and Principal American General
Business Address Securities Incorporated
- ------------------ -----------------------

F. Paul Kovach, Jr. Director and Chairman,
American General Securities Incorporated President and Chief Executive Officer
2727 Allen Parkway
Houston, TX 77019

Rodney O. Martin, Jr. Director and Vice Chairman
American General Life Companies
2929 Allen Parkway
Houston, TX 77019

Donald W. Britton Director and Assistant
American General Life Companies Vice President
2929 Allen Parkway
Houston, TX 77019

J. Andrew Kalbaugh Vice President -
American General Life Companies Chief Marketing Officer
2727 Allen Parkway
Houston, TX 77019

Robert M. Roth Vice President and Secretary
American General Securities Incorporated
2727 Allen Parkway
Houston, TX 77019

Don M. Ward Vice President
American General Life Companies
2727 Allen Parkway
Houston, TX 77019

Pauletta P. Cohn Assistant Secretary
American General Life Companies
2929 Allen Parkway
Houston, TX 77019

40
<PAGE>

Robert F. Herbert, Jr. Assistant Treasurer
American General Life Companies
2727-A Allen Parkway
Houston, Texas 77019

D. Lynne Walters Assistant Tax Officer
American General Corporation
2929 Allen Parkway
Houston, Texas 77019

Royce G. Imhoff, II Director
American General Life Companies
2727-A Allen Parkway
Houston, Texas 77019

Alice T. Kane Director
American General Retirement Services
125 Maiden Lane
New York, NY 10038

LEGAL MATTERS

We are not involved in any legal proceedings that would be considered material
with respect to a policy owner's interest in Separate Account VL-R. Pauletta P.
Cohn, Esquire, Deputy General Counsel of the American General Life Companies, an
affiliate of AGL, has opined as to the validity of the Policies.

INDEPENDENT AUDITORS

The financial statements of AGL included in this prospectus have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
appearing elsewhere in this prospectus. Such financial statements have been
included in this prospectus in reliance upon the report of Ernst & Young LLP
given upon the authority of such firm as experts in accounting and auditing.
Ernst & Young LLP is located at One Houston Center, 1221 McKinney, Suite 2400,
Houston, Texas 77010-2007.

ACTUARIAL EXPERT

Actuarial matters have been examined by Robert M. Beuerlein, who is Senior
Vice President and Chief Actuary of AGL. His opinion on actuarial matters is
filed as an exhibit to the registration statement we have filed with the SEC in
connection with the Policies.

SERVICES AGREEMENT

American General Life Companies ("AGLC") is party to an existing general
services agreement with AGL. AGLC, an affiliate of AGL, is a corporation
incorporated in Delaware on November 24, 1997. Pursuant to this agreement, AGLC
provides services to AGL, including most of the administrative, data

41
<PAGE>

processing, systems, customer services, product development, actuarial,
auditing, accounting and legal services for AGL and AG Legacy Plus Policies.

CERTAIN POTENTIAL CONFLICTS

The Mutual Funds sell shares to separate accounts of insurance companies, both
affiliated and not affiliated with AGL. We currently do not foresee any
disadvantages to you arising out of such sales. Differences in treatment under
tax and other laws, as well as other considerations, could cause the interests
of various owners to conflict. For example, violation of the federal tax laws by
one separate account investing in the Funds could cause the contracts funded
through another separate account to lose their tax-deferred status, unless
remedial action were taken. However, each Mutual Fund has advised us that its
board of trustees (or directors) intends to monitor events to identify any
material irreconcilable conflicts that possibly may arise and to determine what
action, if any, should be taken in response. If we believe that a Fund's
response to any such event insufficiently protects our policy owners, we will
see to it that appropriate action is taken to do so. If it becomes necessary for
any separate account to replace shares of any Mutual Fund in which it invests,
that Fund may have to liquidate securities in its portfolio on a disadvantageous
basis.

YEAR 2000 CONSIDERATIONS

As of March 10, 2000, all of our ultimate parent, American General Corporation's
("AGC") major technology systems, programs, and applications, including those
which rely on third parties, are operating smoothly following our transition
into 2000. We have experienced no interruptions to normal business operations,
including the processing of customer account data and transactions. We will
continue to monitor our technology systems, including critical third party
dependencies, as necessary to maintain our Year 2000 readiness. We do not
expect any future disruptions, if they occur, to have a material effect on the
company's results of operations, liquidity, or financial condition.

Through December 31, 1999, AGC incurred and expensed pretax costs of $98 million
related to Year 2000 readiness, including $18 million in 1999 and $65 million in
1998. In 1999, Year 2000 readiness expenses were included in division earnings.
The 1998 expenses were excluded from division earnings, consistent with the
manner in which we reviewed division results. In addition, we accelerated the
planned replacement of certain systems as part of our Year 2000 plans. The cost
of these replacement systems was immaterial. We do not anticipate incurring any
significant costs in the future to maintain Year 2000 readiness.

42
<PAGE>

FINANCIAL STATEMENTS

The financial statements of AGL contained in this prospectus should be
considered to bear only upon the ability of AGL to meet its obligations under AG
Legacy Plus Policies. They should not be considered as bearing upon the
investment experience of Separate Account VL-R. No financial statements of
Separate Account VL-R are included because, at the date of this prospectus, none
of the Divisions of Separate Account VL-R were available under AG Legacy Plus
Policy.

PAGE TO
CONSOLIDATED FINANCIAL STATEMENTS OF SEE IN THIS
AMERICAN GENERAL LIFE INSURANCE COMPANY PROSPECTUS
- --------------------------------------- ------------

Report of Ernst & Young, LLP Independent Auditors................ F-1
Consolidated Balance Sheets as of December 31, 1999 and 1998..... F-2
Consolidated Income Statements for the years ended
December 31, 1999, 1998 and 1997............................ F-4
Consolidated Statements of Comprehensive Income
for the years ended December 31, 1999, 1998 and 1997......... F-5
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1999, 1998 and 1997..................... F-6
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997...................... F-7
Notes to Consolidated Financial Statements....................... F-8

<PAGE>

[LETTERHEAD OF ERNST & YOUNG]

Report of Independent Auditors

Board of Directors and Stockholder
American General Life Insurance Company

We have audited the accompanying consolidated balance sheets of American General
Life Insurance Company (an indirectly wholly-owned subsidiary of American
General Corporation) and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, comprehensive income, shareholder's
equity, and cash flows for each of the three years in the period ended December
31, 1999. 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 auditing standards generally accepted
in the United States. 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 consolidated financial position of American General
Life Insurance Company and subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.

/s/ Ernst & Young LLP
------------------------------
Ernst & Young LLP

March 1,2000

F-1
<PAGE>

American General Life Insurance Company

Consolidated Balance Sheets

DECEMBER 31
1999 1998
-----------------------------
(In Thousands)

ASSETS
Investments:
Fixed maturity securities, at fair value
(amortized cost - $27,725,167 in 1999 and $27,029,409 $28,906,261
$27,425,605 in 1998)

Equity securities, at fair value (cost -
$198,640 in 1999 and $193,368 in 1998) 237,065 211,684

Mortgage loans on real estate 1,918,956 1,557,268
Policy loans 1,234,729 1,170,686
Investment real estate 125,563 119,520
Other long-term investments 129,155 86,194
Short-term investments 123,779 222,949
----------------------------
Total investments 30,798,656 32,274,562

Cash 45,983 117,675
Investment in Parent Company (cost - $8,597 in
1999 and 1998) 53,083 54,570

Indebtedness from affiliates 75,195 161,096
Accrued investment income 482,652 459,961
Accounts receivable 186,592 196,596
Deferred policy acquisition costs 1,956,653 1,087,718
Property and equipment 78,908 66,197
Other assets 250,299 206,318
Assets held in separate accounts 23,232,419 15,616,020
----------------------------
Total assets $57,160,440 $50,240,713
============================

See accompanying notes.

F-2
<PAGE>

American General Life Insurance Company

Consolidated Balance Sheets

DECEMBER 31
1999 1998
-----------------------------
(In Thousands)

LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits $29,901,842 $29,353,022
Other policy claims and benefits payable 53,326 54,278
Other policyholders' funds 371,632 398,587
Federal income taxes 375,332 677,315
Indebtedness to affiliates 7,086 18,173
Other liabilities 372,416 554,783
Liabilities related to separate accounts 23,232,419 15,616,020
----------------------------
Total liabilities 54,314,053 46,672,178

Shareholder's equity:
Common stock, $10 par value, 600,000 shares
authorized, issued, and outstanding 6,000 6,000

Preferred stock, $100 par value, 8,500 shares
authorized, issued, and outstanding 850 850
Additional paid-in capital 1,371,687 1,368,089
Accumulated other comprehensive (loss) income (356,865) 679,107
Retained earnings 1,824,715 1,514,489
----------------------------
Total shareholder's equity 2,846,387 3,568,535

----------------------------
Total liabilities and shareholder's equity $57,160,440 $50,240,713
============================

See accompanying notes.

F-3
<PAGE>

American General Life Insurance Company

Consolidated Statements of Income

YEAR ENDED DECEMBER 31
1999 1998 1997
-------------------------------------------
(In Thousands)

Revenues:
Premiums and other considerations $ 540,029 $ 470,238 $ 428,721
Net investment income 2,348,196 2,316,933 2,198,623
Net realized investment gains 5,351 (33,785) 29,865
(losses)
Other 82,581 69,602 53,370
-----------------------------------------
Total revenues 2,976,157 2,822,988 2,710,579

Benefits and expenses:
Benefits 1,719,375 1,788,417 1,757,504
Operating costs and expenses 495,606 467,067 379,012
Interest expense 74 15 782
Litigation settlement - 97,096 -
-----------------------------------------
Total benefits and expenses 2,215,055 2,352,595 2,137,298
-----------------------------------------
Income before income tax expense 761,102 470,393 573,281

Income tax expense 263,196 153,719 198,724
------------------------------------------
Net income $ 497,906 $ 316,674 $ 374,557
==========================================

See accompanying notes.

F-4
<PAGE>

American General Life Insurance Company

Consolidated Statements of Comprehensive Income

YEAR ENDED DECEMBER 31
1999 1998 1997
----------------------------------------
(In Thousands)

Net income $ 497,906 $ 316,674 $ 374,557
Other comprehensive income:
Gross change in unrealized gains
(losses) on securities (pretax:
($1,581,500) $341,000; $318,700) (1,027,977) 222,245 207,124
Less: gains (losses) realized in 7,995 (29,336) (1,251)
net income
----------------------------------------
Change in net unrealized gains
(losses) on securities (pretax:
($1,593,800) $387,000; $320,600) (1,035,972) 251,581 208,375
----------------------------------------
Comprehensive (loss) income $ (538,066) $ 568,255 $ 582,932
========================================

See accompanying notes.

F-5
<PAGE>

American General Life Insurance Company

Consolidated Statements of Shareholder's Equity

YEAR ENDED DECEMBER 31
1999 1998 1997
-------------------------------------------
(In Thousands)

Common stock:
Balance at beginning of year $ 6,000 $ 6,000 $ 6,000
Change during year - - -
-------------------------------------------
Balance at end of year 6,000 6,000 6,000

Preferred stock:
Balance at beginning of year 850 850 850
Change during year - - -
-------------------------------------------
Balance at end of year 850 850 850

Additional paid-in capital:
Balance at beginning of year 1,368,089 1,184,743 933,342
Capital contribution from Parent
Company - 182,284 250,000
Other changes during year 3,598 1,062 1,401
-------------------------------------------
Balance at end of year 1,371,687 1,368,089 1,184,743

Accumulated other comprehensive
(loss) income:
Balance at beginning of year 679,107 427,526 219,151
Change in unrealized gains
(losses) on securities (1,035,972) 251,581 208,375
------------------------------------------
Balance at end of year (356,865) 679,107 427,526

Retained earnings:
Balance at beginning of year 1,514,489 1,442,495 1,469,618
Net income 497,906 316,674 374,557
Dividends paid (187,680) (244,680) (401,680)
------------------------------------------
Balance at end of year 1,824,715 1,514,489 1,442,495
-------------------------------------------
Total shareholder's equity $2,846,387 $3,568,535 $3,061,614
===========================================

See accompanying notes.

F-6
<PAGE>

American General Life Insurance Company

Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
--------------------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
OPERATING ACTIVITIES
Net income $ 497,906 $ 316,674 $ 374,557
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Change in accounts receivable 10,004 11,613 (37,752)
Change in future policy benefits and other
policy claims (2,422,221) (866,428) (1,143,736)

Amortization of policy acquisition costs 101,066 125,062 115,467
Policy acquisition costs deferred (307,854) (244,196) (219,339)
Change in other policyholders' funds (26,955) 273 21,639
Provision for deferred income tax expense 85,257 15,872 13,264
Depreciation 24,066 19,418 16,893
Amortization (30,894) (26,775) (28,276)
Change in indebtedness to/from affiliates 74,814 (51,116) (8,695)
Change in amounts payable to brokers (43,321) (894) 31,769
Net loss (gain) on sale of investments 45,379 37,016 (29,865)
Other, net (170,413) 57,307 30,409
--------------------------------------------------------------------
Net cash used in operating activities (2,163,166) (606,174) (863,665)

INVESTING ACTIVITIES
Purchases of investments and loans made (44,508,908) (28,231,615) (29,638,861)
Sales or maturities of investments and
receipts from repayment of loans 43,879,377 26,656,897 28,300,238

Sales and purchases of property, equipment,
and software, net (87,656) (105,907) (9,230)
--------------------------------------------------------------------
Net cash used in investing activities (717,187) (1,680,625) (1,347,853)

FINANCING ACTIVITIES
Policyholder account deposits 5,747,658 4,688,831 4,187,191
Policyholder account withdrawals (2,754,915) (2,322,307) (1,759,660)
Dividends paid (187,680) (244,680) (401,680)
Capital contribution from Parent - 182,284 250,000
Other 3,598 1,062 1,401
--------------------------------------------------------------------
Net cash provided by financing activities 2,808,661 2,305,190 2,277,252
--------------------------------------------------------------------
(Decrease) increase in cash (71,692) 18,391 65,734
Cash at beginning of year 117,675 99,284 33,550
--------------------------------------------------------------------
Cash at end of year $ 45,983 $ 117,675 $ 99,284
====================================================================
</TABLE>

Interest paid amounted to approximately $2,026,000, $420,000, and $1,004,000, in
1999, 1998, and 1997, respectively.

See accompanying notes.

F-7
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements

December 31, 1999

NATURE OF OPERATIONS

American General Life Insurance Company (the "Company") is a wholly-owned
subsidiary of AGC Life Insurance Company, which is a wholly-owned subsidiary of
American General Corporation (the "Parent Company"). The Company's wholly-owned
life insurance subsidiaries are American General Life Insurance Company of New
York ("AGNY") and The Variable Annuity Life Insurance Company ("VALIC"). During
1998, the Company formed a new wholly-owned subsidiary, American General Life
Companies ("AGLC"), to provide management services to certain life insurance
subsidiaries of the Parent Company.

