<PAGE>
PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(1)
(TO PROSPECTUS DATED JUNE 6, 1996) Registration No. 33-65135
3,000,000 STRYPES/SM/
MERRILL LYNCH & CO., INC.
LOGO 7 1/4% STRYPES/SM/ DUE JUNE 15, 1999 LOGO
PAYABLE WITH SHARES OF COMMON STOCK OF
SUNAMERICA INC.
(OR IN CASH)
--------------
The issue price of each Structured Yield Product Exchangeable for Stock/SM/, 7
1/4% STRYPES/SM/ Due June 15, 1999 (each, a "STRYPES") of Merrill Lynch & Co.,
Inc. (the "Company") being offered hereby is $56.375 (the "Issue Price"),
which amount is equal to the last sale price of the Common Stock, par value
$1.00 per share (the "SunAmerica Common Stock"), of SunAmerica Inc., a
Maryland corporation ("SunAmerica"), on June 6, 1996, as reported on the New
York Stock Exchange (the "NYSE"). The STRYPES will mature on June 15, 1999
(the "Maturity Date"). Interest on the STRYPES, at the rate of 7 1/4% of the
Issue Price per annum, is payable in cash quarterly in arrears on March 15,
June 15, September 15 and December 15, beginning September 15, 1996. The
STRYPES will be unsecured obligations of the Company ranking pari passu with
all of its other unsecured and unsubordinated indebtedness. In addition, the
STRYPES will not restrict the Company's ability to incur additional
indebtedness ranking senior to, or pari passu with, the STRYPES. See
"Supplemental Description of the STRYPES--Ranking."
On the Maturity Date, unless redeemed on or prior to such date, the Company
will pay and discharge each STRYPES by delivering to the holder thereof one
share of SunAmerica Common Stock, subject to adjustment in certain events
(subject to the Company's right to deliver, with respect to all, but not less
than all, of the STRYPES then outstanding, cash in an amount equal to the
Current Market Price (as defined herein), determined as of the second Trading
Day (as defined herein) prior to the applicable Notice Date (as defined
herein), of the SunAmerica Common Stock which otherwise would have been
delivered). BECAUSE THE PRICE OF THE SUNAMERICA COMMON STOCK IS SUBJECT TO
MARKET FLUCTUATIONS, THE VALUE OF THE SUNAMERICA COMMON STOCK (OR, AT THE
OPTION OF THE COMPANY, THE AMOUNT OF CASH) RECEIVED BY A HOLDER OF STRYPES AT
MATURITY MAY BE LESS THAN THE AMOUNT PAID FOR THE STRYPES UPON ISSUANCE, IN
WHICH CASE AN INVESTMENT IN THE STRYPES WILL RESULT IN A LOSS.
At any time or from time to time on or prior to the Maturity Date, the
Company may, at its option, redeem the outstanding STRYPES, in whole or in
part, at a redemption price per STRYPES initially equal to $86.568, declining
by $.00966 on each day following the Issue Date to $76.686 on April 15, 1999,
and equal to $76.106 thereafter, payable in either (i) shares of SunAmerica
Common Stock having an aggregate Current Market Price, determined as of the
second Trading Day prior to the applicable Notice Date, equal to the
applicable redemption price or (ii) at the Company's option (which may be
exercised with respect to all, but not less than all, of the STRYPES to be
redeemed on any redemption date) cash, plus in either case an amount in cash
equal to accrued and unpaid interest on the STRYPES to but excluding the
redemption date. The STRYPES are not subject to any sinking fund.
The opportunity for capital appreciation afforded by an investment in the
STRYPES is limited because the Company may, at its option, redeem the STRYPES
at any time on or prior to the Maturity Date at the redemption prices
described above. Although not obligated to do so, the Company may be expected
to redeem the STRYPES on or prior to the Maturity Date if the market price of
the SunAmerica Common Stock exceeds the applicable redemption price, in which
event holders of STRYPES will receive less than one share of SunAmerica Common
Stock for each STRYPES (or, at the option of the Company, cash in an amount
equal to the Current Market Price of less than one share of such SunAmerica
Common Stock).
The Notice Date applicable to the Maturity Date or a redemption date will be
at least 30 days and could be up to 60 days prior to such Maturity Date or
redemption date, as the case may be. If, as described above, the Company (i)
elects to pay the STRYPES in cash at maturity or (ii) elects to redeem the
STRYPES, in whole or in part, and to pay the redemption price by delivering
shares of SunAmerica Common Stock, the amount of cash payable on the Maturity
Date or the number of shares to be delivered on the redemption date, as the
case may be, will be determined on the basis of the Current Market Price as of
the second Trading Day prior to the applicable Notice Date. The price of the
SunAmerica Common Stock is subject to market fluctuations and, as a result,
(a) the amount of cash delivered on the Maturity Date in respect of each
STRYPES may be more or less than the market value on the Maturity Date of the
SunAmerica Common Stock which a holder would otherwise have been entitled to
receive and (b) the market value on a redemption date of shares of SunAmerica
Common Stock delivered in respect of each STRYPES may be more or less than the
applicable redemption price.
Reference is made to the accompanying prospectus of SunAmerica covering the
shares of SunAmerica Common Stock which may be received by a holder of the
STRYPES on the Maturity Date or upon redemption.
SunAmerica is not affiliated with the Company, will not receive any of the
proceeds from the sale of the STRYPES and will have no obligations with
respect to the STRYPES.
SEE "RISK FACTORS" BEGINNING ON PAGE S-9 OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE STRYPES.
For a discussion of certain United States Federal income tax consequences to
holders of the STRYPES, see "Certain United States Federal Income Tax
Considerations."
The SunAmerica Common Stock is listed on the NYSE under the trading symbol
"SAI." The last sale price of the SunAmerica Common Stock on June 6, 1996, as
reported on the NYSE, was $56.375 per share. The STRYPES have been approved
for listing on the NYSE, subject to official notice of issuance.
--------------
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 SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per STRYPES.............................. $56.375 $1.69 $54.685
- --------------------------------------------------------------------------------
Total(4)................................. $169,125,000 $5,070,000 $164,055,000
- --------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from June 12, 1996 to the date of delivery.
(2) The Company, SunAmerica and the Selling Stockholder (as defined herein)
have agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses payable by the Company.
(4) The Company has granted the Underwriter an option for 30 days to purchase
up to an additional 450,000 STRYPES at the initial public offering price
per STRYPES, less the underwriting discount, solely to cover over-
allotments. If such over-allotment option is exercised in full, the total
Price to Public, Underwriting Discount and Proceeds to Company will be
$194,493,750, $5,830,500 and $188,663,250, respectively. See
"Underwriting."
--------------
The STRYPES are offered by the Underwriter, subject to prior sale, when, as
and if issued to and accepted by the Underwriter, and subject to certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the STRYPES will be made in New York, New York, on or about June
12, 1996.
This Prospectus Supplement may be used by the Underwriter in connection with
offers and sales related to market-making transactions in the STRYPES. The
Underwriter may act as principal or agent in such transactions. Such sales
will be made at prices related to prevailing market prices at the time of
sale.
- -------
/SM/ Service mark of Merrill Lynch & Co., Inc.
--------------
MERRILL LYNCH & CO.
--------------
The date of this Prospectus Supplement is June 6, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE STRYPES AND
THE SUNAMERICA COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF
INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSION OF INSURANCE
RULED UPON THE ACCURACY OR THE ADEQUACY OF THIS DOCUMENT.
S-2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the information
included and incorporated by reference in the accompanying Prospectus (the
"ML&Co. Prospectus") and by the more detailed information included elsewhere in
this Prospectus Supplement. Unless otherwise indicated, the information
contained in this Prospectus Supplement assumes that the Underwriter's over-
allotment option is not exercised.
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its subsidiaries
and affiliates, provides investment, financing, insurance, and related services
on a global basis. Its principal subsidiary, Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S"), is one of the largest securities firms in the
world.
SUNAMERICA INC.
SunAmerica Inc. is a diversified financial services company specializing in
retirement savings products and services.
Reference is made to the accompanying prospectus of SunAmerica (the
"SunAmerica Prospectus") covering the shares of SunAmerica Common Stock which
may be received by a holder of STRYPES on the Maturity Date or upon redemption.
SunAmerica is not affiliated with the Company, will not receive any of the
proceeds from the sale of the STRYPES and will have no obligations with respect
to the STRYPES. THE SUNAMERICA PROSPECTUS IS BEING DELIVERED TO PROSPECTIVE
PURCHASERS OF STRYPES TOGETHER WITH THIS PROSPECTUS SUPPLEMENT AND THE ML&CO.
PROSPECTUS FOR CONVENIENCE OF REFERENCE ONLY. THE SUNAMERICA PROSPECTUS DOES
NOT CONSTITUTE A PART OF THIS PROSPECTUS SUPPLEMENT OR THE ML&CO. PROSPECTUS,
NOR IS IT INCORPORATED BY REFERENCE HEREIN OR THEREIN.
THE STRYPES
OFFERING................... 3,000,000 STRYPES
ISSUE PRICE................ $56.375 per STRYPES
MATURITY DATE.............. June 15, 1999
INTEREST RATE.............. 7 1/4% of the Issue Price per annum, or $1.0218 per
STRYPES per quarter, payable in cash quarterly in
arrears
INTEREST PAYMENT DATES..... March 15, June 15, September 15 and December 15,
beginning September 15, 1996
PAYMENT AT MATURITY........ On the Maturity Date, unless redeemed on or prior
to such date, the Company will pay and discharge
each STRYPES by delivering to the holder thereof
one share of SunAmerica Common Stock, subject to
adjustment in certain events (subject to the
Company's right to deliver, with respect to all,
but not less than all, of the STRYPES then
outstanding, cash in an amount equal to the Current
Market Price, determined as of the second Trading
Day prior to the applicable Notice Date, of the
SunAmerica Common Stock which otherwise would have
S-3
<PAGE>
been delivered). BECAUSE THE PRICE OF THE
SUNAMERICA COMMON STOCK IS SUBJECT TO MARKET
FLUCTUATIONS, THE VALUE OF THE SUNAMERICA COMMON
STOCK (OR, AT THE OPTION OF THE COMPANY, THE AMOUNT
OF CASH) RECEIVED BY A HOLDER OF STRYPES AT
MATURITY MAY BE LESS THAN THE AMOUNT PAID FOR THE
STRYPES UPON ISSUANCE, IN WHICH CASE AN INVESTMENT
IN THE STRYPES WILL RESULT IN A LOSS. In addition,
because of such market fluctuations and because the
Current Market Price of the SunAmerica Common Stock
will be determined as of the second Trading Day
prior to the applicable Notice Date (which will be
at least 30 and could be up to 60 days prior to the
Maturity Date), it is likely that, if the Company
elects to pay the STRYPES in cash on the Maturity
Date, the amount of cash payable per STRYPES will
differ from the market value on the Maturity Date
of the shares of SunAmerica Common Stock which a
holder would otherwise have received. See "Risk
Factors--Risk of Fluctuations in Price of
SunAmerica Common Stock; Calculation of Current
Market Price."
OPTIONAL REDEMPTION........ At any time or from time to time on or prior to the
Maturity Date, the Company may, at its option,
redeem the outstanding STRYPES, in whole or in
part, at a redemption price per STRYPES initially
equal to $86.568, declining by $.00966 on each day
following the Issue Date (computed on the basis of
a 360-day year of twelve 30-day months) to $76.686
on April 15, 1999, and equal to $76.106 thereafter,
payable in either (i) shares of SunAmerica Common
Stock having an aggregate Current Market Price,
determined as of the second Trading Day prior to
the applicable Notice Date, equal to the applicable
redemption price or (ii) at the Company's option
(which may be exercised with respect to all, but
not less than all, of the STRYPES to be redeemed on
any redemption date) cash, plus in either case an
amount in cash equal to accrued and unpaid interest
on the STRYPES to but excluding the redemption
date.
The opportunity for capital appreciation afforded
by an investment in the STRYPES is limited because
the Company may, at its option, redeem the STRYPES
at any time on or prior to the Maturity Date at the
redemption prices described above. Although not
obligated to do so, the Company may be expected to
redeem the STRYPES on or prior to the Maturity Date
if the market price of the SunAmerica Common Stock
exceeds the applicable redemption price, in which
event holders of STRYPES will receive less than one
share of SunAmerica Common Stock for each STRYPES
(or, at the option of the Company, cash in an
amount equal to the Current Market Price of less
than one share of such SunAmerica Common Stock).
See "Risk Factors--Limitation on Opportunity for
Capital Appreciation."
