RULE NO. 424(b)(2)
                                                     REGISTRATION NOS. 33-62405
 
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 29, 1995)
                                                                          [LOGO]
                                 $300,000,000
 
                                SUNAMERICA INC.
                          MEDIUM-TERM NOTES, SERIES 2
                  DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
 
                                ---------------
  SunAmerica Inc. (the "Company") may offer from time to time up to
$300,000,000 aggregate initial offering price, or the equivalent thereof in
one or more foreign or composite currencies, of its Medium-Term Notes, Series
2 (the "Notes"). Such aggregate principal amount is subject to reduction as a
result of the sale by the Company of certain other securities pursuant to the
Registration Statement of which the accompanying Prospectus is a part. Each
Note will mature on a Business Day nine months or more from the date of issue,
as specified in a pricing supplement hereto (each, a "Pricing Supplement"),
and may be subject to redemption by the Company or repayment at the option of
the Holder thereof, in each case, in whole or in part, prior to its Stated
Maturity Date, as set forth therein and specified in the applicable Pricing
Supplement.
 
  The interest rate, if any, or the formula for the determination of any such
interest rate, applicable to each Note and other variable terms of the Notes
as described herein will be established by the Company at the date of issue of
such Note and will be set forth therein and specified in a Pricing Supplement.
Interest rates, interest rate formulae and such other variable terms are
subject to change by the Company, but no change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Company.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or definitive form (a "Definitive Note"), as set forth in the
applicable Pricing Supplement, in denominations of $1,000 and integral
multiples thereof, unless otherwise specified in the applicable Pricing
Supplement. Each Book-Entry Note will be represented by one or more fully
registered global securities deposited with or on behalf of The Depository
Trust Company (or such other depositary as is identified in an applicable
Pricing Supplement) (the "Depositary") and registered in the name of the
Depositary or the Depositary's nominee. Interests in Book-Entry Notes will be
shown on, and transfers thereof will be effected only through, records
maintained by the Depositary (with respect to its participants) and the
Depositary's participants (with respect to beneficial owners).
 
  Unless otherwise specified in an applicable Pricing Supplement, the Notes
will bear interest at fixed rates (the "Fixed Rate Notes") or at floating
rates (the "Floating Rate Notes"). The applicable Pricing Supplement will
specify whether a Floating Rate Note is a Regular Floating Rate Note, Floating
Rate/Fixed Rate Note or Inverse Floating Rate Note and whether its rate of
interest is determined by reference to one or more of the CD Rate, the
Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR, the Prime Rate, the CMT Rate or the Treasury Rate (each, an
"Interest Rate Basis"), or any other interest rate basis or formula, as
adjusted by any Spread and/or Spread Multiplier and will specify such other
terms applicable to such Note. See "Description of Notes." Interest on Fixed
Rate Notes will accrue from their date of issue and, unless otherwise
specified in the applicable Pricing Supplement, will be payable semiannually
in arrears on June 1 and December 1 of each year and at Maturity. Unless
otherwise specified in an applicable Pricing Supplement, the rate of interest
on each Floating Rate Note will be reset daily, weekly, monthly, quarterly,
semiannually or annually, as set forth therein and specified in the applicable
Pricing Supplement, and interest on each Floating Rate Note will accrue from
its date of issue and will be payable in arrears monthly, quarterly,
semiannually or annually, as specified in the applicable Pricing Supplement,
and at Maturity. Notes may also be issued with original issue discount, and
such Notes may or may not currently pay interest.
 
                                ---------------
THESE SECURITIES  HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE  SECURITIES AND
 EXCHANGE COMMISSION OR  ANY STATE SECURITIES COMMISSION NOR  HAS THE SECURI-
  TIES AND  EXCHANGE COMMISSION  OR ANY  STATE SECURITIES  COMMISSION PASSED
   UPON THE ACCURACY  OR ADEQUACY  OF THIS PROSPECTUS  SUPPLEMENT, THE  PRO-
   SPECTUS OR ANY SUPPLEMENT  HERETO. ANY REPRESENTATION TO THE CONTRARY IS
    A CRIMINAL OFFENSE.
 
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                     PRICE TO   AGENTS' DISCOUNTS AND        PROCEEDS TO
                    PUBLIC(1)     COMMISSIONS(2)(3)       THE COMPANY(2)(4)
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Per Note..........     100%          .125%-.750%           99.875%-99.250%
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Total............. $300,000,000  $375,000-$2,250,000  $299,625,000-$297,750,000

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(1) Unless otherwise specified in an applicable Pricing Supplement, the Notes
    will be issued at 100% of their principal amount.
(2) The Company will pay a commission ranging from .125% to .750% of the
    principal amount of a Note, depending upon its Stated Maturity Date, to
    Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
    Chase Securities, Inc., Goldman, Sachs & Co., J.P. Morgan Securities Inc.
    or PaineWebber Incorporated (each an "Agent" and collectively, the
    "Agents"). Commissions with respect to Notes with a Stated Maturity Date
    in excess of 30 years from the date of issue which are sold through an
    Agent will be agreed to by the Company and such Agent at the time of such
    sale. The Company may also sell Notes to an Agent, as principal, for
    resale to investors and other purchasers at varying prices related to
    prevailing market prices at the time of resale, as determined by such
    Agent, or, if so agreed, at a fixed public offering price. Unless
    otherwise specified in an applicable Pricing Supplement, any Note sold to
    an Agent, as principal, will be purchased by such Agent at a price equal
    to 100% of the principal amount thereof less a percentage of the principal
    amount equal to the commission as described above applicable to a sale of
    Notes with an identical Stated Maturity Date.
(3) The Company has agreed to indemnify the Agents against, and to provide
    contribution with respect to, certain liabilities, including liabilities
    under the Securities Act of 1933, as amended. See "Plan of Distribution."
(4) Before deducting expenses payable by the Company estimated at $260,000.
 
                                ---------------
  The Notes are being offered on a continuing basis by the Company through the
Agents, who have agreed to use their reasonable efforts to solicit offers to
purchase the Notes. The Company may also sell Notes to an Agent, as principal,
for resale to investors and other purchasers at varying prices related to
prevailing market prices at the time of resale, as determined by such Agent,
or, if so agreed, at a fixed public offering price. In addition, the Company
may arrange for the Notes to be sold through other agents, may sell Notes
directly on its own behalf and may solicit and accept offers, and accept
unsolicited offers, to purchase Notes directly on its own behalf or from any
other broker or dealer. Unless otherwise specified in an applicable Pricing
Supplement, the Notes will not be listed on any securities exchange and there
can be no assurance that the Notes offered by this Prospectus Supplement will
be sold or that there will be a secondary market for the Notes. The Company
reserves the right to cancel or modify the offer made hereby without notice.
The Company or an Agent, if it solicits the offer, may reject any offer to
purchase Notes in whole or in part. See "Plan of Distribution."
 
                                ---------------
MERRILL LYNCH & CO.
           CHASE SECURITIES, INC.
                         GOLDMAN, SACHS & CO.
                                     J.P. MORGAN SECURITIES INC.
                                                       PAINEWEBBER INCORPORATED
 
                                ---------------
          The date of this Prospectus Supplement is October 19, 1995.

 
  IN CONNECTION WITH THE OFFERING OF NOTES, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
  THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED
OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
 
                               ----------------
 
                              DESCRIPTION OF NOTES
 
  The Notes will be issued as a separate series of debt securities under a
Senior Indenture, dated as of April 15, 1993 (the "Indenture"), between the
Company and The First National Bank of Chicago, as trustee (the "Trustee"). The
following description summarizes certain material provisions of the Notes and
of the Indenture and is qualified in its entirety by reference to the
Indenture, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and the accompanying Prospectus
are a part. Capitalized terms used but not defined herein have the meanings
given to them in the Indenture or the Notes, as the case may be. The term "Debt
Securities," as used in this Prospectus Supplement, refers to all securities
issued and issuable from time to time under the Indenture and includes the
Notes. The following description of Notes will apply unless otherwise specified
in an applicable Pricing Supplement.
 
GENERAL
 
  All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be unsecured general obligations of the Company and will rank
pari passu with all other unsecured and unsubordinated indebtedness of the
Company from time to time outstanding. The Indenture does not limit the
aggregate principal amount of Debt Securities which may be issued thereunder
and Debt Securities may be issued thereunder from time to time in one or more
series up to the aggregate principal amount from time to time authorized by the
Company for each series. Prior to the date of this Prospectus Supplement, the
Company had issued $300 million aggregate principal amount of Debt Securities
under the Indenture, including $200 million aggregate principal amount of a
separate series of medium term notes of the Company. The Company may, from time
to time, without the consent of the Holders of the Notes, provide for the
issuance of Notes or other Debt Securities under the Indenture in addition to
the $300,000,000 aggregate initial offering price of Notes offered hereby and
the other Debt Securities previously issued.
 
  The Notes are currently limited to $300,000,000 aggregate initial offering
price, or the equivalent thereof in one or more foreign or composite
currencies. The Notes will be offered on a continuing basis and will mature on
a Business Day (as defined herein) nine months or more from the date of issue,
as specified in an applicable Pricing Supplement. Unless otherwise specified in
an applicable Pricing Supplement, interest-bearing Notes will either be Fixed
Rate Notes or Floating Rate Notes as specified in the applicable Pricing
Supplement. Notes may be issued at significant discounts from their principal
amount payable at the Stated Maturity Date (or on any prior date on which the
principal or an installment of principal of a Note becomes due and payable,
whether by the declaration of acceleration, call for redemption at the option
of the Company, repayment at the option of the Holder or otherwise) (each such
date, a "Maturity"), and some Notes may not bear interest.
 
  Unless otherwise indicated in a Note or in an applicable Pricing Supplement,
the Notes will be denominated in United States dollars and payments of
principal of, and premium, if any, and interest on, the Notes will be made in
United States dollars. If any of the Notes are to be denominated other than in
United States dollars or if the principal of, and interest on, the Notes, and
any premium provided for in any Note is
 
                                      S-2

 
to be payable in or by reference to a currency (or in composite currency units
or in amounts determined by reference to one or more currencies) other than
that in which such Note is denominated or the value, rate or
price of one or more specified indices, provisions with respect thereto will be
set forth in such Note and in the applicable Pricing Supplement.
 
  Interest rates, interest rate formulae and other variable terms of the Notes
are subject to change by the Company from time to time, but no such change will
affect any Note already issued or as to which an offer to purchase has been
accepted by the Company. Interest rates offered by the Company with respect to
the Notes may differ depending upon, among other things, the aggregate
principal amount of the Notes purchased in any single transaction.
 
  Each Note will be issued in fully registered form as a Book-Entry Note or a
Definitive Note, in denominations of $1,000 and integral multiples thereof,
unless otherwise specified in the applicable Pricing Supplement. Book-Entry
Notes may be transferred or exchanged only through the Depositary. See "Book-
Entry Notes." Registration of transfer of Definitive Notes will be made at the
office or agency of the Company maintained by the Company for such purpose in
the Borough of Manhattan, The City of New York. No service charge will be made
by the Company or the Trustee for any such registration of transfer or exchange
of Notes, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith
(other than exchanges pursuant to the Indenture not involving any transfer).
 
  Payments of principal of, and premium and interest, if any, on, Book-Entry
Notes will be made by the Company through the Trustee to the Depositary. See
"Book-Entry Notes." In the case of Definitive Notes, payment of principal or
premium, if any, at the Maturity of each Definitive Note will be made in
immediately available funds upon presentation of the Definitive Note at the
office or agency of the Company maintained by the Company for such purpose in
the Borough of Manhattan, The City of New York, or at such other place as the
Company may designate (or, in the case of any repayment on an Optional
Repayment Date, upon presentation of the Definitive Note in accordance with the
provisions thereon as described below). Payment of interest due at Maturity
will be made to the person to whom payment of the principal of the Definitive
Note shall be made. Payment of interest due on Definitive Notes other than at
Maturity will be made at the office or agency of the Company maintained by the
Company for such purpose or, at the option of the Company, may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the registry books of the Company. Notwithstanding the foregoing, a
Holder of $10,000,000 or more in aggregate principal amount of Definitive Notes
having the same Interest Payment Dates will, at the option of the Company, be
entitled to receive interest payments (other than at Maturity) by wire transfer
of immediately available funds if appropriate wire transfer instructions have
been received in writing by the Trustee not less than 15 days prior to the
applicable Interest Payment Date. Such wire instructions, upon receipt by the
Trustee, shall remain in effect until revoked by such Holder.
 
REDEMPTION AT THE OPTION OF THE COMPANY
 
  Unless otherwise indicated in an applicable Pricing Supplement, Notes will
not be subject to any sinking fund. The Notes will be redeemable at the option
of the Company prior to the Stated Maturity Date only if an Initial Redemption
Date is specified therein and in the applicable Pricing Supplement. If so
indicated in the applicable Pricing Supplement, Notes will be subject to
redemption at the option of the Company on any date on and after the applicable
Initial Redemption Date specified in such Pricing Supplement. On or after the
Initial Redemption Date, if any, the related Note may be redeemed at any time
in whole or from time to time in part in increments of $1,000 at the option of
the Company at the applicable Redemption Price, together with interest thereon
payable to the date of redemption, on notice given not more than 60 nor less
than 30 days prior to the date of redemption and in accordance with the
provisions of the Indenture. "Redemption Price," with respect to a Note, will
initially mean a percentage, the Initial Redemption Percentage, of the
principal amount of such Note to be redeemed specified in the applicable
Pricing Supplement and shall decline at each anniversary of the Initial
Redemption Date by a percentage, the Annual Redemption Percentage Reduction, if
any, specified in the applicable Pricing Supplement, of the principal amount to
be redeemed until the Redemption Price is 100% of such principal amount.
 
                                      S-3

 
REPAYMENT AT THE OPTION OF THE HOLDER
 
  If so indicated in an applicable Pricing Supplement, Notes will be repayable
by the Company in whole or in part at the option of the Holders thereof on
their respective Optional Repayment Dates specified in such Pricing Supplement.
If no Optional Repayment Date is indicated with respect to a Note, such Note
will not be repayable at the option of the Holder prior to the Stated Maturity
Date. Any repayment in part will be in increments of $1,000 provided that any
remaining principal amount of such Note will be an authorized denomination of
such Note. Unless otherwise provided in an applicable Pricing Supplement, the
repayment price for any Note so repaid will be 100% of the principal amount to
be repaid, together with interest thereon payable to the date of repayment. For
any Note to be so repaid the Note must be received, together with the form
thereon entitled "Option to Elect Repayment" duly completed, by the Trustee at
the Corporate Trust Office (or such other address of which the Company shall
from time to time notify the Holders) not more than 60 nor less than 30 days
prior to the Optional Repayment Date. Exercise of such repayment option by the
Holder will be irrevocable.
 
  While the Book-Entry Notes are represented by global securities held by or on
behalf of the Depositary, and registered in the name of the Depositary or the
Depositary's nominee, the option for repayment may be exercised by the
applicable participant that has an account with the Depositary, on behalf of
the owners of the beneficial interests in such Book-Entry Notes, by delivering
a written notice substantially similar to the above-mentioned form to the
Trustee at the Corporate Trust Office (or such other address of which the
Company shall from time to time notify the Holders), not more than 60 nor less
than 30 days prior to the Optional Repayment Date. Notices of elections from
participants on behalf of beneficial owners of the Book-Entry Notes to exercise
their option to have the Book-Entry Notes repaid must be received by the
Trustee by 5:00 P.M., New York City time, on the last day for giving such
notice. In order to ensure that a notice is received by the Trustee on a
particular day, the beneficial owner of Book-Entry Notes must so direct the
applicable participant before such participant's deadline for accepting
instructions for that day. Different firms may have different deadlines for
accepting instructions from their customers. Accordingly, beneficial owners of
Book-Entry Notes should consult the participants through which they own their
interest in the Book-Entry Notes for the respective deadlines for such
participants. All notices shall be executed by a duly authorized officer of
such participant (with signature guaranteed) and shall be irrevocable. In
addition, such beneficial owners of Book-Entry Notes shall effect delivery of
such Book-Entry Notes at the time such notices of election are given to the
Depositary by causing the participant to transfer such beneficial owner's
interest in the Book-Entry Notes, on the Depositary's records, to the Trustee.
Conveyance of notices and other communications by the Depositary to
participants, by participants to indirect participants and by participants and
indirect participants to beneficial owners of the Book-Entry Notes will be
governed by agreements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
 
  If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended, and any other securities
laws or regulations in connection with any such repayment.
 
  The Company may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by the Company may be held or resold
or, at the discretion of the Company, may be surrendered to the Trustee for
cancellation.
 
INTEREST
 
 General
 
  Unless otherwise specified in an applicable Pricing Supplement, each Note
will bear interest from the date of issue at the rate per annum or, in the case
of a Floating Rate Note, pursuant to the interest rate
formula, stated therein and in the applicable Pricing Supplement until the
principal thereof is paid or made
 
                                      S-4

 
available for payment. Interest will be payable in arrears on each Interest
Payment Date specified in the applicable Pricing Supplement on which an
installment of interest is due and payable and at Maturity. Unless otherwise
specified in an applicable Pricing Supplement, the first payment of interest on
any Note originally issued between a record date and the related Interest
Payment Date will be made on the Interest Payment Date immediately following
the next succeeding record date to the registered Holder on such next
succeeding record date. Unless otherwise specified in an applicable Pricing
Supplement, a "record date" shall be the fifteenth day (whether or not a
Business Day) immediately preceding the related Interest Payment Date.
 
 Fixed Rate Notes
 
  Unless otherwise specified in an applicable Pricing Supplement, each Fixed
Rate Note will bear interest from, and including, the date of issue, or the
most recent date to which interest has been paid or duly provided for, to, but
excluding, the Interest Payment Date or Maturity, as the case may be, at the
rate per annum stated on the face thereof until the principal amount thereof is
paid or made available for payment. Unless otherwise specified in an applicable
Pricing Supplement, interest on Fixed Rate Notes will be computed on the basis
of a 360-day year of twelve 30-day months.
 
  Interest on Fixed Rate Notes will be payable semiannually, unless otherwise
specified in an applicable Pricing Supplement, June 1 and December 1 of each
year and at Maturity. If any Interest Payment Date or the Maturity of a Fixed
Rate Note falls on a day that is not a Business Day, the related payment of
principal, premium, if any, or interest will be made on the next succeeding
Business Day as if made on the date such payment was due, and no interest will
accrue on the amount so payable for the period from and after such Interest
Payment Date or Maturity, as the case may be.
 
 Floating Rate Notes
 
  Unless otherwise specified in an applicable Pricing Supplement, Floating Rate
Notes will be issued as described below. Each applicable Pricing Supplement
will specify certain terms with respect to which such Floating Rate Note is
being delivered, including: whether such Floating Rate Note is a "Regular
Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note," the Interest Rate Basis or Bases, Initial Interest Rate, Interest
Reset Dates, Interest Reset Period, record dates, Interest Payment Dates, Index
Maturity, maximum interest rate and minimum interest rate, if any, and the
Spread and/or Spread Multiplier, if any, and if one or more of the specified
Interest Rate Bases is LIBOR, the Index Currency and the Designated LIBOR Page,
as described below.
 
  The interest rate borne by the Floating Rate Notes will be determined as
follows:
 
    (i) Unless such Floating Rate Note is designated as a "Floating
  Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
  Addendum attached, such Floating Rate Note will be designated a "Regular
  Floating Rate Note" and, except as described below or in an applicable
  Pricing Supplement, bear interest at the rate determined by reference to
  the applicable Interest Rate Basis (i) plus or minus the applicable Spread,
  if any, and/or (ii) multiplied by the applicable Spread Multiplier, if any.
  Commencing on the Initial Interest Reset Date, the rate at which interest
  on such Regular Floating Rate Note shall be payable shall be reset as of
  each Interest Reset Date; provided, however, that the interest rate in
  effect for the period from the Original Issue Date to the Initial Interest
  Reset Date will be the Initial Interest Rate.
 