The Company offers a complete portfolio of the standard forms of universal life,
variable universal life, interest-sensitive whole life, term life, structured
settlements, and fixed and variable annuities throughout the United States. In
addition, a variety of equity products is sold through its wholly-owned
broker/dealer, American General Securities, Inc. The Company serves the estate
planning needs of middle- and upper-income households and the life insurance
needs of small- to medium-sized businesses. AGNY offers a broad array of
traditional and interest-sensitive insurance, in addition to individual annuity
products. VALIC provides tax-deferred retirement annuities and employer-
sponsored retirement plans to employees of health care, educational, public
sector, and other not-for-profit organizations throughout the United States.

1. ACCOUNTING POLICIES

1.1 PREPARATION OF FINANCIAL STATEMENTS

The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") and include the accounts of
the Company and its wholly-owned subsidiaries. Transactions with the Parent
Company and other subsidiaries of the Parent Company are not eliminated from the
financial statements of the Company. All other material intercompany
transactions have been eliminated in consolidation.

The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
disclosures of contingent assets and liabilities. Ultimate results could differ
from those estimates.

F-8
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

1. ACCOUNTING POLICIES (CONTINUED)

1.2 STATUTORY ACCOUNTING

The Company and its wholly-owned life insurance subsidiaries are required to
file financial statements with state regulatory authorities. State insurance
laws and regulations prescribe accounting practices for calculating statutory
net income and equity. In addition, state regulators may permit statutory
accounting practices that differ from prescribed practices. The use of such
permitted practices by the Company and its wholly-owned life insurance
subsidiaries did not have a material effect on statutory equity at December 31,
1999.

Statutory financial statements differ from GAAP. Significant differences were as
follows (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------------------
Net income:
<S> <C> <C> <C>
Statutory net income (1999 balance is
unaudited) $ 350,294 $ 259,903 $ 327,813
Deferred policy acquisition costs and cost
of insurance purchased 200,285 116,597 103,872
Deferred income taxes (86,456) (53,358) (13,264)
Adjustments to policy reserves 23,110 52,445 (30,162)
Goodwill amortization (2,437) (2,033) (2,067)
Net realized gain on investments 2,246 41,488 20,139
Litigation settlement - (63,112) -
Other, net 10,864 (35,256) (31,774)
--------------------------------------------------------
GAAP net income $ 497,906 $ 316,674 $ 374,557
========================================================
Shareholders' equity:
Statutory capital and surplus (1999 balance
is unaudited) $1,753,570 $1,670,412 $1,636,327

Deferred policy acquisition costs and cost
of insurance purchased 1,975,667 1,109,831 835,031
Deferred income taxes (350,258) (698,350) (535,703)
Adjustments to policy reserves (202,150) (274,532) (319,680)
Acquisition-related goodwill 52,317 54,754 51,424
Asset valuation reserve ("AVR") 351,904 310,564 255,975
Interest maintenance reserve ("IMR") 53,226 27,323 9,596
Investment valuation differences (683,500) 1,487,658 1,272,339
Surplus from separate accounts (180,362) (174,447) (150,928)
Other, net 75,973 55,322 7,233
--------------------------------------------------------
Total GAAP shareholders' equity $2,846,387 $3,568,535 $3,061,614
========================================================
</TABLE>

F-9
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

1. ACCOUNTING POLICIES (CONTINUED)

1.2 STATUTORY ACCOUNTING (CONTINUED)

The more significant differences between GAAP and statutory accounting
principles are that under GAAP: (a) acquisition costs related to acquiring new
business are deferred and amortized (generally in proportion to the present
value of expected gross profits from surrender charges and investment,
mortality, and expense margins), rather than being charged to operations as
incurred; (b) future policy benefits are based on estimates of mortality,
interest, and withdrawals generally representing the Company's experience, which
may differ from those based on statutory mortality and interest requirements
without consideration of withdrawals; (c) deferred tax assets and liabilities
are established for temporary differences between the financial reporting basis
and the tax basis of assets and liabilities, at the enacted tax rates expected
to be in effect when the temporary differences reverse; (d) certain assets
(principally furniture and equipment, agents' debit balances, computer software,
and certain other receivables) are reported as assets rather than being charged
to retained earnings; (e) acquisitions are accounted for using the purchase
method of accounting rather than being accounted for as equity investments; and
(f) fixed maturity investments are carried at fair value rather than amortized
cost. In addition, statutory accounting principles require life insurance
companies to establish an AVR and an IMR. The AVR is designed to address the
credit-related risk for bonds, preferred stocks, derivative instruments, and
mortgages and market risk for common stocks, real estate, and other invested
assets. The IMR is composed of investment- and liability-related realized gains
and losses that result from interest rate fluctuations. These realized gains and
losses, net of tax, are amortized into income over the expected remaining life
of the asset sold or the liability released.

1.3 INSURANCE CONTRACTS

The insurance contracts accounted for in these financial statements include
primarily long-duration contracts. Long-duration contracts include traditional
whole life, endowment, guaranteed renewable term life, universal life, limited
payment, and investment contracts. Long-duration contracts generally require the
performance of various functions and services over a period of more than one
year. The contract provisions generally cannot be changed or canceled by the
insurer during the contract period; however, most new contracts written by the
Company allow the insurer to revise certain elements used in determining premium
rates or policy benefits, subject to guarantees stated in the contracts. At
December 31, 1999 and 1998, insurance investment contracts of $25.9 million and
$24.1 million, respectively, were included in the Company's liabilities.

F-10
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

1. ACCOUNTING POLICIES (CONTINUED)

1.4 INVESTMENTS

FIXED MATURITY AND EQUITY SECURITIES

All fixed maturity and equity securities were classified as available-for-sale
and recorded at fair value at December 31, 1999 and 1998. After adjusting
related balance sheet accounts as if the unrealized gains (losses) had been
realized, the net adjustment is recorded in accumulated other comprehensive
income within shareholders' equity. If the fair value of a security classified
as available-for-sale declines below its cost and this decline is considered to
be other than temporary, the security is reduced to its fair value, and the
reduction is recorded as a realized loss.

During 1999, the Company maintained a trading portfolio of certain fixed
maturity securities. Trading securities are recorded at fair value. Unrealized
and realized gains (losses) are included in net investment income. The Company
held no trading securities at December 31, 1999, and trading securities did not
have a material effect on net investment income in 1999.

MORTGAGE LOANS

Mortgage loans are reported at amortized cost, net of an allowance for losses.
The allowance for losses covers all non-performing loans and loans for which
management has a concern based on its assessment of risk factors, such as
potential non-payment or non-monetary default. The allowance is based on a loan-
specific review and a formula that reflects past results and current trends.

Loans for which the Company determines that collection of all amounts due under
the contractual terms is not probable are considered to be impaired. The Company
generally looks to the underlying collateral for repayment of impaired loans.
Therefore, impaired loans are considered to be collateral dependent and are
reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated cost to sell.

POLICY LOANS

Policy loans are reported at unpaid principal balance.

F-11
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

1. ACCOUNTING POLICIES (CONTINUED)

1.4 INVESTMENTS (CONTINUED)

INVESTMENT REAL ESTATE

Investment real estate is classified as held for investment or available for
sale, based on management's intent. Real estate held for investment is carried
at cost, less accumulated depreciation and impairment write-downs. Real estate
available for sale is carried at the lower of cost (less accumulated
depreciation, if applicable) or fair value less cost to sell.

INVESTMENT INCOME

Interest on fixed maturity securities and performing and restructured mortgage
loans is recorded as income when earned and is adjusted for any amortization of
premium or discount. Interest and any amortization of premium or discount on
delinquent mortgage loans is recorded as income only when actual interest
payments are received. Dividends are recorded as income on ex-dividend dates.

REALIZED INVESTMENT GAINS

Realized investment gains (losses) are recognized using the specific-
identification method.

1.5 SEPARATE ACCOUNTS

Separate Accounts are assets and liabilities associated with certain contracts,
principally annuities; for which the investment risk lies solely with the
contract holder. Therefore, the Company's liability for these accounts equals
the value of the account assets. Investment income, realized investment gains
(losses), and policyholder account deposits and withdrawals related to separate
accounts are excluded from the consolidated statements of income, comprehensive
income, and cash flows. Assets held in Separate Accounts are primarily shares in
mutual funds, which are carried at fair value based on the quoted net asset
value per share.

F-12
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

1. ACCOUNTING POLICIES (CONTINUED)

1.6 DEFERRED POLICY ACQUISITION COSTS ("DPAC") AND COST OF INSURANCE PURCHASED
("CIP")

Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC.

CIP represents the cost assigned to insurance contracts in force that are
acquired through the purchase of a block of business. At December 31, 1999, CIP
of $19.0 million was reported within other assets.

DPAC and CIP associated with interest-sensitive life contracts, insurance
investment contracts, and participating life insurance contracts is charged to
expense in relation to the estimated gross profits of those contracts. DPAC and
CIP associated with all other insurance contracts is charged to expense over the
premium-paying period or as the premiums are earned over the life of the
contract.

DPAC and CIP are adjusted for the impact on estimated future gross profits as if
net unrealized gains (losses) on securities had been realized at the balance
sheet date. The impact of this adjustment is included in accumulated other
comprehensive income within shareholder's equity.

The Company reviews the carrying amount of DPAC and CIP on at least an annual
basis. Management considers estimated future gross profits or future premiums,
expected mortality, interest earned and credited rates, persistency, and
expenses in determining whether the carrying amount is recoverable.

1.7 PREMIUM RECOGNITION

Most receipts for annuities and interest-sensitive life insurance policies are
classified as deposits instead of revenue. Revenues for these contracts consist
of mortality, expense, and surrender charges. Policy charges that compensate the
Company for future services are deferred and recognized in income over the
period earned, using the same assumptions used to amortize DPAC (see Note 1.6).

For limited-payment contracts, net premiums are recorded as revenue, and the
difference between the gross premium received and the net premium is deferred
and recognized in a constant relationship to insurance in force. For all other
contracts, premiums are recognized when due.

F-13
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

1. ACCOUNTING POLICIES (CONTINUED)

1.8 OTHER ASSETS

Acquisition-related goodwill, which is included in other assets, is charged to
expense in equal amounts over 40 years. The carrying value of goodwill is
regularly reviewed by management for indicators of impairment in value. If facts
and circumstances suggest that goodwill is impaired, other than temporarily, the
Company assesses the fair value of the underlying assets and reduces goodwill
accordingly.

1.9 POLICY AND CONTRACT CLAIMS RESERVES

Substantially all of the Company's insurance and annuity liabilities relate to
long duration contracts. The contracts normally cannot be changed or canceled by
the Company during the contract period.

For interest-sensitive life insurance and investment contracts, reserves equal
the sum of the policy account balance and deferred revenue charges. Reserves for
other contracts are based on estimates of the cost of future policy benefits.
Reserves are determined using the net level premium method. Interest assumptions
used to compute reserves ranged from 2.5% to 13.5% at December 31, 1999.

1.10 REINSURANCE

The Company limits its exposure to loss on any single insured to $2.5 million by
ceding additional risks through reinsurance contracts with other insurers. The
Company diversifies its risk of reinsurance loss by using a number of reinsurers
that have strong claims-paying ability ratings. If the reinsurer could not meet
its obligations, the Company would reassume the liability. The likelihood of a
material reinsurance liability being reassumed by the Company is considered to
be remote.

A receivable is recorded for the portion of benefits paid and insurance
liabilities that have been reinsured. Reinsurance recoveries on ceded
reinsurance contracts were $28 million, $63 million, and $25 million, during
1999, 1998, and 1997, respectively. The cost of reinsurance is recognized over
the life of the reinsured policies using assumptions consistent with those used
to account for the underlying policies. Benefits paid and future policy benefits
related to ceded insurance contracts are recorded as reinsurance receivables.

F-14
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

1. ACCOUNTING POLICIES (CONTINUED)

1.11 PARTICIPATING POLICY CONTRACTS

Participating life insurance accounted for approximately 1% and 2% of life
insurance in force at December 31, 1999 and 1998, respectively.

The portion of earnings allocated to participating policyholders that cannot be
expected to inure to shareholders is excluded from net income and shareholder's
equity. Dividends to be paid on participating life insurance contracts are
determined annually based on estimates of the contracts' earnings. Policyholder
dividends were $4.6 million in 1999.

1.12 INCOME TAXES

The Company and its life insurance subsidiaries, together with certain other
life insurance subsidiaries of the Parent Company, are included in a life/non-
life consolidated tax return with the Parent Company and its noninsurance
subsidiaries. The Company participates in a tax sharing agreement with other
companies included in the consolidated tax return. Under this agreement, tax
payments are made to the Parent Company as if the companies filed separate tax
returns; and companies incurring operating and/or capital losses are reimbursed
for the use of these losses by the consolidated return group.

Deferred tax assets and liabilities are established for temporary differences
between the financial reporting basis and the tax basis of assets and
liabilities, at the enacted tax rates expected to be in effect when the
temporary differences reverse. The effect of a tax rate change is recognized in
income in the period of enactment. State income taxes are included in income tax
expense.

A valuation allowance for deferred tax assets is provided if it is more likely
than not that some portion of the deferred tax asset will not be realized. An
increase or decrease in a valuation allowance that results from a change in
circumstances that causes a change in judgment about the realizability of the
related deferred tax asset is included in income. Changes related to
fluctuations in fair value of available-for-sale securities are included in the
consolidated statements of comprehensive income and accumulated other
comprehensive income in shareholder's equity.

F-15
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

1. ACCOUNTING POLICIES (CONTINUED)

1.13 ACCOUNTING CHANGES

In 1998, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") 133, Accounting for Derivative
Instruments and Hedging Activities, which requires all derivative instruments to
be recognized at fair value in the balance sheet. Changes in the fair value of a
derivative instrument will be reported as earnings or other comprehensive
income, depending upon the intended use of the derivative instrument. The
Company will adopt SFAS 133 on January 1, 2001. The Company does not expect
adoption to have a material impact on the Company's results of operations and
financial position.

2. INVESTMENTS

2.1 INVESTMENT INCOME

Investment income by type of investment was as follows:

1999 1998 1997
-------------------------------------------
(In Thousands)

Investment income:
Fixed maturities $2,118,794 $2,101,730 $1,966,528
Equity securities 17,227 1,813 1,067
Mortgage loans on real estate 134,878 148,447 157,035
Investment real estate 20,553 23,139 22,157
Policy loans 69,684 66,573 62,939
Other long-term investments 7,539 3,837 3,135
Short-term investments 24,874 15,492 8,626
Investment income from affiliates 8,695 10,536 11,094
-------------------------------------------

Gross investment income 2,402,244 2,371,567 2,232,581
Investment expenses 54,048 54,634 33,958
-------------------------------------------
Net investment income $2,348,196 $2,316,933 $2,198,623
===========================================

The carrying value of investments that produced no investment income during 1999
was less than 0.2% of total invested assets. The ultimate disposition of these
investments is not expected to have a material effect on the Company's results
of operations and financial position.