If the Company exercises its option to redeem the
STRYPES, in whole or in part, the Notice Date for
such redemption will be at least 30 days and could
be up to 60 days prior to the redemption date. If,
as described above, the Company elects to pay the
redemption price by delivering shares of SunAmerica
Common Stock, the number of shares to be so
S-4
<PAGE>
delivered will be determined on the basis of the
Current Market Price as of the second Trading Day
prior to the Notice Date. The price of the
SunAmerica Common Stock is subject to market
fluctuations and, as a result, the market value on
such redemption date of the shares of SunAmerica
Common Stock delivered in respect of each STRYPES
may be more or less than the applicable redemption
price. See "Risk Factors--Risk of Fluctuations in
Price of SunAmerica Common Stock; Calculation of
Current Market Price."
NO SINKING FUND............ The STRYPES do not contain any sinking fund or
other mandatory redemption provisions. The STRYPES
are not subject to payment prior to the Maturity
Date at the option of the holder.
RANKING.................... The STRYPES will be unsecured obligations of the
Company ranking pari passu with all of its other
unsecured and unsubordinated indebtedness. See
"Supplemental Description of the STRYPES--Ranking"
herein and "Description of the STRYPES--Ranking" in
the ML&Co. Prospectus.
RELATIONSHIP TO SUNAMERICA
COMMON STOCK.............. The interest rate on the STRYPES exceeds the
current dividend yield on the SunAmerica Common
Stock which, on the date of this Prospectus
Supplement, was approximately 1.06% per annum
(based on the current quarterly dividend rate of
$.15 per share of SunAmerica Common Stock and the
last reported sale price on the NYSE set forth on
the cover page hereof). The dividends payable per
share of SunAmerica Common Stock may be increased
or decreased at the discretion of its board of
directors. The payment of future dividends on the
SunAmerica Common Stock and the amount thereof will
depend on business conditions, earnings and
financial requirements of SunAmerica and other
relevant factors.
Holders of the STRYPES will not be entitled to any
rights with respect to the SunAmerica Common Stock
(including, without limitation, voting rights and
rights to receive any dividends or other
distributions in respect thereof) unless and until
such time, if any, as the Company shall have
delivered shares of SunAmerica Common Stock for
STRYPES on the Maturity Date or upon redemption,
and unless the applicable record date, if any, for
the exercise of such rights occurs after such
delivery. See "Risk Factors--No Stockholder
Rights."
TRADING PRICES............. The trading prices of the STRYPES in the secondary
market will be directly affected by the trading
prices of the SunAmerica Common Stock in the
secondary market. It is impossible to predict
whether the price of SunAmerica Common Stock will
rise or fall. In addition, any market that develops
for the STRYPES is likely to influence the market
for SunAmerica Common Stock. For example, the price
of SunAmerica Common Stock could be depressed by
investors' anticipation of the
S-5
<PAGE>
potential distribution into the market of
substantial amounts of SunAmerica Common Stock on
the Maturity Date or upon redemption of the
STRYPES, by possible sales of SunAmerica Common
Stock by investors who view the STRYPES as a more
attractive means of equity participation in
SunAmerica and by hedging or arbitrage trading
activity that may develop involving the STRYPES and
the SunAmerica Common Stock. See "Risk Factors--
Factors Affecting Trading Prices" and "--Impact of
STRYPES on the Market for SunAmerica Common Stock."
DILUTION................... The number of shares (or the amount of cash) that
holders of the STRYPES are entitled to receive upon
payment and discharge on the Maturity Date or upon
redemption will not be adjusted for certain events,
such as offerings of SunAmerica Common Stock for
cash or in connection with acquisitions. SunAmerica
is not restricted from issuing additional
SunAmerica Common Stock during the term of the
STRYPES and has no obligation to consider the
interests of holders of STRYPES for any reason.
Additional issuances may materially and adversely
affect the market price of the SunAmerica Common
Stock and of the STRYPES. See "Risk Factors--
Dilution of SunAmerica Common Stock."
STOCK AGREEMENT WITH THE
SELLING STOCKHOLDER....... Pursuant to an agreement (the "Stock Agreement")
among the Company, Merrill Lynch Capital Services,
Inc., a wholly owned subsidiary of the Company (the
"ML&Co. Subsidiary"), and Mr. Eli Broad (the
"Selling Stockholder"), the Selling Stockholder is
obligated to deliver to the ML&Co. Subsidiary, on
June 14, 1999, a specified number of shares of
SunAmerica Class B Stock (subject to the Selling
Stockholder's right to deliver cash in an amount
equal to the Current Market Price, determined as of
the second Trading Day prior to the applicable
Notice Date, of the SunAmerica Common Stock
underlying the SunAmerica Class B Stock that
otherwise would have been delivered). At any time
and from time to time through June 15, 1999, the
Selling Stockholder may, at his option, redeem his
obligations under the Stock Agreement in whole or
in part, at declining redemption prices, payable in
either (i) shares of SunAmerica Class B Stock
representing SunAmerica Common Stock having an
aggregate Current Market Price, determined as of
the second Trading Day prior to the date of the
applicable notice of redemption, equal to the
applicable redemption price or (ii) at the Selling
Stockholder's option (which may be exercised with
respect to all, but not less than all, of the
obligations to be redeemed), cash, plus in either
case an amount in cash equal to accrued and unpaid
interest on the Stock Agreement to but excluding
the redemption date. The consideration to be paid
by the ML&Co. Subsidiary to the Selling Stockholder
under the Stock Agreement is approximately $131
million, and is payable on or about June 12, 1996.
Shares of SunAmerica Class B Stock delivered by the
Selling Stockholder will convert automatically into
shares of SunAmerica Common Stock upon transfer to
the ML&Co. Subsidiary.
S-6
<PAGE>
The Selling Stockholder has the right at any time
to modify the Stock Agreement so that he may
deliver shares of SunAmerica Common Stock (or cash)
instead of shares of SunAmerica Class B Stock (or
cash). Until any such shares are delivered, the
Selling Stockholder will retain the right to vote
such shares and receive dividends thereon.
The Selling Stockholder has no obligations with
respect to the STRYPES or amounts to be paid to
holders thereof, including any obligation to take
the needs of the Company or of holders of the
STRYPES into consideration in determining whether
or when to cause redemption of the STRYPES or
whether to deliver shares or cash at maturity or
upon redemption, or for any other reason. The Stock
Agreement is a commercial transaction among the
parties thereto and does not create any rights in,
or for the benefit of, any third party, including
any holder of STRYPES. See "Certain Arrangements
with the Selling Stockholder."
In the Indenture (as defined herein), the Company
will agree to pay and discharge the STRYPES by
delivering to the holders thereof on the Maturity
Date or any redemption date the form of
consideration that the ML&Co. Subsidiary receives
from the Selling Stockholder and to redeem the
STRYPES if and when the Selling Stockholder redeems
his obligations under the Stock Agreement.
See "Stock Ownership by Mr. Broad" in the
SunAmerica Prospectus for information regarding the
relationship between the Selling Stockholder and
SunAmerica.
CERTAIN UNITED STATES
FEDERAL INCOME TAX
CONSIDERATIONS............. Prospective investors in the STRYPES should be
aware that there exists uncertainty concerning the
proper United States Federal income tax
characterization and treatment of the STRYPES.
Accordingly, prospective investors should consider
the tax consequences of investing in the STRYPES.
See "Risk Factors--Tax Matters" and "Certain United
States Federal Income Tax Considerations."
GLOBAL CERTIFICATES........ Upon issuance, all STRYPES will be represented by
one or more global certificates deposited with, and
registered in the name of, The Depository Trust
Company, as Securities Depository (the "Securities
Depository"), or a nominee thereof. As a result,
the Securities Depository, or its nominee, will be
considered the sole owner of the STRYPES under the
Indenture. Ownership interests of actual purchasers
of STRYPES will be recorded on the records of
participants in the Securities Depository. See
"Description of the STRYPES--Securities Depository"
in the ML&Co. Prospectus.
S-7
<PAGE>
USE OF PROCEEDS............ The net proceeds to the Company from the sale of
the STRYPES are expected to be approximately $164
million, approximately $131 million of which will
be used to pay to the Selling Stockholder the
consideration due under the Stock Agreement and the
remainder will be used for general corporate
purposes. See "Certain Arrangements with the
Selling Stockholder."
S-8
<PAGE>
RISK FACTORS
Prospective purchasers should read carefully this entire Prospectus
Supplement, the ML&Co. Prospectus and the SunAmerica Prospectus and should
consider, among other things, the factors set forth below.
RISK OF FLUCTUATIONS IN PRICE OF SUNAMERICA COMMON STOCK; CALCULATION OF
CURRENT MARKET PRICE
Because the price of the SunAmerica Common Stock is subject to market
fluctuations, the value of the SunAmerica Common Stock (or, pursuant to the
option of the Company exercisable at maturity, the amount of cash) received by
a holder of STRYPES upon maturity may be less than the amount paid for the
STRYPES upon issuance, in which case an investment in the STRYPES will result
in a loss. ACCORDINGLY, A HOLDER OF STRYPES ASSUMES THE RISK THAT THE MARKET
VALUE OF THE SUNAMERICA COMMON STOCK MAY DECLINE, AND THAT SUCH DECLINE COULD
BE SUBSTANTIAL. THE SUNAMERICA PROSPECTUS COVERS THE SHARES OF SUNAMERICA
COMMON STOCK WHICH MAY BE RECEIVED BY A HOLDER OF THE STRYPES ON THE MATURITY
DATE OR UPON REDEMPTION.
The Notice Date applicable to the Maturity Date or a redemption date will be
at least 30 days and could be up to 60 days prior to such Maturity Date or
redemption date, as the case may be. If the Company (i) elects to pay the
STRYPES in cash at maturity or (ii) elects to redeem the STRYPES, in whole or
in part, and to pay the redemption price by delivering shares of SunAmerica
Common Stock, the amount of cash payable on the Maturity Date or the number of
shares to be delivered on the redemption date, as the case may be, will be
determined on the basis of the Current Market Price as of the second Trading
Day prior to the applicable Notice Date. The price of the SunAmerica Common
Stock is subject to market fluctuations and, as a result, (a) the amount of
cash delivered on the Maturity Date in respect of each STRYPES may be more or
less than the market value on the Maturity Date of the SunAmerica Common Stock
which a holder would otherwise have been entitled to receive and (b) the
market value on a redemption date of shares of SunAmerica Common Stock
delivered in respect of each STRYPES may be more or less than the applicable
redemption price.
As described under "Supplemental Description of the STRYPES--Certain
Definitions," the Current Market Price used to determine the amount of cash
which may, at the option of the Company, be paid at maturity or the number of
shares of SunAmerica Common Stock which may, at the option of the Company, be
delivered upon any redemption of the STRYPES will generally be equal to the
average of the daily Closing Prices (as defined) of the SunAmerica Common
Stock for the five consecutive Trading Days ending on and including the date
of determination. However, if the Closing Price on the Trading Day next
following such five-day period (the "Next-Day Closing Price") is less than 95%
of such five-day average Closing Price, then the Current Market Price on such
date of determination will be the Next-Day Closing Price. Because the price of
the SunAmerica Common Stock is subject to market fluctuations, it is possible
that the Next-Day Closing Price could be significantly less than such five-day
average.
LIMITATION ON OPPORTUNITY FOR CAPITAL APPRECIATION
The opportunity for capital appreciation afforded by an investment in the
STRYPES is less than the opportunity for capital appreciation afforded by a
direct investment in the SunAmerica Common Stock. The opportunity for capital
appreciation afforded by an investment in the STRYPES is limited because the
Company may, at its option, redeem the STRYPES at any time on or prior to the
Maturity Date at the redemption prices described herein. Although not
obligated to do so, the Company may be expected to redeem the STRYPES on or
prior to the Maturity Date if the market price of the SunAmerica Common Stock
exceeds the applicable redemption price, in which event holders of STRYPES
will receive less than one share of SunAmerica Common Stock for each STRYPES
(or, at the option of the Company, cash in an amount equal to the Current
Market Price of less than one share of such SunAmerica Common Stock). See
"Supplemental Description of the STRYPES--Optional Redemption." If the Company
elects to redeem the STRYPES, in whole or in part, the capital appreciation,
exclusive of accrued interest, realized on an investment in the STRYPES will,
for any owner of STRYPES called for redemption, be limited to the excess, if
any, of (i) the value of the SunAmerica Common
S-9
<PAGE>
Stock or the amount of cash, as the case may be, received in payment of such
redemption price (such redemption price being initially $86.568 and declining
thereafter to $76.106), over (ii) the price paid by such owner for such
STRYPES (the initial price being the price to public for each STRYPES shown on
the cover page of this Prospectus Supplement and the price thereafter being
subject to market fluctuations).
FACTORS AFFECTING TRADING PRICES
The trading prices of the STRYPES in the secondary market will be directly
affected by the trading prices of the SunAmerica Common Stock in the secondary
market. It is impossible to predict whether the price of SunAmerica Common
Stock will rise or fall. Trading prices of SunAmerica Common Stock will be
influenced by SunAmerica's operating results and prospects, by complex and
interrelated political, economic, financial and other factors and market
conditions that can affect the capital markets generally, the market segment
of which SunAmerica is a part, the NYSE (on which the SunAmerica Common Stock
is traded), including the level of, and fluctuations in, the trading prices of
stocks generally and sales of substantial amounts of SunAmerica Common Stock
in the market subsequent to the offering of the STRYPES or the perception that
such sales could occur, and by other events that are difficult to predict and
beyond the Company's control.