    (ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed
  Rate Note," then, except as described below or in an applicable Pricing
  Supplement, such Floating Rate Note will bear interest at the rate
  determined by reference to the applicable Interest Rate Basis (i) plus or
  minus the applicable Spread, if any, and/or (ii) multiplied by the
  applicable Spread Multiplier, if any. Commencing on the Initial Interest
  Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
  Note shall be payable shall be reset as of each Interest Reset Date;
  provided, however, that (i) the interest rate in effect for the period from
  the Original Issue Date to the Initial Interest Reset Date will be the
  Initial Interest
 
                                      S-5

 
  Rate; and (ii) the interest rate in effect commencing on, and including,
  the Fixed Rate Commencement Date to Maturity shall be the Fixed Interest
  Rate, if such rate is specified in the applicable Pricing Supplement, or if
  no such Fixed Interest Rate is so specified, the interest rate in effect
  thereon on the day immediately preceding the Fixed Rate Commencement Date.
 
    (iii) If such Floating Rate Note is designated as an "Inverse Floating
  Rate Note," then, except as described below or in an applicable Pricing
  Supplement, such Floating Rate Note will bear interest equal to the Fixed
  Interest Rate specified in the related Pricing Supplement minus the rate
  determined by reference to the Interest Rate Basis (i) plus or minus the
  applicable Spread, if any, and/or (ii) multiplied by the applicable Spread
  Multiplier, if any. Commencing on the Initial Interest Reset Date, the rate
  at which interest on such Inverse Floating Rate Note is payable shall be
  reset as of each Interest Reset Date; provided, however, that the interest
  rate in effect for the period from the Original Issue Date to the Initial
  Interest Reset Date will be the Initial Interest Rate.
 
  Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating
Rate Note shall bear interest in accordance with the terms described in such
Addendum and the applicable Pricing Supplement.
 
  Unless otherwise provided in the applicable Pricing Supplement, the interest
rate with respect to each Interest Rate Basis will be determined in accordance
with the applicable provisions below. Except as set forth above or in an
applicable Pricing Supplement, the interest rate in effect on each day shall be
(a) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date immediately preceding such Interest Reset Date
or (b) if such day is not an Interest Reset Date, the interest rate determined
as of the Interest Determination Date immediately preceding the next preceding
Interest Reset Date.
 
  Interest on Floating Rate Notes will be determined by reference to an
"Interest Rate Basis," which may be one or more of (i) the "CD Rate," (ii) the
"Commercial Paper Rate," (iii) the "Eleventh District Cost of Funds Rate," (iv)
the "Federal Funds Rate," (v) "LIBOR," (vi) the "Prime Rate," (vii) the "CMT
Rate," (viii) the "Treasury Rate," or (ix) such other Interest Rate Basis or
interest rate formula as may be set forth in the applicable Pricing Supplement;
provided, however, that with respect to a Floating Rate/Fixed Rate Note, the
interest rate commencing on the Fixed Rate Commencement Date and continuing,
unless otherwise specified in the applicable Pricing Supplement, until Maturity
shall be the Fixed Interest Rate, if such rate is specified in the applicable
Pricing Supplement, or if no such Fixed Interest Rate is so specified, the
interest rate in effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
 
  The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate Note.
The "Spread Multiplier" is the percentage of the related Interest Rate Basis or
Bases applicable to such Floating Rate Note by which such interest Rate Basis
or Bases will be multiplied to determine the applicable interest rate on such
Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the Interest Rate Basis or Bases
will be calculated. The Spread, Spread Multiplier, Index Maturity and other
variable terms of the Floating Rate Notes are subject to change by the Company
from time to time, but no such change will affect any Floating Rate Note
previously issued or as to which an offer has been accepted by the Company.
 
  Each applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually, annually or such other specified period (each, an
"Interest Reset Period") and the dates on which such Interest Rate will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Date will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Treasury Rate Notes
which will reset the Tuesday of each week, except as specified below); (iii)
monthly, the third Wednesday of each month (with the exception of Eleventh
District Cost of Funds Rate Notes, all of which reset monthly, which will reset
on the first calendar
 
                                      S-6

 
day of the month); (iv) quarterly, the third Wednesday of March, June,
September and December of each year; (v) semiannually, the third Wednesday of
the two months specified in the applicable Pricing Supplement; and (vi)
annually, the third Wednesday of the month specified in the applicable Pricing
Supplement; provided however, that, with respect to Floating Rate/Fixed Rate
Notes, the fixed rate of interest in effect for the period from the Fixed Rate
Commencement Date until Maturity shall be the Fixed Interest Rate or the
interest rate in effect on the day immediately preceding the Fixed Rate
Commencement Date, as specified in the applicable Pricing Supplement. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date will be postponed to the next
succeeding day that is a Business Day, except that in the case of a Floating
Rate Note as to which LIBOR is an applicable Interest Rate Basis, if such
Business Day falls in the next succeeding calendar month, such Interest Reset
Date will be the immediately preceding Business Day. As used herein, "Business
Day" means, unless otherwise specified in the applicable Pricing Supplement,
any day that, in The City of New York, is not a day on which banking
institutions are authorized or required by law or regulation to close and, with
respect to Notes as to which LIBOR is an applicable Interest Rate Basis, is
also a London Business Day. As used herein, "London Business Day" means any day
(a) if the Index Currency is other than the European Currency Unit ("ECU"), on
which dealings in deposits in such Index Currency are transacted in the London
interbank market or (b) if the Index Currency is the ECU, that is not
designated as an ECU Non-Settlement Day by the ECU Banking Association in Paris
or otherwise generally regarded in the ECU interbank market as a day on which
payments on ECUs shall not be made.
 
  A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period and (ii) a minimum numerical limitation, or
floor, on the rate at which interest may accrue during any interest period. In
addition to any maximum interest rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on Floating Rate
Notes will in no event be higher than the maximum rate permitted by New York
law, as the same may be modified by United States law of general application.
 
  Each Floating Rate Note will bear interest from the date of issue at the
rates specified therein until the principal thereof is paid or otherwise made
available for payment. Except as provided below or in an applicable Pricing
Supplement, the Interest Payment Dates in the case of Floating Rate Notes which
reset: (i) daily, weekly or monthly, will be the third Wednesday of each month
or on the third Wednesday of March, June, September and December of each year
as specified in the applicable Pricing Supplement; (ii) quarterly, will be the
third Wednesday of March, June, September and December of each year; (iii)
semiannually, will be the third Wednesday of the two months of each year
specified in the applicable Pricing Supplement; and (iv) annually, will be the
third Wednesday of the month of each year specified in the applicable Pricing
Supplement and, in each case, interest will be payable at Maturity. If any
Interest Payment Date for any Floating Rate Note (other than an Interest
Payment Date at Maturity) would otherwise be a day that is not a Business Day,
such Interest Payment Date will be postponed to the next succeeding day that is
a Business Day except that in the case of a Floating Rate Note as to which
LIBOR is an applicable Interest Rate Basis, if such Business Day falls in the
next succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day. If the Maturity of a Floating Rate Note
falls on a day that is not a Business Day, the payment of principal, premium,
if any, and interest will be made on the next succeeding Business Day, and no
interest on such payments shall accrue for the period from and after such
Maturity.
 
  Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation on Floating Rate Notes will be
rounded to the nearest one hundred-thousandth of a percentage point, with five
one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
 .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts
used in or resulting from such calculation on Floating Rate Notes will be
rounded to the nearest cent or, in the case of Notes denominated other than in
United States dollars, the nearest unit (with one-half cent or unit being
rounded upward).
 
  Unless otherwise specified in the applicable Pricing Supplement, interest
payments on Floating Rate Notes will equal the amount of interest accrued from
and including the next preceding Interest Payment Date
 
                                      S-7

 
in respect of which interest has been paid (or from and including the date of
issue, if no interest has been paid with respect to such Floating Rate Notes),
to but excluding the related Interest Payment Date or maturity, as the case may
be.
 
  With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
for each such day will be computed by dividing the interest rate applicable to
such day by 360, in the case of Notes for which the Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of
days in the year in the case of Notes for which the Interest Rate Basis is the
Treasury Rate or the CMT Rate. Unless otherwise specified in an applicable
Pricing Supplement, the interest factor for Notes for which the interest rate
is calculated with reference to two or more Interest Rate Bases will be
calculated in each period in the same manner as if only one of the applicable
Interest Rate Bases applied as specified in the applicable Pricing Supplement
and the Notes.
 
  The interest rate applicable to each Interest Rate Reset Period commencing on
the Interest Reset Date with respect to such Interest Rate Reset Period will be
the rate determined as of the applicable Interest Determination Date. Unless
otherwise specified in the applicable Pricing Supplement, the Interest
Determination Date with respect to the CD Rate, the CMT Rate, the Commercial
Paper Rate, the Federal Funds Rate and the Prime Rate will be the second
Business Day preceding each Interest Reset Date for the related Note; the
Interest Determination Date with respect to the Eleventh District Cost of Funds
Rate will be the last working day of the month immediately preceding each
Interest Reset Date on which the Federal Home Loan Bank of San Francisco (the
"FHLB of San Francisco") publishes the Index; and the Interest Determination
Date with respect to LIBOR will be the second London Business Day preceding
each Interest Reset Date. With respect to the Treasury Rate, unless otherwise
specified in an applicable Pricing Supplement, the Interest Determination Date
will be the day in the week in which the related Interest Reset Date falls on
which day Treasury Bills (as defined below) are normally auctioned (Treasury
Bills are normally sold at auction on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday);
provided, however, that if an auction is held on the Friday of the week
preceding the related Interest Reset Date, the related Interest Determination
Date will be such preceding Friday; and provided, further, that if an auction
falls on any Interest Reset Date, then the related Interest Reset Date will
instead be the first Business Day following such auction. Unless otherwise
specified in the applicable Pricing Supplement, the Interest Determination Date
pertaining to a Floating Rate Note the interest rate of which is determined
with reference to two or more Interest Rate Bases will be the latest Business
Day which is at least two Business Days prior to such Interest Reset Date for
such Floating Rate Note on which each Interest Rate Basis is determinable. Each
Interest Rate Basis will be determined on such date, and the applicable
interest rate will take effect on the related Interest Reset Date.
 
  Unless otherwise provided in the applicable Pricing Supplement, The First
National Bank of Chicago will be the "Calculation Agent." Upon request of the
Holder of any Floating Rate Note, the Calculation Agent will provide the
interest rate then in effect and, if determined, the interest rate that will
become effective as a result of a determination made for the next Interest
Reset Date with respect to such Floating Rate Note. Unless otherwise specified
in the applicable Pricing Supplement, the "Calculation Date," if applicable,
pertaining to any Interest Determination Date will be the earlier of (i) the
tenth calendar day after such Interest Determination Date, or, if such day is
not a Business Day, the next succeeding Business Day or (ii) the Business Day
preceding the applicable Interest Payment Date or Maturity, as the case may be.
 
  CD Rate. CD Rate Notes will bear interest at the rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in such CD Rate Notes and in any applicable Pricing Supplement.
 
 
                                      S-8

 
  Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on
such date for negotiable certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates" or any successor publication ("H.15(519)") under the
heading "CDs (Secondary Market)," or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the rate on such CD Rate Interest
Determination Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement as published by the Federal
Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M.
Quotations for U.S. Government Securities" or any successor publication
("Composite Quotations") under the heading "Certificates of Deposit." If such
rate is not yet published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on the related Calculation Date, then the CD Rate on
such CD Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 A.M., New York City time, on such CD Rate Interest Determination Date,
of three leading nonbank dealers in negotiable United States dollar
certificates of deposit in The City of New York selected by the Calculation
Agent for negotiable certificates of deposit of major United States money
market banks for negotiable certificates of deposit with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement
in an amount that is representative for a single transaction in that market at
that time; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as set forth above, the CD Rate with respect
to such CD Rate Interest Determination Date will be the CD Rate in effect on
such CD Rate Interest Determination Date.
 
  CMT Rate. Unless otherwise specified in the applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CMT Rate (a "CMT Rate Interest Determination Date"), the rate displayed on
the Designated CMT Telerate Page under the caption "...Treasury Constant
Maturities...Federal Reserve Board Release H.15...Mondays Approximately 3:45
P.M.," under the column for the Designated CMT Maturity Index for (i) if the
Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate page is 7052, the
week, or the month, as applicable, ended immediately preceding the week in
which the related CMT Rate Interest Determination Date occurs. If such rate is
no longer displayed on the relevant page or is not displayed by 3:00 P.M., New
York City time, on the related Calculation Date, then the CMT Rate for such CMT
Rate Interest Determination Date will be such treasury constant maturity rate
for the Designated CMT Maturity Index as published in the relevant H.15(519).
If such rate is no longer published or is not published by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate on such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for
the Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date
with respect to such Interest Reset Date as may then be published by either the
Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided by
3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate on the CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market closing offer side prices as of approximately 3:30
P.M., New York City time, on such CMT Rate Interest Determination Date
reported, according to their written records, by three leading primary United
States government securities dealers (each, a "Reference Dealer") in The City
of New York (which may include the Agent or its affiliates) selected by the
Calculation Agent (from five such Reference Dealers selected by the Calculation
Agent and eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality, one of
the lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original maturity
of approximately the Designated CMT Maturity Index and a remaining term to
 
                                      S-9

 
maturity of not less than such Designated CMT Maturity Index minus one year. If
the Calculation Agent is unable to obtain three such Treasury Note quotations,
the CMT Rate on such CMT Rate Interest Determination Date will be calculated by
the Calculation Agent and will be a yield to maturity based on the arithmetic
mean of the secondary market offer side prices as of approximately 3:30 P.M.,
New York City time, on such CMT Rate Interest Determination Date of three
Reference Dealers in The City of New York (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for Treasury Notes with an original
maturity of the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated CMT
Maturity Indices and in an amount of at least $100 million. If three or four
(and not five) of such Reference Dealers are quoting as described above, then
the CMT Rate will be based on the arithmetic mean of the offer prices obtained
and neither the highest nor the lowest of such quotes will be eliminated;
provided however, that if fewer than three Reference Dealers so selected by the
Calculation Agent are quoting as mentioned herein, the CMT Rate determined as
of such CMT Rate Interest Determination Date will be the CMT Rate in effect on
such CMT Rate Interest Determination Date. If two Treasury Notes with an
original maturity as described in the second preceding sentence have remaining
terms to maturity equally close to the Designated CMT Maturity Index, the
Calculation Agent will obtain from five Reference Dealers quotations for the
Treasury Note with the shorter remaining term to maturity.
 
  "Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement, the designated
CMT Telerate Page shall be 7052 for the most recent week.
 
  "Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified
in the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
 
  Commercial Paper Rate. Commercial Paper Rate Notes will bear interest at the
rates (calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any) specified in such Commercial Paper Rate Notes
and in any applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date relating to
a Commercial Paper Rate Note or any Floating Rate Note for which the interest
rate is determined with reference to the Commercial Paper Rate (a "Commercial
Paper Rate Interest Determination Date"), the Money Market Yield (as defined
below) on such date of the rate for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "Commercial Paper." In the event that such rate is not published by
3:00 P.M., New York City time, on the related Calculation Date, then the
Commercial Paper Rate will be the Money Market Yield on such Commercial Paper
Rate Interest Determination Date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Commercial Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an Index
Maturity of 30 days or 90 days, respectively). If by 3:00 P.M., New York City
time, on the related Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the Commercial Paper Rate on such
Commercial Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized securities rating agency, provided,
however, that if the dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the Commercial Paper
 
                                      S-10

 
Rate determined on such Commercial Paper Rate Interest Determination Date will
be the Commercial Paper Rate in effect on such Commercial Paper Rate Interest
Determination Date.
 
  "Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
 
                                        D X 360
                Money Market Yield = ------------- X 100
                                     360 - (D X M)
 
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
 
  Eleventh District Cost of Funds Rate. Eleventh District Cost of Funds Rate
Notes will bear interest at the rates (calculated with reference to the
Eleventh District Cost of Funds Rate and the Spread and/or Spread Multiplier,
if any) specified in such Eleventh District Cost of Funds Rate Notes and in any
applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Interest Determination
Date relating to an Eleventh District Cost of Funds Rate Note or any Floating
Rate Note for which the interest rate is determined with reference to the
Eleventh District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate
Interest Determination Date"), the rate equal to the monthly weighted average
cost of funds for the calendar month preceding such Eleventh District Cost of
Funds Rate Interest Determination Date as set forth under the caption "11th
District" on Telerate Page 7175 as of 11:00 A.M., San Francisco time, on such
Eleventh District Cost of Funds Rate Interest Determination Date. If such rate
does not appear on Telerate Page 7175 on any related Eleventh District Cost of
Funds Rate Interest Determination Date, the Eleventh District Cost of Funds
Rate for such Eleventh District Cost of Funds Rate Interest Determination Date
shall be the monthly weighted average cost of funds paid by member institutions
of the Eleventh Federal Home Loan Bank District that was most recently
announced (the "Index") by the FHLB of San Francisco as such cost of funds for
the calendar month preceding the date of such announcement. If the FHLB of San
Francisco fails to announce such rate for the calendar month next preceding
such Eleventh District Cost of Funds Rate Interest Determination Date, then the
Eleventh District Cost of Funds Rate for such Eleventh District Cost of Funds
Rate Interest Determination Date will be the Eleventh District Cost of Funds
Rate in effect on such Eleventh District Cost of Funds Rate Interest
Determination Date.
 
  Federal Funds Rate. Federal Funds Rate Notes will bear interest at the rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Notes and in
any applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to
a Federal Funds Rate Note or any Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)" or, if not
published by 3:00 P.M., New York City time, on the related Calculation Date,
the rate on such Federal Funds Rate Interest Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 P.M., New York City time, on the related Calculation Date such rate is not
published in either H.15(519) or Composite Quotations, then the Federal Funds
Rate on such Federal Funds Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the rates for the
last transaction in overnight United States dollar federal funds arranged by
three leading brokers of federal funds transactions in The City of New York
selected by the Calculation Agent prior to 9:00 A.M., New York City time on
such Federal Funds Rate Interest Determination Date; provided, however that if
the brokers so selected by the Calculation Agent are not quoting as mentioned
in this sentence, the Federal Funds Rate with respect to such Federal Funds
Rate Interest Determination Date will be the Federal Funds Rate in effect on
such Federal Funds Rate Interest Determination Date.
 
                                      S-11

 
  LIBOR. LIBOR Notes will bear interest at the rates (calculated with reference
to LIBOR and the Spread and/or Spread Multiplier, if any) specified in such
LIBOR Notes and in any applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
 
    (i) With respect to an Interest Determination Date relating to a LIBOR
  Note or any Floating Rate Note for which the interest rate is determined
  with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
  be either: (a) if "LIBOR Reuters" is specified in the applicable Pricing
  Supplement, the arithmetic mean of the offered rates (unless the specified
  Designated LIBOR Page by its terms provides only for a single rate, in
  which case such single rate shall be used) for deposits in the Index
  Currency having the Index Maturity designated in the applicable Pricing
  Supplement, commencing on the second London Business Day immediately
  following that LIBOR Interest Determination Date, that appear on the
  Designated LIBOR Page specified in the applicable Pricing Supplement as of
  11:00 A.M., London time, on that LIBOR Interest Determination Date, if at
  least two such offered rates appear (unless, as aforesaid, only a single
  rate is required) on such Designated LIBOR Page, or (b) if "LIBOR Telerate"
  is specified in the applicable Pricing Supplement, the rate for deposits in
  the Index Currency having the Index Maturity designated in the applicable
  Pricing Supplement commencing on the second London Business Day immediately
  following that LIBOR Interest Determination Date that appears on the
  Designated LIBOR Page specified in the applicable Pricing Supplement as of
  11:00 A.M., London time, on that LIBOR Interest Determination Date. If
  fewer than two offered rates appear, or no rate appears, as applicable,
  LIBOR in respect of the related LIBOR Interest Determination Date will be
  determined as if the parties had specified the rate described in clause
  (ii) below.
 