F-16
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

2. INVESTMENTS (CONTINUED)

2.2 NET REALIZED INVESTMENT GAINS (LOSSES)

Realized gains (losses) by type of investment were as follows:

1999 1998 1997
-------------------------------------------
(In Thousands)

Fixed maturities:
Gross gains $ 118,427 $ 20,109 $ 42,966
Gross losses (102,299) (62,657) (34,456)
-------------------------------------------
Total fixed maturities 16,128 (42,548) 8,510
Equity securities 793 645 1,971
Other investments (11,570) 8,118 19,384
-------------------------------------------
Net realized investment gains
(losses) 5,351 (33,785) 29,865
before tax
Income tax expense (benefit) 1,874 (11,826) 10,452
Net realized investment gains
(losses) $ 3,477 $(21,959) $ 19,413
after tax
===========================================

F-17
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

2. INVESTMENTS (CONTINUED)

2.3 FIXED MATURITY AND EQUITY SECURITIES

All fixed maturity and equity securities are classified as available-for-sale
and reported at fair value (see Note 1.4). Amortized cost and fair value at
December 31, 1999 and 1998 were as follows:

GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
--------------------------------------------------
(In Thousands)
DECEMBER 31, 1999
Fixed maturity securities:
Corporate securities:
Investment-grade $19,455,518 $134,003 $(704,194) $18,885,326
Below investment-grade 1,368,494 11,863 (114,260) 1,266,098
Mortgage-backed securities* 6,195,003 45,022 (74,746) 6,165,279
U.S. government obligations 276,621 15,217 (2,376) 289,462
Foreign governments 245,782 5,774 (1,767) 249,789
State and political 154,034 499 (10,836) 143,697
subdivisions
Redeemable preferred stocks 29,715 43 - 29,758
-------------------------------------------------
Total fixed maturity $27,725,167 $212,421 $(908,179) $27,029,409
securities
==================================================
Equity securities $ 198,640 $ 39,381 $ (956) $ 237,065
==================================================
Investment in Parent Company $ 8,597 $ 44,486 $ - $ 53,083
==================================================

* Primarily include pass-through securities guaranteed by and mortgage
obligations ("CMOs") collateralized by the U.S. government and government
agencies.

F-18
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

2. INVESTMENTS (CONTINUED)

2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)

GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
-------------------------------------------------
(In Thousands)
DECEMBER 31, 1998
Fixed maturity securities:
Corporate securities:
Investment-grade $18,800,553 $1,129,504 $(26,353) $19,903,703
Below investment-grade 1,409,198 33,910 (45,789) 1,397,320
Mortgage-backed securities* 6,359,242 294,331 (870) 6,652,703
U.S. government obligations 417,822 69,321 (178) 486,965
Foreign governments 331,699 24,625 (2,437) 353,887
State and political 86,778 4,796 (187) 91,387
subdivisions
Redeemable preferred stocks 20,313 - (17) 20,296
-------------------------------------------------
Total fixed maturity $27,425,605 $1,556,487 $(75,831) $28,906,261
securities
=================================================
Equity securities $ 193,368 $ 19,426 $ (1,110) $ 211,684
=================================================
Investment in Parent Company $ 8,597 $ 45,973 $ - $ 54,570
=================================================

* Primarily include pass-through securities guaranteed by and mortgage
obligations ("CMOs") collateralized by the U.S. government and government
agencies.

F-19
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

2. INVESTMENTS (CONTINUED)

2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)

Net unrealized gains (losses) on securities included in accumulated
comprehensive income in shareholders' equity at December 31 were as follows:

1999 1998
-------------------------------
(In Thousands)
Gross unrealized gains $ 296,288 $1,621,883
Gross unrealized losses (909,135) (76,941)
DPAC and other fair value adjustments 200,353 (488,120)
Deferred federal income taxes 55,631 (377,718)
Net unrealized (losses) gains on securities $(356,863) $ 679,104
===============================

The contractual maturities of fixed maturity securities at December 31, 1999
were as follows:
1999 1998
--------------------------------------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------------------------------------------------------
(In thousands) (In thousands)
Fixed maturity
securities, excluding
mortgage-backed
securities:
Due in one year or $ 810,124 $ 813,683 $ 531,496 $ 536,264
less
Due after one year
through five years 5,380,557 5,394,918 5,550,665 5,812,581

Due after five years
through ten years 8,350,207 8,080,065 9,229,980 9,747,761

Due after ten years 6,988,799 6,575,461 5,754,220 6,156,950
Mortgage-backed 6,195,480 6,165,282 6,359,244 6,652,705
securities
--------------------------------------------------------
Total fixed maturity $27,725,167 $27,029,409 $27,425,605 $28,906,261
securities
========================================================

Actual maturities may differ from contractual maturities, since borrowers may
have the right to call or prepay obligations. In addition, corporate
requirements and investment strategies may result in the sale of investments
before maturity. Proceeds from sales of fixed maturities were $12.3 billion,
$5.4 billion, and $14.8 billion during 1999, 1998, and 1997, respectively.

F-20
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

2. INVESTMENTS (CONTINUED)

2.4 MORTGAGE LOANS ON REAL ESTATE

Diversification of the geographic location and type of property collateralizing
mortgage loans reduces the concentration of credit risk. For new loans, the
Company requires loan-to-value ratios of 75% or less, based on management's
credit assessment of the borrower. The mortgage loan portfolio was distributed
as follows at December 31, 1999 and 1998:

OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
----------------------------------------------
(In Millions)

DECEMBER 31, 1999
Geographic distribution:
South Atlantic $ 470 24.6% 0.2%
Pacific 363 18.9 7.8
West South Central 185 9.6 0.0
East South Central 144 7.5 0.0
East North Central 256 13.3 0.0
Mid-Atlantic 323 16.8 0.9
Mountain 107 5.6 13.8
West North Central 43 2.2 0.0
New England 44 2.3 0.0
Allowance for losses (16) (0.8) 0.0
-------------------------------
Total $1,919 100.0% 2.4%
===============================

Property type:
Retail $ 628 32.6% 2.5%
Office 746 38.9 4.2
Industrial 302 15.7 0.0
Apartments 189 9.9 0.0
Hotel/motel 46 2.4 0.0
Other 24 1.3 0.2
Allowance for losses (16) (0.8) 0.0
-------------------------------
Total $1,919 100.0% 2.4%
===============================

F-21
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (Continued)

2. INVESTMENTS (CONTINUED)

2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)

OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
----------------------------------------------
(In Millions)
DECEMBER 31, 1998
Geographic distribution:
South Atlantic $ 429 27.6% 0.2%
Pacific 320 20.6 10.4
Mid-Atlantic 326 20.9 4.1
East North Central 178 11.4 -
Mountain 95 6.1 -
West South Central 118 7.5 -
East South Central 46 3.0 -
West North Central 33 2.1 -
New England 25 1.6 -
Allowance for losses (13) (0.8) -
-------------------------------
Total $1,557 100.00% 3.1%
===============================

Property type:
Office $ 593 38.1% 7.0%
Retail 423 27.1 0.2
Industrial 292 18.8 -
Apartments 178 11.4 2.9
Hotel/motel 38 2.4 -
Other 46 3.0 -
Allowance for losses (13) (0.8) -
-------------------------------
Total $1,557 100% 3.1%
===============================

Impaired mortgage loans on real estate and related interest income is not
material.

F-22
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (continued)

2. INVESTMENTS (CONTINUED)

2.5 INVESTMENT SUMMARY

Investments of the Company were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
-----------------------------------------------------------------------------------------
CARRYING CARRYING
COST FAIR VALUE AMOUNT COST FAIR VALUE AMOUNT
-----------------------------------------------------------------------------------------
(In Thousands) (In Thousands)
Fixed maturities:
Bonds:
<S> <C> <C> <C> <C> <C> <C>
United States
government and
government agencies $ 276,621 $ 289,462 $ 289,462 $ 417,822 $ 486,965 $ 486,965
and authorities
States, municipalities,
and political 154,034 143,697 143,697 86,778 91,387 91,387
subdivisions
Foreign governments 245,782 249,789 249,789 331,699 353,887 353,887
Public utilities 1,468,758 1,465,129 1,465,129 1,777,172 1,895,326 1,895,326
Mortgage-backed 6,195,003 6,165,279 6,165,279 6,359,242 6,652,703 6,652,703
securities
All other corporate 19,355,254 18,686,295 18,686,295 18,432,579 19,405,697 19,405,697
bonds**
Redeemable preferred 29,715 29,758 29,758 20,313 20,296 20,296
stocks
---------------------------------------------------------------------------------------------
Total fixed maturities 27,725,167 27,029,409 27,029,409 27,425,605 28,906,261 28,906,261
Equity securities:
Common stocks:
Banks, trust, and
insurance companies - - - - - -

Industrial,
miscellaneous, and 180,849 219,089 219,089 176,321 211,684 211,684
other

Nonredeemable preferred
stocks 17,791 17,976 17,976 17,047 - -
---------------------------------------------------------------------------------------------

Total equity securities 198,640 237,065 237,065 193,368 211,684 211,684
Mortgage loans on real 1,918,956 1,829,212 1,918,956 1,557,268 1,607,599 1,557,268
estate*
Investment real estate 125,563 XXXXXXX 125,563 119,520 xxxxxxx 119,520
Policy loans 1,234,729 1,205,056 1,234,729 1,170,686 1,252,409 1,170,686
Other long-term investments 129,155 XXXXXXX 129,155 86,194 xxxxxxx 86,194
Short-term investments 123,779 XXXXXXX 123,779 222,949 xxxxxxx 222,949
---------------------------------------------------------------------------------------------
Total investments $31,455,989 $ XXXXXXX $ 30,798,656 $ 30,775,590 $ xxxxxxx $ 32,274,562
============================================================================================
</TABLE>

* Amount is net of allowance for losses of $16 million and $13 million at
December 31, 1999 and 1998, respectively.

** Includes derivative financial instruments with negative fair values of $4.7
million and $1.0 million and positive fair values of $2.3 million and $24.3
million at December 31, 1999 and 1998, respectively.

F-23
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (continued)

3. DEFERRED POLICY ACQUISITIONS COSTS

The balance of DPAC at December 31 and the components of the change reported in
operating costs and expenses for the years then ended were as follows:

1999 1998 1997
--------------------------------------
(In Thousands)
Balance at January 1 $1,087,718 $ 835,031 $1,042,783
Capitalization 307,854 244,196 219,339
Amortization (101,066) (125,062) (115,467)
Effect of realized and unrealized
gains (losses) on securities 662,147 133,553 (311,624)
--------------------------------------
Balance at December 31 $1,956,653 $1,087,718 $ 835,031
=======================================

4. OTHER ASSETS

Other assets consisted of the following:

DECEMBER 31
1999 1998
------------------------------
(In Thousands)

Goodwill $ 52,317 $ 54,754
American General Corporation CBO (Collateralized
Bond Obligation) 98-1 Ltd. - 9,740

Cost of insurance purchased ("CIP") 19,014 22,113
Computer software 117,571 78,775
Other 61,397 40,936
------------------------------
Total other assets $250,299 $206,318
==============================

F-24
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (continued)

4. OTHER ASSETS (CONTINUED)

A rollforward of CIP for the year ended December 31, 1999, was as follows:

1999
------------

(In
Thousands)

Balance at January 1 $ 22,113
Acquisition of business -
Accretion of interest at 5.02% 926
Amortization (4,025)
---------
Balance at December 31 $ 19,014
=========

5. FEDERAL INCOME TAXES

5.1 TAX LIABILITIES

Income tax liabilities were as follows:

DECEMBER 31
1999 1998
-----------------------------
(In Thousands)

Current tax (receivable) payable $ 25,074 $ (21,035)
Deferred tax liabilities, applicable to:
Net income 405,889 320,632
Net unrealized investment gains (55,631) 377,718
-----------------------------
Total deferred tax liabilities 350,258 698,350
-----------------------------
Total current and deferred tax liabilities $375,332 $677,315
=============================

F-25
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (continued)

5. FEDERAL INCOME TAXES (CONTINUED)

5.1 TAX LIABILITIES (CONTINUED)

Components of deferred tax liabilities and assets at December 31 were as
follows:

1999 1998
--------------------------
(In Thousands)

Deferred tax liabilities applicable to:
Deferred policy acquisition costs $ 601,678 $ 307,025
Basis differential of investments - 590,661
Other 171,763 150,189
---------------------------

Total deferred tax liabilities 773,441 1,047,875

Deferred tax assets applicable to:
Policy reserves (215,465) (212,459)
Basis differential of investments (158,421) -
Other (141,236) (137,066)
--------------------------

Total deferred tax assets before valuation
allowance (515,122) (349,525)
Valuation allowance 91,939 -
--------------------------

Total deferred tax assets, net of valuation
allowance (423,183) (349,525)
--------------------------
Net deferred tax liabilities $ 350,258 $ 698,350
==========================

A portion of life insurance income earned prior to 1984 is not taxable unless it
exceeds certain statutory limitations, is distributed as dividends, or unless
the income tax deferred status of such amount is modified by future tax
legislation. Such income, accumulated in policyholders' surplus accounts,
totaled $88.2 million at December 31, 1999. At current corporate rates, the
maximum amount of tax on such income is approximately $30.9 million. Deferred
income taxes on these accumulations are not required because no distributions
are expected.

F-26
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (continued)

5. FEDERAL INCOME TAXES (CONTINUED)

5.1 TAX LIABILITIES (CONTINUED)

Components of income tax expense for the years were as follows:

1999 1998 1997
-------------------------------------
(In Thousands)

Current expense $176,725 $134,344 $185,460
Deferred expense (benefit):
Deferred policy acquisition cost 65,377 33,230 27,644
Policy reserves (22,654) 2,189 (27,496)
Basis differential of investments (4,729) 11,969 3,769
Litigation settlement 22,641 (33,983) -
Year 2000 - (9,653) -
Internally developed software 18,654 - -
Other, net 7,182 15,623 9,347
-------------------------------------
Total deferred expense 86,471 19,375 13,264
-------------------------------------
Income tax expense $263,196 $153,719 $198,724
=====================================

5.2 TAX EXPENSE

A reconciliation between the income tax expense computed by applying the federal
income tax rate (35%) to income before taxes and the income tax expense reported
in the financial statement is presented below.