IMPACT OF STRYPES ON THE MARKET FOR SUNAMERICA COMMON STOCK
It is not possible to predict accurately how or whether the STRYPES will
trade in the secondary market or whether such market will be liquid. Any
market that develops for the STRYPES is likely to influence and be influenced
by the market for SunAmerica Common Stock. For example, the price of
SunAmerica Common Stock could be depressed by investors' anticipation of the
potential distribution into the market of substantial additional amounts of
SunAmerica Common Stock on the Maturity Date or upon redemption of the
STRYPES, by possible sales of SunAmerica Common Stock by investors who view
the STRYPES as a more attractive means of equity participation in SunAmerica
and by hedging or arbitrage trading activity that may develop involving the
STRYPES and the SunAmerica Common Stock. In addition, after a 60 day period
from the date of this Prospectus Supplement, the Selling Stockholder is not
precluded from selling SunAmerica Common Stock. Any such sales could have an
adverse effect on the market price of SunAmerica Common Stock and/or the
STRYPES.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
It is not possible to predict how the STRYPES will trade in the secondary
market or whether such market will be liquid or illiquid. The STRYPES are
novel securities and there is currently no secondary market for the STRYPES.
The STRYPES have been approved for listing on the NYSE, subject to official
notice of issuance. However there can be no assurance that an active trading
market for the STRYPES will develop, that such listing will provide the
holders of the STRYPES with liquidity of investment, or that the STRYPES will
not later be delisted or that trading of the STRYPES on the NYSE will not be
suspended. In the event of a delisting or suspension of trading on the NYSE,
the Company will apply for listing of the STRYPES on another national
securities exchange or for quotation on another trading market. If the STRYPES
are not listed or traded on any securities exchange or trading market, or if
trading of the STRYPES is suspended, pricing information for the STRYPES may
be more difficult to obtain and the liquidity of the STRYPES may be adversely
affected.
NO STOCKHOLDER RIGHTS
Holders of the STRYPES will not be entitled to any rights with respect to
the SunAmerica Common Stock (including, without limitation, voting rights and
rights to receive any dividends or other distributions in respect thereof)
unless and until such time, if any, as the Company shall have delivered shares
of SunAmerica Common Stock for STRYPES on the Maturity Date or upon
redemption, and unless the applicable record date, if any, for the exercise of
such rights occurs after such date. For example, in the event that an
amendment is proposed to the certificate of incorporation of SunAmerica and
the record date for determining the stockholders of record entitled to vote on
such amendment occurs prior to such delivery, holders of the STRYPES will not
be entitled to vote on such amendment.
S-10
<PAGE>
NO AFFILIATION BETWEEN THE COMPANY AND THE SELLING STOCKHOLDER
The Company has no affiliation with the Selling Stockholder, and the Selling
Stockholder has no obligation with respect to the STRYPES or amounts to be
paid to the holders thereof, including any obligation to take the needs of the
Company or of the holders of STRYPES into consideration in determining whether
or when to cause redemption of the STRYPES or whether to deliver shares or
cash at maturity or upon redemption, or for any other reason.
NO AFFILIATION BETWEEN THE COMPANY AND SUNAMERICA
The Company has no affiliation with SunAmerica, and SunAmerica has no
obligations with respect to the STRYPES or amounts to be paid to holders
thereof, including any obligation to take the needs of the Company or of
holders of the STRYPES into consideration for any reason. SunAmerica will not
receive any of the proceeds of the offering of the STRYPES made hereby and is
not responsible for, and has not participated in, the determination or
calculation of the amount receivable by holders of the STRYPES on the Maturity
Date or upon redemption. SunAmerica is not involved with the administration or
trading of the STRYPES and has no obligations with respect to the amount
receivable by holders of the STRYPES on the Maturity Date or upon redemption.
DILUTION OF SUNAMERICA COMMON STOCK
The number of shares of SunAmerica Common Stock (or, pursuant to the option
of the Company, the amount of cash) that holders of the STRYPES are entitled
to receive on the Maturity Date or upon redemption is subject to adjustment
for certain events arising from, among other things, a merger or consolidation
in which SunAmerica is not the surviving or resulting corporation, or a sale
or transfer of all or substantially all of the assets of SunAmerica on the
liquidation, dissolution, winding up or bankruptcy of SunAmerica, as well as
stock splits and combinations, stock dividends and certain other actions of
SunAmerica that modify its capital structure. See "Supplemental Description of
the STRYPES--Dilution Adjustments." Such number of shares of SunAmerica Common
Stock (or, pursuant to the option of the Company, the amount of cash) to be
received by such holders on the Maturity Date or upon redemption will not be
adjusted for other events, such as offerings of SunAmerica Common Stock for
cash or in connection with acquisitions. SunAmerica is not restricted from
issuing additional shares of SunAmerica Common Stock during the term of the
STRYPES and has no obligation to consider the interests of the holders of the
STRYPES for any reason. Additional issuances may materially and adversely
affect the market price of the SunAmerica Common Stock and of the STRYPES.
TAX MATTERS
Because of an absence of authority as to the proper characterization of the
STRYPES, their ultimate tax treatment is uncertain. Accordingly, no assurances
can be given that any particular characterization and treatment of the STRYPES
will be accepted by the Internal Revenue Service ("IRS") or upheld by a court.
However, it is the opinion of Brown & Wood, counsel to the Company, that the
characterization and tax treatment of the STRYPES described herein (and
described in greater detail under "Certain United States Federal Income Tax
Considerations"), while not the only reasonable characterization and tax
treatment, is based on reasonable interpretations of law currently in effect
and, even if successfully challenged by the IRS, will not result in the
imposition of penalties. The Indenture will require that any holder subject to
United States Federal income tax include currently in income, for United
States Federal income tax purposes, payments denominated as interest that are
made with respect to a STRYPES in accordance with such holder's regular method
of tax accounting. The Indenture also requires the Company and holders to
treat each STRYPES for tax purposes as a unit (a "Unit") consisting of (i) a
debt instrument (the "Debt Instrument") with a fixed principal amount
unconditionally payable on the Maturity Date equal to the Issue Price of the
STRYPES and bearing interest at the stated interest rate on the STRYPES and
(ii) a forward purchase contract (the "Forward Contract") pursuant to which
the holder agrees to use the principal payment due on the Debt Instrument (or,
in the event of redemption on or prior to the Maturity Date, the redemption
price) to purchase on the Maturity Date or upon
S-11
<PAGE>
redemption on or prior to the Maturity Date the SunAmerica Common Stock which
the Company is obligated under the STRYPES to deliver at that time (subject to
the Company's right to deliver cash in lieu of the SunAmerica Common Stock).
The Indenture also requires that upon the acquisition of a STRYPES and upon a
holder's sale or other disposition of a STRYPES prior to the Maturity Date or
redemption of the STRYPES, the amount paid or realized by the holder be
allocated by the holder between the Debt Instrument and the Forward Contract
based upon their relative fair market values (as determined on the date of
acquisition or disposition). For these purposes, with respect to acquisitions
of STRYPES in connection with the original issuance thereof, the Company and
each holder agrees, pursuant to the terms of the Indenture, to assign $57.277
(i.e., 101.6%) of the initial purchase price of a STRYPES (i.e., the Issue
Price of a STRYPES) to the Debt Instrument component and to assign $.902
(i.e., 1.6%) of the initial purchase price of a STRYPES to the Forward
Contract component. As previously mentioned, the appropriate character and
timing of income, gain or loss to be recognized on a STRYPES is uncertain and
investors should consult their own tax advisers concerning the application of
the United States Federal income tax laws to their particular situations as
well as any consequences of the purchase, ownership and disposition of the
STRYPES arising under the laws of any other taxing jurisdiction. The tax
consequences of investing in the STRYPES are described in greater detail under
"Certain United States Federal Income Tax Considerations."
HOLDING COMPANY STRUCTURE
Since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the holders of the STRYPES),
to participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that claims of the
Company itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including MLPF&S, to
the Company are restricted by net capital requirements under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and under the rules of
certain securities exchanges and other regulatory bodies.
S-12
<PAGE>
SUNAMERICA INC.
SunAmerica Inc. is a diversified financial services company specializing in
retirement savings products and services.
SunAmerica is subject to the informational requirements of the Exchange Act.
Accordingly, SunAmerica files reports, proxy and information statements and
other information with the Securities and Exchange Commission (the
"Commission"). Copies of such material can be inspected and copied at the
public reference facilities maintained by the Commission at the addresses
specified under "Available Information" in the SunAmerica Prospectus. Reports,
proxy and information statements and other information concerning SunAmerica
may also be inspected at the offices of the NYSE.
THE COMPANY IS NOT AFFILIATED WITH SUNAMERICA, AND SUNAMERICA HAS NO
OBLIGATIONS WITH RESPECT TO THE STRYPES. THIS PROSPECTUS SUPPLEMENT AND THE
ML&CO. PROSPECTUS RELATE ONLY TO THE STRYPES OFFERED HEREBY AND DO NOT RELATE
TO THE SUNAMERICA COMMON STOCK. SUNAMERICA HAS FILED A REGISTRATION STATEMENT
ON FORM S-3 WITH THE COMMISSION COVERING THE SHARES OF SUNAMERICA COMMON STOCK
THAT MAY BE RECEIVED BY A HOLDER OF STRYPES ON THE MATURITY DATE OR UPON
REDEMPTION. THE PROSPECTUS OF SUNAMERICA CONSTITUTING A PART OF SUCH
REGISTRATION STATEMENT INCLUDES INFORMATION RELATING TO SUNAMERICA AND THE
SUNAMERICA COMMON STOCK. THE SUNAMERICA PROSPECTUS IS BEING DELIVERED TO
PROSPECTIVE PURCHASERS OF STRYPES TOGETHER WITH THIS PROSPECTUS SUPPLEMENT AND
THE ML&CO. PROSPECTUS FOR CONVENIENCE OF REFERENCE ONLY. THE SUNAMERICA
PROSPECTUS DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS SUPPLEMENT OR THE
ML&CO. PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN OR THEREIN.
S-13
<PAGE>
PRICE RANGE OF SUNAMERICA COMMON STOCK AND DIVIDENDS
The SunAmerica Common Stock sale prices (as quoted on the NYSE Composite
Tape) and per share dividend data for each full quarter during fiscal years
ended September 30, 1994 and 1995, for the first and second fiscal quarters of
1996 and for the third fiscal quarter of 1996 through June 6, 1996 are set
forth below. The payment of future dividends on the SunAmerica Common Stock
and the amounts thereof will depend on business conditions, earnings and
financial requirements of SunAmerica and other relevant factors. The sale
prices and dividend amounts set forth below have been restated to reflect a
three-for-two stock split paid in the form of a stock dividend on November 10,
1995.
The SunAmerica Common Stock trades under the symbol "SAI."
<TABLE>
<CAPTION>
SUNAMERICA
COMMON STOCK
PRICES DIVIDENDS PAID
----------------- ---------------------------
SUNAMERICA SUNAMERICA
COMMON NONTRANSFERABLE
FISCAL YEAR HIGH LOW STOCK CLASS B STOCK(1)
----------- ------- --------- ---------- ----------------
<S> <C> <C> <C> <C>
1994
First Quarter................ $31 $22 $.067 $ .06
Second Quarter............... 29 1/8 22 3/8 .067 .06
Third Quarter................ 29 1/2 22 7/8 .067 .06
Fourth Quarter............... 30 7/8 26 7/8 .067 .06
1995
First Quarter................ $27 7/8 $22 7/8 $ .10 $ .09
Second Quarter............... 29 1/2 24 .10 .09
Third Quarter................ 37 28 1/4 .10 .09
Fourth Quarter............... 42 33 1/2 .10 .09
1996
First Quarter................ $49 3/4 $40 53/64 $ .15 $.135
Second Quarter............... 57 1/2 44 1/8 .15 .135
Third Quarter (through June
6, 1996)................... 58 1/8 45 5/8 .15 .135
</TABLE>
- --------
(1) Holders of Nontransferable Class B Stock are entitled to receive cash
dividends equal to 90% of any cash dividends paid to holders of the
SunAmerica Common Stock. For a description of the rights of holders of
Nontransferable Class B Stock, see "Description of Capital Stock--Common
Stock and Class B Stock" in the SunAmerica Prospectus.
SUPPLEMENTAL USE OF PROCEEDS
The net proceeds to the Company from the sale of the STRYPES are expected to
be approximately $164 million. Of that amount, approximately $131 million will
be used to pay to the Selling Stockholder the consideration due under the
Stock Agreement and the remainder will be used for general corporate purposes.