    (ii) With respect to a LIBOR Interest Determination Date on which fewer
  than two offered rates appear, or no rate appears, as the case may be, on
  the applicable Designated LIBOR Page as specified in clause (i) above, the
  Calculation Agent will request the principal London offices of each of four
  major reference banks in the London interbank market, as selected by the
  Calculation Agent, to provide the Calculation Agent with its offered
  quotation for deposits in the Index Currency for the period of the Index
  Maturity designated in the applicable Pricing Supplement, commencing on the
  second London Business Day immediately following such LIBOR Interest
  Determination Date, to prime banks in the London interbank market at
  approximately 11:00 A.M., London time, on such LIBOR Interest Determination
  Date and in a principal amount that is representative for a single
  transaction in such Index Currency in such market at such time. If at least
  two such quotations are provided, LIBOR determined on such LIBOR Interest
  Determination Date will be the arithmetic mean of such quotations. If fewer
  than two quotations are provided, LIBOR determined on such LIBOR Interest
  Determination Date will be the arithmetic mean of the rates quoted at
  approximately 11:00 A.M., in the applicable Principal Financial Center, on
  such LIBOR Interest Determination Date by three major banks in such
  Principal Financial Center selected by the Calculation Agent for loans in
  the Index Currency to leading European banks, having the Index Maturity
  designated in the applicable Pricing Supplement and in a principal amount
  that is representative for a single transaction in such Index Currency in
  such market at such time; provided, however, that if the banks so selected
  by the Calculation Agent are not quoting as mentioned in this sentence,
  LIBOR determined on such LIBOR Interest Determination Date will be LIBOR in
  effect on such LIBOR Interest Determination Date.
 
  "Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
 
  "Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
 
                                      S-12

 
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Index Currency, page 3750) had been specified.
 
  "Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to U.S.
dollars, Deutsche marks, and the ECUs, the Principal Financial Center shall be
The City of New York, Frankfurt, and Luxembourg, respectively.
 
  Prime Rate. Prime Rate Notes will bear interest at the rates (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any)
specified in such Prime Rate Notes and any applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date relating to a Prime Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the
rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 9:00 A.M., New York
City time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen USPRIME1 Page as such bank's prime rate or base
lending rate as in effect for that Prime Rate Interest Determination Date. If
fewer than four such rates but more than one such rate appear on the Reuters
Screen USPRIME1 Page for such Prime Rate Interest Determination Date, the Prime
Rate shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by a 360-day year as of the close of
business on such Prime Rate Interest Determination Date by four major money
center banks in The City of New York selected by the Calculation Agent. If
fewer than two such rates appear on the Reuters Screen USPRIME1 Page, the Prime
Rate will be determined by the Calculation Agent on the basis of the rates
furnished in The City of New York by three substitute banks or trust companies
organized and doing business under the laws of the United States, or any state
thereof, having total equity capital of at least $500 million and being subject
to supervision or examination by Federal or state authority, selected by the
Calculation Agent to provide such rate or rates; provided, however, that if the
banks or trust companies selected as aforesaid are not quoting as mentioned in
this sentence, the Prime Rate for such Prime Rate Interest Determination Date
will be the Prime Rate as determined based on the last such rate published in
H.15(519).
 
  "Reuters Screen USPRIME1 Page" means the display designated as page
"USPRIME1" on the Reuters Monitor Money Rates Service (or such other page as
may replace the USPRIME1 page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks).
 
  Treasury Rate. Treasury Rate Notes will bear interest at the rates
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Notes and in any applicable
Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
specified in the applicable Pricing Supplement, as such rate is published in
H.15(519) under the heading "Treasury Bills-auction average (investment)" or,
if not published by 3:00 P.M., New York City time, on the related Calculation
Date, the auction average rate (expressed as a bond equivalent on the basis of
a year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury Bills having the Index
Maturity designated in the applicable Pricing Supplement are not reported
 
                                      S-13

 
as provided by 3:00 P.M., New York City time, on such Calculation Date, or if
no such auction is held in a particular week, then the Treasury Rate will be
calculated by the Calculation Agent and will be a yield to maturity (expressed
as a bond equivalent on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) of the arithmetic mean of the secondary market
bid rates, as of approximately 3:30 P.M., New York City time, on such Treasury
Rate Interest Determination Date, of three leading primary United States
government securities dealers (which may include one or more of the Agents)
selected by the Calculation Agent, for the issue of Treasury Bills with a
remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Treasury
Rate with respect to such Treasury Rate Interest Determination Date will be the
Treasury Rate in effect on such Treasury Rate Interest Determination Date.
 
OTHER PROVISIONS; ADDENDA
 
  Any provisions with respect to Notes, including the determination of an
Interest Rate Basis, the specification of an Interest Rate Basis, calculation
of the interest rate applicable to a Floating Rate Note, its
Interest Payment Dates or any other matter relating thereto may be modified by
the terms as specified under "Other Provisions" on the face thereof or in an
Addendum relating thereto, if so specified on the face thereof and in the
applicable Pricing Supplement.
 
ORIGINAL ISSUE DISCOUNT NOTES
 
  Notes may be issued at a price less than their redemption price at Maturity,
resulting in such Notes being treated as if they were issued with original
issue discount for Federal income tax purposes ("Original Issue Discount
Notes"). Such Original Issue Discount Notes may currently pay no interest or
interest at a rate which at the time of issuance is below market rates. See
"United States Taxation." Certain additional considerations relating to any
Original Issue Discount Notes may be described in the Pricing Supplement
relating thereto.
 
INDEXED NOTES
 
  Notes also may be issued with the principal amount payable at Maturity and/or
interest to be paid thereon to be determined with reference to the price or
prices of specified commodities or stocks, the exchange rate of one or more
specified currencies (including a composite currency such as the ECU) relative
to an indexed currency, or such other price or exchange rate as may be
specified in such Note ("Indexed Notes"), as set forth in an applicable Pricing
Supplement. Holders of such Notes may receive a principal amount at Maturity
that is greater than or less than the face amount of the Notes depending upon
the relative value at Maturity of the specified indexed item. Information as to
the method for determining the principal amount payable at Maturity, certain
historical information with respect to the specified indexed item and tax
considerations associated with investment in Indexed Notes will be set forth in
the applicable Pricing Supplement.
 
  An investment in Notes indexed, as to principal or interest or both, to one
or more values of currencies (including exchange rates between currencies),
commodities or interest rate indices entails significant risks that are not
associated with similar investments in a conventional fixed-rate debt security.
If the interest rate of such a Note is so indexed, it may result in an interest
rate that is less than that payable on a conventional fixed-rate debt security
issued at the same time, including the possibility that no interest will be
paid, and, if the principal amount of such a Note is so indexed, the principal
amount payable at Maturity may be less than the original purchase price of such
Note if allowed pursuant to the terms of such Note, including the possibility
that no principal will be paid. The secondary market for such Notes will be
affected by a number of factors, independent of the creditworthiness of the
Company and the value of the applicable currency, commodity or interest rate
index, including the volatility of the applicable currency, commodity or
interest rate index, the time remaining to the maturity of such Notes, the
amount outstanding of such Notes and
 
                                      S-14

 
market interest rates. The value of the applicable currency, commodity or
interest rate index depends on a number of interrelated factors, including
economic, financial and political events, over which the Company has no
control. Additionally, if the formula used to determine the principal amount or
interest payable with respect to such Notes contains a multiple or leverage
factor, the effect of any change in the applicable currency, commodity or
interest rate index may be increased. The historical experience of the relevant
currencies, commodities or interest rate indices should not be taken as an
indication of future performance of such currencies, commodities or interest
rate indices during the term of any Note. Accordingly, prospective investors
should consult their own financial and legal advisors as to the risks entailed
by an investment in such Notes and the suitability of such Notes in light of
their particular circumstances.
 
BOOK-ENTRY NOTES
 
  Upon issuance, all Book-Entry Notes having the same Original Issue Date,
Stated Maturity Date and otherwise having identical terms and provisions will
be represented by a single global security (each, a "Registered Global
Security"); provided, however, that if by reason of the foregoing, a single
Registered Global Security would exceed $200,000,000 in aggregate principal
amount, one Registered Global Security will be issued to represent each
$200,000,000 of aggregate principal amount and an additional Registered Global
Security will be issued to represent any remaining principal amount. Each
Registered Global Security representing Book-Entry Notes will be deposited
with, or on behalf of, the Depositary. Except as set forth below, Registered
Global Securities may not be transferred except as a whole by the Depositary to
a nominee of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary or by the Depositary or any nominee to a
successor of the Depositary or a nominee of such successor.
 
  The Depository Trust Company, New York, New York ("DTC"), will be the initial
Depositary with respect to the Notes. DTC has advised the Company and the Agent
that it is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Depositary was
created to hold securities of its participants and to facilitate the clearance
and settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers
(including the Agents), banks, trust companies, clearing corporations and
certain other organizations, some of whom (and/or their representatives) own
DTC. Access to DTC's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Persons who are not participants may beneficially own securities held by DTC
only through participants.
 
                                      S-15

 
                             UNITED STATES TAXATION
 
  The following summary describes the principal United States federal income
tax consequences of ownership and disposition of the Notes to initial Holders
purchasing Notes at the "issue price" (as defined below). This summary is based
on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), administrative pronouncements, judicial decisions and existing and
proposed Treasury Regulations, including regulations concerning the treatment
of debt instruments issued with original issue discount (the "OID
Regulations"), changes to any of which subsequent to the date of this
Prospectus Supplement may affect the tax consequences described herein. This
summary discusses only Notes held as capital assets within the meaning of
Section 1221 of the Code. It does not discuss all of the tax consequences that
may be relevant to a Holder in light of his particular circumstances or to
holders subject to special rules, such as certain financial institutions,
insurance companies, dealers in securities or foreign currencies, persons
holding Notes as a hedge against, or which are hedged against, currency risks,
or United States Holders whose functional currency (as defined in Code Section
985) is not the U.S. dollar. Persons considering the purchase of Notes should
consult their tax advisors with regard to the application of the United States
federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
 
  As used herein, the term "United States Holder" means an owner of a Note that
is (i) for United States federal income tax purposes a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source. The term
also includes certain former citizens of the United States.
 
  As used herein, the term "United States Alien Holder" means an owner of a
Note that is, for United States federal income tax purposes, (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a nonresident alien
fiduciary of a foreign estate or trust or (iv) a foreign partnership one or
more of the members of which is, for United States federal income tax purposes,
a nonresident alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust.
 
TAX CONSEQUENCES TO UNITED STATES HOLDERS
 
 Payments of Interest
 
  Interest paid on a Note will generally be taxable to a United States Holder
as ordinary interest income at the time it accrues or is received in accordance
with the United States Holder's method of accounting for federal income tax
purposes. Under the OID Regulations, all payments of interest on a Note that
matures one year or less from its date of issuance will be included in the
stated redemption price at maturity of the Notes and will be taxed in the
manner described below under "Original Issue Discount Notes." Special rules
governing the treatment of interest paid with respect to Original Issue
Discount Notes, including certain Floating Rate Notes and Indexed Notes,
Foreign Currency Notes and Currency Indexed Notes, are described under
"Original Issue Discount Notes," "Foreign Currency Notes" and "Currency Indexed
Notes" below.
 
 Original Issue Discount Notes
 
  A Note which is issued for an amount less than its stated redemption price at
maturity will generally be considered to have been issued at an original issue
discount for federal income tax purposes (an "Original Issue Discount Note").
The "issue price" of a Note will equal the first price to the public (not
including bond houses, brokers or similar persons or organizations acting in
the capacity of underwriters, placement agents or wholesalers) at which a
substantial amount of the Notes is sold for money. The stated redemption price
at maturity of a Note will equal the sum of all payments required under the
Note other than payments of
 
                                      S-16

 
"qualified stated interest." "Qualified stated interest" is stated interest
unconditionally payable as a series of payments in cash or property (other than
debt instruments of the issuer) at least annually during the entire term of the
Note and equal to the outstanding principal balance of the Note multiplied by a
single fixed rate of interest. In addition, interest unconditionally payable at
least annually with respect to Floating Rate Notes may in certain circumstances
be treated as qualified stated interest. Ordinarily, interest payable at least
annually at a single Interest Rate Basis that can reasonably be expected to
measure contemporaneous variations in the cost of newly borrowed funds, such as
the CD Rate, Commercial Paper Rate, Eleventh District Cost of Funds Rate,
Federal Funds Rate, LIBOR, Prime Rate, CMT Rate and the Treasury Rate, plus or
minus a fixed Spread (or a fixed rate minus one of the above Interest Rate
Bases) will generally be treated as qualified stated interest. However, special
tax considerations (including possible original issue discount and contingent
debt treatment (see below)) may arise with respect to Floating Rate Notes
providing for (i) interest not unconditionally payable at least annually, (ii)
interest payable at more than one Interest Rate Basis, (iii) interest payable
at a fixed rate followed or preceded by an Interest Rate Basis or Bases, (iv) a
Spread Multiplier, (v) a cap, floor, governor or similar restriction that is
not fixed throughout the term of the Note, or (vi) an interest rate, the
average value of which during the first half of the Note's term is reasonably
expected to be either significantly less than or significantly greater than the
average value of the rate during the final half of the Note's term. PURCHASERS
OF FLOATING RATE NOTES SHOULD CONSULT THEIR TAX ADVISORS SINCE THE TAX
CONSEQUENCES WILL DEPEND, IN PART, ON THE PARTICULAR TERMS OF THE PURCHASED
NOTE.
 
  Proposed regulations issued on December 15, 1994, address, among other
things, the accrual of original discount on, and the character of gain realized
on the sale, exchange or retirement of, debt instruments providing for
contingent payments. Such regulations would apply only to contingent payment
debt instruments issued on or after 60 days after the date final regulations
are published. Prospective Holders of Indexed Notes or Floating Rate Notes
providing for contingent payments should refer to the discussion regarding
taxation in the applicable Pricing Supplement.
 
  If the difference between a Note's stated redemption price at maturity and
its issue price is less than a de minimis amount, i.e., 1/4 of 1 percent of the
stated redemption price at maturity multiplied by the number of complete years
to maturity, then the Note will not be considered to have original issue
discount. Holders of Notes with a de minimis amount of original issue discount
will generally include such original issue discount in income, as capital gain,
on a pro rata basis as principal payments are made on the Note.
 
  United States Holders of Original Issue Discount Notes will be required to
include any qualified stated interest payments in income in accordance with
such Holder's method of accounting for federal income tax purposes. United
States Holders of Original Issue Discount Notes that mature more than one year
from their date of issuance will be required to include original issue discount
in income for federal income tax purposes as it accrues, in accordance with a
constant yield method based on a compounding of interest, before the receipt of
cash payments attributable to such income. Under this method, United States
Holders of Original Issue Discount Notes generally will be required to include
in income increasingly greater amounts of original issue discount in successive
accrual periods.
 
  A Note that matures one year or less from its date of issuance will be
treated as a "short-term Original Issue Discount Note." In general, a cash
method United States Holder of a short-term Original Issue Discount Note is not
required to accrue original issue discount for United States federal income tax
purposes unless it elects to do so. Holders who make such an election, Holders
who report income for federal income tax purposes on the accrual method and
certain other Holders, including banks and dealers in securities, are required
to include original issue discount in income on such short-term Original Issue
Discount Notes as it accrues on a straight-line basis, unless an election is
made to accrue the original issue discount according to a constant yield method
based on daily compounding. In the case of a Holder who is not required and who
does not elect to include original issue discount in income currently, any gain
realized on the sale, exchange
 
                                      S-17

 
or retirement of the short-term Original Issue Discount Note will be ordinary
income to the extent of the original issue discount accrued on a straight-line
basis (or, if elected, according to a constant yield method based on daily
compounding) through the date of sale, exchange or retirement. In addition,
such Holders will be required to defer deductions for any interest paid on
indebtedness incurred to purchase or carry short-term Original Issue Discount
Notes in an amount not exceeding the deferred interest income, until such
deferred interest income is recognized.
 
  Under the OID Regulations, a Holder may make an election (the "Constant Yield
Election") to include in gross income all interest that accrues on a Note
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) in accordance with a constant yield method based on the
compounding of interest.
 
  Certain of the Original Issue Discount Notes may be redeemed prior to
maturity. Original Issue Discount Notes containing such a feature may be
subject to rules that differ from the general rules discussed above. Purchasers
of Original Issue Discount Notes with such a feature should carefully examine
the applicable Pricing Supplement and should consult their tax advisors with
respect to such a feature since the tax consequences with respect to original
issue discount will depend, in part, on the particular terms and the particular
features of the purchased Note.
 
 Premium
 
  If a United States Holder purchases a Note for an amount that is greater than
the amount payable at maturity, such Holder will be considered to have
purchased such Note with "amortizable bond premium" equal in amount to such
excess, and may elect (in accordance with applicable Code provisions) to
amortize such premium, using a constant yield method, over the remaining term
of the Note (where such Note is not optionally redeemable prior to its maturity
date). If such Note may be optionally redeemed prior to maturity after such
Holder has acquired it, the amount of amortizable bond premium is determined
with reference to either the amount payable on maturity or, if it results in a
smaller premium attributable to the period of earlier redemption date, with
reference to the amount payable on the earlier redemption date. A Holder who
elects to amortize bond premium must reduce his tax basis in the Note by the
amount of the premium amortized in any year. An election to amortize bond
premium applies to all taxable debt obligations then owned and thereafter
acquired by the taxpayer and may be revoked only with the consent of the
Internal Revenue Service.
 
  If a Holder makes a Constant Yield Election for a Note with amortizable bond
premium, such election will result in a deemed election to amortize bond
premium for all of the Holder's debt instruments with amortizable bond premium
and may be revoked only with the permission of the Internal Revenue Service
with respect to debt instruments acquired after revocation.
 
 Sale, Exchange or Retirement of the Notes
 
  Upon the sale, exchange or retirement of a Note, a United States Holder will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and such Holder's adjusted tax
basis in the Note. For these purposes, the amount realized does not include any
amount attributable to accrued interest on the Note. Amounts attributable to
accrued interest are treated as interest as described under "Payments of
Interest" above. A United States Holder's adjusted tax basis in a Note will
equal the cost of the Note to such Holder, increased by the amount of any
original issue discount previously included in income by the Holder with
respect to such Note and reduced by any amortized premium and any principal
payments received by the Holder and, in the case of an Original Issue Discount
Note, by the amounts of any other payments that do not constitute qualified
stated interest.
 
  Subject to the discussion under "Foreign Currency Notes" below, gain or loss
realized on the sale, exchange or retirement of a Note will be capital gain or
loss (except in the case of a short-term Original Issue
 
                                      S-18

 
Discount Note, to the extent of any original issue discount not previously
included in such Holder's taxable income), and will be long-term capital gain
or loss if at the time of sale, exchange or retirement the Note has been held
for more than one year. See "Original Issue Discount Notes" above. The excess
of net long-term capital gains over net short-term capital losses is taxed at a
lower rate than ordinary income for certain non-corporate taxpayers. The
distinction between capital gain or loss and ordinary income or loss is also
relevant for purposes of, among other things, limitations on the deductibility
of capital losses.
 
 Foreign Currency Notes
 
  The following summary relates to Notes that are denominated in a currency or
currency unit other than the U.S. dollar ("Foreign Currency Notes").
 
  A United States Holder of a Foreign Currency Note who uses the cash method of
accounting and who receives a payment of interest (other than a payment in
respect of original issue discount that is accrued currently) in a foreign
currency will be required to include in income the U.S. dollar value of such
foreign currency payment (determined on the date such payment is received)
regardless of whether the payment is in fact converted to U.S. dollars at that
time, and such U.S. dollar value will be the United States Holder's tax basis
in the foreign currency.
 