1999 1998 1997
-------------------------------------
(In Thousands)
Income tax at statutory percentage
of GAAP pretax income $266,386 $164,638 $200,649
Tax-exempt investment income (16,423) (11,278) (9,493)
Goodwill 853 712 723
Other 12,380 (353) 6,845
-------------------------------------
Income tax expense $263,196 $153,719 $198,724
=====================================

F-27
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (continued)

5. FEDERAL INCOME TAXES (CONTINUED)

5.3 TAXES PAID

Income taxes paid amounted to approximately $126 million, $159 million, and $168
million in 1999, 1998, and 1997, respectively.

5.4 TAX RETURN EXAMINATIONS

The Parent Company and the majority of its subsidiaries file a consolidated
federal income tax return. The Internal Revenue Service ("IRS") has completed
examinations of the Parent Company's tax returns through 1992. The IRS is
currently examining tax returns for 1993 through 1996. In addition, the tax
returns of companies recently acquired are also being examined. Although the
final outcome of any issues raised in examination is uncertain, the Parent
Company believes that the ultimate liability, including interest, will not
materially exceed amounts recorded in the consolidated financial statements.

6. TRANSACTIONS WITH AFFILIATES

Affiliated notes and accounts receivable were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------------------------------------
PAR VALUE BOOK VALUE PAR VALUE BOOK VALUE
------------------------------------------------------------
<S> <C> <C> <C> <C>

(In Thousands)

American General
Corporation, 9 3/8%, $ 4,725 $ 3,410 $ 4,725 $ 3,345
due 2008
American General
Corporation, Promissory
notes, due 2004 12,232 12,232 14,679 14,679
American General
Corporation, Restricted
Subordinated Note,
13 1/2%, due 2002 27,378 27,378 29,435 29,435
------------------------------------------------------------
Total notes receivable
from affiliates 44,335 43,020 48,839 47,459
Accounts receivable from
affiliates - 32,175 - 113,637
------------------------------------------------------------
Indebtedness from $44,335 $75,195 $48,839 $161,096
affiliates
============================================================
</TABLE>

F-28
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (continued)

6. TRANSACTIONS WITH AFFILIATES (CONTINUED)

Various American General companies provide services to the Company, principally
mortgage servicing and investment management services, provided by American
General Investment Management Corporation on a fee basis. The Company paid
approximately $55,318,000, $46,921,000, and $33,916,000 for such services in
1999, 1998, and 1997, respectively. Accounts payable for such services at
December 31, 1999 and 1998 were not material. The Company rents facilities and
provides services on an allocated cost basis to various American General
companies. Beginning in 1998, amounts received by the Company from affiliates
include amounts received by its wholly-owned, non-life insurance subsidiary,
American General Life Companies ("AGLC"). AGLC provides shared services,
including technology, to a number of American General Corporation's life
insurance subsidiaries. The Company received approximately $138,885,000,
$66,550,000, and $6,455,000 for such services and rent in 1999, 1998, and 1997,
respectively. Accounts receivable for rent and services at December 31, 1999 and
1998 were not material.

The Company has 8,500 shares of $100 par value cumulative preferred stock
authorized and outstanding with an $80 dividend rate, redeemable at $1,000 per
share after December 31, 2000. The holder of this stock, The Franklin Life
Insurance Company ("Franklin"), an affiliated company, is entitled to one vote
per share, voting together with the holders of common stock.

7. STOCK-BASED COMPENSATION

Certain officers of the Company participate in American General Corporation's
stock and incentive plans which provide for the award of stock options,
restricted stock awards, performance awards, and incentive awards to key
employees. Stock options constitute the majority of such awards. American
General Corporation follows the intrinsic value method of accounting for stock
options as prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees. Therefore, the expense related to stock options
is measured as the excess of the market price of the stock at the measurement
date over the exercise price. The measurement date is the first date on which
both the number of shares that the employee is entitled to receive and the
exercise price are known. Under the stock option plans, no expense is
recognized, since the market price equals the exercise price at the measurement
date.

F-29
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (continued)

7. STOCK-BASED COMPENSATION (CONTINUED)

Under an alternative accounting method of accounting under Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation,
compensation expense arising from stock options would be measured at the
estimated fair value of the options at the date of grant. Had compensation
expense for the stock options been determined using this method, net income
would have been as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Net income as reported $497,906 $316,674 $374,557
Net income pro forma $495,331 $315,078 $373,328
</TABLE>

The average fair values of the options granted during 1999, 1998, and 1997 were
$17.06, $15.38, and $10.33, respectively. The fair value of each option was
estimated at the date of grant using a Black-Scholes option pricing model. The
weighted average assumptions used to estimate the fair value of the stock
options were as follows:

<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------------
<S> <C> <C> <C>
Dividend yield 2.5% 2.5% 3.0%
Expected volatility 24.4% 23.0% 22.0%
Risk-free interest rate 4.95% 5.76% 6.4%
Expected life 6 years 6 years 6 years
</TABLE>

8. BENEFIT PLANS

8.1 PENSION PLANS

The Company has non-contributory defined benefit pension plans covering most
employees. Pension benefits are based on the participant's compensation and
length of credited service.

Equity and fixed maturity securities were 71% and 26%, respectively, of the
plans' assets at the plans' most recent balance sheet dates. Additionally, 1% of
plan assets were invested in general investment accounts of the Parent Company's
subsidiaries through deposit administration insurance contracts.

F-30
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (continued)

8. BENEFIT PLANS (CONTINUED)

8.1 PENSION PLANS (CONTINUED)

The benefit plans have purchased annuity contracts from American General
Corporation's subsidiaries to provide benefits for certain retirees. These
contracts are expected to provide future annual benefits to certain retirees of
American General Corporation and its subsidiaries of approximately $59 million.

The components of pension expense and underlying assumptions were as follows:

<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------------
(In Thousands)

<S> <C> <C> <C>
Service cost $ 3,575 $ 3,693 $ 1,891
Interest cost 7,440 6,289 2,929
Expected return on plan assets (12,670) (9,322) (5,469)
Amortization (820) (557) 195
Pension (income) expense $ (2,475) $ 103 $ (454)
===============================================

Discount rate on benefit obligation 7.75% 7.00% 7.25%
Rate of increase in compensation levels 4.25% 4.25% 4.00%
Expected long-term rate of return on
plan assets 10.35% 10.25% 10.00%

</TABLE>

The Company's funding policy is to contribute annually no more than the maximum
deductible for federal income tax purposes. The funded status of the plans and
the prepaid pension expense included in other assets at December 31 were as
follows:

<TABLE>
<CAPTION>
1999 1998
-------------------------------
(In Thousands)

<S> <C> <C>
Projected benefit obligation (PBO) $100,600 $ 96,554
Plan assets at fair value 145,863 120,898
-------------------------------
Plan assets at fair value in excess of PBO 45,263 24,344
Other unrecognized items, net (26,076) (10,176)
-------------------------------
Prepaid pension expense $ 19,187 $ 14,168
===============================
</TABLE>

F-31
<PAGE>

American General Life Insurance Company

Notes to Consolidated Financial Statements (continued)

8. BENEFIT PLANS (CONTINUED)

8.1 PENSION PLANS (CONTINUED)

The change in PBO was as follows:

<TABLE>
<CAPTION>
1999 1998
-------------------------------
(In Thousands)

<S> <C> <C>
PBO at January 1 $ 96,554 $43,393
Service and interest costs 11,015 9,982
Benefits paid (4,919) (1,954)
Actuarial loss (12,036) 17,089
Amendments, transfers, and acquisitions 9,986 28,044
-------------------------------
PBO at December 31 $100,600 $96,554
===============================
</TABLE>

The change in the fair value of plan assets was as follows:

<TABLE>
<CAPTION>
1999 1998
-------------------------------
(In Thousands)

<S> <C> <C>
Fair value of plan assets at January 1 $120,898 $ 80,102
Actual return on plan assets 17,934 12,269
Benefits paid (4,919) (1,954)
Acquisitions and other 11,950 30,481
-------------------------------
Fair value of plan assets at December 31 $145,863 $120,898
===============================
</TABLE>

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company has life, medical, supplemental major medical, and dental plans for
certain retired employees and agents. Most plans are contributory, with retiree
contributions adjusted annually to limit employer contributions to predetermined
amounts. The Company has reserved the right to change or eliminate these
benefits at any time.

F-32
<PAGE>

American General Life Insurance Company

Notes to Consolidate Financial Statements (continued)

8. BENEFIT PLANS (CONTINUED)

8.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)

The life plans are insured through December 31, 1999. A portion of the retiree
medical and dental plans is funded through a voluntary employees' beneficiary
association ("VEBA"); the remainder is unfunded and self-insured. All of the
retiree medical and dental plans' assets held in the VEBA were invested in
readily marketable securities at its most recent balance sheet date.

Postretirement benefit expense in 1999, 1998, and 1997 was $254,000, $60,000,
and $601,000, respectively. The accrued liability for postretirement benefits
was $18.8 million and $19.2 million at December 31, 1999 and 1998, respectively.
These liabilities were discounted at the same rates used for the pension plans.

9. DERIVATIVE FINANCIAL INSTRUMENTS

9.1 USE OF DERIVATIVE FINANCIAL INSTRUMENTS

The Company's use of derivative financial instruments is generally limited to
reducing its exposure to interest rate and currency exchange risk by utilizing
interest rate and currency swap agreements, and options to enter into interest
rate swap agreements (called swaptions). The Company accounts for these
derivative and financial instruments as hedges. Hedge accounting requires a high
correlation between changes in fair values or cash flows of the derivative
financial instrument and the specific item being hedged, both at inception and
throughout the life of the hedge.

9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS

Interest rate swap agreements are used to convert specific investment securities
from a floating to a fixed rate basis, or vice versa, and to hedge against the
risk of declining interest rates on anticipated security purchases. Interest
rate swap agreements are also used to convert a portion of floating -rate
borrowings to a fixed rate and to hedge against the risk of rising interest
rates on anticipated debt issuances.

Currency swap agreements are used to convert cash flows from specific investment
securities denominated in foreign currencies into U.S. dollars at specific
exchange rates and to hedge against currency rate fluctuation on anticipated
security purchases.

F-33
<PAGE>

American General Life Insurance Company

Notes to Consolidate Financial Statements (continued)

9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS (CONTINUED)

The difference between amounts paid and received on swap agreements is recorded
on an accrual basis as an adjustment to net investment income or interest
expense, as appropriate, over the periods covered by the agreements. The related
amount payable to or receivable from counterparties is included in other
liabilities or assets.

The fair values of swap agreements are recognized in the consolidated balance
sheets if the hedge investments are carried at fair value or if they hedge
anticipated purchases of such investments. In this event, changes in the fair
value of a swap agreement are reported in net unrealized gains on securities
included in other accumulated comprehensive income in shareholders' equity,
consistent with the treatment of the related investment security. The fair
values of swap agreements hedging debt are not recognized in the consolidated
balance sheet.

For swap agreements hedging anticipated investment purchases or debt issuances,
the net swap settlement amount or unrealized gain or loss is deferred and
included in the measurement of the anticipated transaction when it occurs.

Swap agreements generally have terms of two to ten years. Any gain or loss from
early termination of a swap agreement is deferred and amortized into income over
the remaining term of the related investment or debt. If the underlying
investment or debt is extinguished or sold, any related gain or loss on swap
agreements is recognized in income.

F-34
<PAGE>

American General Life Insurance Company

Notes to Consolidate Financial Statements (continued)

9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS (CONTINUED)

Interest rate and currency swap agreements related to investment securities at
December 31 were as follows:

<TABLE>
<CAPTION>
1999 1998
-------------------------------
(Dollars in Millions)
<S> <C> <C>
Interest rate swap agreements to receive fixed rate:
Notional amount $ 160 $ 369
Average receive rate 6.73% 6.06%
Average pay rate 6.55% 5.48%
Currency swap agreements (receive U.S.
dollars/pay Canadian dollars):
Notional amount (in U.S. dollars) $ 124 $ 124
Average exchange rate 1.50 1.50
Currency swap agreements (receive U.S. dollars/pay
Australian dollars):
Notional amount (in U.S. dollars) $ 23 $ -
Average exchange rate 0.65 -
</TABLE>

9.3 CALL SWAPTIONS

Options to enter into interest rate swap agreements are used to limit the
Company's exposure to reduced spreads between investment yields and interest
crediting rates should interest rates decline significantly over prolonged
periods. During such periods, the spread between investment yields and interest
crediting rates may be reduced as a result of certain limitations on the
Company's ability to manage interest crediting rates. Call swaptions allow the
Company to enter into interest rate swap agreements to receive fixed rates and
pay lower floating rates, effectively increasing the spread between investment
yields and interest crediting rates.

F-35
<PAGE>

American General Life Insurance Company

Notes to Consolidate Financial Statements (continued)

9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

9.3 CALL SWAPTIONS (CONTINUED)

Premiums paid to purchase call swaptions are included in investments and are
amortized to net investment income over the exercise period of the swaptions. If
a call swaption is terminated, any gain is deferred and amortized to insurance
and annuity benefits over the expected life of the insurance and annuity
contracts and any unamortized premium is charged to income. If a call swaption
ceases to be an effective hedge, any related gain or loss is recognized in
income.

Swaptions at December 31 were as follows:

<TABLE>
<CAPTION>
1999 1998
-------------------------------
(Dollars in Billions)
<S> <C> <C>
Call swaptions:
Notional amount $3.78 $1.76
Average strike rate 4.52% 3.97%

Put swaptions:
Notional amount $2.14 $1.05
Average strike rate 8.60% 8.33%
</TABLE>

9.4 CREDIT AND MARKET RISK

Derivative financial instruments expose the Company to credit risk in the event
of non-performance by counterparties. The Company limits this exposure by
entering into agreements with counterparties having high credit ratings and by
regularly monitoring the ratings. The Company does not expect any counterparty
to fail to meet its obligation; however, non-performance would not have a
material impact on the Company's consolidated results of operations or financial
position.

The Company's exposure to market risk is mitigated by the offsetting effects of
changes in the value of the agreements and the related items being hedged.

F-36
<PAGE>

American General Life Insurance Company

Notes to Consolidate Financial Statements (continued)

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amounts and fair values for certain of the Company's financial
instruments at December 31 are presented below. Care should be exercised in
drawing conclusions based on fair value, since (1) the fair values presented do
not include the value associated with all the Company's assets and liabilities,
and (2) the reporting of investments at fair value without a corresponding
evaluation of related policyholders liabilities can be misinterpreted.

The following methods and assumptions were used to estimate the fair value of
financial instruments:

FIXED MATURITY AND EQUITY SECURITIES

Fair values of fixed maturity and equity securities were based on quoted
market prices, where available. For investments not actively traded, fair
values were estimated using values obtained from independent pricing
services or, in the case of some private placements, by discounting
expected future cash flows using a current market rate applicable to yield,
credit quality, and average life of investments.