See "Certain Arrangements with the Selling Stockholder."
S-14
<PAGE>
SUPPLEMENTAL DESCRIPTION OF THE STRYPES
The STRYPES are a series of Senior Debt Securities to be issued under an
indenture, dated as of April 1, 1983 and restated as of April 1, 1987, as
amended and supplemented as of June 1, 1996 (the indenture dated as of April
1, 1983 and restated as of April 1, 1987, as amended and supplemented from
time to time, the "Indenture") between the Company and Chemical Bank
(successor by merger to Manufacturers Hanover Trust Company), as trustee (the
"Trustee"). All capitalized terms not otherwise defined herein have the
meanings specified in the Indenture.
GENERAL
The aggregate number of STRYPES to be issued under the Indenture will be
limited to 3,000,000, plus such additional number of STRYPES as may be issued
pursuant to the over-allotment option granted by the Company to the
Underwriter. See "Underwriting." No fractional STRYPES will be issued.
Each STRYPES, which will be issued at the Issue Price of $56.375, will bear
interest at the rate of 7 1/4% of the Issue Price per annum (or $4.0872 per
annum) from June 12, 1996, or from the most recent Interest Payment Date to
which interest has been paid or provided for, until the Maturity Date or such
earlier date on which such STRYPES is redeemed or the Issue Price of such
STRYPES is repaid pursuant to the terms thereof. Interest on the STRYPES will
be payable in cash quarterly in arrears on March 15, June 15, September 15 and
December 15, beginning September 15, 1996, and on the Maturity Date (each, an
"Interest Payment Date"), to the persons in whose names the STRYPES are
registered at the close of business on the last day (whether or not a Business
Day) of the calendar month immediately preceding such Interest Payment Date.
Interest on the STRYPES will be computed on the basis of a 360-day year of
twelve 30-day months. If an Interest Payment Date, Maturity Date or redemption
date falls on a day that is not a Business Day, the payments to be made
(including any shares of SunAmerica Common Stock to be delivered) on such date
will be made on the next succeeding Business Day with the same force and
effect as if made on such Interest Payment Date, Maturity Date or redemption
date, and no additional interest will accrue as a result of such delayed
payment.
PAYMENTS AT MATURITY
The STRYPES will mature on June 15, 1999. On the Maturity Date, unless
redeemed on or prior to such date, the Company will pay and discharge each
STRYPES by delivering to the holder thereof a number of shares of SunAmerica
Common Stock equal to the Common Equivalent Rate (as described below) in
effect on the Maturity Date (subject to the Company's right to deliver, with
respect to all, but not less than all, of the STRYPES then outstanding, cash
in an amount equal to the Current Market Price, determined as of the second
Trading Day prior to the applicable Notice Date, of the SunAmerica Common
Stock which otherwise would have been delivered). The Common Equivalent Rate
will initially be one share of Common Stock per STRYPES. The Common Equivalent
Rate is subject to adjustment as described below under "--Dilution
Adjustments." Because the price of the SunAmerica Common Stock is subject to
market fluctuations, the value of the SunAmerica Common Stock (or, at the
option of the Company, the amount of cash) received by a holder of STRYPES on
the Maturity Date may be less than the amount paid for the STRYPES upon
issuance, in which case an investment in the STRYPES will result in a loss. In
addition, because of such market fluctuations and because the Current Market
Price of the SunAmerica Common Stock will be determined as of the second
Trading Date prior to the applicable Notice Date (which will be at least 30
and could be up to 60 days prior to the Maturity Date), it is likely that, if
the Company elects to pay the STRYPES in cash on the Maturity Date, the amount
of cash payable per STRYPES will differ from the market value on the Maturity
Date of the shares of SunAmerica Common Stock which a holder would otherwise
have received. See "Risk Factors--Risk of Fluctuations in Price of SunAmerica
Common Stock; Calculation of Current Market Price."
S-15
<PAGE>
In the Indenture, the Company will agree to deliver on the Maturity Date the
form of consideration that the ML&Co. Subsidiary receives from the Selling
Stockholder. The Company will be required to mail a notice, at least 30 but
not more than 60 days prior to the Maturity Date, to each holder of STRYPES at
its registered address, which notice shall state whether the STRYPES will be
paid and discharged with shares of SunAmerica Common Stock or in cash and, if
payable in cash, specifying the amount of cash payable for each STRYPES and
the Current Market Price used to calculate such amount. If the Company elects
to deliver shares of SunAmerica Common Stock, holders of the STRYPES will be
responsible for the payment of any and all brokerage costs upon the subsequent
sale of such stock.
OPTIONAL REDEMPTION
At any time or from time to time on or prior to the Maturity Date, the
Company may, at its option, redeem the outstanding STRYPES, in whole or in
part, at a redemption price per STRYPES initially equal to $86.568, declining
by $.00966 on each day following the Issue Date (computed on the basis of a
360-day year of twelve 30-day months) to $76.686 on April 15, 1999, and equal
to $76.106 thereafter, payable in either (i) a number of shares of SunAmerica
Common Stock equal to the redemption price on the applicable redemption date
divided by the Current Market Price of the SunAmerica Common Stock determined
as of the second Trading Day preceding the applicable Notice Date or (ii) at
the Company's option (which may be exercised with respect to all, but not less
than all, of the STRYPES to be redeemed on any redemption date) cash, plus in
either case an amount in cash equal to accrued and unpaid interest on the
STRYPES to but excluding the redemption date; provided that installments of
interest which are due and payable on or prior to the redemption date shall be
payable to the holders of STRYPES registered as such at the close of business
on the relevant record dates. On and after the redemption date, interest will
cease to accrue on the STRYPES called for redemption, unless the Company
defaults in the payment of the redemption price therefor. If the Company
elects to deliver shares of SunAmerica Common Stock, holders of the STRYPES
will be responsible for the payment of any and all brokerage costs upon the
subsequent sale of such stock.
Notice of redemption shall be mailed at least 30 days but not more than 60
days before the redemption date to each holder of STRYPES to be redeemed at
its registered address. Such notice shall specify whether the Company will pay
the redemption price by delivery of SunAmerica Common Stock or in cash and, if
payable in SunAmerica Common Stock, will also specify the number of shares of
SunAmerica Common Stock to be delivered for each STRYPES and the Current
Market Price used to calculate such number of shares. If only a portion of the
STRYPES held by any registered holder are to be redeemed, the notice of
redemption shall specify the number of STRYPES to be redeemed from such holder
and, upon redemption, a new STRYPES certificate evidencing the unredeemed
STRYPES will be issued in the name of the holder upon surrender for
cancellation of the original certificate.
In the event that less than all of the STRYPES are to be redeemed at any
time, selection of STRYPES for redemption will be made by the Trustee by such
method as the Trustee shall deem fair and appropriate (subject to compliance
with the requirements of the principal national securities exchange on which
the STRYPES may be listed); provided, however, that the STRYPES shall not be
redeemed except in units of one or more whole STRYPES.
The opportunity for capital appreciation afforded by an investment in the
STRYPES is limited because the Company may, at its option, redeem the STRYPES
at any time on or prior to the Maturity Date at the redemption prices
described above. Although not obligated to do so, the Company may be expected
to redeem the STRYPES on or prior to the Maturity Date if the market price of
the SunAmerica Common Stock exceeds the applicable redemption price, in which
event holders of STRYPES will receive less than one share of SunAmerica Common
Stock for each STRYPES (or, at the option of the Company, cash in an amount
equal to the Current Market Price of less than one share of such SunAmerica
Common Stock). See "Risk Factors--Limitation on Opportunity for Capital
Appreciation."
S-16
<PAGE>
If the Company exercises its option to redeem the STRYPES, in whole or in
part, the Notice Date for such redemption will be at least 30 days and could
be up to 60 days prior to the redemption date. If, as described above, the
Company elects to pay the redemption price by delivering shares of SunAmerica
Common Stock, the number of shares to be so delivered will be determined on
the basis of the Current Market Price as of the second Trading Date prior to
the Notice Date. The price of the SunAmerica Common Stock is subject to market
fluctuations and, as a result, the market value on such redemption date of the
shares of SunAmerica Common Stock delivered in respect of each STRYPES may be
more or less than the applicable redemption price. See "Risk Factors--Risk of
Fluctuations in Price of SunAmerica Common Stock; Calculation of Current
Market Price."
CERTAIN DEFINITIONS
The "Closing Price" of any security on any day shall mean the closing sales
price regular way on such day or, in case no such sale takes place on such
day, the average of the reported closing bid and asked prices regular way on
such day, in each case on the NYSE, or, if such security is not listed or
admitted to trading on the NYSE, on the principal national securities exchange
on which such security is listed or admitted to trading, or, if not listed or
admitted to trading on any national securities exchange, the average of the
closing bid and asked prices of such security on the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similarly generally accepted reporting service, or if not
so available in such manner, as furnished by any NYSE member firm selected
from time to time by the Board of Directors of the Company for that purpose.
The "Current Market Price" per share of the SunAmerica Common Stock on any
date of determination means the average of the daily Closing Prices for the
five consecutive Trading Days ending on and including such date of
determination (appropriately adjusted to take into account the occurrence
during such five-day period of any event that results in an adjustment of the
Common Equivalent Rate); provided, however, that if the Closing Price of the
SunAmerica Common Stock on the Trading Day next following such five-day period
(the "Next-Day Closing Price") is less than 95% of such five-day average, then
the Current Market Price per share of SunAmerica Common Stock on such date of
determination will be the Next-Day Closing Price; and provided, further, that,
for the purposes of calculating the Current Market Price in connection with
the Maturity Date or any redemption of STRYPES or any determination of an
amount in cash payable in lieu of a fractional share of SunAmerica Common
Stock, if any adjustment of the Common Equivalent Rate becomes effective as of
any date during the period beginning on the first day of such five-day period
and ending on the Maturity Date or the relevant redemption date, as the case
may be, then the Current Market Price as determined pursuant to the foregoing
will be appropriately adjusted to reflect such adjustment. Because the price
of SunAmerica Common Stock is subject to market fluctuations, it is possible
that the Next-Day Closing Price could be significantly less than such five-day
average. See "Risk Factors--Risk of Fluctuations in Price of SunAmerica Common
Stock; Calculation of Current Market Price."
A "Notice Date" with respect to any notice given by the Company in
connection with the Maturity Date or any redemption of STRYPES means the
commencement of the mailing of such notice to the holders of STRYPES in
accordance with "--Payments at Maturity" or "--Optional Redemption," as the
case may be, above.
A "Trading Day" is defined as a day on which the security, the Closing Price
of which is being determined, (A) is not suspended from trading on any
national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of such security; provided
that, if the Closing Price of such security is to be determined by a NYSE
member firm, then the term Trading Day shall mean, for purposes of determining
such Closing Price, a day on which the NYSE is open for trading.
S-17
<PAGE>
DILUTION ADJUSTMENTS
The Common Equivalent Rate will initially be one share of SunAmerica Common
Stock for each STRYPES. The Common Equivalent Rate is subject to adjustment if
SunAmerica shall: (i) pay a dividend or make a distribution with respect to
SunAmerica Common Stock in shares of SunAmerica Common Stock; (ii) subdivide
or split the outstanding shares of SunAmerica Common Stock into a greater
number of shares; (iii) combine the outstanding shares of SunAmerica Common
Stock into a smaller number of shares; (iv) issue by reclassification of
shares of SunAmerica Common Stock any shares of common stock of SunAmerica;
(v) issue certain rights or warrants to all holders of SunAmerica Common
Stock; or (vi) pay a dividend or make a distribution to all holders of
SunAmerica Common Stock of evidences of its indebtedness or other assets
(including shares of capital stock of SunAmerica but excluding any cash
dividends and any stock dividends or distributions referred to in clause (i)
above).
All adjustments to the Common Equivalent Rate will be calculated to the
nearest 1/100th of a share of SunAmerica Common Stock (or if there is not a
nearest 1/100th of a share to the next lower 1/100th of a share). No
adjustment in the Common Equivalent Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason of the
foregoing are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. Each such adjustment to the Common
Equivalent Rate shall be made successively.