  To the extent the above paragraph is not applicable, a United States Holder
will be required to include in income the U.S. dollar value of the amount of
interest income (including original issue discount, but reduced by amortizable
bond premium to the extent applicable) that has accrued and is otherwise
required to be taken into account with respect to a Foreign Currency Note
during an accrual period. The U.S. dollar value of such accrued income will be
determined by translating such income at the average rate of exchange for the
accrual period or, with respect to an accrual period that spans two taxable
years, at the average rate for the partial period within the taxable year. Such
United States Holder will recognize ordinary income or loss with respect to
accrued interest income on the date such income is actually received. The
amount of ordinary income or loss recognized will equal the difference between
the U.S. dollar value of the foreign currency payment received (determined on
the date such payment is received) in respect of such accrual period and the
U.S. dollar value of interest income that has accrued during such accrual
period (as determined above). A United States Holder may elect to translate
interest income (including original issue discount) into U.S. dollars at the
spot rate on the last day of the interest accrual period (or, in the case of a
partial accrual period, the spot rate on the last date of the taxable year) or,
if the date of receipt is within five business days of the last day of the
interest accrual period, the spot rate on the date of receipt. A United States
Holder that makes such an election must apply it consistently to all debt
instruments from year to year and cannot change the election without the
consent of the Internal Revenue Service.
 
  Any loss realized on the sale, exchange or retirement of a Foreign Currency
Note with amortizable bond premium by a United States Holder who has not
elected to amortize such premium under Section 171 of the Code will be a
capital loss to the extent of such bond premium. If such an election is made,
amortizable bond premium taken into account on a current basis shall reduce
interest income in units of the relevant foreign currency. Exchange gain or
loss is realized on such amortized bond premium with respect to any period by
treating the bond premium amortized in such period as a return of principal.
 
  A United States Holder's tax basis in a Foreign Currency Note, and the amount
of any subsequent adjustment to such Holder's tax basis, will be the U.S.
dollar value of the foreign currency amount paid for such Foreign Currency
Note, or of the foreign currency amount of the adjustment, determined on the
date of such purchase or adjustment. A United States Holder who purchases a
Foreign Currency Note with previously owned foreign currency will recognize
ordinary income or loss in an amount equal to the difference, if any, between
such United States Holder's tax basis in the foreign currency and the U.S.
dollar value of the Foreign Currency Note on the date of purchase.
 
  Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which will not be
 
                                      S-19

 
treated as interest income or expense. Gain or loss attributable to
fluctuations in exchange rates will equal the difference between (i) the U.S.
dollar value of the foreign currency principal amount of such Note, and any
payment with respect to accrued interest, determined on the date such payment
is received or such Note is disposed of, and (ii) the U.S. dollar value of the
foreign currency principal amount of such Note, determined on the date such
United States Holder acquired such Note, and the U.S. dollar value of the
accrued interest received, determined by translating such interest at the
average exchange rate for the accrual period. Such foreign currency gain or
loss will be recognized only to the extent of the total gain or loss realized
by a United States Holder on the sale, exchange or retirement of the Foreign
Currency Note. The source of such foreign currency gain or loss will be
determined by reference to the residence of the Holder or the "qualified
business unit" of such Holder on whose books the Note is properly reflected.
Any gain or loss realized by such a Holder in excess of such foreign currency
gain or loss will be capital gain or loss (except in the case of a short-term
Original Issue Discount Note, to the extent of any original issue discount not
previously included in such Holder's income).
 
  A United States Holder will have a tax basis in any foreign currency received
on the sale, exchange or retirement of a Foreign Currency Note equal to the
U.S. dollar value of such foreign currency, determined at the time of such
sale, exchange or retirement. Regulations issued under Section 988 of the Code
provide a special rule for purchases and sales of publicly traded Foreign
Currency Notes by a cash method taxpayer under which units of foreign currency
paid or received are translated into U.S. dollars at the spot rate on the
settlement date of the purchase or sale. Accordingly, no exchange gain or loss
will result from currency fluctuations between the trade date and the
settlement of such a purchase or sale. An accrual method taxpayer may elect the
same treatment required of cash-method taxpayers with respect to the purchase
and sale of publicly traded Foreign Currency Notes provided the election is
applied consistently. Such election cannot be changed without the consent of
the Internal Revenue Service. Any gain or loss realized by a United States
Holder on a sale or other disposition of foreign currency (including its
exchange for U.S. dollars or its use to purchase Foreign Currency Notes) will
be ordinary income or loss.
 
 Currency Indexed Notes
 
  The proper treatment of payments of principal of and interest on Indexed
Notes where payments are determined by reference to the exchange rate of one or
more specified currencies relative to an indexed currency (a "Currency Indexed
Note") is uncertain at this time. Holders of Currency Indexed Notes should
consult with their tax advisors as to the federal income tax consequences of
the ownership and disposition of such Notes.
 
TAX CONSEQUENCES TO UNITED STATES ALIEN HOLDERS
 
  Under present United States federal income and estate tax law, and subject to
the discussion below concerning backup withholding:
 
    (a) payments of principal, interest (including original issue discount,
  if any) and premium on the Notes by the Company or any paying agent to any
  United States Alien Holder will not be subject to United States federal
  withholding tax, provided that, in the case of interest, (i) such Holder
  does not own, actually or constructively, 10 percent or more of the total
  combined voting power of all classes of stock of the Company entitled to
  vote, is not a controlled foreign corporation related, directly or
  indirectly, to the Company through stock ownership, and is not a bank
  receiving interest described in Section 881(c)(3)(A) of the Code and (ii)
  the beneficial owner thereof fulfills the statement requirement set forth
  in Section 871(h) or Section 881(c) of the Code, as discussed below;
 
    (b) a United States Alien Holder of a Note will not be subject to United
  States federal income tax on gain realized on the sale, exchange or other
  disposition of such Note, unless (i) such Holder is an individual who is
  present in the United States for 183 days or more in the taxable year of
  disposition, and certain conditions are met or (ii) such gain is
  effectively connected with the conduct by such Holder of a trade or
  business in the United States; and
 
 
                                      S-20

 
    (c) a Note or coupon held by an individual who is not a citizen or
  resident of the United States at the time of his death will not be subject
  to United States federal estate tax as a result of such individual's death,
  provided that the individual does not own, actually or constructively, 10
  percent or more of the total combined voting power of all classes of stock
  of the Company entitled to vote and, at the time of such individual's
  death, payments with respect to such Note would not have been effectively
  connected to the conduct by such individual of a trade or business in the
  United States.
 
  Sections 871(h) and 881(c) of the Code require that, in order to obtain the
portfolio interest exemption from withholding tax described in paragraph (a)
above, either the beneficial owner of the Note or a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") and that is holding the Note on behalf of such beneficial owner,
files a statement with the withholding agent to the effect that the beneficial
owner of the Note is not a United States Holder. Under temporary United States
Treasury Regulations, such requirement will be fulfilled if the beneficial
owner of a Note certifies on Internal Revenue Service Form W-8, under penalties
of perjury, that it is not a United States Holder and provides its name and
address, and any Financial Institution holding the Note on behalf of the
beneficial owner, files a statement with the withholding agent to the effect
that it has received such a statement from the Holder (and furnishes the
withholding agent with a copy thereof). The portfolio interest exemption from
withholding tax described in paragraph (a) above will not apply to contingent
interest if the amount of such interest is determined with reference to certain
attributes of the Company or a related person. Unless otherwise provided in the
applicable Pricing Supplement, the Company does not expect any interest on the
Notes to be subject to this provision.
 
  If a United States Alien Holder of a Note is engaged in a trade or business
in the United States, and if interest (including original issue discount) on
the Note is effectively connected with the conduct of such trade or business,
the United States Alien Holder, although exempt from the withholding tax
discussed in the preceding paragraph, will generally be subject to regular
United States income tax on interest (including any original issue discount)
and on any gain realized on the sale, exchange or other disposition of a Note
in the same manner as if it were a United States Holder. See "Tax Consequences
to United States Holders" above. In lieu of the certificate described in the
preceding paragraph, such a Holder will be required to provide to the Company a
properly executed Internal Revenue Service Form 4224 in order to claim an
exemption from withholding tax. In addition, if such United States Alien Holder
is a foreign corporation, it may be subject to a branch profits tax equal to
30% of its effectively connected earnings and profit for the taxable year,
subject to certain adjustments. For purposes of the branch profits tax,
interest (including original issue discount) on and any gain recognized on the
sale, exchange or other disposition of a Note will be included in the
effectively connected earnings and profits of such United States Alien Holder
if such interest is effectively connected with the conduct by the United States
Alien Holder of a trade or business in the United States.
 
BACKUP WITHHOLDING AND INFORMATION REPORTING
 
  Under current United States federal income tax law, a 31% backup withholding
tax and information reporting requirements apply to certain payments of
principal, premium and interest (including original issue discount) made to,
and to the proceeds of sale before maturity by, certain Holders of the Notes.
 
  In the case of a United States Holder, backup withholding will apply only if
such Holder (i) fails to furnish its Taxpayer Identification Number ("TIN")
which, for an individual, would be his Social Security number, (ii) furnishes
an incorrect TIN, (iii) is notified by the Internal Revenue Service that it has
failed to properly report payments of interest and dividends or (iv) under
certain circumstances, fails to certify, under penalties of perjury, that it
has furnished a correct TIN and has not been notified by the Internal Revenue
Service that it is subject to backup withholding for failure to report interest
and dividend payments. United States Holders should consult their tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption if applicable.
 
 
                                      S-21

 
  The amount of any backup withholding from a payment to a United States Holder
will be allowed as a credit against such Holder's United States federal income
tax liability and may entitle such Holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.
 
  In the case of a United States Alien Holder, under current Treasury
Regulations, backup withholding will not apply to payments of principal,
premium or interest made by the Company or any paying agent thereof on a Note
if the certifications required by Sections 871(h) and 881(c) are received,
provided in each case that the Company or such paying agent, as the case may
be, does not have actual knowledge that the payee is a United States person.
The Company will, where required, report to Holders of the Notes and the
Internal Revenue Service the amount of any interest paid or original issue
discount accruing on the Notes in each calendar year and the amounts of tax
withheld, if any, with respect to such payments.
 
  Under current Treasury Regulations, if payments of principal, premium or
interest are made to or through the foreign office of a custodian, nominee or
other agent acting on behalf of a beneficial owner of a Note, such custodian,
nominee or other agent will not be required to apply backup withholding to such
payments made to such beneficial owner and generally will not be subject to
information reporting requirements. However, if such custodian, nominee or
other agent is a United States person, a controlled foreign corporation for
United States tax purposes, or a foreign person 50 percent or more of whose
gross income is effectively connected with a United States trade or business
for a specified three-year period, such custodian, nominee or other agent may
be subject to certain information reporting requirements with respect to such
payments unless it has in its records documentary evidence that the beneficial
owner is not a United States person and certain conditions are met or the
beneficial owner otherwise establishes an exemption. Under proposed Treasury
Regulations, backup withholding may apply to any payment which such custodian,
nominee or other agent is required to report if such custodian, nominee or
other agent has actual knowledge that the payee is a United States person.
 
  Under current Treasury Regulations, payments on the sale, exchange or other
disposition of a Note made to or through a foreign office of a broker generally
will not be subject to backup withholding. However, if such broker is a United
States person, a controlled foreign corporation for United States tax purposes
or a foreign person 50 percent or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting will be required unless the broker has in its
records documentary evidence that the beneficial owner is not a United States
person and certain other conditions are met or the beneficial owner otherwise
establishes an exemption. Under proposed Treasury Regulations, backup
withholding may apply to any payment which such broker is required to report if
such broker has actual knowledge that the payee is a United States person.
Payments to or through the United States office of a broker will be subject to
backup withholding and information reporting unless the Holder certifies, under
penalties of perjury, that it is not a United States person or otherwise
establishes an exemption.
 
  United States Alien Holders of Notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and
the procedure for obtaining such an exemption, if available. Any amounts
withheld from a payment to a United States Alien Holder under the backup
withholding rules will be allowed as a credit against such Holder's United
States federal income tax liability and may entitle such Holder to a refund,
provided that the required information is furnished to the United States
Internal Revenue Service.
 
                              PLAN OF DISTRIBUTION
 
  The Notes are being offered on a continuing basis for sale by the Company
through the Agents, who have agreed to use their reasonable efforts to solicit
offers to purchase the Notes, and the Company may also sell Notes to an Agent,
as principal, for resale to investors and other purchasers at varying prices
related to prevailing market prices at the time of resale, as determined by
such Agent, or, if so agreed, at a fixed public offering price. In addition,
the Company may arrange for the Notes to be sold through other agents, may sell
 
                                      S-22

 
Notes directly on its own behalf and may solicit and accept offers, and accept
unsolicited offers, to purchase Notes directly on its own behalf or from any
other broker or dealer. The Company reserves the right to withdraw, cancel or
modify the offer made hereby without notice and may reject offers to purchase
in whole or in part whether placed directly with the Company or through one of
the Agents. The Agents will have the right, in their discretion, to reject in
whole or in part any offer to purchase Notes received by them. The Company will
pay each Agent, in the form of a discount or otherwise, a commission, ranging
from .125% to .750% of the principal amount of a Note, depending on its Stated
Maturity Date. Commissions with respect to Notes with a Stated Maturity Date in
excess of 30 years from the date of issue which are sold through an Agent will
be agreed to by the Company and such Agent at the time of such sale.
 
  In addition, the Agents may offer the Notes they have purchased as principal
to other dealers for resale to investors and may allow to such dealers any
portion of the discount received by such Agent from the Company in connection
with the sale of such Notes. Unless otherwise indicated in the applicable
Pricing Supplement, any Notes sold to an Agent as principal will be purchased
by such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission as described above applicable to any agency
sale of a Note with an identical Stated Maturity Date, and may be resold by the
Agent to investors and other purchasers from time to time in one or more
transactions as described above. After the initial public offering of Notes,
the public offering price (in the case of Notes to be resold on a fixed
offering price basis), the concession and discount may be changed.
 
  Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in New York City on the date of settlement.
 
  No Note will have an established trading market when issued, and unless
otherwise specified in an applicable Pricing Supplement, the Notes will not be
listed on any securities exchange. Each of the Agents may from time to time
purchase and sell Notes in the secondary market, but no Agent is obligated to
do so, and there can be no assurance that there will be a secondary market for
the Notes or liquidity in the secondary market if one develops. From time to
time, each of the Agents may make a market in the Notes.
 
  Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company and the
Agents have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
made in respect thereof. The Company has also agreed to reimburse each of the
Agents for certain expenses.
 
  In the ordinary course of their respective businesses, certain of the Agents
and/or certain of their affiliates have in the past engaged, and may in the
future engage, in commercial banking transactions with the Company, and the
Agents and/or certain of their affiliates have in the past engaged, and may in
the future engage, in investment banking transactions with the Company.
 
  Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Debt Securities pursuant to the Indenture
referred to herein.
 
                                 LEGAL MATTERS
 
  The validity of the Notes will be passed upon for the Company by Susan L.
Harris, Vice President and General Counsel--Corporate Affairs of the Company,
and by Davis Polk & Wardwell, New York, New York. Certain legal matters in
connection with the offering of the Notes will be passed upon for the Agents
and any other agents, underwriters or dealers by Skadden, Arps, Slate, Meagher
& Flom, Los Angeles, California. Ms. Harris, Davis Polk & Wardwell and Skadden,
Arps, Slate, Meagher & Flom will rely as to matters of Maryland law on Piper &
Marbury L.L.P., Baltimore, Maryland. Ms. Harris holds stock, restricted stock
and options to purchase stock granted under the Company's employee stock plans,
which in the aggregate represent less than 1% of the Company's Common Stock.
David W. Ferguson, a partner of Davis Polk & Wardwell, is a director of First
SunAmerica Life Insurance Company, a subsidiary of the Company. Skadden, Arps,
Slate, Meagher & Flom has from time to time represented the Company and its
subsidiaries on unrelated matters.
 
                                      S-23

 
PROSPECTUS
                                                                          [LOGO]
 
 
                                SUNAMERICA INC.
 
                                DEBT SECURITIES
 
                                PREFERRED STOCK
 
                                  COMMON STOCK
 
                                    WARRANTS
 
 
                                ---------------
 
  SunAmerica Inc. (the "Company") may offer and sell from time to time (i) its
unsecured debt securities ("Debt Securities"), (ii) shares of its preferred
stock, without par value (the "Preferred Stock"), which may be represented by
depositary shares as described herein, (iii) shares of its common stock, par
value $1.00 per share (the "Common Stock") or (iv) warrants to purchase Debt
Securities, Preferred Stock and Common Stock (the "Warrants"). The Debt
Securities, Preferred Stock, Common Stock and Warrants are herein collectively
referred to as the "Securities". The Securities may be offered in one or more
separate classes or series, in amounts, at prices and on terms to be determined
by market conditions at the time of sale and to be set forth in a supplement or
supplements to this Prospectus (a "Prospectus Supplement"). Securities may be
sold for U.S. dollars, foreign denominated currency or currency units; amounts
payable with respect to any Securities may likewise be payable in U.S. dollars,
foreign denominated currency or currency units -- in each case as the Company
specifically designates. By separate prospectus, the form of which is included
in the Registration Statement of which this Prospectus forms a part, three
Delaware statutory business trusts (the "Trusts"), which are wholly owned
subsidiaries of the Company, may from time to time severally offer Preferred
Securities guaranteed by the Company to the extent set forth therein and the
Company may offer from time to time Junior Subordinated Debt Securities either
directly or to a Trust. The aggregate initial public offering price of the
securities to be offered by this Prospectus and such other prospectus shall not
exceed $1,000,000,000.
 
  An accompanying Prospectus Supplement will set forth certain terms of any
Debt Securities in respect of which this Prospectus is being delivered,
including, where applicable, the ranking as senior or subordinated Debt
Securities, the specific designation, aggregate principal amount, purchase
price, maturity, interest rate (or manner of calculation thereof), time of
payment of interest (if any), listing (if any) on a securities exchange,
authorized denomination, any exchangeability, conversion, redemption,
prepayment or sinking fund provisions, the currency or currencies or currency
unit or units in which principal, premium, if any, or interest is payable and
any other specific terms of the Debt Securities. An accompanying Prospectus
Supplement will set forth certain terms of any Preferred Stock in respect of
which this Prospectus is being delivered, including the specific designation,
number of shares, purchase price and the rights, preferences and privileges
thereof and any qualifications or restrictions thereon (including dividends,
liquidation value, voting rights, terms for the redemption, conversion or
exchange thereof and any other specific terms of the Preferred Stock), listing
(if any) on a securities exchange and whether the Company has elected to offer
the Preferred Stock in the form of depositary shares. An accompanying
Prospectus Supplement will set forth certain terms of any Common Stock in
respect of which this Prospectus is being delivered, including the number of
shares offered, the initial offering price, market price and dividend
information. An accompanying Prospectus Supplement will set forth certain terms
of any Warrants in respect of which this Prospectus is being delivered,
including the specific designation, the number, purchase price and terms
thereof, any listing of the Warrants or the underlying Securities on a
securities exchange or any other terms in connection with the offering, sale
and exercise of the Warrants, as well as the terms on which and the Securities
for which such Warrants may be exercised.
 
                                ---------------
 
  The Company may sell the Securities directly, through agents designated from
time to time or through underwriters or dealers. See "Plan of Distribution"
below. If any agents of the Company or any underwriters or dealers are involved
in the sale of the Securities, the names of such agents, underwriters or
dealers and any applicable commissions and discounts will be set forth in any
related Prospectus Supplement. The managing underwriter or underwriters with
respect to each series sold to or through underwriters will be named in the
accompanying Prospectus Supplement. See "Plan of Distribution" for possible
indemnification arrangements for dealers, underwriters and agents.
 
                                ---------------
 
 THESE SECURITIES HAVE NOT BEEN APPROVED  OR DISAPPROVED BY THE SECURITIES AND
  EXCHANGE  COMMISSION  OR  ANY  STATE  SECURITIES COMMISSION,  NOR  HAS  THE
   SECURITIES AND  EXCHANGE COMMISSION  OR  ANY STATE  SECURITIES COMMISSION
    PASSED  UPON  THE   ACCURACY  OR  ADEQUACY  OF   THIS  PROSPECTUS.  ANY
     REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
                                ---------------
               The date of this Prospectus is September 29, 1995.