MORTGAGE LOANS ON REAL ESTATE

Fair value of mortgage loans was estimated primarily using discounted cash
flows, based on contractual maturities and risk-adjusted discount rates.

POLICY LOANS

Fair value of policy loans was estimated using discounted cash flows and
actuarially determined assumptions, incorporating market rates.

INVESTMENT IN PARENT COMPANY

The fair value of the investment in Parent Company is based on quoted
market prices of American General Corporation common stock.

INSURANCE INVESTMENT CONTRACTS

Fair value of insurance investment contracts was estimated using cash flows
discounted at market interest rates.

F-37
<PAGE>

American General Life Insurance Company

Notes to Consolidate Financial Statements (continued)

10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

INDEBTEDNESS FROM AFFILIATES

Indebtedness from affiliates is composed of accounts receivable and notes
receivable from affiliates. Due to the short-term nature of accounts
receivable, fair value is assumed to equal carrying value. Fair value of
notes receivable was estimated using discounted cash flows based on
contractual maturities and discount rates that were based on U.S. Treasury
rates for similar maturity ranges.

11. DIVIDENDS PAID

American General Life Insurance Company paid $187 million, $244 million, and
$401 million, in dividends on common stock to AGC Life Insurance Company in
1999, 1998, and 1997, respectively. The Company also paid $680 thousand per year
in dividends on preferred stock to an affiliate, The Franklin Life Insurance
Company, in 1999, 1998, and 1997.

12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES

The Company and its insurance subsidiaries are restricted by state insurance
laws as to the amounts they may pay as dividends without prior approval from
their respective state insurance departments. At December 31, 1999,
approximately $2.6 billion of consolidated shareholder's equity represents net
assets of the Company, which cannot be transferred, in the form of dividends,
loans, or advances to the Parent Company. Approximately $1.9 billion of
consolidated shareholders' equity is similarly restricted as to transfer from
its subsidiaries to the Company.

Generally, the net assets of the Company's subsidiaries available for transfer
to the Parent are limited to the amounts that the subsidiaries' net assets, as
determined in accordance with statutory accounting practices, exceed minimum
statutory capital requirements. However, payments of such amounts as dividends
may be subject to approval by regulatory authorities and are generally limited
to the greater of 10% of policyholders' surplus or the previous year's statutory
net gain from operations.

The Company has various leases, substantially all of which are for office space
and facilities. Rentals under financing leases, contingent rentals, and future
minimum rental commitments and rental expense under operating leases are not
material.

F-38
<PAGE>

American General Life Insurance Company

Notes to Consolidate Financial Statements (continued)

12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)

In recent years, various life insurance companies have been named as defendants
in class action lawsuits relating to life insurance pricing and sales practices,
and a number of these lawsuits have resulted in substantial settlements. On
December 16, 1998, American General Corporation announced that certain of its
life insurance subsidiaries had entered into agreements to resolve all pending
market conduct class action lawsuits.

In conjunction with the proposed settlements, the Company recorded a charge of
$97.1 million ($63.1 million after-tax) in the fourth quarter of 1998. The
charge covers the cost of policyholder benefits and other anticipated expenses
resulting from the proposed settlements, as well as other administrative and
legal costs.

On December 31, 1998, the Company entered into an agreement with the Parent
Company whereby the Company assigned, and the Parent Company assumed, $80.1
million of the liabilities of the Company related to the proposed resolution.
The liabilities of American General Life Insurance Company of New York, which
totaled $17.0 million, were not assumed by the Parent Company. As consideration
for the assumption of the liabilities, the Company paid the Parent Company an
amount equal to the liabilities recorded with respect to the proposed resolution
of the litigation. The litigation liabilities were reduced by payments of $2.7
million, and the remaining balance of $94.4 million was included in other
liabilities on the Company's balance sheet at December 31, 1998. All settlements
were finalized in 1999.

The Company is party to various other lawsuits and proceedings arising in the
ordinary course of business. Many of these lawsuits and proceedings, including
those filed by individuals who have excluded themselves from the market conduct
settlement, and lawsuits relating to policies not covered by the market conduct
settlements, arise in jurisdictions, such as Alabama and Mississippi, that
permit damage awards disproportionate to the actual economic damages incurred.
Based upon information presently available, the Company believes that the total
amounts that will ultimately be paid, if any, arising from these lawsuits and
proceedings will not have a material adverse effect on the Company's
consolidated results of operations and financial position. However, it should be
noted that the frequency of large damage awards, including large punitive damage
awards, that bear little or no relation to actual economic damages incurred by
plaintiffs in jurisdictions like Alabama and Mississippi continues to create the
potential for an unpredictable judgment in any given suit.

F-39
<PAGE>

American General Life Insurance Company

Notes to Consolidate Financial Statements (continued)

12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)

The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through a reduction in future premium taxes in certain
states. At December 31, 1999 and 1998, the Company has accrued $8.6 million and
$6.0 million, respectively, for guaranty fund assessments, net of $3.4 million
and $3.7 million, respectively, of premium tax deductions. The Company has
recorded receivables of $4.4 million and $6.2 million at December 31, 1999 and
1998, respectively, for expected recoveries against the payment of future
premium taxes. Expenses incurred for guaranty fund assessments were $2.1
million, $3.6 million, and $2.1 million in 1999, 1998, and 1997, respectively.

F-40
<PAGE>

American General Life Insurance Company

Notes to Consolidate Financial Statements (continued)

13. REINSURANCE

Reinsurance transactions for the years ended December 31, 1999, 1998, and 1997
were as follows:

<TABLE>
<CAPTION>
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER ASSUMED TO
AMOUNT COMPANIES COMPANIES NET AMOUNT NET
---------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1999
Life insurance in force $50,060,334 $17,056,734 $524,062 $33,527,662 1.56%
==============================================================
Premiums:
Life insurance and annuities $ 101,900 $ 49,530 $ 252 $ 52,622 0.48%
Accident and health insurance 977 84 - 893 0.00%
--------------------------------------------------------------
Total premiums $ 102,877 $ 49,614 $ 252 $ 53,515 0.47%
===============================================================

DECEMBER 31, 1998
Life insurance in force $46,057,031 $13,288,183 $629,791 $33,398,639 1.89%
=============================================================
Premiums:
Life insurance and annuities $ 90,298 $ 42,235 $ 117 $ 48,180 0.24%
Accident and health insurance 1,134 87 - 1,047 0.00%
------------------------------------------------------------
Total premiums $ 91,432 $ 42,322 $ 117 $ 49,227 0.24%
============================================================
DECEMBER 31, 1997
Life insurance in force $45,963,710 $10,926,255 $ 4,997 $35,042,452 0.01%
============================================================
Premiums:
Life insurance and annuities $ 100,357 $ 37,294 $ 75 $ 63,138 0.12%
Accident and health insurance 1,208 172 - 1,036 0.00%
------------------------------------------------------------
Total premiums $ 101,565 $ 37,466 $ 75 $ 64,174 0.12%
============================================================
</TABLE>

Reinsurance recoverable on paid losses was approximately $8.0 million, $7.7
million, and $2.3 million at December 31, 1999, 1998, and 1997, respectively.
Reinsurance recoverable on unpaid losses was approximately $10.5 million, $2.5
million, and $3.2 million at December 31, 1999, 1998, and 1997, respectively.

F-41
<PAGE>

American General Life Insurance Company

Notes to Consolidate Financial Statements (continued)

14. YEAR 2000 CONTINGENCY (UNAUDITED)

Currently, all of our major technology systems, programs, and applications,
including those which rely on third parties, are operating smoothly following
our transition into 2000. We have experienced no interruptions to normal
business operations, including the processing of customer account data and
transactions. We will continue to monitor our technology systems, including
critical third-party dependencies, as necessary to maintain our Year 2000
readiness. We do not expect any future disruptions, if they occur, to have a
material effect on the Company's results of operations, liquidity, or financial
condition.

15. DIVISION OPERATIONS

15.1 NATURE OF OPERATIONS

The Company manages its business operation through two divisions, which are
based on products and services offered.

RETIREMENT SERVICES

The Retirement Services Division provides tax-deferred retirement annuities and
employer-sponsored retirement plans to employees of educational, health care,
public sector, and other not-for-profit organizations marketed nationwide
through exclusive sales representatives.

LIFE INSURANCE

The Life Insurance division provides traditional, interest-sensitive, and
variable life insurance and annuities to a broad spectrum of customers through
multiple distribution channels focused on specific market segments.

F-42
<PAGE>

American General Life Insurance Company

Notes to Consolidate Financial Statements (continued)

15. DIVISION OPERATIONS

15.2 DIVISION RESULTS

Results of each division exclude goodwill amortization, net realized investment
gains, and non-recurring items.

Division earnings information was as follows:

<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES EARNINGS
----------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
----------------------------------------------------------------------------------------

In Millions
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retirement Services $2,088 $1,987 $1,859 $ 567 $ 469 $ 398 $ 374 $ 315 $ 261
Life Insurance 883 870 822 191 162 147 123 107 97
---------------------------------------------------------------------------------------
Total divisions 2,971 2,857 2,681 758 631 545 497 422 358
Goodwill
amortization - - - (2) (2) (2) (2) (2) (2)
RG (L) 5 (34) 30 5 (34) 30 3 (22) 19
Nonrecurring items - - - - (125)(a) - - (81)(a) -
----------------------------------------------------------------------------------------
Total consolidated $2,976 $2,823 $2,711 $ 761 $ 470 $ 573 $ 498 $ 317 $ 375
=======================================================================================
</TABLE>

(a) Includes $97 million pretax ($63 million after-tax) in litigation
settlements and $28 million pretax ($18 million after-tax) in Year 2000
costs.

Division balance sheet information was as follows:

<TABLE>
<CAPTION>
ASSETS LIABILITIES
--------------------------------------------------------
December 31
--------------------------------------------------------
In millions 1999 1998 1999 1998
--------------------------------------------------------

<S> <C> <C> <C> <C>
Retirement Services $47,323 $41,347 $45,359 $38,841
Life Insurance 9,837 8,894 8,955 7,831
--------------------------------------------------------
Total consolidated $57,160 $50,241 $54,314 $46,672
========================================================
</TABLE>

F-43

<PAGE>

INDEX OF WORDS AND PHRASES

This index should help you to locate more information about some of the
terms and phrases used in this prospectus.
PAGE TO
SEE IN THIS
DEFINED TERM PROSPECTUS
- ------------ -----------

accumulation value 5
AGL 1
AGLC 41
AG Legacy Plus 1
amount at risk 7
automatic rebalancing 5
basis 25
beneficiary 30
cash surrender value 12
close of business 32
Code 24
cost of insurance rates 7
daily charge 7
date of issue 32
death benefit 5
dollar cost averaging 4
full surrender 12
Fund 2
investment option 1
lapse 11
loan, loan interest 13
maturity, maturity date 14
modified endowment contract 25
monthly deduction day 32
monthly insurance charge 7
Mutual Fund 2
option 1, 2 6
partial surrender 12
payment option 14
planned periodic premium 10
Policy 1
Policy loan 13
Policy month, year 32
preferred loan interest 13
premium payments 4
premiums 4
prospectus 1

44
<PAGE>

PAGE TO
SEE IN THIS
DEFINED TERM PROSPECTUS
- ------------ -----------

reinstate, reinstatement 11
SEC 2
separate account 1
Separate Account VL-R 24
seven-pay test 25
specified amount 5
surrender 12
telephone transactions 17
transfers 11
valuation date, period 32

We have filed a registration statement relating to Separate Account VL-R and
the Policy with the SEC. The registration statement, which is required by the
Securities Act of 1933, includes additional information that is not required in
this prospectus. If you would like the additional information, you may obtain it
from the SEC's Website at http://www.sec.gov or main office in Washington, D.C.
You will have to pay a fee for the material.

You should rely only on the information contained in this prospectus or sales
materials we have approved. We have not authorized anyone to provide you with
information that is different. The policies are not available in all states.
This prospectus is not an offer in any state to any person if the offer would be
unlawful.

45
<PAGE>

PART II

(OTHER INFORMATION)

UNDERTAKING TO FILE REPORTS

Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore, or hereafter duly adopted pursuant to
authority conferred in that section.

RULE 484 UNDERTAKING

American General Life Insurance Company's Bylaws provide in Article VII,
Section 1 for indemnification of directors, officers and employees of the
Company.

Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant 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 is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant 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 Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A) OF THE INVESTMENT COMPANY ACT OF
1940

American General Life Insurance Company hereby represents that the fees and
charges deducted under the Policy, in the aggregate, are reasonable in relation
to the services rendered, the expenses expected to be incurred, and risks
assumed by American General Life Insurance Company.

II-1
<PAGE>

CONTENTS OF REGISTRATION STATEMENT
- ----------------------------------

This Registration Statement contains the following papers and documents:

The facing sheet.
Cross-Reference Table.
Prospectus, consisting of 45 pages of text, plus 43 financial pages of American
General Life Insurance Company.
The undertaking to file reports.
The Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A).
The signatures.
Written Consents of the following persons:

Independent Auditors

The following exhibits:

1. Exhibits required by Article IX, paragraph A of Form N-8B-2:

(1)(a) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of Separate
Account VL-R. (1)

(1)(b) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of variable
life insurance standards of suitability and conduct. (1)

(2) Not applicable.

(3)(a) Amended and Restated Distribution Agreement between American
General Securities Incorporated and American General Life
Insurance Company effective October 15, 1998. (4)

(3)(b) Form of Selling Group Agreement. (13)

(3)(c) Schedule of Commissions (incorporated by reference from the
text included under the heading "Distribution of the Policies"
in the prospectus that is filed as part of this amended
Registration Statement).

(4) Not applicable.

(5) Specimen form of the "Key Legacy Plus" Variable Universal
Life Insurance Policy (Policy Form No. 99616). (11)

(6)(a) Amended and Restated Articles of Incorporation of American
General Life Insurance Company, effective December 31, 1991.
(2)

(6)(b) Bylaws of American General Life Insurance Company, adopted
January 22, 1992. (3)

II-2
<PAGE>

(6)(c) Amendment to the Amended and Restated Articles of
Incorporation of American General Life Insurance Company,
effective July 13, 1995. (5)

(7) Not applicable.