In the event of (A) any consolidation or merger of SunAmerica, or any
surviving entity or subsequent surviving entity of SunAmerica (a "SunAmerica
Successor"), with or into another entity (other than a merger or consolidation
in which SunAmerica is the continuing corporation and in which the SunAmerica
Common Stock outstanding immediately prior to the merger or consolidation is
not exchanged for cash, securities or other property of SunAmerica or another
corporation), (B) any sale, transfer, lease or conveyance to another
corporation of the property of SunAmerica or any SunAmerica Successor as an
entirety or substantially as an entirety, (C) any statutory exchange of
securities of SunAmerica or any SunAmerica Successor with another corporation
(other than in connection with a merger or acquisition) or (D) any
liquidation, dissolution, winding up or bankruptcy of SunAmerica or any
SunAmerica Successor (any such event described in clause (A), (B), (C) or (D),
a "Reorganization Event"), the Common Equivalent Rate will be adjusted to
provide that each holder of STRYPES will receive on the Maturity Date or any
redemption date for each STRYPES cash in an amount equal to the Transaction
Value. "Transaction Value" means (i) for any cash received in any such
Reorganization Event, the amount of cash received per share of SunAmerica
Common Stock, (ii) for any property other than cash or securities received in
any such Reorganization Event, an amount equal to the market value on the
Maturity Date or any redemption date of such property received per share of
SunAmerica Common Stock as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Company and (iii) for
any securities received in any such Reorganization Event, an amount equal to
the average Closing Price per unit of such securities on the five Trading Days
immediately prior to the second Trading Day preceding the Maturity Date or any
redemption date multiplied by the number of such securities received for each
share of SunAmerica Common Stock. Notwithstanding the foregoing, in the event
that property or securities, or a combination of cash, on the one hand, and
property or securities, on the other, are received in such Reorganization
Event, the Company may, at its option, in lieu of delivering cash as described
above, deliver the amount of cash, securities and other property received per
share of SunAmerica Common Stock in such Reorganization Event determined in
accordance with clause (i), (ii) or (iii) above, as applicable. If the Company
elects to deliver securities or other property, holders of the STRYPES will be
responsible for the payment of any and all brokerage and other transaction
costs upon any subsequent sale of such securities or other property. The kind
and amount of securities with which the STRYPES shall be paid and discharged
after consummation of such transaction shall be subject to adjustment as
described above following the date of consummation of such transaction.
No adjustments will be made for certain other events, such as offerings of
SunAmerica Common Stock by SunAmerica for cash or in connection with
acquisitions. Likewise, no adjustments will be made for any sales of
SunAmerica Common Stock by the Selling Stockholder.
S-18
<PAGE>
The Company is required, within ten Business Days following the occurrence
of an event that requires an adjustment to the Common Equivalent Rate (or if
the Company is not aware of such occurrence, as soon as practicable after
becoming so aware), to provide written notice to the Trustee and to the
holders of the STRYPES of the occurrence of such event and a statement in
reasonable detail setting forth the adjusted Common Equivalent Rate and the
method by which the adjustment to the Common Equivalent Rate was determined.
CERTAIN PROCEDURES IN CONNECTION WITH MATURITY AND REDEMPTION
Each holder of STRYPES on the Maturity Date, and each holder of STRYPES
called for redemption on any redemption date, must surrender the certificates
evidencing such STRYPES at the office or agency of the Company maintained for
such purpose in order to receive the consideration payable on such date. If,
on the Maturity Date or any redemption date, the Company shall have deposited
with the Trustee or other agent under the Indenture the consideration payable
on such date in respect of all of the STRYPES then outstanding (in the case of
the Maturity Date) or the STRYPES called for redemption (in the case of any
redemption date), then, on the Maturity Date or redemption date, as the case
may be, all of the outstanding STRYPES or the STRYPES called for redemption,
as the case may be, shall cease to bear interest and all rights of the holders
thereof shall terminate (except for the right to receive the consideration
payable in respect of such STRYPES on such date), notwithstanding that the
certificates evidencing any of the STRYPES which are payable or subject to
redemption on such date shall not have been surrendered to the Company.
FRACTIONAL SHARES
No fractional shares of SunAmerica Common Stock will be delivered if the
Company pays and discharges the STRYPES by delivering shares of SunAmerica
Common Stock on the Maturity Date or any redemption date. In lieu of any
fractional share otherwise deliverable in respect of all STRYPES of any holder
on the Maturity Date or any redemption date, such holder shall be entitled to
receive an amount in cash equal to the value of such fractional share at the
Current Market Price of the SunAmerica Common Stock determined as of the
second Trading Day immediately preceding the relevant Notice Date.
NO SINKING FUND
The STRYPES do not contain sinking fund or other mandatory redemption
provisions. The STRYPES are not subject to payment prior to the Maturity Date
at the option of the holder.
RANKING
The STRYPES will be unsecured obligations and will rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. At March 29,
1996, the Company had long-term borrowings outstanding of $20,226 million. In
addition, at March 29, 1996, there were $526 million of bank loans and $17,222
million of commercial paper outstanding.
The Company had no secured debt at March 29, 1996. At such date,
collateralized financing transactions of the Company's subsidiaries consisted
of $3,768 million of cash deposits for securities loaned and $61,657 million
of securities sold under agreements to repurchase. See Note 4 to "Summary
Financial Information" in the ML&Co. Prospectus.
There are no contractual restrictions on the ability of the Company or its
subsidiaries to incur additional secured or unsecured debt. However,
borrowings by certain subsidiaries, including MLPF&S, are restricted by net
capital requirements under the Exchange Act and under rules of certain
exchanges and other regulatory bodies. See "Description of the STRYPES--
Ranking" in the ML&Co. Prospectus.
LISTING
The STRYPES have been approved for listing on the NYSE, subject to official
notice of issuance.
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CERTAIN ARRANGEMENTS WITH THE SELLING STOCKHOLDER
Pursuant to the Stock Agreement, the Selling Stockholder is obligated to
deliver to the ML&Co. Subsidiary, on June 14, 1999, a specified number of
shares of SunAmerica Class B Stock (subject to the Selling Stockholder's right
to deliver cash in an amount equal to the Current Market Price, determined as
of the second Trading Day prior to the applicable Notice Date, of the
SunAmerica Common Stock underlying the SunAmerica Class B Stock that otherwise
would have been delivered). At any time and from time to time through June 15,
1999, the Selling Stockholder may, at his option, redeem his obligations under
the Stock Agreement in whole or in part, at declining redemption prices,
payable in either (i) shares of SunAmerica Class B Stock representing
SunAmerica Common Stock having an aggregate Current Market Price, determined
as of the second Trading Day prior to the date of the applicable notice of
redemption, equal to the applicable redemption price or (ii) at the Selling
Stockholder's option (which may be exercised with respect to all, but not less
than all, of the obligations to be redeemed), cash, plus in either case an
amount in cash equal to accrued and unpaid interest on the Stock Agreement to
but excluding the redemption date. The consideration to be paid by the ML&Co.
Subsidiary to the Selling Stockholder under the Stock Agreement is
approximately $131 million, and is payable on or about June 12, 1996. In the
Indenture, the Company will also agree to pay and discharge the STRYPES by
delivering to the holders thereof on the Maturity Date or any redemption date
the form of consideration that the ML&Co. Subsidiary receives from the Selling
Stockholder and to redeem the STRYPES if and when the Selling Stockholder
redeems his obligations under the Stock Agreement.
Shares of SunAmerica Class B Stock delivered by the Selling Stockholder will
convert automatically into shares of SunAmerica Common Stock upon transfer to
the ML&Co. Subsidiary. The Selling Stockholder has the right at any time to
modify the Stock Agreement so that he may deliver shares of SunAmerica Common
Stock (or cash) instead of shares of SunAmerica Class B Stock (or cash). Until
such time, if any, as the Selling Stockholder shall have delivered shares to
the ML&Co. Subsidiary at maturity or upon redemption pursuant to the terms of
the Stock Agreement, the Selling Stockholder will retain all ownership rights
with respect to the shares held by him (including, without limitation, voting
rights and rights to receive any dividends or other distributions in respect
thereof).
The Selling Stockholder has no obligations with respect to the STRYPES or
amounts to be paid to holders thereof, including any obligation to take the
needs of the Company or holders of the STRYPES into consideration in
determining whether or when to cause the redemption of the STRYPES or whether
to deliver shares or cash at maturity or upon redemption, or for any other
reason. The Stock Agreement is a commercial transaction among the parties
thereto and does not create any rights in, or for the benefit of, any third
party, including any holder of STRYPES.
In the event the Selling Stockholder does not perform under the Stock
Agreement, the Company will be required to otherwise acquire shares of
SunAmerica Common Stock for delivery to holders of the STRYPES on the Maturity
Date or upon redemption, unless it elects to exercise its option to deliver
cash with an equal value.
Merrill Lynch Capital Corporation, a wholly owned subsidiary of the Company,
will enter into a secured loan agreement with the Selling Stockholder pursuant
to which the Selling Stockholder will borrow approximately $33 million for a
term of three years.
For more information regarding the relationship between the Selling
Stockholder and SunAmerica and the SunAmerica Common Stock that may be
delivered to holders of STRYPES on the Maturity Date or upon redemption, see
the accompanying SunAmerica Prospectus.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Set forth in full below is the opinion of Brown & Wood, counsel to the
Company, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the STRYPES. Such opinion is based upon
laws, regulations, rulings and decisions now in effect (or, in the case of
certain regulations, in proposed form), all of which are subject to change
(including retroactive changes in effective dates) or possible differing
interpretations. The discussion below deals only with STRYPES held as capital
assets and does not purport to deal with persons in special tax situations,
such as financial institutions, insurance companies, regulated investment
companies, dealers in securities or currencies, tax-exempt entities, or
persons holding STRYPES as a hedge against currency risks or as a position in
a "straddle" for tax purposes. The following discussion also does not address
the tax consequences of investing in the STRYPES arising under the laws of any
state, local or foreign jurisdiction. Persons considering the purchase of the
STRYPES should consult their own tax advisors concerning the application of
the United States Federal income tax laws to their particular situations as
well as any consequences of the purchase, ownership and disposition of the
STRYPES arising under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a STRYPES
that is for United States Federal income tax purposes (i) 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, (iii) an estate or trust the income of which is
subject to United States Federal income taxation regardless of its source or
(iv) any other person whose income or gain in respect of a STRYPES is
effectively connected with the conduct of a United States trade or business.
As used herein, the term "non-U.S. Holder" means a beneficial owner of a
STRYPES that is not a U.S. Holder.
GENERAL
There are no statutory provisions, regulations (except possibly the Proposed
Regulations as described below), published rulings or judicial decisions
addressing or involving the characterization, for United States Federal income
tax purposes, of the STRYPES or securities with terms substantially the same
as the STRYPES. Accordingly, the proper United States Federal income tax
characterization and treatment of the STRYPES is uncertain. Pursuant to the
terms of the Indenture, the Company and any holder of a STRYPES agree to treat
each STRYPES as a unit (a "Unit") consisting of (i) a debt instrument (the
"Debt Instrument") with a fixed principal amount unconditionally payable on
the Maturity Date equal to the issue price of the STRYPES and bearing interest
at the stated interest rate on the STRYPES and (ii) a forward purchase
contract (the "Forward Contract") pursuant to which the holder agrees to use
the principal payment due on the Debt Instrument (or, in the event of a
redemption on or prior to the Maturity Date, the redemption price) to purchase
on the Maturity Date or upon redemption on or prior to the Maturity Date the
SunAmerica Common Stock which the Company is obligated to deliver at that time
(subject to the Company's right to deliver cash in lieu of the SunAmerica
Common Stock). Therefore, the Company currently intends to treat each STRYPES
as a Unit consisting of the Debt Instrument and the Forward Contract for
United States Federal income tax purposes and, where required, intends to file
information returns with the Internal Revenue Service ("IRS") in accordance
with such treatment, in the absence of any change or clarification in the law,
by regulation or otherwise, requiring a different characterization and
treatment of the STRYPES for United States Federal income tax purposes. In the
opinion of Brown & Wood, counsel to the Company, such characterization and tax
treatment of the STRYPES, although not the only reasonable characterization
and tax treatment, is based on reasonable interpretations of law currently in
effect and, even if successfully challenged by the IRS, will not result in the
imposition of penalties.
Prospective investors in the STRYPES should be aware, however, that no
ruling is being requested from the IRS with respect to the STRYPES, the IRS is
not bound by the characterization of each STRYPES by the Company and the
holders thereof as a Unit consisting of the Debt Instrument and the Forward
Contract, and the IRS could possibly assert a different position as to the
proper United States Federal income tax characterization and treatment of the
STRYPES. For instance, it is possible that the IRS could assert that each
STRYPES should be treated entirely as a single debt instrument of the Company
for United States Federal income tax purposes. Except where otherwise
specifically provided herein, the following discussion of the principal United
States
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Federal income tax consequences of the purchase, ownership and disposition of
the STRYPES is based upon the assumption that each STRYPES will be
characterized and treated as a Unit consisting of the Debt Instrument and the
Forward Contract for United States Federal income tax purposes. As discussed
in greater detail herein, if the STRYPES are not in fact ultimately
characterized and treated as a Unit consisting of the Debt Instrument and the
Forward Contract for United States Federal income tax purposes, then the
United States Federal income tax treatment of the purchase, ownership and
disposition of the STRYPES could significantly differ from the treatment
discussed immediately below with the result that the timing and character of
income, gain or loss recognized on a STRYPES could significantly differ from
the timing and character of income, gain or loss recognized on a STRYPES had
each STRYPES in fact been characterized and treated as a Unit consisting of
the Debt Instrument and the Forward Contract for United States Federal income
tax purposes.