 
                             AVAILABLE INFORMATION
 
  The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by the Company with the Commission can be inspected and
copied at the Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at the public reference facilities of the regional
offices in Chicago and New York. The addresses of these regional offices are as
follows: 500 West Madison Street, Chicago, Illinois 60661, and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material also can
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington D.C. 20549, upon payment of the fees prescribed
by the rules and regulations of the Commission. Reports, proxy statements, and
other information concerning the Company may also be inspected at the offices
of the New York Stock Exchange, Inc. at 20 Broad Street, New York, New York
10005 and at the offices of the Pacific Stock Exchange at 301 Pine Street, San
Francisco, California 94104. The Company's Common Stock is listed on both
exchanges.
 
  The Company has filed with the Commission a Registration Statement on Form S-
3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered by this Prospectus. This Prospectus does not
contain all the information set forth in the Registration Statement and
exhibits thereto. In addition, certain documents filed by the Company with the
Commission have been incorporated in this Prospectus by reference. See
"Incorporation of Certain Documents by Reference." Statements contained herein
concerning the provisions of any document do not purport to be complete and, in
each instance, are qualified in all respects by reference to the copy of such
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission. Each such statement is subject to and qualified in its
entirety by such reference. For further information with respect to the Company
and the securities offered hereby, reference is made to the Registration
Statement, including the exhibits thereto, and the documents incorporated
herein by reference.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
  There are hereby incorporated by reference in the Prospectus the following
documents previously filed by the Company with the Commission pursuant to the
1934 Act:
 
    1. Annual Report on Form 10-K for the fiscal year ended September 30,
  1994.
 
    2. Quarterly Reports on Form 10-Q for the quarters ended December 31,
        1994, March 31, 1995 and June 30, 1995.
 
    3. Current Reports on Form 8-K filed on November 14, 1994, January 24,
        1995, April 25, 1995, May 26, 1995, July 14, 1995, July 28, 1995 and
        September 6, 1995.
 
  All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the securities offered hereby shall be
deemed to be incorporated by reference in the Prospectus and to be part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
 
  The Company will provide without charge to each person, including any
beneficial owner to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any and all of the information that has been
incorporated by reference in the Prospectus (not including exhibits to the
information that is incorporated by reference unless such exhibits are
specifically incorporated by reference
 
                                       2

 
into the information that this Prospectus incorporates). Requests for such
document shall be directed to SunAmerica Inc., 1 SunAmerica Center, Los
Angeles, California 90067-6022, Attention: Vice President, Investor Relations
(telephone (310) 772-6000).
 
  FOR NORTH CAROLINA INVESTORS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS SUCH
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
 
  NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
 
                               ----------------
 
  Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$," "dollars" or
"U.S.$").
 
                                       3

 
                                  THE COMPANY
 
  The Company is a diversified financial services company specializing in
retirement savings products and services. At June 30, 1995, the Company held
$27 billion of assets throughout its businesses, including $16.20 billion of
assets on its balance sheet, $2.08 billion of assets managed in mutual funds
and private accounts and $8.76 billion of assets under custody in retirement
trust accounts. Together, the Company's life insurance companies rank among the
largest U.S. issuers of annuities. Complementing these annuity operations are
the Company's asset management operations; its two broker-dealers, which the
Company believes, based on industry data, represent the largest network of
independent registered representatives in the nation; and its trust company,
which provides administrative and custodial services to qualified retirement
plans. Through these subsidiaries, the Company specializes in the sale of tax-
deferred long-term savings products and investments to the expanding
preretirement savings market. The Company markets fixed annuities and fee-
generating variable annuities, mutual funds and trust services, as well as
guaranteed investment contracts. The Company's products are distributed through
a broad spectrum of financial services distribution channels, including
independent registered representatives of the Company's broker-dealer
subsidiaries and unaffiliated broker-dealers, independent general insurance
agents and financial institutions.
 
  The principal executive offices of the Company are located at 1 SunAmerica
Center, Los Angeles, California 90067-6022, telephone number (310) 772-6000.
 
                              RECENT DEVELOPMENTS
 
  On September 20, 1995, the Company's wholly owned subsidiary, Anchor National
Life Insurance Company, signed a definitive agreement pursuant to which it or
an affiliate will acquire CalFarm Life Insurance Company ("CalFarm Life") from
its parent, Zenith National Insurance Corp., for approximately $120 million in
cash. Completion of the acquisition, expected by year-end 1995, is subject to
receipt of normal regulatory approvals and other customary terms and
conditions. CalFarm Life is headquartered in Sacramento, California and
currently markets a range of life and health insurance and annuity products,
specializing in the qualified 403(b) market for teachers and other non-profit
organizations. At June 30, 1995, CalFarm Life had approximately $739 million in
annuity and life reserves, and approximately $2.8 billion of life insurance in
force. Under terms of the agreement, Zenith National will retain CalFarm Life's
health insurance business.
 
  On September 11, 1995, the Company's Board of Directors approved for
submission to shareholder vote an amendment to the Articles of Incorporation to
increase the Company's authorized capital from (i) 50,000,000 to 175,000,000
shares of Common Stock and (ii) 15,000,000 to 25,000,000 shares of
Nontransferable Class B Stock. The Company has scheduled a special
shareholders' meeting on October 30, 1995 (for shareholders of record as of
September 21, 1995) for consideration of the proposed increase in authorized
capital stock. On September 11, 1995, the Board of Directors also approved a
three-for-two stock split, to be effected in the form of a stock dividend, of
its outstanding Common Stock and Nontransferable Class B Stock, contingent upon
shareholder approval of the proposed increase in authorized capital stock.
 
                                USE OF PROCEEDS
 
  Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of the Securities are expected to be used for general
corporate purposes, including repayment or redemption of outstanding debt or
preferred stock, the possible acquisition of financial services businesses or
assets thereof, investments in portfolio assets and working capital needs. The
Company routinely reviews opportunities to acquire financial services
businesses or assets thereof.
 
 
                                       4

 
             CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
       EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
 
  The following table sets forth the consolidated ratios of earnings to fixed
charges and earnings to combined fixed charges and preferred stock dividends
for the Company for the periods indicated:
 


                                                             NINE MONTHS ENDED
                                                                 JUNE 30,
                                 YEARS ENDED SEPTEMBER 30,      (UNAUDITED)
                               ----------------------------- -----------------
                                                 
                                1990  1991  1992  1993  1994     1994     1995
                               ----- ----- ----- ----- ----- -------- --------
Ratio of earnings to fixed
 charges (excluding interest
 incurred on reserves and
 trust deposits)(1)..........   2.4x  2.7x  4.0x  6.1x  5.8x     5.9x     5.8x
Ratio of earnings to fixed
 charges (including interest
 incurred on reserves and
 trust deposits)(2)..........   1.1x  1.1x  1.2x  1.4x  1.5x     1.5x     1.5x
Ratio of earnings to combined
 fixed charges and preferred
 stock dividends (excluding
 interest incurred on re-
 serves and trust depos-
 its)(3).....................   2.0x  2.3x  2.7x  2.8x  2.8x     2.8x     3.3x
Ratio of earnings to combined
 fixed charges and preferred
 stock dividends (including
 interest incurred on re-
 serves and trust depos-
 its)(4).....................   1.1x  1.1x  1.2x  1.3x  1.4x     1.4x     1.4x

- --------
(1) In computing the ratio of earnings to fixed charges (excluding interest
    incurred on reserves and trust deposits), fixed charges consist of
    interest expense on senior and subordinated indebtedness and dividends on
    the preferred securities of a subsidiary grantor trust. Earnings are
    computed by adding interest incurred on senior and subordinated
    indebtedness and dividends paid on the preferred securities of a
    subsidiary grantor trust to pretax income.
(2) In computing the ratio of earnings to fixed charges (including interest
    incurred on reserves and trust deposits), fixed charges consist of
    interest expense on senior and subordinated indebtedness, fixed annuity
    contracts, guaranteed investment contracts and trust deposits, and
    dividends on the preferred securities of a subsidiary grantor trust.
    Earnings are computed by adding interest incurred on senior and
    subordinated indebtedness, fixed annuity contracts, guaranteed investment
    contracts and trust deposits, and dividends paid on the preferred
    securities of a subsidiary grantor trust to pretax income.
(3) In computing the ratio of earnings to combined fixed charges and preferred
    stock dividends (excluding interest incurred on reserves and trust
    deposits), combined fixed charges and preferred stock dividends consist of
    interest expense on senior and subordinated indebtedness, dividends on the
    preferred securities of a subsidiary grantor trust and dividends on
    preferred stock of the Company on a tax equivalent basis. Earnings are
    computed by adding interest incurred on senior and subordinated
    indebtedness and dividends paid on the preferred securities of a
    subsidiary grantor trust to pretax income.
(4) In computing the ratio of earnings to combined fixed charges and preferred
    stock dividends (including interest incurred on reserves and trust
    deposits), combined fixed charges and preferred stock dividends consist of
    interest expense on senior and subordinated indebtedness, fixed annuity
    contracts, guaranteed investment contracts and trust deposits; dividends
    on the preferred securities of a subsidiary grantor trust; and dividends
    on preferred stock of the Company on a tax equivalent basis. Earnings are
    computed by adding interest incurred on senior and subordinated
    indebtedness, fixed annuity contracts, guaranteed investment contracts and
    trust deposits and dividends paid on the preferred securities of a
    subsidiary grantor trust to pretax income.
 
                                       5

 
                         DESCRIPTION OF DEBT SECURITIES
 
  The Company's unsecured Debt Securities, consisting of notes, debentures or
other evidences of indebtedness, may constitute either senior Debt Securities
("Senior Debt Securities") or subordinated Debt Securities ("Subordinated Debt
Securities") of the Company and will be issued in the case of Senior Debt
Securities, under a Senior Indenture dated as of April 15, 1993 (the "Senior
Debt Indenture") between the Company and The First National Bank of Chicago, as
Trustee, and in the case of Subordinated Debt Securities, under a Subordinated
Indenture dated as of April 15, 1993 (the "Subordinated Debt Indenture")
between the Company and The First National Bank of Chicago, as Trustee. The
Senior Debt Indenture and the Subordinated Debt Indenture are sometimes
hereinafter referred to individually as an "Indenture" and collectively as the
"Indentures". The First National Bank of Chicago, in its capacity as trustee
under either or both of the Indentures, is referred to hereinafter as the
"Trustee." The Indentures are included as exhibits to the Registration
Statement of which this Prospectus is a part. The following description
summarizes the material terms of the Indentures and the Debt Securities and is
qualified in its entirety by reference to the detailed provisions of the
applicable Indenture, which contains the full text of such provisions,
including the definition of certain terms used herein, and for other
information regarding the Debt Securities. Numerical references in parentheses
below are to sections in the applicable Indenture. Wherever particular sections
or defined terms of the applicable Indenture are referred to, such sections or
defined terms are incorporated herein by reference as part of the statement
made, and the statement is qualified in its entirety by such reference. The
indentures are substantially identical except for provisions relating to
subordination and the Company's negative pledge and restrictions on certain
dispositions. Any Debt Securities offered by this Prospectus and the
accompanying Prospectus Supplement are referred to herein as the "Offered Debt
Securities".
 
GENERAL
 
  Neither of the Indentures limits the amount of additional indebtedness the
Company or any of its subsidiaries may incur. The Debt Securities will be
unsecured senior or subordinated obligations of the Company. Since the Company
is a holding company, the Company's rights and the rights of its creditors,
including the holders of Debt Securities, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization will be subject to
the prior claims of the subsidiary's creditors, except to the extent that the
Company may itself be a creditor with recognized claims against the subsidiary.
Claims on the Company's subsidiaries by creditors other than the Company
include substantial claims for policy benefits and debt obligations, as well as
other liabilities incurred in the ordinary course of business. In addition,
since many of the Company's subsidiaries are insurance companies subject to
regulatory control by various state insurance departments, the ability of such
subsidiaries to pay dividends or make loans or advances to the Company without
prior regulatory approval is limited by applicable laws and regulations.
 
  The Indentures do not limit the amount of Debt Securities that may be issued
and provide that Debt Securities may be issued from time to time in one or more
series and may be denominated and payable in foreign currencies or units based
on or related to foreign currencies, including European Currency Units. Special
United States federal income tax considerations applicable to any Debt
Securities so denominated are described in the relevant Prospectus Supplement.
 
  Reference is made to the applicable Prospectus Supplement for the following
terms of and information relating to the Offered Debt Securities offered
thereby (to the extent such terms are applicable to such Debt Securities): (i)
classification as senior or subordinated Debt Securities, the specific
designation, aggregate principal amount, purchase price and denomination; (ii)
currency or units based on or relating to currencies in which the Offered Debt
Securities are denominated and/or in which principal, premium, if any, and/or
any interest will or may be payable; (iii) any date of maturity; (iv) interest
rate or rates (or the method by which such rate will be determined), if any;
(v) the dates on which any such interest will be payable; (vi) the place or
places where the principal of, premium, if any, and interest, if any, on the
Offered Debt Securities will be payable; (vii) any redemption, repayment or
sinking fund provisions; (viii) whether, in the case of
 
                                       6

 
Subordinated Debt Securities, such Offered Debt Securities are convertible into
Common Stock of the Company; (ix) whether the Offered Debt Securities will be
issuable in registered form ("Registered Debt Securities") or bearer form
("Bearer Debt Securities") or both and, if Bearer Debt Securities are issuable,
any restrictions applicable to the place of payment of any principal of,
premium, if any, and interest on such Bearer Debt Securities, to the exchange
of one form for another and to the offer, sale and delivery of such Bearer Debt
Securities (except that under current United States federal income tax law,
Registered Debt Securities will not be exchangeable into Bearer Debt
Securities); (x) any applicable United States federal income tax consequences,
including whether and under what circumstances the Company will pay additional
amounts on Offered Debt Securities held by a person who is not a U.S. person
(as hereinafter defined) in respect of any tax, assessment or governmental
charge withheld or deducted and, if so, whether the Company will have the
option to redeem such Debt Securities rather than pay such additional amounts;
(xi) the proposed listing, if any, of the Offered Debt Securities on any
securities exchange; and (xii) any other specific terms of the Offered Debt
Securities, including any modifications of or additions to the events of
default or covenants provided for with respect to such Debt Securities, and any
terms which may be required by or advisable under applicable laws or
regulations not inconsistent with the applicable Indenture.
 
  Debt Securities may be presented for exchange and Registered Debt Securities
may be presented for transfer in the manner, at the places and subject to the
restrictions set forth in the Debt Securities and the Prospectus Supplement.
Such services will be provided without charge, other than any tax or other
governmental charge payable in connection therewith, but subject to the
limitations provided in the applicable Indenture. Debt Securities in bearer
form and the coupons, if any, appertaining thereto will be transferable by
delivery.
 
  Debt Securities will bear interest at a fixed rate or a floating rate. Debt
Securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate will be sold at a discount below
their stated principal amount. Special United States federal income tax
considerations applicable to any such discounted Debt Securities or to certain
Debt Securities issued at par which are treated as having been issued at a
discount for United States federal income tax purposes are described in the
relevant Prospectus Supplement.
 
  Debt Securities may be issued, from time to time, with the principal amount
payable on any principal payment date, or the amount of interest payable on any
interest payment date, to be determined by reference to one or more currency
exchange rates, commodity prices, equity indices or other factors. Holders of
such Debt Securities may receive a principal amount on any principal payment
date, or a payment of interest on any interest payment date, that is greater
than or less than the amount of principal or interest otherwise payable on such
dates, depending upon the value on such dates of the applicable currency,
commodity, equity index or other factors. Information as to the methods for
determining the amount of principal or interest payable on any date, the
currencies, commodities, equity indices or other factors to which the amount
payable on such date is linked and certain additional tax considerations will
be set forth in the applicable Prospectus Supplement.
 
GLOBAL DEBT SECURITIES
 
  The registered Debt Securities of a series may be issued in the form of one
or more fully registered global Securities (a "Registered Global Security")
that will be deposited with a depositary (a "Depositary") or with a nominee for
a Depositary identified in the Prospectus Supplement relating to such series
and registered in the name of the Depositary or a nominee thereof. In such
case, one or more Registered Global Securities will be issued in a denomination
or aggregate denominations equal to the portion of the aggregate principal
amount of outstanding registered Debt Securities of the series to be
represented by such Registered Global Security or Securities. Unless and until
it is exchanged in whole for Debt Securities in definitive registered form, a
Registered Global Security may not be transferred except as a whole by the
Depositary for such Registered Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary
 
                                       7

 
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor of such Depositary or a nominee of such successor.
 
  The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such
series. The Company anticipates that the following provisions will apply to all
depositary arrangements.
 
  Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Depositary for such Registered
Global Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Registered Global Security, the Depositary
for such Registered Global Security will credit, on its book-entry registration
and transfer system, the participants' accounts with the respective principal
amounts of the Debt Securities represented by such Registered Global Security
beneficially owned by such participants. The accounts to be credited shall be
designated by any dealers, underwriters or agents participating in the
distribution of such Debt Securities. Ownership of beneficial interests in such
Registered Global Security will be shown on, and the transfer of such ownership
interests will be effected only through, records maintained by the Depositary
for such Registered Global Security (with respect to interests of participants)
and on the records of participants (with respect to interests of persons
holding through participants). The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to own,
transfer or pledge beneficial interests in Registered Global Securities.
 
  So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder
of the Debt Securities represented by such Registered Global Security for all
purposes under the applicable Indenture. Except as set forth below, owners of
beneficial interests in a Registered Global Security will not be entitled to
have the Debt Securities represented by such Registered Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of such Debt Securities in definitive form and will not be considered
the owners or holders thereof under the applicable Indenture. Accordingly, each
person owning a beneficial interest in a Registered Global Security must rely
on the procedures of the Depositary for such Registered Global Security and, if
such person is not a participant, on the procedures of the participant through
which such person owns its interest, to exercise any rights of a holder under
the applicable Indenture. The Company understands that under existing industry
practices, if the Company requests any action of holders or if an owner of a
beneficial interest in a Registered Global Security desires to give or take any
action which a holder is entitled to give or take under the applicable
Indenture, the Depositary for such Registered Global Security would authorize
the participants holding the relevant beneficial interests to give or take such
action, and such participants would authorize beneficial owners owning through
such participants to give or take such action or would otherwise act upon the
instructions of beneficial owners holding through them.
 
  Payments of principal and premium, if any, and interest, if any, of Debt
Securities represented by a Registered Global Security registered in the name
of a Depositary or its nominee will be made to such Depositary or its nominee,
as the case may be, as the registered owners of such Registered Global
Security. None of the Company, the Trustee or any other agent of the Company or
agent of the Trustee will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in such Registered Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
 
  The Company expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium or interest in respect of such Registered Global Security, will
immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in such Registered
Global Security as shown on the records of such Depositary. The Company also
expects that payments by participants to owners of beneficial interests in such
Registered Global Security held through such participants will be governed by
standing customer instructions and
 
                                       8

 
customary practices, as is now the case with the securities held for the
accounts of customers in bearer form or registered in "street name", and will
be the responsibility of such participants.
 
  If the Depositary for any Debt Securities represented by a Registered Global
Security is at any time unwilling or unable to continue as Depositary or ceases
to be a clearing agency registered under the 1934 Act, and a successor
Depositary registered as a clearing agency under the 1934 Act is not appointed
by the Company within 90 days, the Company will issue such Debt Securities in
definitive form in exchange for such Registered Global Security. In addition,
the Company may at any time and in its sole discretion determine not to have
any of the Debt Securities of a series represented by one or more Registered
Global Securities and, in such event, will issue Debt Securities of such series
in a definitive form in exchange for all of the Registered Global Security or
Securities representing such Debt Securities. Any Debt Securities issued in
definitive form in exchange for a Registered Global Security will be registered
in such name or names as the Depositary shall instruct the Trustee. It is
expected that such instructions will be based upon directions received by the
Depositary from participants with respect to ownership of beneficial interests
in such Registered Global Security.
 