(8)(a)(i) Form of Participation Agreement by and Among AIM Variable
Insurance Funds, Inc., AIM Distributors, Inc., American
General Life Insurance Company, on Behalf of Itself and
its Separate Accounts, and American General Securities
Incorporated. (6)

(8)(a)(ii) Form of Amendment Three to Participation Agreement by and
among AIM Variable Insurance Funds, Inc., A I M
Distributors, Inc., American General Life Insurance
Company, on Behalf of Itself and its Separate Accounts,
and American General Securities Incorporated dated as of
February 1, 2000. (12)

(8)(b)(i) Form of Participation Agreement by and between The
Variable Annuity Life Insurance Company and American
General Life Insurance Company. (10)

(8)(b)(ii) Amendment One to Participation Agreement by and between
The Variable Annuity Life Insurance Company and American
General Life Insurance Company dated as of July 21, 1998.
(8)

(8)(c)(i) Form of Participation Agreement Among MFS Variable
Insurance Trust, American General Life Insurance Company
and Massachusetts Financial Services Company. (6)

(8)(c)(ii) Form of Amendment Three to Participation Agreement Among
MFS Variable Insurance Trust, American General Life
Insurance Company and Massachusetts Financial Services
Company dated as of February 1, 2000. (12)

(8)(c)(iii) Form of Amendment Four to Participation Agreement Among
MFS Variable Insurance Trust, American General Life
Insurance Company and Massachusetts Financial Services
Company dated as of May 1, 2000. (Filed herewith)

(8)(d)(i) Form of Participation Agreement Among Putnam Variable
Trust, Putnam Mutual Funds Corp., and American General
Life Insurance Company. (6)

(8)(d)(ii) Form of Amendment No. 1 to Participation Agreement among
Putnam Variable Trust, Putnam Mutual Funds Corp. and
American General Life Insurance Company. (12)

(8)(e)(i) Amended and Restated Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Van Kampen American Capital Life
Investment Trust, Van Kampen American Capital Asset
Management, Inc., and Van Kampen American Capital
Distributors, Inc. (9)

II-3
<PAGE>

(8)(e)(ii) Amendment One to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van
Kampen American Capital Life Investment Trust, Van Kampen
American Capital Asset Management, Inc., and Van Kampen
American Capital Distributors, Inc. (8)

(8)(e)(iii) Form of Amendment Five to Amended and Restated
Participation Agreement by and among American General Life
Insurance Company, American General Securities
Incorporated, Van Kampen Life Investment Trust, Van Kampen
Asset Management Inc. and Van Kampen Funds Inc. (12)

(8)(f) Form of Participation Agreement by and among American
General Life Insurance Company, Oppenheimer Variable
Account Funds, and OppenheimerFunds, Inc. (12)

(8)(g)(i) Participation Agreement by and among American General Life
Insurance Company, Templeton Variable Products Series
Fund, and Franklin Templeton Distributors, Inc. (8)

(8)(g)(ii) Form of Amendment to Participation Agreement by and among
American General Life Insurance Company, Templeton
Variable Products Series Fund, Franklin Templeton Variable
Insurance Products Trust, and Franklin Templeton
Distributors, Inc. dated February 1, 2000. (12)

(8)(g)(iii) Form of Participation Agreement by and among American
General Life Insurance Company, Franklin Templeton
Variable Insurance Products Trust, and Franklin Templeton
Distributors, Inc. (Filed herewith)

(8)(h) Form of Participation Agreement by and between American
General Life Insurance Company, American General
Securities Incorporated, The Victory Variable Insurance
Funds and BISYS Fund Services Limited Partnership. (13)

(8)(i) Form of Shareholders Service Agreement by and between
American General Life Insurance Company and American
Century Investment Management, Inc. (13 )

(8)(j)(i) Sales Agreement by and between American General Life
Insurance Company and Neuberger & Berman Advisers
Management Trust, and Neuberger & Berman Management
Incorporated. (13)

(8)(j)(ii) Form of Assignment and Modification Agreement by and
between Neuberger & Berman Advisers Management Trust,
Neuberger & Berman Management Incorporated, Neuberger &
Berman Advisers Management Trust, and American General
Life Insurance Company. (13)

(8)(k) Form of Administrative Services Agreement between American
General Life Insurance Company and fund distributor. (5)

II-4
<PAGE>

(8)(l)(i) Administrative Services Agreement between American General
Life Insurance Company and Van Kampen Asset Management Inc.
dated December 1, 1998. (12)

(8)(l)(ii) Form of Administrative Services Agreement between American
General Life Insurance Company and Van Kampen Asset
Management Inc. (14)

(8)(m) Form of services agreement dated July 31, 1975, (limited to
introduction and first two recitals, and sections 1-3) among
various affiliates of American General Corporation, including
American General Life Insurance Company and American General
Life Companies. (7)

(8)(n) Administrative Services Agreement dated as of June 1, 1998,
between American General Life Insurance Company and AIM
Advisors, Inc. (4)

(8)(o) Form of Administrative Services Agreement by and among
American General Life Insurance Company and OppenheimerFunds,
Inc. (12)

(8)(p) Administrative Services Agreement by and among American
General Life Insurance Company and Franklin Templeton
Services, Inc. dated as of March 9, 1999. (8)

(8)(q) Form of Administrative Services Agreement between Neuberger &
Berman Management Inc. and American General Life Insurance
Company. (13)

(8)(r) Form of Administrative Services Agreement between Key Asset
Management, Inc. and American General Life Insurance Company.
(13)

(9) Not applicable.

(10)(a) Single Insured Life Insurance Application - Part A. (11)

(10)(b) Single Insured Life Insurance Application - Part B. (11)

(10)(c) Medical Exam Form Life Insurance Application. (11)

(10)(d) Single Insured Simplified Life Insurance Application. (12)

(10)(e) Variable Universal Life Insurance Supplemental Application.
(13)

(10)(f) Service Request Form. (13)

Other Exhibits

2(a) Opinion and Consent of Pauletta P. Cohn, Deputy General
Counsel of American General Life Companies. (13)

II-5
<PAGE>

2(b) Opinion and Consent of American General Life Insurance
Company's actuary. (13)

3 Not applicable.

4 Not applicable.

6 Consent of Independent Auditors. (Filed herewith)

7 Powers of Attorney. (Filed herewith on signature pages)

27 Financial Data Schedule. Not applicable.

/1/ Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-42567) of American General Life Insurance
Company Separate Account VL-R on December 18, 1997.

/2/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 33-43390) of Separate Account D of American
General Life Insurance Company on October 16, 1991.

/3/ Incorporated herein by reference to the filing of Post-Effective Amendment
No. 1 of the Form N-4 Registration Statement (File No. 33-43390) of Separate
Account D of American General Life Insurance Company on April 30, 1992.

/4/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 333-70667) of American General Life Insurance
Company Separate Account D on January 15, 1999.

/5/ Incorporated by reference to the filing of Pre-Effective Amendment No. 3 of
the Form S-6 Registration Statement (File No. 333-53909) of American General
Life Insurance Company Separate Account VL-R on August 19, 1998.

/6/ Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of
the Form S-6 Registration Statement (File No. 333-42567) of American General
Life Insurance Company Separate Account VL-R on March 23, 1998.

/7/ Incorporated by reference to the filing of Pre-Effective Amendment No. 23
to the Form N-4 Registration Statement of American General Life Insurance
Company's Separate Account A (File No. 33-44745) on April 24, 1998.

/8/ Incorporated by reference to the filing of the Pre-Effective Amendment No. 1
to Form N-4 Registration Statement (File No. 333-70667) of American General Life
Insurance Company Separate Account D on March 18, 1999.

/9/ Incorporated by reference to Post-Effective Amendment No. 12 to Registrant's
Form N-4 Registration Statement (File No. 33-43390) filed on April 30, 1997.

II-6
<PAGE>

/10/ Incorporated by reference to Pre-Effective Amendment No. 1 of the Form N-4
Registration Statement (File No. 333-40637) of Separate Account D of American
General Life Insurance Company filed on February 12, 1998.

/11/ Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-89897) of American General Life Insurance
Company Separate Account VL-R on October 29, 1999.

/12/ Incorporated herein by reference to the filing of Pre-Effective Amendment
No. 1 of the Form S-6 Registration Statement (File No. 333-87307) of American
General Life Insurance Company Separate Account VL-R on January 20, 2000.

/13/ Incorporated herein by reference to the filing of Pre-Effective Amendment
No. 1 of the Form S-6 Registration Statement (File No. 333-89897) of American
General Life Insurance Company Separate Account VL-R on January 21, 2000.

/14/ Incorporated herein by reference to the filing of Post-Effective Amendment
No. 18 of the Form N-4 Registration Statement (File No. 33-43390) of Separate
Account D of American General Life Insurance Company on April 12, 2000.

II-7
<PAGE>

POWERS OF ATTORNEY

Each person whose signature appears below hereby appoints Thomas M. Zurek,
Robert F. Herbert, Jr. and Pauletta P. Cohn and each of them, any one of whom
may act without the joinder of the others, as his/her attorney-in-fact to sign
on his/her behalf and in the capacity stated below and to file all amendments to
this Registration Statement, which amendment or amendments may make such changes
and additions to this Registration Statement as such attorney-in-fact may deem
necessary or appropriate.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant,
American General Life Insurance Company Separate Account VL-R, certifies that it
meets all of the requirements for effectiveness of this amended registration
statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amended registration statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City of Houston, and State of Texas, on the 25/th/ day of
April, 2000.

AMERICAN GENERAL LIFE INSURANCE
COMPANY
SEPARATE ACCOUNT VL-R
(Registrant)

BY: AMERICAN GENERAL LIFE INSURANCE
COMPANY
(On behalf of the Registrant and itself)

BY: /s/ ROBERT F. HERBERT, JR.
--------------------------
Robert F. Herbert, Jr.
Senior Vice President, Treasurer
and Controller
[SEAL]

ATTEST: /s/ JULIE COTTON HEARNE
------------------------
Julie Cotton Hearne
Assistant Secretary

II-8
<PAGE>

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following officers and directors
of American General Life Insurance Company in the capacities and on the dates
indicated.

Signature Title Date
- --------- ----- ----

/s/ RONALD H. RIDLEHUBER President and CEO April 25, 2000
- -------------------------
Ronald H. Ridlehuber

/s/ ROBERT F. HERBERT, JR. Senior Vice President, April 25, 2000
- -------------------------- Treasurer and Controller
Robert F. Herbert, Jr.

/s/ DONALD W. BRITTON Director April 25, 2000
- ---------------------
Donald W. Britton

/s/ DAVID A. FRAVEL Director April 25, 2000
- --------------------
David A. Fravel

/s/ DAVID L. HERZOG Director and April 25, 2000
- ------------------- Chief Financial Officer
David L. Herzog

/s/ ROYCE G. IMHOFF, II Director April 25, 2000
- -----------------------
Royce G. Imhoff, II

/s/ JOHN V. LAGRASSE Director April 25, 2000
- --------------------
John V. LaGrasse

/s/ RODNEY O. MARTIN, JR. Director April 25, 2000
- -------------------------
Rodney O. Martin, Jr.

/s/ THOMAS M. ZUREK Director April 25, 2000
- -------------------
Thomas M. Zurek

II-9
<PAGE>

EXHIBIT INDEX
- -------------

The following exhibits:

1. Exhibits required by Article IX, paragraph A of Form N-8B-2:

(1)(a) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of Separate
Account VL-R. (1)

(1)(b) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of variable
life insurance standards of suitability and conduct. (1)

(2) Not applicable.

(3)(a) Amended and Restated Distribution Agreement between American
General Securities Incorporated and American General Life
Insurance Company effective October 15, 1998. (4)

(3)(b) Form of Selling Group Agreement. (13)

(4) Not applicable.

(5) Specimen form of the "Key Legacy Plus" Variable Universal
Life Insurance Policy (Policy Form No. 99616). (11)

(6)(a) Amended and Restated Articles of Incorporation of American
General Life Insurance Company, effective December 31, 1991.
(2)

(6)(b) Bylaws of American General Life Insurance Company, adopted
January 22, 1992. (3)

(6)(c) Amendment to the Amended and Restated Articles of
Incorporation of American General Life Insurance Company,
effective July 13, 1995. (5)

(7) Not applicable.

E-1
<PAGE>

(8)(b)(i) Form of Participation Agreement by and between The
Variable Annuity Life Insurance Company and American
General Life Insurance Company. (10)

(8)(b)(ii) Amendment One to Participation Agreement by and between
The Variable Annuity Life Insurance Company and American
General Life Insurance Company dated as of July 21, 1998.
(8)

(8)(c)(i) Form of Participation Agreement Among MFS Variable
Insurance Trust, American General Life Insurance Company
and Massachusetts Financial Services Company. (6)

(8)(d)(i) Form of Participation Agreement Among Putnam Variable
Trust, Putnam Mutual Funds Corp., and American General
Life Insurance Company. (6)

(8)(d)(ii) Form of Amendment No. 1 to Participation Agreement among
Putnam Variable Trust, Putnam Mutual Funds Corp. and
American General Life Insurance Company. (12)

E-2
<PAGE>

(8)(f) Form of Participation Agreement by and among American
General Life Insurance Company, Oppenheimer Variable
Account Funds, and OppenheimerFunds, Inc. (12)

(8)(g)(i) Participation Agreement by and among American General Life
Insurance Company, Templeton Variable Products Series
Fund, and Franklin Templeton Distributors, Inc. (8)

(8)(i) Form of Shareholders Service Agreement by and between
American General Life Insurance Company and American
Century Investment Management, Inc. (13)

(8)(j)(i) Sales Agreement by and between American General Life
Insurance Company and Neuberger & Berman Advisers
Management Trust, and Neuberger & Berman Management
Incorporated. (13)

E-3
<PAGE>

(8)(k) Form of Administrative Services Agreement between American
General Life Insurance Company and fund distributor. (5)

(8)(l)(i) Administrative Services Agreement between American General
Life Insurance Company and Van Kampen Asset Management Inc.
dated December 1, 1998. (12)

(8)(l)(ii) Form of Administrative Services Agreement between American
General Life Insurance Company and Van Kampen Asset
Management Inc. (14)

(8)(m) Form of services agreement dated July 31, 1975, (limited to
introduction and first two recitals, and sections 1-3)
among various affiliates of American General Corporation,
including American General Life Insurance Company and
American General Life Companies. (7)

(8)(n) Administrative Services Agreement dated as of June 1, 1998,
between American General Life Insurance Company and AIM
Advisors, Inc. (4)

(8)(o) Form of Administrative Services Agreement by and among
American General Life Insurance Company and
OppenheimerFunds, Inc. (12)

(8)(p) Administrative Services Agreement by and among American
General Life Insurance Company and Franklin Templeton
Services, Inc. dated as of March 9, 1999. (8)

(8)(q) Form of Administrative Services Agreement between Neuberger
& Berman Management Inc. and American General Life
Insurance Company. (13)

(8)(r) Form of Administrative Services Agreement between Key Asset
Management, Inc. and American General Life Insurance
Company. (13)

(9) Not applicable.