U.S. HOLDERS
As previously discussed, pursuant to the terms of the Indenture, the Company
and any holder of a STRYPES agree to treat each STRYPES as a Unit consisting
of the Debt Instrument and the Forward Contract. Consistent with this
treatment of the STRYPES, pursuant to the terms of the Indenture, a U.S.
Holder of a STRYPES will be required to include currently in income payments
denominated as interest that are made with respect to a STRYPES in accordance
with such U.S. Holder's regular method of tax accounting. Furthermore,
pursuant to the agreement contained in the Indenture to treat each STRYPES as
a Unit consisting of the Debt Instrument and the Forward Contract, any holder
of a STRYPES agrees to allocate the purchase price paid by such holder to
acquire the STRYPES between the two components of the Unit (i.e., the Debt
Instrument and the Forward Contract) based upon their relative fair market
values (as determined on the purchase date). The portion of the total purchase
price so allocated by the holder to each component of the Unit will generally
constitute the holder's initial tax basis for each such component of the Unit.
Accordingly, in the event that the fair market value of the Debt Instrument
(as determined on the purchase date) exceeds the purchase price paid by the
holder to acquire the STRYPES, the holder would be deemed to have acquired the
Debt Instrument for an amount equal to the fair market value of the Debt
Instrument (as determined on the purchase date) and would be deemed to have
assumed the Forward Contract component of the STRYPES in exchange for a
payment in an amount equal to the excess of the fair market value of the Debt
Instrument (as determined on the purchase date) over the purchase price paid
by the holder to acquire the STRYPES. In such event, such deemed payment
received by the holder in respect of the Forward Contract should only be taken
into account by the holder as an additional amount realized with respect to
the Forward Contract on the earlier of the sale or other disposition of the
STRYPES by the holder or the Maturity Date or redemption date (which could
either reduce the holder's tax basis in any SunAmerica Common Stock received
thereby or, if the STRYPES are paid in cash on the Maturity Date or upon
redemption or sold prior to the Maturity Date or redemption, increase the
amount of gain or decrease the amount of loss realized with respect to the
Forward Contract). Pursuant to the terms of the Indenture, with respect to
acquisitions of STRYPES in connection with the original issuance thereof, the
Company and the holders agree to assign $57.277 (i.e., 101.6%) of the initial
purchase price of a STRYPES (i.e., the issue price of a STRYPES) to the Debt
Instrument component and to assign $.902 (i.e., 1.6%) of the initial purchase
price of a STRYPES to the Forward Contract component. Based upon the
foregoing, pursuant to the agreement to treat each STRYPES as a Unit
consisting of the Debt Instrument and the Forward Contract, a holder who
acquires a STRYPES in connection with the original issuance thereof, will have
agreed to treat such acquisition of the STRYPES by the holder as a purchase of
the Debt Instrument by the holder for $57.277 and the receipt of an initial
payment by the holder with respect to the Forward Contract of $.902.
Under general principles of current United States Federal income tax law,
payments of interest on a debt instrument (e.g., the Debt Instrument)
generally will be taxable to a U.S. Holder as ordinary interest income at the
time such payments are accrued or are received (in accordance with the U.S.
Holder's regular method of tax accounting). In addition, a debt instrument
will be treated as having been issued with bond premium for United States
Federal income tax purposes to the extent that the issue price of the debt
instrument exceeds the stated redemption price at maturity of the debt
instrument (generally the debt instrument's stated principal amount). Pursuant
to the agreement to treat each STRYPES as a Unit consisting of the Debt
Instrument and the Forward Contract, each such Debt Instrument component will
be treated as having an issue price equal to $57.277. Since
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the issue price of each such Debt Instrument component (i.e., $57.277) exceeds
its stated redemption price at maturity (i.e., $56.375), the Debt Instrument
component of each Unit will be treated as having been issued at a premium.
Under the foregoing principles and in accordance with the agreement to treat
each STRYPES as a Unit consisting of the Debt Instrument and the Forward
Contract, subject to the bond premium rules (as discussed below), the
quarterly interest payments payable with respect to the STRYPES at the stated
interest rate of 7 1/4% of the issue price of the STRYPES per annum (the
"Interest Payments") generally will be taxable to a U.S. Holder as ordinary
interest income on the respective dates that such Interest Payments are
accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting). On the Maturity Date or upon redemption on or prior to the
Maturity Date, pursuant to the agreement to treat each STRYPES as a Unit
consisting of the Debt Instrument and the Forward Contract, a U.S. Holder will
recognize capital gain or loss with respect to the Debt Instrument in an
amount equal to the difference, if any, between the principal amount of the
Debt Instrument (i.e., the issue price of the STRYPES) (or, as discussed
below, in the event of a redemption, the redemption price) and such U.S.
Holder's adjusted tax basis (as defined below) in the Debt Instrument. Such
capital gain or loss will generally be long-term capital gain or loss if the
STRYPES has been held by the U.S. Holder for more than one year as of the
Maturity Date or the redemption date. In addition, pursuant to the agreement
to treat each STRYPES as a Unit consisting of the Debt Instrument and the
Forward Contract, on the Maturity Date or upon redemption on or prior to the
Maturity Date, if the Company delivers SunAmerica Common Stock upon payment of
the STRYPES, a U.S. Holder will generally not realize any taxable gain or loss
on the exchange, pursuant to the Forward Contract, of the principal amount of
the Debt Instrument (or, in the event of a redemption, the redemption price)
for the SunAmerica Common Stock. However, a U.S. Holder will generally be
required to recognize taxable gain or loss with respect to any cash received
in lieu of fractional shares. The amount of such gain or loss recognized by a
U.S. Holder will be equal to the difference, if any, between the amount of
cash received by the U.S. Holder and the portion of the sum of (or, the
difference between) the principal amount of the Debt Instrument (or, in the
event of a redemption, the redemption price) and the U.S. Holder's tax basis
in the Forward Contract (or, the amount deemed to have been realized by the
U.S. Holder in respect of the Forward Contract) that is allocable to the
fractional shares. Any such taxable gain or loss will be treated as short-term
capital gain or loss. A U.S. Holder will have an initial tax basis in any
SunAmerica Common Stock received on the Maturity Date or upon redemption on or
prior to the Maturity Date in an amount equal to the sum of (or, the
difference between) the principal amount of the Debt Instrument (or, in the
event of a redemption, the redemption price) and the U.S. Holder's tax basis
in the Forward Contract (or, the amount deemed to have been realized by the
U.S. Holder in respect of the Forward Contract) less the portion of such sum
(or difference) that is allocable to any fractional shares (as described
above) and will realize taxable gain or loss with respect to such SunAmerica
Common Stock received on the Maturity Date or upon redemption on or prior to
the Maturity Date only upon the subsequent sale or disposition by the U.S.
Holder of such SunAmerica Common Stock. In addition, a U.S. Holder's holding
period for any SunAmerica Common Stock received by such U.S. Holder on the
Maturity Date or upon redemption on or prior to the Maturity Date will begin
on the day immediately following the Maturity Date or redemption date and will
not include the period during which the U.S. Holder held such STRYPES. In
addition to the foregoing, in the event of redemption of the STRYPES, the
payment of all accrued and unpaid interest on the STRYPES to the redemption
date would constitute a payment of interest on the Debt Instrument and would
be taxed accordingly. The portion of the redemption price in excess of the
principal amount of the Debt Instrument (even if paid in shares of SunAmerica
Common Stock) should be treated as redemption premium on the Debt Instrument
and should give rise to long-term or short-term capital gain (depending upon
whether the U.S. Holder has held the STRYPES for more than one year as of the
redemption date). It is possible, however, that only the portion of the
redemption price in excess of $76.106 should be treated as redemption premium
on the Debt Instrument. In such event, the portion of the redemption price
equal to $19.731 would not give rise to long-term or short-term capital gain
and would not be includible in a U.S. Holder's tax basis in the SunAmerica
Common Stock received by such U.S. Holder upon redemption.
Alternatively, pursuant to the agreement to treat the STRYPES as a Unit
consisting of the Debt Instrument and the Forward Contract, if the Company
pays the STRYPES in cash on the Maturity Date (and assuming that the STRYPES
are not redeemed on the Maturity Date), a U.S. Holder will recognize taxable
gain or loss on the Maturity Date with respect to the Forward Contract (in
addition to any gain or loss recognized with respect to
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the Debt Instrument as described above) in an amount equal to the difference,
if any, between the total amount of cash received by such U.S. Holder on the
Maturity Date and an amount equal to the sum of (or, the difference between)
the principal amount of the Debt Instrument and the U.S. Holder's tax basis in
the Forward Contract (or, the amount deemed to have been realized by the U.S.
Holder in respect of the Forward Contract). It is uncertain whether such gain
or loss would be treated as capital or ordinary gain or loss. If such gain or
loss is properly treated as capital gain or loss, then such gain or loss will
be treated as long-term capital gain or loss if the STRYPES has been held by
the U.S. Holder for more than one year as of the Maturity Date. If such gain
or loss is properly treated as ordinary gain or loss, it is possible that the
deductibility of any loss recognized on the Maturity Date with respect to the
Forward Contract by a U.S. Holder who is an individual could be subject to the
limitations applicable to miscellaneous itemized deductions provided for under
Section 67(a) of the Internal Revenue Code of 1986, as amended (the "Code").
In general, Section 67(a) of the Code provides that an individual may only
deduct miscellaneous itemized deductions for a particular taxable year to the
extent that the aggregate amount of the individual's miscellaneous itemized
deductions for such taxable year exceed two percent of the individual's
adjusted gross income for such taxable year (although, the miscellaneous
itemized deductions allowable to high-income individuals are generally subject
to further limitations). If the Company delivers cash upon redemption of the
STRYPES (including a redemption on the Maturity Date), a U.S. Holder will
recognize taxable gain on the redemption date with respect to the Forward
Contract in an amount equal to any amount deemed to have been received by the
U.S. Holder in respect of the Forward Contract upon a purchase of the STRYPES
(as discussed above) or will recognize a taxable loss on the redemption date
with respect to the Forward Contract in an amount equal to the U.S. Holder's
tax basis (if any) in the Forward Contract. In the event that only the portion
of the redemption price in excess of $76.106 is treated as redemption premium
on the Debt Instrument, a U.S. Holder would be deemed to have realized an
additional $19.731 with respect to the Forward Contract (which would either
increase the amount of gain or decrease the amount of loss recognized by the
U.S. Holder with respect to the Forward Contract). Any such taxable gain or
loss should be treated as long-term capital gain or loss if the STRYPES has
been held by the U.S. Holder for more than one year as of the redemption date,
but could possibly be treated as ordinary gain or loss (in which case any such
ordinary loss could be subject to the limitations applicable to miscellaneous
itemized deductions described above). Prospective investors in the STRYPES are
urged to consult their own tax advisors concerning the character of any gain
or loss realized on the Maturity Date or the redemption date with respect to
the Forward Contract in the event that the Company elects to pay the STRYPES
in cash on the Maturity Date or the redemption date as well as the
deductibility of any such loss.
Pursuant to the agreement to treat each STRYPES as a Unit consisting of the
Debt Instrument and the Forward Contract, upon the sale or other disposition
of a STRYPES prior to the Maturity Date or the redemption of the STRYPES, a
U.S. Holder generally will be required to allocate the total amount realized
by such U.S. Holder upon such sale or other disposition (other than amounts
representing accrued and unpaid interest) between the two components of the
Unit (i.e., the Debt Instrument and the Forward Contract) based upon their
relative fair market values (as determined on the date of disposition).
Accordingly, in the event that the fair market value of the Debt Instrument
(as determined on the date of disposition) exceeds the actual amount realized
by the U.S. Holder upon the sale or other disposition of a STRYPES prior to
the Maturity Date or the redemption of the STRYPES, the U.S. Holder would be
deemed to have sold the Debt Instrument for an amount equal to the fair market
value of the Debt Instrument (as determined on the date of disposition) and
would be deemed to have made a payment to the purchaser of the STRYPES in
exchange for such purchaser's assumption of the Forward Contract in an amount
equal to the excess of the fair market value of the Debt Instrument (as
determined on the date of disposition) over the actual amount realized by the
U.S. Holder upon such sale or disposition of the STRYPES. A U.S. Holder will
generally be required to recognize taxable gain or loss with respect to each
such component in an amount equal to the difference, if any, between (or, in
some cases, the sum of) the amount realized (or paid) with respect to each
such component upon the sale or disposition of the STRYPES (as determined in
the manner described above) and the U.S. Holder's adjusted tax basis in each
such component (or, the amount deemed to have been realized by the U.S. Holder
in respect of the Forward Contract). Any such gain or loss will generally be
treated as long-term capital gain or loss if the U.S. Holder has held the
STRYPES for more than one year at the time of disposition.