  Bearer Debt Securities of a series may also be issued in the form of one or
more global Securities (a "Bearer Global Security") that will be deposited with
a common depositary for Euro-clear and CEDEL, or with a nominee for such
depositary identified in the Prospectus Supplement relating to such series. The
specific terms and procedures, including the specific terms of the depositary
arrangement and any specific procedures for the issuance of Debt Securities in
definitive form in exchange for a Bearer Global Security, with respect to any
portion of a series of Debt Securities to be represented by a Bearer Global
Security will be described in the Prospectus Supplement relating to such
series.
 
SENIOR DEBT
 
  Payment of the principal of, premium, if any, and interest on Debt Securities
issued under the Senior Debt Indenture will rank pari passu with all other
unsecured and unsubordinated debt of the Company.
 
SUBORDINATED DEBT
 
  Subordination. Payment of the principal of, premium, if any, and interest on
Debt Securities issued under the Subordinated Debt Indenture will be
subordinate and junior in right of payment, to the extent and in the manner set
forth in the Subordinated Debt Indenture, to all "Senior Indebtedness" of the
Company. The Subordinated Debt Indenture defines "Senior Indebtedness" as the
principal of and premium, if any, and interest on (a) all indebtedness of the
Company, whether outstanding on the date of the Subordinated Debt Indenture or
thereafter created, (i) for money borrowed by the Company, (ii) for money
borrowed by, or obligations of, others and either assumed or guaranteed,
directly or indirectly, by the Company, (iii) in respect of letters of credit
and acceptances issued or made by banks, or (iv) constituting purchase money
indebtedness, or indebtedness secured by property included in the property,
plant and equipment accounts of the Company at the time of the acquisition of
such property by the Company, for the payment of which the Company is directly
liable, and (b) all deferrals, renewals, extensions and refundings of, and
amendments, modifications and supplements to, any such indebtedness. As used in
the preceding sentence the term "purchase money indebtedness" means
indebtedness evidenced by a note, debenture, bond or other instrument (whether
or not secured by any lien or other security interest) issued or assumed as all
or a part of the consideration for the acquisition of property, whether by
purchase, merger, consolidation or otherwise, unless by its terms such
indebtedness is subordinate to other indebtedness of the Company.
Notwithstanding anything to the contrary in the Subordinated Debt Indenture or
the Subordinated Debt Securities, Senior Indebtedness shall not include, (i)
any indebtedness of the Company which, by its terms or the terms of the
instrument creating or evidencing it, is subordinate in right of payment to or
pari passu with the Subordinated Debt Securities or (ii) any indebtedness of
the Company to a subsidiary of the Company. (Subordinated Debt Indenture,
Section 1.1) The Subordinated Debt Indenture does not contain any limitation on
the amount of Senior Indebtedness that can be incurred by the Company.
Indebtedness issued or to be issued pursuant to
 
                                       9

 
the Indenture dated March 15, 1995 between the Company and The First National
Bank of Chicago, as Trustee, providing for the issuance of junior subordinated
indebtedness of the Company is subordinate in right of payment to the
Subordinated Debt Securities. As of the date of this Prospectus, approximately
$54.3 million principal amount of 9.95% junior subordinated debentures due 2044
are outstanding under such Indenture.
 
  In the event (a) of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or its property, or (b) that Subordinated Debt
Securities of any series are declared and payable before their expressed
maturity because of the occurrence of an Event of Default pursuant to Section
5.1 of the Subordinated Debt Indenture (under circumstances other than as set
forth in clause (a) above), then the holders of all Senior Indebtedness shall
first be entitled to receive payment of the full amount due thereon in money or
money's worth, before the holders of any of such Subordinated Debt Securities
or coupons appertaining thereto are entitled to receive a payment on account of
the principal of, premium, if any, or interest on the indebtedness evidenced by
such Subordinated Debt Securities or of such coupons appertaining thereto. In
the event and during the continuation of any default in payment of any Senior
Indebtedness or if any event of default shall exist under any Senior
Indebtedness, as "event of default" is defined therein or in the agreement
under which the same is outstanding, no payment of the principal or interest on
the Subordinated Debt Securities or coupons shall be made. (Subordinated Debt
Indenture, Article 13) If this Prospectus is being delivered in connection with
a series of Subordinated Debt Securities, the accompanying Prospectus
Supplement will set forth the approximate amount of Senior Indebtedness
outstanding as of the end of the most recent fiscal quarter.
 
  Conversion Rights. The terms and conditions, if any, on which Subordinated
Debt Securities are convertible into Common Stock of the Company will be set
forth in the prospectus supplement relating thereto. Such terms will include
the conversion price, the conversion period, provisions as to whether
conversion will be at the option of the holder or the Company, the events
requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of the convertible Subordinated Debt
Securities; and such terms may include provisions under which the number of
shares of Common Stock to be received by the holders of the Subordinated Debt
Securities would be calculated according to the market price of the Common
Stock as of a time stated in the prospectus supplement.
 
CERTAIN COVENANTS OF THE COMPANY
 
  Limitations on Liens. The Senior Debt Indenture provides that the Company and
its Restricted Subsidiaries (as defined below) may not issue, assume, incur or
guarantee any indebtedness for borrowed money secured by a mortgage, pledge,
lien or other encumbrance (except for certain liens specifically permitted by
the Senior Debt Indenture), directly or indirectly, upon any shares of the
Voting Stock (as defined in the Senior Debt Indenture) of a Restricted
Subsidiary which shares are owned by the Company or its Restricted Subsidiaries
without effectively providing that the Debt Securities issued under the Senior
Debt Indenture (and if the Company so elects, any other indebtedness of the
Company ranking on a parity with such Debt Securities) shall be secured equally
and ratably with, or prior to, any such secured indebtedness so long as such
indebtedness remains outstanding. The foregoing restrictions, however, do not
apply to liens upon any shares of Voting Stock of any corporation existing at
the time such corporation becomes a Restricted Subsidiary and extensions,
renewals or replacements thereof. (Senior Debt Indenture, Section 3.9)
 
  The term "Restricted Subsidiary" means (a) so long as they are Subsidiaries
of the Company, SunAmerica Life Insurance Company ("SunAmerica Life") and
Anchor National Life Insurance Company ("Anchor"); (b) any other present or
future Insurance Subsidiary the Consolidated Total Assets (as defined in the
Senior Debt Indenture) of which constitute 20% or more of the Consolidated
Total Assets of the Company; and (c) any Subsidiary which is a successor, by
merger or otherwise, to substantially all of the business or properties of any
Insurance Subsidiary referred to or described in the foregoing clauses (a) or
(b). The term "Subsidiary" means any corporation or other entity more than 50%
of the outstanding shares of Voting Stock of which is at the time of
determination owned or controlled, directly or indirectly, by the
 
                                       10

 
Company. The term "Insurance Subsidiary" means a Subsidiary registered in the
state of its domicile under the insurance laws of such state and qualified to
sell insurance products. (Senior Debt Indenture, Section 1.1)
 
  Consolidation, Merger and Sale of Assets. Each Indenture provides that the
Company shall not consolidate or merge with or into, or transfer or lease its
assets substantially as an entirety to any person unless the Company shall be
the continuing corporation, or the successor corporation or person to which
such assets are transferred or leased shall be organized under the laws of the
United States or any state thereof or the District of Columbia and shall
expressly assume the Company's obligations on the Debt Securities and under
such Indenture, and after giving effect to such transaction no Event of Default
(as defined in such Indenture) shall have occurred and be continuing, and
certain other conditions are met. (Senior and Subordinated Debt Indentures,
Section 9.1)
 
  This covenant would not apply to any recapitalization transaction, a change
of control of the Company or a highly leveraged transaction unless such
transactions or change of control were structured to include a merger or
consolidation or transfer or lease of the Company's assets substantially as an
entirety. Except as may be described in a Prospectus Supplement applicable to a
particular series of Debt Securities, there are no covenants or other
provisions in the Indentures providing for a put or increased interest or that
would otherwise afford holders of Debt Securities additional protection in the
event of a recapitalization transaction, a change of control of the Company or
a highly leveraged transaction.
 
  Restrictions on Certain Dispositions. The Senior Debt Indenture provides that
as long as any of the Senior Debt Securities remain outstanding, the Company
will not, and will not permit any Restricted Subsidiary to, issue, sell,
assign, transfer or otherwise dispose of, directly or indirectly, any of the
Voting Stock of any Restricted Subsidiary, unless (a) the issuance, sale,
assignment, transfer or other disposition is required to comply with the order
of a court or regulatory authority of competent jurisdiction, other than an
order issued at the request of the Company or of one of its Restricted
Subsidiaries; (b) the shares of Voting Stock issued, sold, assigned,
transferred or otherwise disposed of constitute directors' qualifying shares;
(c) all of the Voting Stock of a Restricted Subsidiary then owned by the
Company or by its Restricted Subsidiaries is disposed of, in a single
transaction or in a series of related transactions, for a consideration
consisting of cash or other property the fair market value of which (as
determined in good faith by the Board of Directors) is at least equal to the
Fair Value (as defined below) of such Voting Stock; or (d) after giving effect
to the issuance, sale, assignment, transfer or other disposition, the Company
and its Restricted Subsidiaries would own directly or indirectly at least 80%
of the issued and outstanding Voting Stock of such Restricted Subsidiary and
such issuance, sale, assignment, transfer or other disposition is made for a
consideration consisting of cash or other property which is at least equal to
the Fair Value of such Voting Stock. (Senior Debt Indenture, Section 9.3) The
term "Fair Value" when used with respect to any Voting Stock means the fair
value as determined in good faith by the Board of Directors of the Company.
(Senior Debt Indenture, Section 1.1) The Senior Debt Indenture does not
restrict the transfer of assets from a Restricted Subsidiary to any other
person, including the Company or another subsidiary of the Company.
 
EVENTS OF DEFAULT
 
  An Event of Default is defined under each Indenture with respect to Debt
Securities of any series issued under such Indenture as being: (a) default in
payment of all or any part of the principal of the Debt Securities of such
series when due, either at maturity (or upon any redemption), by declaration or
otherwise; (b) default for 30 days in payment of any interest on any Debt
Securities of such series; (c) default in payment of any sinking fund
installment when due; (d) default for 60 days after written notice as provided
in such Indenture in the observance or performance of any other covenant or
agreement in the Debt Securities of such series or such Indenture other than a
covenant included in such Indenture solely for the benefit of a series of Debt
Securities other than such series; (e) certain events of bankruptcy, insolvency
or reorganization; or (f) an event of default with respect to any other
indebtedness for borrowed money (other than non-recourse obligations) of the
Company or any of its Restricted Subsidiaries, in an aggregate principal amount
exceeding $10,000,000, if such event of default shall result in the
acceleration of such other indebtedness under the terms of the
 
                                       11

 
instrument under which such indebtedness is issued or secured, so long as such
acceleration is not cured, waived, rescinded or annulled, or such indebtedness
is not discharged, within 10 days after written notice thereof as provided in
such Indenture; provided that if any such acceleration shall cease or be cured,
waived, rescinded or annulled, then the Event of Default by reason thereof
shall be deemed likewise to have been thereupon cured. (Senior and Subordinated
Debt Indentures, Section 5.1)
 
  Each Indenture provides that (a) if an Event of Default due to the default in
payment of principal of, premium, if any, or interest on, any series of Debt
Securities issued under such Indenture or due to the default in the performance
or breach of any other covenant or agreement of the Company applicable to the
Debt Securities of such series but not applicable to all outstanding Debt
Securities issued under such Indenture shall have occurred and be continuing,
either the Trustee or the holders of not less than 25% in principal amount of
the Debt Securities of each affected series (treated as one class) issued under
such Indenture and then outstanding may then declare the principal of all Debt
Securities of each such affected series and interest accrued thereon to be due
and payable immediately; and (b) if any Event of Default due to a default in
the performance of any other of the covenant or agreements in such Indenture
applicable to all outstanding Debt Securities issued thereunder and then
outstanding or due to certain events of bankruptcy, insolvency and
reorganization of the Company shall have occurred and be continuing, either the
trustee or the holders of not less than 25% in principal amount of all Debt
Securities issued under such Indenture and then outstanding (treated as one
class) may declare the principal of all such Debt Securities and interest
accrued thereon to be due and payable immediately, but upon certain conditions
such declarations may be annulled and past defaults may be waived (except a
continuing default in payment of principal of (or premium, if any) or interest
on such Debt Securities) by the holders of a majority in principal amount of
the Debt Securities of all such affected series then outstanding. (Senior and
Subordinated Debt Indentures, Sections 5.1 and 5.10)
 
  Each Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during a default to act with the required standard of care,
to be indemnified by the holders of Debt Securities issued under such Indenture
requesting the Trustee to exercise any right or power under such Indenture
before proceeding to exercise any such right or power at the request of such
holders. (Senior and Subordinated Debt Indentures, Section 6.2) Subject to such
provisions in each Indenture for the indemnification of the Trustee and certain
other limitations, the holders of a majority in principal amount of the
outstanding Debt Securities of each affected series (treated as one class)
issued under such Indenture may direct the time, method and place of conducting
any proceedings for any remedy available to the Trustee, or exercising any
trust or power conferred on the Trustee. (Senior and Subordinated Debt
Indentures, Section 5.9)
 
  Each Indenture provides that no holder of Debt Securities issued under such
Indenture may institute any action against the Company under such Indenture
(except actions for payment of overdue principal, premium, if any, or interest)
unless such holder previously shall have given to the Trustee written notice of
default and continuance thereof and unless the holders of not less than 25% in
principal amount of the Debt Securities of each affected series (treated as one
class) issued under such Indenture and then outstanding shall have requested
the Trustee to institute such action and shall have offered the Trustee
reasonable indemnity, the Trustee shall not have instituted such action within
60 days of such request and the Trustee shall not have received direction
inconsistent with such written request by the holders of a majority in
principal amount of the Debt Securities of each affected series (treated as one
class) issued under such Indenture and then outstanding. (Senior and
Subordinated Debt Indentures, Sections 5.6 and 5.9)
 
  Each Indenture contains a covenant that the Company will file annually with
the Trustee a certificate of no default or a certificate specifying any default
that exists. (Senior and Subordinated Debt Indentures, Section 3.5)
 
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
 
  The Company can discharge or defease its obligations under each Indenture as
set forth below. (Senior and Subordinated Debt Indentures, Section 10.1)
 
                                       12

 
  Under terms satisfactory to the Trustee, the Company may discharge certain
obligations to holders of any series of Debt Securities issued under such
Indentures which have not already been delivered to the Trustee for
cancellation and which have either become due and payable or are by their terms
due and payable within one year (or scheduled for redemption within one year)
by irrevocably depositing with the Trustee cash or, in the case of Debt
Securities payable only in U.S. dollars, U.S. Government Obligations (as
defined in such Indenture), as trust funds in an amount certified to be
sufficient to pay when due, whether at maturity, upon redemption or otherwise,
the principal of, premium, if any, and interest on such Debt Securities.
 
  The Company may also discharge any and all of its obligations to holders of
any series of Debt Securities issued under an Indenture at any time
("defeasance"), but may not thereby avoid its duty to register the transfer or
exchange of such series of Debt Securities, to replace any temporary,
mutilated, destroyed, lost or stolen series of Debt Securities or to maintain
an office or agency in respect of such series of Debt Securities. Under terms
satisfactory to the Trustee, the Company may instead be released with respect
to any outstanding series of Debt Securities issued under the relevant
Indenture from the obligations imposed by certain provisions of such Indenture
including Sections 3.9, 9.1 and 9.3, in the case of the Senior Debt Indenture,
and Section 9.1, in the case of the Subordinated Debt Indenture (which contain
the covenants described above limiting liens, consolidations, mergers,
transfers and leases and certain dispositions) and omit to comply with such
Sections without creating an Event of Default ("covenant defeasance").
Defeasance or covenant defeasance may be effected only if, among other things:
(i) the Company irrevocably deposits with the Trustee cash or, in the case of
Debt Securities payable only in U.S. dollars, U.S. Government Obligations, as
trust funds in an amount certified to be sufficient to pay at maturity (or upon
redemption) the principal of, premium, if any, and interest on all outstanding
Debt Securities of such series issued under such Indenture; (ii) the Company
delivers to the Trustee an opinion of counsel to the effect that the holders of
such series of Debt Securities will not recognize income, gain or loss for
United States federal income tax purposes as a result of such defeasance or
covenant defeasance and that defeasance or covenant defeasance will not
otherwise alter such holders' United States federal income tax treatment of
principal, premium and interest payments on such series of Debt Securities (in
the case of a defeasance, such opinion must be based on a ruling of the
Internal Revenue Service or a change in United States federal income tax law
occurring after the date of such Indenture, since such a result would not occur
under current tax law); and (iii) in the case of the Subordinated Debt
Indenture no event or condition shall exist that, pursuant to certain
provisions described under "Subordinated Debt" above, would prevent the Company
from making payments of principal of, premium, if any, and interest on the
Subordinated Debt Securities at the date of the irrevocable deposit referred to
above.
 
MODIFICATION OF THE INDENTURES
 
  Each Indenture provides that the Company and the Trustee may enter into
supplemental indentures without the consent of the holders of Debt Securities
to: (a) secure any Debt Securities, (b) evidence the assumption by a successor
corporation of the obligations of the Company, (c) add covenants for the
protection of the holders of Debt Securities, (d) cure any ambiguity or correct
any inconsistency in such Indenture, provided that such cure or correction does
not adversely affect the holders of such Debt Securities, (e) establish the
forms or terms of Debt Securities of any series and (f) evidence the acceptance
of appointment by a successor trustee. (Senior and Subordinated Debt
Indentures, Section 8.1)
 
  Each Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of Debt Securities of all series issued under such
Indenture then outstanding and affected (voting as one class), to add any
provisions to, or change in any manner or eliminate any of the provisions of,
such Indenture or modify in any manner the rights of the holders of the Debt
Securities of each series so affected; provided that the Company and the
Trustee may not, without the consent of the holder of each outstanding Debt
Security affected thereby, (a) extend the stated maturity of the principal of
any Debt Security, or reduce the principal amount thereof or reduce the rate or
extend the time of payment of interest thereon, or reduce any amount payable on
redemption thereof
 
                                       13

 
or change the currency in which the principal thereof (including any amount in
respect of original issue discount), premium, if any, or interest thereon is
payable or reduce the amount of any original issue Debt Security that is
payable upon acceleration or provable in bankruptcy or alter certain provisions
of such Indenture relating to the Debt Securities issued thereunder not
denominated in U.S. dollars or impair the right to institute suit for the
enforcement of any payment on any Debt Security when due or (b) reduce the
aforesaid percentage in principal amount of Debt Securities of any series
issued under such Indenture, the consent of the holders of which is required
for any such modification. (Senior and Subordinated Debt Indentures, Section
8.2)
 
  The Subordinated Debt Indenture may not be amended to alter the subordination
of any outstanding Subordinated Debt Securities without the consent of each
holder of Senior Indebtedness then outstanding that would be adversely affected
thereby. (Subordinated Debt Indenture, Section 8.6)
 
CONCERNING THE TRUSTEE
 
  The First National Bank of Chicago is one of a number of banks with which the
Company and its subsidiaries maintain ordinary banking and trust relationships.
 