(10)(a) Single Insured Life Insurance Application - Part A. (11)

(10)(b) Single Insured Life Insurance Application - Part B. (11)

(10)(c) Medical Exam Form Life Insurance Application. (11)

E-4
<PAGE>

(10)(d) Single Insured Simplified Life Insurance Application. (12)

(10)(e) Variable Universal Life Insurance Supplemental Application. (13)

(10)(f) Service Request Form. (13)

Other Exhibits

2(a) Opinion and Consent of Pauletta P. Cohn, Deputy General Counsel
of American General Life Companies. (13)

2(b) Opinion and Consent of American General Life Insurance Company's
actuary. (13)

3 Not applicable.

4 Not applicable.

6 Consent of Independent Auditors. (Filed herewith)

7 Powers of Attorney. (Filed herewith on signature pages)

27 Financial Data Schedule. Not applicable.

E-5
<PAGE>

/9/ Incorporated by reference to Post-Effective Amendment No. 12 to Registrant's
Form N-4 Registration Statement (File No. 33-43390) filed on April 30, 1997.

E-6

<PAGE>

EXHIBIT (8)(c)(III)

AMENDMENT NO. 4 TO PARTICIPATION AGREEMENT

Pursuant to the Participation Agreement, made and entered into as of the
13th day of April, 1998 by and among MFS Variable Insurance Trust, American
General Life Insurance Company and Massachusetts Financial Company, the parties
do hereby agree to an amended Schedule A as attached hereto.

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
the Participation Agreement to be executed in its name and on its behalf by its
duly authorized representative. The Amendment shall take effect on May 1, 2000.

AMERICAN GENERAL LIFE
INSURANCE COMPANY
By its authorized officer,

By: ______________________________________

Title: ___________________________________

MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer,

By: ______________________________________
James R. Bordewick, Jr.
Assistant Secretary

MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By its authorized officer,

By: _______________________________________
Jeffrey L. Shames
Chairman and Chief Executive Officer

#30480

<PAGE>

As of May 1, 2000

SCHEDULE A

ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
American General Life Insurance Platinum Investor I Flexible Premium MFS Emerging Growth
Company Separate Account VL-R Life Insurance Policy Series
(May 1, 1997) Policy Form No. 97600

Platinum Investor II Flexible Premium
Life Insurance Policy
Policy Form No. 97610

Legacy Plus Variable
Life Insurance Policy
Policy Form No. 98615

Corporate America-Variable
Life Insurance Policy
Policy Form No. 99301

Platinum Investor Survivor Variable
Life Insurance Policy
Policy Form No. 90787

The One VUL Solution MFS Growth With Income
Variable Life Insurance Policy Series
Policy Form No. 99615

AG Legacy Plus MFS Emerging Growth
Variable Life Insurance Policy Series
Policy Form No. 99616 MFS New Discovery Series

American General Life Insurance Platinum Investor Variable Annuity
Company Policy Form No. 98020
Separate Account D MFS Emerging Growth
(November 19, 1973) Series

</TABLE>

<PAGE>

EXHIBIT (8)(G)(iii)
Participation Agreement
as of May 1, 2000
Franklin Templeton Variable Insurance Products Trust
Franklin Templeton Distributors, Inc.
American General Life Insurance Company

CONTENTS

Paragraph Subject Matter
--------- --------------

1. Parties and Purpose
2. Representations and Warranties
3. Purchase and Redemption of Trust Portfolio Shares
4. Fees, Expenses, Prospectuses, Proxy Materials and Reports
5. Voting
6. Sales Material, Information and Trademarks
7. Indemnification
8. Notices
9. Termination
10. Miscellaneous

SCHEDULES TO THIS AGREEMENT

A. The Company
B. Accounts of the Company
C. Available Portfolios and Classes of Shares of the Trust; Investment
Advisers
D. Contracts of the Company
E. Other Portfolios Available under the Contracts
F. [REDACTED]
G. Addresses for Notices
H. Shared Funding Order

1. PARTIES AND PURPOSE
-------------------

This agreement (the "Agreement") is between Franklin Templeton Variable
Insurance Products Trust, an open-end management investment company organized as
a business trust under Massachusetts law (the "Trust"), Franklin Templeton
Distributors, Inc., a California corporation which is the principal underwriter
for the Trust (the "Underwriter," and together with the Trust, "we" or "us") and
the insurance company identified on Schedule A ("you"), on your own behalf and
on behalf of each segregated asset account maintained by you that is listed on
Schedule B, as that schedule may be amended from time to time ("Account" or
"Accounts").

<PAGE>

[REDACTED]

2. REPRESENTATIONS AND WARRANTIES
------------------------------

(a) Representations and Warranties by You

You represent and warrant that:

1. You are an insurance company duly organized and in good standing
under the laws of your state of incorporation.

2. All of your directors, officers, employees, and other individuals
or entities dealing with the money and/or securities of the Trust are and shall
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Trust, in an amount not less than $5 million. Such bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company. You agree to make all reasonable efforts to see that this bond
or another bond containing such provisions is always in effect, and you agree to
notify us in the event that such coverage no longer applies.

3. Each Account is a duly organized, validly existing segregated
asset account under applicable insurance law and interests in each Account are
offered exclusively through the purchase of or transfer into a "variable
contract" within the meaning of such terms under Section 817 of the Internal
Revenue Code of 1986, as amended ("Code") and the regulations thereunder. You
will use your best efforts to continue to meet such definitional requirements,
and will notify us immediately upon having a reasonable basis for believing that
such requirements have ceased to be met or that they might not be met in the
future.

4. Each Account either: (i) has been registered or, prior to any
issuance or sale of the Contracts, will be registered as a unit investment trust
under the Investment Company Act of 1940 ("1940 Act"); or (ii) has not been so
registered in proper reliance upon an exemption from registration under Section
3(c) of the 1940 Act; if the Account is exempt from registration as an
investment company under Section 3(c) of the 1940 Act, you will make every
effort to maintain such exemption and will notify us immediately upon having a
reasonable basis for believing that such exemption no longer applies or might
not apply in the future.

5. The Contracts or interests in the Accounts: (i) are or, prior to
any issuance or sale will be, registered as securities under the Securities Act
of 1933, as amended (the "1933 Act"); or (ii) are not registered because they
are properly exempt from registration under Section 3(a)(2) of the 1933 Act or
will be offered exclusively in transactions that are properly exempt from
registration under Section 4(2) or Regulation D of the 1933 Act, in which case
you will make every effort to maintain such exemption and will notify us
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future.

6. The Contracts: (i) will be sold by broker-dealers, or their
registered representatives, who are registered with the Securities and Exchange
Commission ("SEC") under the Securities and Exchange Act of 1934, as amended
(the "1934 Act") and who are

2
<PAGE>

members in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); (ii) will be issued and sold in compliance in all material
respects with all applicable federal and state laws; and (iii) will be sold in
compliance in all material respects with state insurance suitability
requirements and NASD suitability guidelines.

7. { }

8. The fees and charges deducted under each Contract, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by you.

9. You will use shares of the Trust only for the purpose of funding
benefits of the Contracts through the Accounts.

10. Contracts will not be sold outside of the United States.

11. With respect to any Accounts which are exempt from registration
under the 1940 Act in reliance on 3(c)(1) or Section 3(c)(7) thereof:

a. the principal underwriter for each such Account and any
subaccounts thereof is a registered broker-dealer with the
SEC under the 1934 Act;

b. the shares of the Portfolios of the Trust are and will
continue to be the only investment securities held by the
corresponding subaccounts; and

c. with regard to each Portfolio, you, on behalf of the
corresponding subaccount; will:

(i) vote such shares held by it in the same proportion as
the vote of all other holders of such shares; and

(ii) refrain from substituting shares of another security
for such shares unless the SEC has approved such
substitution in the manner provided in Section 26 of
the 1940 Act.

(B) REPRESENTATIONS AND WARRANTIES BY THE TRUST

The Trust represents and warrants that:

1. It is duly organized and in good standing under the laws of the
State of Massachusetts.

2. All of its directors, officers, employees and others dealing with
the money and/or securities of a Portfolio are and shall be at all times covered
by a blanket fidelity bond or similar coverage for the benefit of the Trust in
an amount not less that the minimum coverage

3
<PAGE>

required by Rule 17g-1 or other regulations under the 1940 Act. Such bond shall
include coverage for larceny and embezzlement and be issued by a reputable
bonding company.

3. It is registered as an open-end management investment company
under the 1940 Act.

4. Each class of shares of the Portfolios of the Trust is registered
under the 1933 Act.

5. It will amend its registration statement under the 1933 Act and
the 1940 Act from time to time as required in order to effect the continuous
offering of its shares.

6. It will comply, in all material respects, with the 1933 and 1940
Acts and the rules and regulations thereunder.

7. It is currently qualified as a "regulated investment company"
under Subchapter M of the Code, it will make every effort to maintain such
qualification, and will notify you immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.

8. The investments of each Portfolio will comply with the
diversification requirements for variable Life, endowment or life insurance
contracts set forth in Section 817(h) of the Code, and the rules and regulations
thereunder, including without limitation Treasury Regulation 1.817-5. Upon
having a reasonable basis for believing any Portfolio has ceased to comply and
will not be able to comply within the grace period afforded by Regulation 1.817-
5, the Trust will notify you immediately and will take all reasonable steps to
adequately diversify the Portfolio to achieve compliance.

9. [ ]

The Underwriter represents and warrants that:

1. It is registered as a broker dealer with the SEC under the 1934
Act, and is a member in good standing of the NASD.

2. Each investment adviser listed on Schedule C (each, an "Adviser")
is duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and any applicable state securities law.

(D) WARRANTY AND AGREEMENT BY BOTH YOU AND US

We received an order from the SEC dated November 16, 1993 (file no. 812-
8546), which was amended by a notice and an order we received on September 17,
1999 and October 13, 1999, respectively (file no. 812-11698) (collectively, the
"Shared Funding Order," attached to this Agreement as Schedule H). The Shared
Funding Order grants exemptions from certain provisions of the 1940 Act and the
regulations thereunder to the extent necessary to permit

4
<PAGE>

shares of the Trust to be sold to and held by variable Life and variable life
insurance separate accounts of both affiliated and unaffiliated life insurance
companies and qualified pension and retirement plans outside the separate
account context. You and we both warrant and agree that both you and we will
comply with the "Applicants' Conditions" prescribed in the Shared Funding Order
as though such conditions were set forth verbatim in this Agreement, including,
without limitation, the provisions regarding potential conflicts of interest
between the separate accounts which invest in the Trust and regarding contract
owner voting privileges.

3. Purchase and Redemption of Trust Portfolio Shares
-------------------------------------------------

(a) We will make shares of the Portfolios available to the Accounts for the
benefit of the Contracts. The shares will be available for purchase at the net
asset value per share next computed after we (or our agent) receive a purchase
order, as established in accordance with the provisions of the then current
prospectus of the Trust. Notwithstanding the foregoing, the Trust's Board of
Trustees ("Trustees") may refuse to sell shares of any Portfolio to any person,
or may suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
if, in the sole discretion of the Trustees, they deem such action to be in the
best interests of the shareholders of such Portfolio. Without limiting the
foregoing, the Trustees have determined that there is a significant risk that
the Trust and its shareholders may be adversely affected by investors whose
purchase and redemption activity follows a market timing pattern, and have
authorized the Trust, the Underwriter and the Trust's transfer agent to adopt
procedures and take other action (including, without limitation, rejecting
specific purchase orders) as they deem necessary to reduce, discourage or
eliminate market timing activity. You agree to cooperate with us to assist us
in implementing the Trust's restrictions on purchase and redemption activity
that follows a market timing pattern.

(b) We agree that shares of the Trust will be sold only to life insurance
companies which have entered into fund participation agreements with the Trust
("Participating Insurance Companies") and their separate accounts or to
qualified pension and retirement plans in accordance with the terms of the
Shared Funding Order. No shares of any Portfolio will be sold to the general
public.

(d) { }

(e) { }

(f) { }

(g) We will redeem any full or fractional shares of any Portfolio, when
requested by you on behalf of an Account, at the net asset value next computed
after receipt by us (or our agent) of the request for redemption, as established
in accordance with the provisions of the then current prospectus of the Trust.
We shall make payment for such shares in the manner we establish from time to
time, but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act. Payments for the purchase or redemption of shares by
you may be

5
<PAGE>

netted against one another on any Business Day for the purpose of determining
the amount of any wire transfer on that Business Day.

(h) Issuance and transfer of the Portfolio shares will be by book entry
only. Stock certificates will not be issued to you or the Accounts. Portfolio
shares purchased from the Trust will be recorded in the appropriate title for
each Account or the appropriate subaccount of each Account.

(i) We shall furnish, on or before the ex-dividend date, notice to you of
any income dividends or capital gain distributions payable on the shares of any
Portfolio. You hereby elect to receive all such income dividends and capital
gain distributions as are payable on shares of a Portfolio in additional shares
of that Portfolio, and you reserve the right to change this election in the
future. We will notify you of the number of shares so issued as payment of such
dividends and distributions.

4. FEES, EXPENSES, PROSPECTUSES, PROXY MATERIALS AND REPORTS
---------------------------------------------------------
(a) { }

(b) We shall prepare and be responsible for filing with the SEC, and any
state regulators requiring such filing, all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
We shall bear the costs of preparation and filing of the documents listed in the
preceding sentence, registration and qualification of the Trust's shares of the
Portfolios.

(c) We shall use reasonable efforts to provide you, on a timely basis, with
such information about the Trust, the Portfolios and each Adviser, in such form
as you may reasonably require, as you shall reasonably request in connection
with the preparation of disclosure documents and annual and semi-annual reports
pertaining to the Contracts.

(d) { }

(e) { }

(f) You assume sole responsibility for ensuring that the Trust's
prospectuses, shareholder reports and communications, and proxy materials are
delivered to Contract owners in accordance with applicable federal and state
securities laws.

5. VOTING
------

(a) All Participating Insurance Companies shall have the obligations and
responsibilities regarding pass-through voting and conflicts of interest
corresponding to those contained in the Shared Funding Order.

(b) If and to the extent required by law, you shall: (i) solicit voting
instructions from Contract owners; (ii) vote the Trust shares in accordance with
the instructions received from

6
<PAGE>

Contract owners; and (iii) vote Trust shares for which no instructions have been
received in the same proportion as Trust shares of such Portfolio for which
instructions have been received; so long as and to the extent that the SEC
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. You reserve the right to vote Trust shares held in
any Account in your own right, to the extent permitted by law.