As previously discussed, prospective investors in the STRYPES should be
aware that the IRS is not bound by the characterization of the STRYPES by the
Company and the holders thereof as a Unit consisting of the
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Debt Instrument and the Forward Contract, and the IRS could possibly assert a
different position as to the proper United States Federal income tax
characterization and treatment of the STRYPES. For instance, it is possible
that the IRS could assert that each STRYPES should be treated entirely as a
single debt instrument of the Company for United States Federal income tax
purposes.
If the STRYPES were ultimately characterized and treated entirely as debt
instruments of the Company for United States Federal income tax purposes, then
the timing and character of income, gain or loss recognized on a STRYPES would
differ from the timing and character of income, gain or loss recognized on a
STRYPES had each STRYPES in fact been characterized and treated for United
States Federal income tax purposes as a Unit consisting of the Debt Instrument
and the Forward Contract. If the STRYPES were ultimately characterized and
treated entirely as indebtedness of the Company for United States Federal
income tax purposes, under general principles of current United States Federal
income tax law, the interest payments on the STRYPES generally would be
taxable to a U.S. Holder as ordinary interest income on the respective dates
that such interest payments are accrued or are received (in accordance with
the U.S. Holder's regular method of tax accounting). Under this same analysis
and treatment of each STRYPES as a single debt instrument of the Company for
United States Federal income tax purposes, under general principles of current
United States Federal income tax law, if the fair market value (as determined
on the Maturity Date or redemption date) of the amount of SunAmerica Common
Stock or cash payable on the Maturity Date or the redemption date with respect
to a STRYPES exceeds the issue price thereof, such excess (except amounts
representing accrued and unpaid interest and possibly any portion of such
excess representing redemption premium) could be treated as contingent
interest and, if so treated, generally would be includible in income by a U.S.
Holder as ordinary interest on the Maturity Date or the redemption date
(regardless of the U.S. Holder's regular method of tax accounting). In
addition, if the fair market value (as determined on the Maturity Date or a
redemption date) of the amount of SunAmerica Common Stock or cash payable on
the Maturity Date or the redemption date with respect to a STRYPES exceeds the
issue price thereof, then such STRYPES would be treated as having been retired
on the Maturity Date or the redemption date in exchange for an amount equal to
the issue price thereof (plus possibly any amounts representing redemption
premium). If, however, the fair market value (as determined on the Maturity
Date or a redemption date) of the amount of SunAmerica Common Stock or cash
payable on the Maturity Date or the redemption date with respect to a STRYPES
is equal to or less than the issue price thereof, then such STRYPES would be
treated as having been retired on the Maturity Date or the redemption date in
exchange for an amount equal to the fair market value (as determined on the
Maturity Date or the redemption date) of the entire amount payable on the
Maturity Date or the redemption date with respect to such STRYPES (other than
amounts representing accrued and unpaid interest) and no portion of the amount
payable on the Maturity Date or the redemption date with respect to such
STRYPES would be treated as contingent interest. A U.S. Holder's initial tax
basis in any SunAmerica Common Stock received by such U.S. Holder on the
Maturity Date or a redemption date of a STRYPES would equal the fair market
value (as determined on the Maturity Date or the redemption date) of the
SunAmerica Common Stock received by such U.S. Holder. Furthermore, a U.S.
Holder's holding period for any SunAmerica Common Stock received by such U.S.
Holder on the Maturity Date or a redemption date of a STRYPES would begin on
the day immediately following the Maturity Date or the redemption date and
would not include the period during which the U.S. Holder held such STRYPES.
Moreover, under this analysis and treatment of each STRYPES as a single debt
instrument of the Company for United States Federal income tax purposes, upon
the sale, exchange or retirement of a STRYPES, a U.S. Holder generally would
recognize taxable gain or loss in an amount equal to the difference, if any,
between the amount realized on the sale, exchange or retirement (other than
amounts representing accrued and unpaid interest) and such U.S. Holder's
adjusted tax basis in the STRYPES. A U.S. Holder's adjusted tax basis in a
STRYPES generally would equal such U.S. Holder's initial investment in the
STRYPES (as adjusted pursuant to the market discount and bond premium rules
described below). Such gain or loss generally would be long-term capital gain
or loss if the STRYPES were held by the U.S. Holder for more than one year
(subject to the market discount rules, as discussed below). It is possible,
however, that under this analysis and treatment of the STRYPES the IRS could
assert that any amounts realized upon the sale or exchange of a STRYPES prior
to the Maturity Date or upon the redemption of the STRYPES in excess of the
STRYPES issue price constitutes ordinary interest income (subject to the bond
premium rules, as discussed below). Nonetheless, if the STRYPES
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were ultimately characterized and treated entirely as indebtedness of the
Company for United States Federal income tax purposes, although the matter is
not free from doubt, in the opinion of Brown & Wood, counsel to the Company,
under current law, any gain realized upon the sale or exchange of a STRYPES
prior to the Maturity Date or upon the redemption of the STRYPES should be
treated entirely as capital gain (subject to the market discount rules, as
discussed below).
Prospective investors in the STRYPES should also be aware that on December
15, 1994, the Treasury Department issued proposed regulations (the "Proposed
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments. In the event that the STRYPES were
characterized and treated entirely as debt instruments of the Company for
United States Federal income tax purposes, the STRYPES would be treated as
contingent payment debt instruments. The Proposed Regulations, however, are
proposed to only be effective 60 days after the date on which the Proposed
Regulations are published as final Treasury regulations. Accordingly, due to
the proposed prospective effective date of the Proposed Regulations, if
ultimately adopted in their current form, the Proposed Regulations would not
apply to the STRYPES even if the STRYPES were characterized and treated
entirely as debt instruments of the Company for United States Federal income
tax purposes. Furthermore, proposed Treasury regulations are not binding upon
either the IRS or taxpayers prior to becoming effective as temporary or final
regulations. In general, if ultimately adopted in their current form, the
Proposed Regulations would cause the timing and character of income, gain or
loss reported on a contingent payment debt instrument to substantially differ
from the timing and character of income, gain or loss reported on a contingent
payment debt instrument under general principles of current United States
Federal income tax law (as described immediately above). Prospective investors
in the STRYPES are urged to consult their own tax advisers concerning the
effect, if any, of the Proposed Regulations on their investment in the
STRYPES.
Prospective investors in the STRYPES should also be aware that it is
possible that the ultimate characterization and treatment of the STRYPES for
United States Federal income tax purposes could differ from the possible
characterizations and treatments described herein with the result that the
ultimate United States Federal income tax treatment of the purchase, ownership
and disposition of the STRYPES could significantly differ from any of the
treatments described herein.
Despite the foregoing, as previously discussed, pursuant to the agreement
contained in the Indenture to treat each STRYPES as a Unit consisting of the
Debt Instrument and the Forward Contract, the Company, where required,
currently intends to file information returns with the IRS treating each
STRYPES as a Unit consisting of the Debt Instrument and the Forward Contract
for United States Federal income tax purposes (as described above), in the
absence of any change or clarification in the law, by regulation or otherwise,
requiring another characterization and treatment of the STRYPES for United
States Federal income tax purposes.
MARKET DISCOUNT AND PREMIUM
In general, if a U.S. Holder purchases a debt instrument (e.g., the Debt
Instrument component of a Unit) for an amount that is less than the principal
amount thereof, the amount of the difference will be treated as "market
discount," unless such difference is less than a specified de minimis amount
(generally 1/4 of 1% of the debt instrument's stated principal amount
multiplied by the number of complete years to maturity from the date the U.S.
Holder purchased such debt instrument).
Under the market discount rules, a U.S. Holder will be required to treat any
gain realized on the sale, exchange, retirement or other disposition of a debt
instrument as ordinary income to the extent of the lesser of (i) the amount of
such realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such debt instrument at
the time of such payment or disposition. Market discount will be considered to
accrue ratably during the period from the date of acquisition to the maturity
of the debt instrument, unless the U.S. Holder elects to accrue market
discount on the basis of semiannual compounding.
S-26
<PAGE>
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a debt instrument with market discount until the maturity of
the debt instrument or its earlier disposition in a taxable transaction and
certain nontaxable transactions, because a current deduction is only allowed
to the extent that the interest expense exceeds an allocable portion of the
market discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the deferral of interest
deductions will not apply. Generally, such currently included market discount
is treated as ordinary interest income for United States Federal income tax
purposes and a U.S. Holder would increase its tax basis in a debt instrument
by the amount of any such currently included market discount. Such an election
will apply to all debt instruments acquired by the U.S. Holder on or after the
first day of the first taxable year to which such election applies and may be
revoked only with the consent of the IRS.
In general, if a U.S. Holder purchases a debt instrument for an amount that
is greater than the principal amount thereof, such U.S. Holder will be
considered to have purchased the debt instrument with "amortizable bond
premium" equal in amount to such excess. A U.S. Holder may elect to amortize
such premium using a constant yield method over the remaining term of the debt
instrument and may offset ordinary interest otherwise required to be included
in respect of the debt instrument during any taxable year by the amortized
amount of such premium for such year (or, prior years, if such amortized
premium for prior years has not yet offset interest) and would reduce its tax
basis in the debt instrument by the amount of any such interest offset taken.
Such election, if made, would apply to all debt instruments held by the U.S.
Holder at the beginning of the taxable year to which such election applies and
to all debt instruments acquired by the U.S. Holder thereafter. Such election
would also be irrevocable once made, unless the U.S. Holder making such an
election obtains the express written consent of the IRS to revoke such
election.
MISCELLANEOUS TAX MATTERS
Special tax rules may apply to persons holding a STRYPES as part of a
"synthetic security" or other integrated investment, or as part of a straddle,
hedging transaction or other combination of offsetting positions. For
instance, Section 1258 of the Code may possibly require certain U.S. Holders
of the STRYPES who enter into hedging transactions or offsetting positions
with respect to the STRYPES to treat all or a portion of any gain realized on
the STRYPES as ordinary income in instances where such gain may have otherwise
been treated as capital gain. U.S. Holders hedging their positions with
respect to the STRYPES or otherwise holding their STRYPES in a manner
described above should consult their own tax advisors regarding the
applicability of Section 1258 of the Code, or any other provision of the Code,
to their investment in the STRYPES.
NON-U.S. HOLDERS
Based on the treatment of each STRYPES as a Unit consisting of the Debt
Instrument and the Forward Contract, in the case of a non-U.S. Holder,
payments made with respect to the STRYPES should not be subject to United
States withholding tax, provided that such non-U.S. Holder complies with
applicable certification requirements. Any capital gain realized upon the sale
or other disposition of a STRYPES by a non-U.S. Holder will generally not be
subject to United States Federal income tax if (i) such gain is not
effectively connected with a United States trade or business of such non-U.S.
Holder and (ii) in the case of an individual non-U.S. Holder, such individual
is not present in the United States for 183 days or more in the taxable year
of the sale or other disposition, or the gain is not attributable to a fixed
place of business maintained by such individual in the United States and such
individual does not have a "tax home" (as defined for United States Federal
income tax purposes) in the United States.
As discussed above, alternative characterizations of the STRYPES for United
States Federal income tax purposes are possible. Should an alternative
characterization of the STRYPES, by reason of a change or clarification of the
law, by regulation or otherwise, cause payments with respect to the STRYPES to
become subject to withholding tax, the Company will withhold tax at the
statutory rate. Prospective non-U.S. Holders of the STRYPES should consult
their own tax advisors in this regard.
S-27
<PAGE>
BACKUP WITHHOLDING AND INFORMATION REPORTING
A beneficial owner of a STRYPES may be subject to information reporting and
to backup withholding at a rate of 31 percent of certain amounts paid to the
beneficial owner unless such beneficial owner provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the backup withholding rules.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Underwriter"), and the Underwriter has agreed to purchase
from the Company, 3,000,000 STRYPES. Under the terms and conditions of the
Underwriting Agreement, the Underwriter is committed to take and pay for all
of the STRYPES, if any are taken.
The Underwriter has advised the Company that it proposes initially to offer
the STRYPES directly to the public at the public offering price set forth on
the cover page of this Prospectus Supplement, and to certain dealers at such
price less a concession not to exceed $1.00 per STRYPES. After the initial
public offering, the public offering price and concession may be changed.
The Company has granted the Underwriter an option exercisable for 30 days
after the date of this Prospectus Supplement to purchase up to an aggregate of
450,000 additional STRYPES at the public offering price set forth on the cover
page of this Prospectus Supplement, less the underwriting discount. The
Underwriter may exercise this option only to cover over-allotments, if any,
made on the sale of the STRYPES offered hereby.