                          DESCRIPTION OF CAPITAL STOCK
 
  Under the Articles of Incorporation of the Company, as amended and restated
and including any Articles Supplementary (the "Articles of Incorporation"), the
Company has authority to issue 50,000,000 shares of Common Stock, par value
$1.00 per share ("Common Stock"), 15,000,000 shares of Nontransferable Class B
Stock, par value $1.00 per share (the "Nontransferable Class B Stock"),
15,000,000 shares of Transferable Class B Stock, par value $1.00 per share (the
"Transferable Class B Stock," and, together with the Nontransferable Class B
Stock, the "Class B Stock") and 20,000,000 shares of Preferred Stock, without
par value ("Preferred Stock"). Preferred Stock may be issued from time to time
in one or more classes with such full, specific, limited or no voting powers,
and such designations, preferences and relative, participating, optional or
other special rights, and qualifications and limitations or restrictions
thereof, as shall be stated and expressed in the Articles of Incorporation or
any amendment thereof or in the resolution or resolutions of the Board of
Directors of the Company establishing any class of Preferred Stock. The
dividend, voting, conversion, exchange, repurchase and redemption rights, if
applicable, the liquidation preference, and other specific terms of each series
of the Preferred Stock will be set forth in the applicable Prospectus
Supplement. At July 31, 1995, there were outstanding (i) 29,438,110 shares of
Common Stock (and 13,641,701 shares of Common Stock reserved for issuance upon
conversion of the outstanding Series D Preferred Shares (as defined below) and
the Nontransferable Class B Stock and in connection with outstanding employee
stock options and 150,000 shares of Common Stock deferred under the Long-Term
Performance-Based Incentive Plan for the Chief Executive Officer); (ii)
6,826,439 shares of Nontransferable Class B Stock; (iii) 3,514,765 shares of a
series of Preferred Stock designated the 9 1/4% Preferred Stock, Series B
("Series B Preferred Shares"); (iv) 486,800 shares of a series of Preferred
Stock designated the Adjustable Rate Cumulative Preferred Stock, Series C
("Series C Preferred Shares"); and (v) 100,050 shares of a series of Preferred
Stock designated the Series D Mandatory Conversion Premium Dividend Preferred
Stock ("Series D Preferred Shares"), represented by 5,002,500 Depositary Shares
("Series D Depositary Shares") (each representing one-fiftieth of a Series D
Preferred Share). There are no shares of Transferable Class B Stock
outstanding. The Series B Preferred Shares, Series C Preferred Shares and the
Series D Preferred Shares rank pari passu with each other and senior to the
Common Stock and Class B Stock. For further information regarding the Common
Stock and Class B Stock, including a description of the rights attached
thereto, see "Common Stock and Class B Stock" below. For a description of the
series of Preferred Stock of the Company currently outstanding, see "Series B
Preferred Shares", "Series C Preferred Shares" and "Series D Preferred Shares"
below.
 
  For a discussion of certain recent proposed amendments to the Articles of
Incorporation and other proposed actions which would (i) increase the number of
authorized shares of the Company's Common Stock
 
                                       14

 
and Nontransferable Class B Stock and (ii) effect a three-for-two stock split
of outstanding shares of Common Stock and Class B Stock, see "The Company--
Recent Developments".
 
  The Prospectus Supplement relating to an offering of Common Stock will
describe terms relevant thereto, including the number of shares offered, the
initial offering price, market price and dividend information.
 
  The applicable Prospectus Supplement will describe the following terms of any
Preferred Stock in respect of which this Prospectus is being delivered (to the
extent applicable to such Preferred Stock): (i) the specific designation,
number of shares, seniority and purchase price; (ii) any liquidation preference
per share; (iii) any date of maturity; (iv) any redemption, repayment or
sinking fund provisions; (v) any dividend rate or rates and the dates on which
any such dividends will be payable (or the method by which such rates or dates
will be determined); (vi) any voting rights; (vii) if other than the currency
of the United States of America, the currency or currencies including composite
currencies in which such Preferred Stock is denominated and/or in which
payments will or may be payable; (viii) the method by which amounts in respect
of such Preferred Stock may be calculated and any commodities, currencies or
indices, or value, rate or price, relevant to such calculation; (ix) whether
the Preferred Stock is convertible or exchangeable and, if so, the securities
or rights into which such Preferred Stock is convertible or exchangeable (which
may include other Preferred Stock, Debt Securities, Common Stock or other
securities or rights of the Company (including rights to receive payment in
cash or securities based on the value, rate or price of one or more specified
commodities, currencies or indices) or securities of other issuers or a
combination of the foregoing), and the terms and conditions upon which such
conversions or exchanges will be effected including the initial conversion or
exchange prices or rates, the conversion or exchange period and any other
related provisions; (x) the place or places where dividends and other payments
on the Preferred Stock will be payable; and (xi) any additional voting,
dividend, liquidation, redemption and other rights, preferences, privileges,
limitations and restrictions.
 
  As described under "Description of Depositary Shares", the Company may, at
its option, elect to offer depositary shares ("Depositary Shares") evidenced by
depositary receipts ("Depositary Receipts"), each representing an interest (to
be specified in the Prospectus Supplement relating to the particular series of
the Preferred Stock) in a share of the particular series of the Preferred Stock
issued and deposited with a Preferred Stock Depositary (as defined herein).
 
  All shares of Preferred Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and non-
assessable.
 
COMMON STOCK AND CLASS B STOCK
 
  Dividends. Except as provided below, holders of Common Stock and Class B
Stock are entitled to receive dividends and other distributions in cash, stock
or property of the Company, when, as and if declared by the Board of Directors
out of assets or funds of the Company legally available therefor and shall
share equally on a per share basis in all such dividends and other
distributions (subject to the rights of holders of Preferred Stock). If a cash
dividend is paid on any of the Common Stock, the Nontransferable Class B Stock
or the Transferable Class B Stock, a cash dividend also will be paid on the
Common Stock, the Nontransferable Class B Stock and the Transferable Class B
Stock, as the case may be. The amount of the cash dividend paid on each share
of Class B Stock will be equal to 90% of the amount of the cash dividend paid
on each share of Common Stock. In addition if holders of Common Stock receive
shares of Common Stock in connection with stock dividends or stock splits,
holders of Transferable Class B Stock will receive a proportionate number of
shares of Transferable Class B Stock and holders of Nontransferable Class B
Stock will receive a proportionate number of shares of Nontransferable Class B
Stock.
 
  Voting Rights. At every meeting of shareholders, every holder of Common Stock
is entitled to one vote per share and every holder of Class B Stock is entitled
to 10 votes per share. All actions submitted to a vote of shareholders are
voted upon by holders of Common Stock and Class B Stock voting together as a
single
 
                                       15

 
class (subject to any voting rights which may be granted to holders of
Preferred Stock) and a majority of the votes cast by such holders is required
to approve any such action, except where other provision is made by law.
 
  In addition to any vote required by law, the holders of Common Stock and
Class B Stock each vote separately as a class (i) on any merger or
consolidation of the Company with or into any other corporation, or any sale,
lease, exchange or other disposition of all or substantially all of the
Company's assets to or with any other person or any dissolution of the Company
(unless the other party to such merger or other transaction is a majority-owned
subsidiary of the Company) and (ii) on any additional issuances of Class B
Stock other than in connection with stock splits and stock dividends and
exchanges of Nontransferable Class B Stock for Transferable Class B Stock. A
majority of votes cast by the Common Stock and Class B Stock, each voting
separately as a class, is required to approve any matters described above as to
which holders of such shares have a separate class vote, unless, in the case of
the events described in clause (i) above, a greater vote is required by law. In
addition to any vote required by law, the affirmative vote of the holders of a
majority of the shares of the Common Stock and the Nontransferable Class B
Stock, each voting separately as a class, is required to approve any amendments
to the Articles of Incorporation.
 
  Liquidation Rights. In the event of any Liquidation, the holders of Common
Stock and Class B Stock are entitled to share equally in the assets available
for distribution after payment of all liabilities and provision for the
liquidation preference of any shares of Preferred Stock then outstanding.
 
  Class B Stock Conversion Rights. Each share of Class B Stock is convertible
into one share of Common Stock at any time at the option of the holder. In
addition, any transfer of shares of Nontransferable Class B Stock not permitted
under the Articles of Incorporation will result in the conversion of such
shares into shares of Common Stock.
 
  Exchange of Nontransferable Class B Stock. The Nontransferable Class B Stock
is exchangeable in whole at the option of the Company at any time for
Transferable Class B Stock. Holders of Nontransferable Class B Stock will
receive one share of Transferable Class B Stock for each share of
Nontransferable Class B Stock held by them at the time of the exchange.
 
  Miscellaneous. The holders of Common Stock and Class B Stock have no
preemptive rights, cumulative voting rights or subscriptions rights. Except as
described above, the Common Stock and Class B Stock have no conversion rights
and are not subject to redemption.
 
  The transfer agent and registrar with respect to the Common Stock is The Bank
of New York.
 
  All shares of Common Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and non-
assessable.
 
  Mr. Eli Broad, Chairman, President and Chief Executive Officer of the
Company, beneficially owns, as of July 31, 1995, 1,162,041 shares of Common
Stock and 5,276,762 shares of Nontransferable Class B Stock, representing an
aggregate of 55.2% of the voting power of the Company's outstanding stock.
 
SERIES B PREFERRED SHARES
 
  Dividends. Subject to the rights of holders of other classes of stock ranking
on a parity with or senior to the Series B Preferred Shares which may from time
to time be issued by the Company, the holders of Series B Preferred Shares are
entitled to receive, when, as and if the Board of Directors declares a dividend
on the Series B Preferred Shares, out of assets legally available for
dividends, cumulative preferential cash dividends from the issue date of the
Series B Preferred Shares (June 29, 1992), accruing at the rate per Series B
Preferred Share of $2.3125 per annum or $.5781 per quarter, payable quarterly
in arrears on the 15th day of each March, June, September and December or, if
any such date is not a business day, on the next succeeding business day.
 
 
                                       16

 
  Dividends on the Series B Preferred Shares accrue whether or not the Company
has earnings, whether or not there are funds legally available for the payment
of such dividends and whether or not such dividends are declared, and will
accumulate to the extent they are not paid on the dividend payment date for the
quarter for which they accrue. Accumulated unpaid dividends do not bear
interest.
 
  Liquidation Rights. Subject to the rights of holders of other classes of
stock ranking on a parity with or senior to Series B Preferred Shares, in the
event of any liquidation, dissolution or winding-up of the business of the
Company, whether voluntary or involuntary (any such event, a "Liquidation"),
the holders of the Series B Preferred Shares, after payment or provision for
payment of the debts and other liabilities of the Company, will be entitled to
receive for each Series B Preferred Share, an amount equal to the sum of $25
and all accrued and unpaid dividends thereon, and no more. If, upon any
Liquidation, there are insufficient assets to permit full payment of holders of
Series B Preferred Shares and shares of any other class of outstanding
Preferred Stock, the holders of Series B Preferred Shares and such other shares
shall be paid ratably in proportion to the full distributable amounts to which
holders of Series B Preferred Shares and such other shares are respectively
entitled upon Liquidation.
 
  Redemption. The Series B Preferred Shares are not redeemable prior to June
15, 1997. On and after such date, the Series B Preferred Shares are redeemable
in cash at the option of the Company, in whole or in part, from time to time,
at a redemption price of $25.00 per share plus accrued and unpaid dividends to
the date fixed for redemption.
 
  The Series B Preferred Shares are not entitled to the benefits of any sinking
fund.
 
  Voting Rights. The Series B Preferred Shares do not entitle holders thereof
to voting rights, except (i) the Company may not alter any of the provisions of
the Articles of Incorporation or the Articles Supplementary relating to the
Series B Preferred Shares which would materially and adversely affect any
right, preference or privilege of the Series B Preferred Shares without the
affirmative vote of the holders of at least two-thirds of the Series B
Preferred Shares outstanding at the time (voting separately as a class);
provided, however, that any such alteration that would authorize, create or
issue additional shares of Preferred Stock or any other shares of stock
(whether or not already authorized) ranking senior to, on a parity with or
junior to the Series B Preferred Shares as to dividends or on the distribution
of assets upon Liquidation shall be deemed not to materially and adversely
affect such rights, preferences or privileges, (ii) in the event dividends
payable on the Series B Preferred Shares shall be in arrears in an aggregate
amount equivalent to six full quarterly dividends (a "Series B Preferred Share
Dividend Default") or (iii) as required by law. In the event of a Series B
Preferred Share Dividend Default, the holders of the outstanding Series B
Preferred Shares will be entitled to elect together with holders of all other
outstanding classes of Preferred Stock ranking on a parity with the Series B
Preferred Shares and entitled to participate in such election, voting as a
single class, two directors at a special meeting called by the Board of
Directors for such purpose. Such two directors shall serve until the full
dividends accumulated on all outstanding Series B Preferred Shares and all
other outstanding classes of Preferred Stock ranking on a parity with the
Series B Preferred Shares are paid.
 
SERIES C PREFERRED SHARES
 
  Dividends. Subject to the rights of holders of other classes of stock ranking
on a parity with or senior to the Series C Preferred Shares which may from time
to time be issued by the Company, the holders of the Series C Preferred Shares
are entitled to receive, when, as and if the Board of Directors declares a
dividend on the Series C Preferred Shares, out of assets legally available for
dividends, cumulative preferential cash dividends accruing at an adjustable
rate, payable quarterly in arrears on the 1st day of March, June, September or
December of each year or, if such day is not a business day, on the next
preceding business day, equal for each quarterly dividend period to .50% less
than the highest of the "Three-Month Treasury Bill Rate," the "Ten Year
Constant Maturity Rate" or the "Twenty Year Constant Maturity Rate" determined
in advance of such dividend period. However, the rate may not be less than
7.00% per annum nor greater than 13.50% per annum. The current rate is 7.00%.
 
                                       17

 
  Dividends on the Series C Preferred Shares accrue whether or not the Company
has earnings, whether or not there are funds legally available for the payment
of such dividends and whether or not such dividends are declared, and will
accumulate to the extent they are not paid on the dividend payment date for the
quarter for which they accrue. Accumulated unpaid dividends do not bear
interest.
 
  Liquidation Rights. Subject to the rights of holders of other classes of
stock ranking on a parity with or senior to Series C Preferred Shares, in the
event of any Liquidation, the holders of the Series C Preferred Shares, after
payment or provision for payment of the debts and other liabilities of the
Company, will be entitled to receive for each Series C Preferred Share, an
amount equal to the sum of $100 and all accrued and unpaid dividends thereon,
and no more. If, upon any Liquidation, there are insufficient assets to permit
full payment of holders of Series C Preferred Shares and shares of any other
class of outstanding Preferred Stock, the holders of Series C Preferred Shares
and such other shares shall be paid ratably in proportion to the full
distributable amounts to which holders of Series C Preferred Shares and such
other shares are respectively entitled upon Liquidation.
 
  Redemption. The Series C Preferred Shares are redeemable at any time at the
option of the Company, in whole or in part, at $103 per share prior to March 1,
1996 and, thereafter, at $100 per share, plus in each case accrued and unpaid
dividends to the redemption date.
 
  The Series C Preferred Shares are not entitled to the benefits of any sinking
fund.
 
  Voting Rights. Each Series C Preferred Share is entitled to one-tenth of one
vote per share on all matters submitted to a vote of the holders of the
Company's Common Stock, voting as a single class with holders of Common Stock
and with holders of any other class or series having the right to vote with the
holders of Common Stock. In addition, if, on the date used to determine
shareholders of record for any meeting of shareholders at which directors are
to be elected, dividends on the Series C Preferred Shares or any other series
of preferred stock ranking on a parity with the Series C Preferred Shares as to
dividends are in arrears in an amount equal to at least six quarterly dividends
(whether or not consecutive), holders of Series C Preferred Shares (separately
as a class with other holders of affected Preferred Stock) are entitled to vote
for and elect two directors of the Company. Each holder of Series C Preferred
Shares has one vote for each share held in such circumstance.
 
  Without the consent or affirmative vote of the holders of at least two-thirds
of the outstanding Series C Preferred Shares, voting separately as a class with
all other affected series of Preferred Stock ranking on a parity either as to
dividends or upon liquidation with the Series C Preferred Shares, the Company
shall not authorize, create or issue, or increase the authorized amount of, any
class or series of stock ranking prior to the Series C Preferred Shares as to
dividends or upon liquidation (or any securities convertible into any such
stock). The affirmative vote or consent of the holders of a least two-thirds of
the outstanding Series C Preferred Shares, voting separately as a class with
all other affected series of Preferred Stock, will be required for any
amendment, alteration or repeal, whether by merger or consolidation or
otherwise, of the Company's Articles or any articles supplemental thereto if
the amendment, alteration or repeal adversely affects the preferences, rights,
powers or privileges of the Series C Preferred Shares and any other Preferred
Stock; provided, however, that in any case in which one or more, but not all,
series of such class would be adversely affected as to the preferences, rights,
powers or privileges thereof, the affirmative vote or consent of the holders of
a least two-thirds of the votes entitled to be cast by the holders of shares of
any series that would be adversely affected, voting as a class, shall be
required in lieu thereof; excluding, however, an increase or decrease (but not
to less than the then outstanding Series C Preferred Shares) in the aggregate
number of authorized Series C Preferred Shares.
 
SERIES D PREFERRED SHARES
 
  Dividends. Subject to the rights of holders of other classes of stock ranking
on a parity with or senior to the Series D Preferred Shares which may from time
to time be issued by the Company, the holders of
 
                                       18

 
Series D Preferred Shares are entitled to receive, when, as and if the Board of
Directors declares a dividend on the Series D Preferred Shares, out of assets
legally available for dividends, cumulative preferential cash dividends from
the date of issue of the Series D Preferred Shares (March 3, 1993), accruing at
the rate per Series D Preferred Share of $139 per annum or $34.75 per quarter
(equivalent to $2.78 per annum or $.695 per quarter for each Series D
Depositary Share), payable quarterly in arrears.
 
  Dividends on the Series D Preferred Shares accrue whether or not the Company
has earnings, whether or not there are funds legally available for the payment
of such dividends and whether or not such dividends are declared, and will
accumulate to the extent they are not paid on the dividend payment date for the
quarter for which they accrue. Accumulated unpaid dividends will not bear
interest.
 
  Mandatory Conversion of Series D Preferred Shares. On March 1, 1996 (the
"Series D Mandatory Conversion Date"), each outstanding Series D Preferred
Share will convert automatically into shares of Common Stock at the Series D
Common Stock Equivalent Rate (as described below) in effect on the Series D
Mandatory Conversion Date and the right to receive an amount in cash equal to
all accrued and unpaid dividends on such Series D Preferred Share to and
including the Series D Mandatory Conversion Date (the "Series D Mandatory
Conversion"), subject to the rights of the Company to call Series D Preferred
Shares prior to the Series D Mandatory Conversion. The Series D Common
Equivalent Rate is currently fifty shares of Common Stock for each Series D
Preferred Share (equivalent to one share of Common Stock for each Series D
Depositary Share), subject to adjustment in the event of stock dividends,
distribution of assets or certain other events.
 
  Immediately prior to the effectiveness of a Merger or Consolidation, each
outstanding Series D Preferred Share will convert automatically into (i) shares
of Common Stock at the Series D Common Equivalent Rate in effect on the
effective date of the Merger or Consolidation, plus (ii) the right to receive
an amount in cash equal to the accrued and unpaid dividends on such Series D
Preferred Share to and including the effective date, plus (iii) the right to
receive an amount in cash initially equal to $375 (equivalent to $7.50 for each
Series D Depositary Share), declining by $.350150 (equivalent to $.007003 for
each Series D Depositary Share) on each day following the date of issue of the
Series D Preferred Shares (March 3, 1993) to $21 (equivalent to $.42 for each
Series D Depositary Share) on January 1, 1996, and equal to zero thereafter,
determined with reference to the effective date, unless sooner redeemed. At the
option of the Company, it may deliver on the effective date, in lieu of some or
all of the cash consideration described in clauses (ii) and (iii) of the
preceding sentence, shares of Common Stock.
 
  Series D Preferred Shares are not convertible into Common Stock at the option
of the holders thereof.
 