(c) So long as, and to the extent that, the SEC interprets the 1940 Act to
require pass-through voting privileges for Contract owners, you shall provide
pass-through voting privileges to Contract owners whose Contract values are
invested, through the Accounts, in shares of one or more Portfolios of the
Trust. We shall require all Participating Insurance Companies to calculate
voting privileges in the same manner and you shall be responsible for assuring
that the Accounts calculate voting privileges in the manner established by us.
With respect to each Account, you will vote shares of each Portfolio of the
Trust held by an Account and for which no timely voting instructions from
Contract owners are received in the same proportion as those shares held by that
Account for which voting instructions are received. You and your agents will in
no way recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contracts without our prior written consent,
which consent may be withheld in our sole discretion.

6. SALES MATERIAL, INFORMATION AND TRADEMARKS
------------------------------------------

(a) { }

(b) { }

(c) You and your agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or an Adviser, other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Trust shares (as such registration statement and prospectus
may be amended or supplemented from time to time), annual and semi-annual
reports of the Trust, Trust-sponsored proxy statements, or in Sales literature
or other Promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.

(d) We shall not give any information or make any representations or
statements on behalf of you or concerning you, the Accounts or the Contracts
other than information or representations contained in and accurately derived
from disclosure documents for the Contracts (as such disclosure documents may be
amended or supplemented from time to time), or in materials approved by you for
distribution, including Sales literature or other Promotional materials, except
as required by legal process or regulatory authorities or with your written
permission. We may use the names of you, the Accounts and the Contracts in our
sales literature and disclosure documents.

(e) Except as provided in Section 6(b), you shall not use any designation
comprised in whole or part of the names or marks "Franklin" or "Templeton" or
any logo or other trademark relating to the Trust or the Underwriter without
prior written consent, and upon

7
<PAGE>

termination of this Agreement for any reason, you shall cease all use of any
such name or mark as soon as reasonably practicable.

7. INDEMNIFICATION
---------------

(A) INDEMNIFICATION BY YOU

1. You agree to indemnify and hold harmless the Underwriter, the
Trust and each of its Trustees, officers, employees and agents and each person,
if any, who controls the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually the "Indemnified
Party" for purposes of this Section 7) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with your written
consent, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses are related to the sale or acquisition of
shares of the Trust or the Contracts and

a. arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a disclosure
document for the Contracts or in the Contracts themselves or in sales
literature generated or approved by you on behalf of the Contracts or
Accounts (or any amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of this Section 7), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to you by or on
behalf of the Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or

b. arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Trust Documents as defined below in Section 7(b)) or wrongful
conduct of you or persons under your control, with respect to the sale or
acquisition of the Contracts or Trust shares; or

c. arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust Documents as defined
below in Section 7(b) or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was made in
reliance upon and accurately derived from written information furnished to
the Trust by or on behalf of you; or

d. arise out of or result from any failure by you to provide the
services or furnish the materials required under the terms of this
Agreement;

8
<PAGE>

e. arise out of or result from any material breach of any
representation and/or warranty made by you in this Agreement or arise out
of or result from any other material breach of this Agreement by you; or

f. arise out of or result from a Contract failing to be
considered a life insurance policy or an Life Contract, whichever is
appropriate, under applicable provisions of the Code thereby depriving the
Trust of its compliance with Section 817(h) of the Code.

2. You shall not be liable under this indemnification provision with
respect to any Losses to which an Indemnified Party would otherwise be subject
by reason of such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Trust or Underwriter, whichever is applicable. You shall
also not be liable under this indemnification provision with respect to any
claim made against an Indemnified Party unless such Indemnified Party shall have
notified you in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify you of any such claim shall not relieve you from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, you shall be entitled to participate,
at your own expense, in the defense of such action. Unless the Indemnified
Party releases you from any further obligations under this Section 7(a), you
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from you to such party of the
your election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and you will not
be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.

3. The Indemnified Parties will promptly notify you of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust shares or the Contracts or the operation of
the Trust.

(B) INDEMNIFICATION BY THE UNDERWRITER

1. The Underwriter agrees to indemnify and hold harmless you, and
each of your directors and officers and each person, if any, who controls you
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually an "Indemnified Party" for purposes of this Section
7(b)) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Underwriter, which
consent shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in connection
therewith) (collectively, "Losses") to which the Indemnified Parties may become
subject under any statute, at common

9
<PAGE>

law or otherwise, insofar as such Losses are related to the sale or acquisition
of the shares of the Trust or the Contracts and:

a. arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement, prospectus or sales literature of the Trust (or any
amendment or supplement to any of the foregoing) (collectively, the "Trust
Documents") or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission of such alleged statement or omission was made in
reliance upon and in conformity with information furnished to us by or on
behalf of you for use in the Registration Statement or prospectus for the
Trust or in sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Trust shares; or

b. arise out of or as a result of statements or representations
(other than statements or representations contained in the disclosure
documents or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of the Trust,
Adviser or Underwriter or persons under their control, with respect to the
sale or distribution of the Contracts or Trust shares; or

c. arise out of any untrue statement or alleged untrue statement
of a material fact contained in a disclosure document or sales literature
covering the Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in reliance
upon information furnished to you by or on behalf of the Trust; or

d. arise as a result of any failure by us to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise,
to comply with the qualification representation specified above in Section
2(b)(7) and the diversification requirements specified above in Section
2(b)(8); or

e. arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Underwriter; as limited by and in accordance with the provisions of
Sections 7(b)(2) and 7(b)(3) hereof.

2. The Underwriter shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to you or the Accounts, whichever
is applicable.

10
<PAGE>

3. The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. Unless the Indemnified
Party releases the Underwriter from any further obligations under this Section
7(b), the Underwriter also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Underwriter to such party of the Underwriter's election to assume the defense
thereof, the Indemnified Party shall bear the expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.

4. You agree promptly to notify the Underwriter of the commencement
of any litigation or proceedings against you or the Indemnified Parties in
connection with the issuance or sale of the Contracts or the operation of each
Account.

11
<PAGE>

1. The Trust agrees to indemnify and hold harmless you, and each of
your directors and officers and each person, if any, who controls you within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Section 7(c)) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Trust, which consent shall not be unreasonably withheld) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith or willful misconduct of
the Board or any member thereof, are related to the operations of the Trust, and
arise out of or result from any material breach of any representation and/or
warranty made by the Trust in this Agreement or arise out of or result from any
other material breach of this Agreement by the Trust; as limited by and in
accordance with the provisions of Sections 7(c)(2) and 7(c)(3) hereof. It is
understood and expressly stipulated that neither the holders of shares of the
Trust nor any Trustee, officer, agent or employee of the Trust shall be
personally liable hereunder, nor shall any resort be had to other private
property for the satisfaction of any claim or obligation hereunder, but the
Trust only shall be liable.

2. The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against any Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
you, the Trust, the Underwriter or each Account, whichever is applicable.

3. The Trust shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Trust in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claims shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve the Trust from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Trust will be entitled to participate, at its own
expense, in the defense thereof. Unless the Indemnified Party releases the
Trust from any further obligations under this Section 7(c), the Trust also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Trust to such party of the
Trust's election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the Trust
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.

4. You agree promptly to notify the Trust of the commencement of any
litigation or proceedings against you or the Indemnified Parties in connection
with this

12
<PAGE>

Agreement, the issuance or sale of the Contracts, with respect to the
operation of the Account, or the sale or acquisition of shares of the Trust.

8. NOTICES
-------

Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth in Schedule G below or
at such other address as such party may from time to time specify in writing to
the other party.

9. TERMINATION
-----------

(a) This Agreement may be terminated by any party in its entirety or with
respect to one, some or all Portfolios for any reason by sixty (60) days advance
written notice delivered to the other parties, and shall terminate immediately
in the event of its assignment, as that term is used in the 1940 Act.

(b) This Agreement may be terminated immediately by us upon written notice
to you if:

1. you notify the Trust or the Underwriter that the exemption from
registration under Section 3(c) of the 1940 Act no longer applies, or might
not apply in the future, to the unregistered Accounts, or that the
exemption from registration under Section 4(2) or Regulation D promulgated
under the 1933 Act no longer applies or might not apply in the future, to
interests under the unregistered Contracts; or

2. either one or both of the Trust or the Underwriter respectively,
shall determine, in their sole judgment exercised in good faith, that you
have suffered a material adverse change in your business, operations,
financial condition or prospects since the date of this Agreement or are
the subject of material adverse publicity; or

3. you give us the written notice specified above in Section 3(c) and
at the same time you give us such notice there was no notice of termination
outstanding under any other provision of this Agreement; provided, however,
that any termination under this Section 9(b)(3) shall be effective forty-
five (45) days after the notice specified in Section 3(c) was given; or

4. upon your assignment of this Agreement without our prior written
approval.

(c) If this Agreement is terminated for any reason, except as required by
the Shared Funding Order or pursuant to Section 9(b)(1), above, we shall, at
your option, continue to make available additional shares of any Portfolio and
redeem shares of any Portfolio pursuant to all of the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement. If this Agreement is terminated as required by the Shared
Funding Order, its provisions shall govern.

13
<PAGE>

(d) The provisions of Sections 2 (Representations and Warranties) and 7
(Indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement, as long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 9(c), except that we shall have no further obligation
to sell Trust shares with respect to Contracts issued after termination.

(e) You shall not redeem Trust shares attributable to the Contracts (as
opposed to Trust shares attributable to your assets held in the Account) except:
(i) as necessary to implement Contract owner initiated or approved transactions;
(ii) as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application (hereinafter referred to as a
"Legally Required Redemption"); or (iii) as permitted by an order of the SEC
pursuant to Section 26(b) of the 1940 Act. Upon request, you shall promptly
furnish to us the opinion of your counsel (which counsel shall be reasonably
satisfactory to us) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, you shall not prevent Contract
owners from allocating payments to a Portfolio that was otherwise available
under the Contracts without first giving us ninety (90) days notice of your
intention to do so.

10. MISCELLANEOUS
-------------

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

(b) This Agreement may be executed simultaneously in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.

(c) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.

(d) This Agreement shall be construed and its provisions interpreted under
and in accordance with the laws of the State of California. It shall also be
subject to the provisions of the federal securities laws and the rules and
regulations thereunder, to any orders of the SEC on behalf of the Trust granting
it exemptive relief, and to the conditions of such orders. We shall promptly
forward copies of any such orders to you.

(e) The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.

(f) Each party to this Agreement shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the SEC,
the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.

14
<PAGE>

(g) Each party to this Agreement shall treat as confidential all
information reasonably identified as confidential in writing by any other party
to this Agreement, and, except as permitted by this Agreement or as required by
legal process or regulatory authorities, shall not disclose, disseminate, or use
such names and addresses and other confidential information until such time as
they may come into the public domain, without the express written consent of the
affected party. Without limiting the foregoing, no party to this Agreement shall
disclose any information that such party has been advised is proprietary, except
such information that such party is required to disclose by any appropriate
governmental authority (including, without limitation, the SEC, the NASD, and
state securities and insurance regulators).

(h) The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties to this Agreement are entitled to under
state and federal laws.

(i) The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided above in
Section 3(c).

(j) Neither this Agreement nor any rights or obligations created by it may
be assigned by any party without the prior written approval of the other
parties.

(k) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.

15
<PAGE>

IN WITNESS WHEREOF, each of the parties have caused their duly authorized
officers to execute this Agreement.

The Company: American General Life Insurance Company
---------------------------------------

By:__________________________________________________

Name:________________________________________________

Title:_______________________________________________

The Trust: Franklin Templeton Variable Insurance Products Trust
----------------------------------------------------

By:__________________________________________________
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant Secretary

The Underwriter: Franklin Templeton Distributors, Inc.
-------------------------------------

By:__________________________________________________
Name: [ ]
Title: [ ]

16
<PAGE>

SCHEDULE A

THE COMPANY

[name]
[address]

[state of incorporation]

[name]
[address]

[state of incorporation]

17
<PAGE>

SCHEDULE B

ACCOUNTS OF THE COMPANY

1. Name: [name]
Date Established: [date]
SEC Registration Number: 811-____

2. Name: [name]
Date Established: [date]
SEC Registration Number: 811-____

...

18
<PAGE>

SCHEDULE C

AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST; INVESTMENT ADVISERS

Franklin Templeton Variable Insurance Products Trust Investment Adviser
- ---------------------------------------------------- ------------------

19
<PAGE>

SCHEDULE D

CONTRACTS OF THE COMPANY

<TABLE>
<CAPTION>
CONTRACT 1 CONTRACT 2 Contract 3
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Contract/Product
NAME
- --------------------------------------------------------------------------------------------------------
REGISTERED (Y/N)

- --------------------------------------------------------------------------------------------------------
SEC REGISTRATION
NUMBER

- --------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM
NUMBERS

- --------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT
NAME/DATE
ESTABLISHED

- --------------------------------------------------------------------------------------------------------
SEC REGISTRATION
NUMBER

- --------------------------------------------------------------------------------------------------------
PORTFOLIOS AND
CLASSES-ADVISER

- --------------------------------------------------------------------------------------------------------
</TABLE>

20
<PAGE>

SCHEDULE D CONT.

CONTRACTS OF THE COMPANY

<TABLE>
<CAPTION>
CONTRACT 4 Contract 5 CONTRACT 6
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT
NAME
- --------------------------------------------------------------------------------------------------------
REGISTERED (Y/N)

- --------------------------------------------------------------------------------------------------------
SEC REGISTRATION
NUMBER

- --------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM
NUMBERS

- --------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT
NAME/DATE
ESTABLISHED

- --------------------------------------------------------------------------------------------------------
SEC REGISTRATION
NUMBER

- --------------------------------------------------------------------------------------------------------
PORTFOLIOS AND
CLASSES-ADVISER

- --------------------------------------------------------------------------------------------------------
</TABLE>

21
<PAGE>

SCHEDULE E

OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS

[names of other portfolios]

22
<PAGE>

SCHEDULE F

[REDACTED]

23
<PAGE>

SCHEDULE G

ADDRESSES FOR NOTICES

To the Company: [ ] Insurance Company
[address]
[address]
Attention: [name, title]

To the Trust: Franklin Templeton Variable Insurance Products Trust
777 Mariners Island Boulevard
San Mateo, California 94404
Attention: Karen L. Skidmore
[title]

To the Underwriter: Franklin Templeton Distributors, Inc.
777 Mariners Island Boulevard
San Mateo, California 94404
Attention: [name, title]

24
<PAGE>

SCHEDULE H

Shared Funding Order

P:\PUBLIC\PRODLAW\PETERD2\AGA\PRODUCTS\BANKONE\00UPDATE\BK-EXH\FT-PA.DOC

<PAGE>

OTHER EXHIBITS - EXHIBIT 6

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 March 1, 2000, with respect to the
financial statements of American General Life Insurance Company included in this
Post-Effective Amendment No. 1 to the Registration Statement (Form S-6, No. 333-
89897) of American General Life Insurance Company Separate Account VL-R.

/s/ ERNST & YOUNG LLP
---------------------

Houston, Texas
April 25, 2000