  Right to Call Series D Preferred Shares. Except as provided below, at any
time or from time to time prior to the Series D Mandatory Conversation Date,
the Company has the right to call the outstanding Series D Preferred Shares for
redemption, in whole or in part, and to deliver to the holders thereof in
exchange for each such Series D Preferred Share a number of shares of Common
Stock equal to the Series D Call Price (as described below) on the redemption
date divided by the current market price (as defined) of the Common Stock on
the second trading day preceding the earlier of the commencement of the mailing
of notice of such redemption to holders of the Series D Preferred Shares or the
date such notice is published in accordance with the terms of the Series D
Preferred Shares (the "Series D Notice Date") plus an amount in cash equal to
accrued and unpaid dividends to and including the date of redemption. The
Series D Call Price of each Series D Preferred Share declines by $.350150
(equivalent to $7.50 for each Series D Depositary Share) on each day following
the date of original issue of the Series D Preferred Shares (March 3, 1993)
from $2,872.50 (equivalent to $57.45 for each Series D Depositary Share) to
$2,518.50 (equivalent to $50.37 for each Series D Depositary Share) on January
1, 1996, and will be $2,497.50 (equivalent to $49.95 for each Series D
Depositary Share) thereafter.
 
  Liquidation Rights. Subject to the rights of holders of other classes of
stock ranking on a parity with or senior to the Series D Preferred Shares, in
the event of any Liquidation, the holders of Series D Preferred
 
                                       19

 
Shares, after payment or provision for payment of the debts and other
liabilities of the Company, will be entitled to receive, for each Series D
Preferred Share, an amount equal to the sum of (i) $1,850 (equivalent to $37.00
for each Series D Depositary Share) and (ii) all accrued and unpaid dividends
thereon, and no more. If, upon any such liquidation, there are insufficient
assets to permit full payment to holders of Series D Preferred Shares and
shares of any class of outstanding Preferred Stock, the holders of Series D
Preferred Shares and such other shares shall be paid ratably in proportion to
the full distributable amounts to which holders of Series D Preferred Shares
and such other shares are respectively entitled.
 
  The Series D Preferred Shares are not entitled to the benefits of any sinking
fund.
 
  Voting Rights. The Series D Preferred Shares do not entitle holders thereof
to voting rights, except (i) the Company may not alter any of the provisions of
the Articles of Incorporation or the Articles Supplementary relating to the
Series D Preferred Shares which would materially and adversely affect any
right, preference or privilege of the Series D Preferred Shares without the
affirmative vote of the holders of at least two-thirds of the shares of Series
D Preferred Shares outstanding at the time (voting separately as a class);
provided, however, that any such alteration that would authorize, create or
issue any additional shares of Preferred Stock or any other shares of stock
(whether or not already authorized) ranking senior to, on a parity with or
junior to the Series D Preferred Shares as to dividends or on the distribution
of assets upon Liquidation shall be deemed not to materially and adversely
affect such rights, preferences or privileges, (ii) in the event dividends
payable on the Series D Preferred Shares shall be in arrears in an aggregate
amount equivalent to six full quarterly dividends (a "Series D Preferred Share
Dividend Default") or (iii) as required by law. In the event of a Series D
Preferred Share Dividend Default, the holders of the outstanding Series D
Preferred Shares will be entitled to elect together with holders of all other
outstanding classes of Preferred Stock ranking on a parity with Series D
Preferred Shares and entitled to participate in such election, voting as a
single class, two directors at a special meeting called by the Board of
Directors for such purpose. Such two directors shall serve until the full
dividends accumulated on all outstanding Series D Preferred Shares and all
other outstanding classes of Preferred Stock ranking on a parity with the
Series D Preferred Shares are paid.
 
                        DESCRIPTION OF DEPOSITARY SHARES
 
  The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares and Depositary Receipts summarizes the material terms of the Deposit
Agreement and of the Depositary Shares and Depositary Receipts, and is
qualified in its entirety by reference to, the form of Deposit Agreement and
form of Depositary Receipts relating to each series of the Preferred Stock.
 
GENERAL
 
  The Company may, at its option, elect to have shares of Preferred Stock be
represented by Depositary Shares. The shares of any series of the Preferred
Stock underlying the Depositary Shares will be deposited under a separate
deposit agreement (the "Deposit Agreement") between the Company and a bank or
trust company selected by the Company (the "Preferred Stock Depositary"). The
Prospectus Supplement relating to a series of Depositary Shares will set forth
the name and address of the Preferred Stock Depositary. Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled,
proportionately, to all the rights, preferences and privileges of the Preferred
Stock represented thereby (including dividend, voting, redemption, conversion,
exchange and liquidation rights).
 
  The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement, each of which will represent the applicable
interest in a number of shares of a particular series of the Preferred Stock
described in the applicable Prospectus Supplement.
 
  A holder of Depositary Shares will be entitled to receive the shares of
Preferred Stock (but only in whole shares of Preferred Stock) underlying such
Depositary Shares. If the Depositary Receipts delivered by the
 
                                       20

 
holder evidence a number of Depositary Shares in excess of the whole number of
shares of Preferred Stock to be withdrawn, the Depositary will deliver to such
holder at the same time a new Depositary Receipt evidencing such excess number
of Depositary Shares.
 
DIVIDENDS AND OTHER DISTRIBUTIONS
 
  The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions in respect of the Preferred Stock to the record holders of
Depositary Receipts in proportion, insofar as possible, to the number of
Depositary Shares owned by such holders.
 
  In the event of a distribution other than in cash in respect to the Preferred
Stock, the Preferred Stock Depositary will distribute property received by it
to the record holders of Depositary Receipts in proportion, insofar as
possible, to the number of Depositary Shares owned by such holders, unless the
Preferred Stock Depositary determines that it is not feasible to make such
distribution, in which case the Preferred Stock Depositary may, with the
approval of the Company, adopt such method as it deems equitable and
practicable for the purpose of effecting such distribution, including sale (at
public or private sale) of such property and distribution of the net proceeds
from such sale to such holders.
 
  The amount so distributed in any of the foregoing cases will be reduced by
any amount required to be withheld by the Company or the Preferred Stock
Depositary on account of taxes.
 
CONVERSION AND EXCHANGE
 
  If any Preferred Stock underlying the Depositary Shares is subject to
provisions relating to its conversion or exchange as set forth in the
Prospectus Supplement relating thereto, each record holder of Depositary Shares
will have the right or obligation to convert or exchange such Depositary Shares
pursuant to the terms thereof.
 
REDEMPTION OF DEPOSITARY SHARES
 
  If Preferred Stock underlying the Depositary Shares is subject to redemption,
the Depositary Shares will be redeemed from the proceeds received by the
Preferred Stock Depositary resulting from the redemption, in whole or in part,
of the Preferred Stock held by the Preferred Stock Depositary. The redemption
price per Depositary Share will be equal to the aggregate redemption price
payable with respect to the number of shares of Preferred Stock underlying the
Depositary Shares. Whenever the Company redeems Preferred Stock from the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of
the same redemption date a proportionate number of Depositary Shares
representing the shares of Preferred Stock that were redeemed. If less than all
the Depositary Shares are to be redeemed, the Depositary Shares to be redeemed
will be selected by lot or pro rata as may be determined by the Company.
 
  After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
redemption price upon such redemption. Any funds deposited by the Company with
the Preferred Stock Depositary for any Depositary Shares which the holders
thereof fail to redeem shall be returned to the Company after a period of two
years from the date such funds are so deposited.
 
VOTING
 
  Upon receipt of notice of any meeting at which the holders of any shares of
Preferred Stock underlying the Depositary Shares are entitled to vote, the
Preferred Stock Depositary will mail the information contained in such notice
to the record holders of the Depositary Receipts. Each record holder of such
Depositary Receipts on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Preferred
Stock Depositary as to the exercise of the voting rights pertaining to the
 
                                       21

 
number of shares of Preferred Stock underlying such holder's Depositary Shares.
The Preferred Stock Depositary will endeavor, insofar as practicable, to vote
the number of shares of Preferred Stock underlying such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting the Preferred Stock to the
extent it does not receive specific written instructions from holders of
Depositary Receipts representing such Preferred Stock.
 
RECORD DATE
 
  Whenever (i) any cash dividend or other cash distribution shall become
payable, any distribution other than cash shall be made, or any rights,
preferences or privileges shall be offered with respect to the Preferred Stock,
or (ii) the Preferred Stock Depositary shall receive notice of any meeting at
which holders of Preferred Stock are entitled to vote or of which holders of
Preferred Stock are entitled to notice, or of the mandatory conversion of or
any election on the part of the Company to call for the redemption of any
Preferred Stock, the Preferred Stock Depositary shall in each such instance fix
a record date (which shall be the same as the record date for the Preferred
Stock) for the determination of the holders of Depositary Receipts (x) who
shall be entitled to receive such dividend, distribution, rights, preferences
or privileges or the net proceeds of the sale thereof or (y) who shall be
entitled to give instructions for the exercise of voting rights at any such
meeting or to receive notice of such meeting or of such redemption or
conversion, subject to the provisions of the Deposit Agreement.
 
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
 
  The form of Depositary Receipt and any provision of the Deposit Agreement may
at any time be amended by agreement between the Company and the Preferred Stock
Depositary. However, any amendment which imposes or increases any fees, taxes
or other charges payable by the holders of Depositary Receipts (other than
taxes and other governmental charges, fees and other expenses payable by such
holders as stated under "Charges of Preferred Stock Depositary"), or which
otherwise prejudices any substantial existing right of holders of Depositary
Receipts, will not take effect as to outstanding Depositary Receipts until the
expiration of 90 days after notice of such amendment has been mailed to the
record holders of outstanding Depositary Receipts.
 
  Whenever so directed by the Company, the Preferred Stock Depositary will
terminate the Deposit Agreement by mailing notice of such termination to the
record holders of all Depositary Receipts then outstanding at least 30 days
prior to the date fixed in such notice for such termination. The Preferred
Stock Depositary may likewise terminate the Deposit Agreement if at any time 45
days shall have expired after the Preferred Stock Depositary shall have
delivered to the Company a written notice of its election to resign and a
successor depositary shall not have been appointed and accepted its
appointment. If any Depositary Receipts remain outstanding after the date of
termination, the Preferred Stock Depositary thereafter will discontinue the
transfer of Depositary Receipts, will suspend the distribution of dividends to
the holders thereof, and will not give any further notices (other than notice
of such termination) or perform any further acts under the Deposit Agreement
except as provided below and except that the Preferred Stock Depositary will
continue (i) to collect dividends on the Preferred Stock and any other
distributions with respect thereto and (ii) to deliver the Preferred Stock
together with such dividends and distributions and the net proceeds of any
sales of rights, preferences, privileges or other property, without liability
for interest thereon, in exchange for Depositary Receipts surrendered. At any
time after the expiration of two years from the date of termination, the
Preferred Stock Depositary may sell the Preferred Stock then held by it at
public or private sales, at such place or places and upon such terms as it
deems proper and may thereafter hold the net proceeds of any such sale,
together with any money and other property then held by it, without liability
for interest thereon, for the pro rata benefit of the holders of Depositary
Receipts which have not been surrendered.
 
                                       22

 
CHARGES OF PREFERRED STOCK DEPOSITARY
 
  The Company will pay all charges of the Preferred Stock Depositary including
charges in connection with the initial deposit of the Preferred Stock, the
initial issuance of the Depositary Receipts, the distribution of information to
the holders of Depositary Receipts with respect to matters on which Preferred
Stock is entitled to vote, withdrawals of the Preferred Stock by the holders of
Depositary Receipts or redemption or conversion of the Preferred Stock, except
for taxes (including transfer taxes, if any) and other governmental charges and
such other charges as are expressly provided in the Deposit Agreement to be at
the expense of holders of Depositary Receipts or persons depositing Preferred
Stock.
 
MISCELLANEOUS
 
  The Preferred Stock Depositary will make available for inspection by holders
of Depositary Receipts at its Corporate Office and its New York Office, all
reports and communications from the Company which are delivered to the
Preferred Stock Depositary as the holder of Preferred Stock.
 
  Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The obligations of the
Preferred Stock Depositary under the Deposit Agreement are limited to
performing its duties thereunder without negligence or bad faith. The
obligations of the Company under the Deposit Agreement are limited to
performing its duties thereunder in good faith. Neither the Company nor the
Preferred Stock Depositary is obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. The Company and the Preferred Stock
Depositary are entitled to rely upon advice of or information from counsel,
accountants or other persons believed to be competent and on documents believed
to be genuine.
 
  The Preferred Stock Depositary may resign at any time or be removed by the
Company, effective upon the acceptance by its successor of its appointment;
provided, that if a successor Preferred Stock Depositary has not been appointed
or accepted such appointment within 45 days after the Preferred Stock
Depositary has delivered a notice of election to resign to the Company, the
Preferred Stock Depositary may terminate the Deposit Agreement. See "Amendment
and Termination of Deposit Agreement" above.
 
                            DESCRIPTION OF WARRANTS
 
GENERAL
 
  The Company may issue Warrants to purchase Securities, and such Warrants may
be issued independently or together with any Securities and may be attached to
or separate from such Securities. Each series of Warrants will be issued under
a separate warrant agreement (each a "Warrant Agreement") to be entered into
between the Company and a warrant agent ("Warrant Agent"). The Warrant Agent
will act solely as an agent of the Company in connection with the Warrants of
such series and will not assume any obligation or relationship of agency for or
with holders or beneficial owners of Warrants. The following sets forth certain
general terms and provisions of the Warrants offered hereby. Further terms of
the Warrants and the applicable Warrant Agreement are set forth in the
applicable Prospectus Supplement.
 
  The applicable Prospectus Supplement will describe the terms of any Warrants
in respect of which this Prospectus is being delivered, including the
following: (i) the title of such Warrants; (ii) the aggregate number of such
Warrants; (iii) the price or prices at which such Warrants will be issued; (iv)
the currency or currencies, including composite currencies, in which the price
of such Warrants may be payable; (v) the designation and terms of the
Securities purchasable upon exercise of such Warrants; (vi) the price at which
and the currency or currencies, including composite currencies, in which the
Securities purchasable upon exercise of such Warrants may be purchased; (vii)
the date on which the right to exercise such Warrants shall commence and the
date on which such right shall expire; (viii) whether such Warrants will be
issued in
 
                                       23

 
registered form or bearer form; (ix) if applicable, the minimum or maximum
amount of such Warrants which may be exercised at any one time; (x) if
applicable, the designation and terms of the Securities with which such
Warrants are issued and the number of such Warrants issued with each such
Security; (xi) if applicable, the date on and after which such Warrants and the
related Securities will be separately transferable; (xii) information with
respect to book-entry procedures, if any; (xiii) if applicable, a discussion of
certain United States federal income tax considerations; and (xiv) any other
terms of such Warrants, including terms, procedures and limitations relating to
the exchange and exercise of such Warrants.
 
                              PLAN OF DISTRIBUTION
 
  The Company may sell the Securities being offered hereby directly or through
agents, underwriters or dealers.
 
  Offers to purchase Securities may be solicited by agents designated by the
Company from time to time. Any such agent, who may be deemed to be an
underwriter as that term is defined in the Securities Act, involved in the
offer or sale of the Securities in respect of which this Prospectus is
delivered will be named, and any commissions payable by the Company to such
agent set forth, in the Prospectus Supplement. Unless otherwise indicated in
the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment. The Company may also sell Securities
to an agent as principal. Agents may be entitled to, under agreements which may
be entered into with the Company, indemnification by the Company against
certain liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for the Company
in the ordinary course of business.
 
  If any underwriters are utilized in the sale of Securities in respect of
which this Prospectus is delivered, the Company will enter into an underwriting
agreement with such underwriters and the names of the underwriters and the
terms of the transaction will be set forth in the Prospectus Supplement, which
will be used by the underwriters to make resales of the Securities in respect
of which this Prospectus is delivered to the public. Underwriters may offer and
sell the Securities at a fixed price or prices, which may be changed, or from
time to time at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. The underwriters may
be entitled, under the relevant underwriting agreement, to indemnification by
the Company against certain liabilities, including liabilities under the
Securities Act, and may be customers of, engage in transactions with or perform
services for the Company in the ordinary course of business.
 
  If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to the
dealer, as principal. The dealer may then resell such Securities to the public
at varying prices to be determined by such dealer at the time of resale.
Dealers may be entitled to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for the Company
in the ordinary course of business.
 
  Securities may also be offered and sold, if so indicated in the Prospectus
Supplement, in connection with a remarketing upon their purchase, in accordance
with a redemption or repayment pursuant to their terms, or otherwise, by one or
more firms ("remarketing firms"), acting as principals for their own accounts
or as agents for the Company. Any remarketing firm will be identified and the
terms of its agreement, if any, with the Company and its compensation will be
described in the Prospectus Supplement. Remarketing firms may be deemed to be
underwriters in connection with the Securities remarketing thereby. Remarketing
firms may be entitled under agreements which may be entered into with the
Company to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, and may be customers of, engage
in transactions with or perform services for the Company in the ordinary course
of business.
 
  If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters or dealers to solicit offers by certain purchasers to
purchase Securities from the Company at the public offering
 
                                       24

 
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
Such contracts will be subject to only those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such offers.
 
                                 LEGAL MATTERS
 
  Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Securities will be passed upon for the Company by Susan L.
Harris, Vice President and General Counsel--Corporate Affairs of the Company,
and by Davis Polk & Wardwell, New York, New York. Ms. Harris and Davis Polk &
Wardwell will rely as to matters of Maryland law on Piper & Marbury L.L.P.,
Baltimore, Maryland. Ms. Harris holds stock, restricted stock and options to
purchase stock granted under the Company's employee stock plans, which in the
aggregate represent less than 1% of the Company's Common Stock. David W.
Ferguson, a partner of Davis Polk & Wardwell, is a director of First SunAmerica
Life Insurance Company, a subsidiary of the Company.
 
                                    EXPERTS
 
  The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended September 30,
1994, have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
 
                                 ERISA MATTERS
 
  The Company and certain affiliates of the Company, including Anchor and
SunAmerica Life, may each be considered a "party in interest" within the
meaning of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or a "disqualified person" within the meaning of the Internal
Revenue Code of 1986, as amended (the "Code") with respect to many employee
benefit plans. Prohibited transactions within the meaning of ERISA or the Code
may arise, for example, if the Securities are acquired by a pension or other
employee benefit plan with respect to which the Company or any of its
affiliates is a service provider, unless such Securities are acquired pursuant
to an exemption for transactions effected on behalf of such plan by a
"qualified professional asset manager" or pursuant to any other available
exemption. Any such pension or employee benefit plan proposing to invest in the
Securities should consult with its legal counsel.
 
                                       25

 
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 NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS SUP-
PLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PRO-
SPECTUS SUPPLEMENT AND THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COM-
PANY OR THE AGENTS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CON-
STITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH THEY RELATE IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITA-
TION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
 
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                               TABLE OF CONTENTS
 
                             PROSPECTUS SUPPLEMENT


                                                                           PAGE
                                                                           ----
                                                                        
Description of Notes......................................................  S-2
United States Taxation.................................................... S-16
Plan of Distribution...................................................... S-22
Legal Matters............................................................. S-23
 
                                   PROSPECTUS
 
Available Information.....................................................    2
Incorporation of Certain Documents by Reference...........................    2
The Company...............................................................    4
Recent Developments.......................................................    4
Use of Proceeds...........................................................    4
Consolidated Ratio of Earnings to Fixed Charges and Earnings to Combined
 Fixed Charges and Preferred Stock Dividends..............................    5
Description of Debt Securities............................................    6
Description of Capital Stock..............................................   14
Description of Depositary Shares..........................................   20
Description of Warrants...................................................   23
Plan of Distribution......................................................   24
Legal Matters.............................................................   25
Experts...................................................................   25
Erisa Matters.............................................................   25

 
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                                 $300,000,000
 
                                    [LOGO]

                          MEDIUM-TERM NOTES, SERIES 2
 
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                             PROSPECTUS SUPPLEMENT
 
                              -------------------
 
                              MERRILL LYNCH & CO.
                             CHASE SECURITIES, INC.
                              GOLDMAN, SACHS & CO.
                          J.P. MORGAN SECURITIES INC.
                            PAINEWEBBER INCORPORATED
 
                                OCTOBER 19, 1995
 
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