SunAmerica has agreed, subject to certain limited exceptions, that it will
not, and will cause its subsidiaries not to, without the prior written consent
of the Underwriter, directly or indirectly, for a period of 60 days after the
date of this Prospectus Supplement, sell, offer to sell, grant any option for
the sale of, or otherwise dispose of, or enter into any agreement to sell, any
SunAmerica Common Stock or any securities convertible into or exchangeable or
exercisable for any SunAmerica Common Stock. The Selling Stockholder has
agreed, subject to certain limited exceptions, not to sell, for a period of 60
days after the date of this Prospectus Supplement, any shares of SunAmerica
Common Stock or any shares of SunAmerica's Transferable or Nontransferable
Class B Stock owned by the Selling Stockholder without the prior written
consent of the Underwriter; provided, however, that such restriction shall not
effect the ability of the Selling Stockholder to take any such action as may
be required pursuant to or in connection with the Stock Agreement.
The underwriting of the STRYPES will conform to the requirements set forth
in the applicable sections of Schedule E to the By-Laws of the National
Association of Securities Dealers, Inc.
The STRYPES have been approved for listing on the NYSE, subject to official
notice of issuance.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act relating to this
Prospectus Supplement and the ML&Co. Prospectus (including the documents
incorporated by reference therein).
VALIDITY OF THE STRYPES
The validity of the STRYPES offered hereby will be passed upon for the
Company and for the Underwriter by Brown & Wood, New York, New York.
S-28
<PAGE>
PROSPECTUS
LOGO
MERRILL LYNCH & CO., INC.
STRYPESSM
PAYABLE WITH SHARES OF COMMON STOCK OR OTHER SECURITIES
OF THE UNDERLYING ISSUER
(OR CASH WITH AN EQUAL VALUE)
----------------
Merrill Lynch & Co., Inc. (the "Company") intends to sell from time to time
its Structured Yield Product Exchangeable for Stock SM, STRYPES SM. The
STRYPES will be offered to the public in series and on terms determined by
market conditions at the time of sale and set forth in the accompanying
prospectus supplement (the "Prospectus Supplement"). The STRYPES will be
unsecured obligations of the Company ranking pari passu with all of its other
unsecured and unsubordinated indebtedness. See "Description of the STRYPES--
Ranking."
On the maturity date of each series of STRYPES (the "Maturity Date"), the
Company will pay and discharge such STRYPES by delivering to the holder
thereof a number of shares of common stock or other securities (the
"Underlying Securities") of the unaffiliated corporation identified in the
Prospectus Supplement (the "Underlying Issuer") determined in accordance with
a payment rate formula specified in the Prospectus Supplement (subject to the
Company's right to deliver, with respect to all, but not less than all,
STRYPES of such series, cash with an equal value). THERE CAN BE NO ASSURANCE
THAT THE VALUE OF THE UNDERLYING SECURITIES (OR CASH) PAYABLE TO HOLDERS OF A
SERIES OF STRYPES ON THE MATURITY DATE WILL BE EQUAL TO OR GREATER THAN THE
ISSUE PRICE OF SUCH STRYPES. IF THE VALUE OF THE UNDERLYING SECURITIES (OR
CASH) RECEIVED ON THE MATURITY DATE OF A SERIES OF STRYPES IS LESS THAN THE
ISSUE PRICE PAID FOR SUCH STRYPES, AN INVESTMENT IN STRYPES WILL RESULT IN A
LOSS. SEE "DESCRIPTION OF THE STRYPES."
Each series of STRYPES may vary, where applicable, as to aggregate issue
price, Maturity Date, Underlying Issuer, Underlying Securities deliverable
upon maturity, formula or other method by which the amount of such Underlying
Securities will be determined, public offering or purchase price, interest
rate or rates, if any, and timing of payments thereof, provision for
redemption, currencies of denomination or currencies otherwise applicable
thereto and any other variable terms and method of distribution. The
accompanying Prospectus Supplement sets forth the specific terms with regard
to the series of STRYPES in respect of which this Prospectus is being
delivered.
Reference is made to any accompanying prospectus of the Underlying Issuer
covering the Underlying Securities which may be received by holders of a
series of STRYPES on the Maturity Date.
----------------
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 STRYPES may be sold through Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"). STRYPES may not be sold without
delivery of a Prospectus Supplement describing such issue of STRYPES and the
method and terms of offering thereof, and any accompanying prospectus of the
Underlying Issuer covering the Underlying Securities which may be received by
holders of a series of STRYPES on the Maturity Date.
- --------
SMService mark of Merrill Lynch & Co., Inc.
----------------
The date of this Prospectus is June 6, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and Northeast Regional Office, Seven
World Trade Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Reports, proxy and
information statements and other information concerning the Company may also
be inspected at the offices of the New York Stock Exchange, the American Stock
Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 29,
1995, Quarterly Report on Form 10-Q for the period ended March 29, 1996, and
Current Reports on Form 8-K dated January 17, 1996, January 22, 1996, February
7, 1996, February 29, 1996, March 1, 1996, March 12, 1996, March 18, 1996,
April 1, 1996, April 15, 1996, May 1, 1996, May 13, 1996, May 15, 1996 and May
29, 1996 filed pursuant to Section 13 of the Exchange Act, are hereby
incorporated by reference into this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the STRYPES shall be deemed to be
incorporated by reference into this Prospectus and to be a 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 TO WHOM THIS
PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
(WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE)
OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T. RUSSO,
SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR, NEW YORK,
NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF
INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSION OF INSURANCE
RULED UPON THE ACCURACY OR THE ADEQUACY OF THIS DOCUMENT.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one of
the largest securities firms in the world, is a leading broker in securities,
options contracts, and commodity and financial futures contracts; a leading
dealer in options and in corporate and municipal securities; a leading
investment banking firm that provides advice to, and raises capital for, its
clients; and an underwriter of selected insurance products. Other subsidiaries
provide financial services on a global basis similar to those of MLPF&S and
are engaged in such other activities as international banking, lending, and
providing other investment and financing services. Merrill Lynch International
Incorporated, through subsidiaries and affiliates, provides investment,
financing, and related services outside the United States and Canada. Merrill
Lynch Asset Management, LP and Fund Asset Management, LP together constitute
one of the largest mutual fund managers in the world and provide investment
advisory services. Merrill Lynch Government Securities Inc. is a primary
dealer in obligations issued or guaranteed by the U.S. Government and its
agencies. Merrill Lynch Capital Services, Inc., Merrill Lynch Derivative
Products, Inc., and Merrill Lynch Capital Markets PLC are the Company's
primary derivative product dealers and enter into interest rate and currency
swaps and other derivative transactions as intermediaries and as principals.
The Company's insurance underwriting operations consist of the underwriting of
life insurance and annuity products. Banking, trust, and mortgage lending
operations conducted through subsidiaries of the Company include issuing
certificates of deposit, offering money market deposit accounts, making
secured loans, and providing foreign exchange trading facilities and other
related services.
The principal executive office of the Company is located at World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281; its telephone
number is (212) 449-1000.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the STRYPES for
general corporate purposes. Such uses may include the funding of investments
in, or extensions of credit to, its subsidiaries, the funding of assets held
by the Company or its subsidiaries, including securities inventories, customer
receivables and loans (including business loans, home equity loans, and loans
in connection with investment banking-related merger and acquisition
activities), and the refunding of maturing indebtedness. The precise amount
and timing of investments in, and extensions of credit to, its subsidiaries
will depend upon their funding requirements and the availability of other
funds to the Company and its subsidiaries. Pending such applications, the net
proceeds will be temporarily invested or applied to the reduction of short-
term indebtedness. Management of the Company expects that it will, on a
recurrent basis, engage in additional financings as the need arises to finance
the growth of the Company or to lengthen the average maturity of its
borrowings. To the extent that STRYPES being purchased for resale by MLPF&S
are not resold, the aggregate proceeds to the Company and its subsidiaries
would be reduced.
3
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following summary of consolidated financial information was derived
from, and is qualified in its entirety by reference to, the financial
statements and other information and data contained in the Company's Annual
Report on Form 10-K for the year ended December 29, 1995 and Quarterly Report
on Form 10-Q for the period ended March 29, 1996 (the "Quarterly Report"). See
"Incorporation of Certain Documents by Reference." The condensed consolidated
financial statements contained in the Quarterly Report are unaudited; however,
in the opinion of management of the Company, all adjustments, consisting only
of normal recurring accruals, necessary for a fair statement of the results of
operations have been included. The year-end results include 52 weeks for 1991,
1992, 1994, and 1995 and 53 weeks for 1993.
The Company conducts its business in highly volatile markets. Consequently,
the Company's results can be affected by many factors, including general
market conditions, the liquidity of secondary markets, the level and
volatility of interest rates and currency values, the valuation of securities
positions, competitive conditions, and the size, number, and timing of
transactions. In periods of unfavorable market activity, profitability can be
adversely affected because certain expenses remain relatively fixed. As a
result, net earnings and revenues can vary significantly from period to
period.
<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY IN DECEMBER THREE MONTHS ENDED
--------------------------------------------- -------------------
MARCH 31, MARCH 29,
1991 1992 1993 1994 1995 1995 1996
------- -------- -------- -------- -------- --------- ---------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $12,353 $ 13,413 $ 16,588 $ 18,234 $ 21,513 $ 5,204 $ 6,019
Net revenues............ $ 7,246 $ 8,577 $ 10,558 $ 9,625 $ 10,265 $ 2,421 $ 3,261
Earnings before income $ 1,017 $ 1,621 $ 2,425 $ 1,730 $ 1,811 $ 380 $ 671
taxes and cumulative
effect of changes in
accounting
principles(1)..........
Cumulative effect of -- $ (58) $ (35) -- -- -- --
changes in accounting
principles (net of
applicable income
taxes)(1)..............
Net earnings(1)......... $ 696 $ 894 $ 1,359 $ 1,017 $ 1,114 $ 228 $ 409
Ratio of earnings to 1.2 1.3 1.4 1.2 1.2 1.1 1.2
fixed charges(2)........
Total assets(3)......... $86,259 $107,024 $152,910 $163,749 $176,857 $176,733 $195,884
Long-term borrowings(4). $ 7,964 $ 10,871 $ 13,469 $ 14,863 $ 17,340 $ 14,485 $ 20,226
Stockholders' equity.... $ 3,818 $ 4,569 $ 5,486 $ 5,818 $ 6,141 $ 5,704 $ 6,364
</TABLE>
- --------
(1) Net earnings for 1992 have been reduced by $58 million to reflect the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 106,
Employers' Accounting for Postretirement Benefits Other than Pensions, and
SFAS No. 109, Accounting for Income Taxes. Net earnings for 1993 were
reduced by $35 million to reflect the adoption of SFAS No. 112, Employers'
Accounting for Postemployment Benefits.
(2) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
(3) In 1994, the Company adopted Financial Accounting Standards Board ("FASB")
Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts,
and FASB Interpretation No. 41, Offsetting of Amounts Related to Certain
Repurchase and Reverse Repurchase Agreements, which increased assets and
liabilities at December 30, 1994 by approximately $8,500 million.
(4) To finance its diverse activities, the Company and certain of its
subsidiaries borrow substantial amounts of short-term funds on a regular
basis. Although the amount of short-term borrowings varies significantly
with the level of general business activity, on March 29, 1996, $526
million of bank loans and $17,222 million of commercial paper were
outstanding. In addition, certain of the Company's subsidiaries lend
securities and enter into repurchase agreements to obtain financing. At
March 29, 1996, cash deposits for securities loaned and securities sold
under agreements to repurchase amounted to $3,768 million and $61,657
million, respectively. From March 30, 1996 to June 4, 1996, long-term
borrowings, net of repayments and repurchases, increased by approximately
$1,176 million.
4
<PAGE>
FISCAL YEAR 1995
Global financial markets, which steadily weakened during most of 1994,
generally improved during 1995, led by a more stable U.S. economy, declining
interest rates, and heightened investor activity. Inflationary fears eased
throughout 1995 as key U.S. economic statistics indicated slow to moderate
growth. The Federal Reserve decreased short-term interest rates in July and
December 1995 following seven rate increases between February 1994 and
February 1995. Investors reacted favorably to these events and were more
active in stock and bond markets during 1995. Net earnings for the 1995 fourth
quarter were $303 million, up 1% from the 1995 third quarter and up 88% from
the 1994 fourth quarter.
Net earnings for 1995 were $1,114 million, up 10% from 1994 net earnings of
$1,017 million. Earnings per common share were $5.44 primary and $5.42 fully
diluted in 1995, compared with $4.75 primary and $4.74 fully diluted in 1994.
Total revenues were a record $21,513 million, up 18% from 1994. Net revenues
(revenues after interest expense) totaled $10,265 million in 1995, up 7% from
1994.
Commission revenues increased 9% to a record $3,126 million from $2,871
million in 1994, due primarily to higher levels of listed and over-the-counter
securities transactions and mutual fund commissions, partially offset by lower
revenues from commodities. Commissions from listed and over-the-counter
securities increased due primarily to higher trading volumes on most major
U.S. and international exchanges. Mutual fund commissions increased due
primarily to higher distribution and redemption fees. Distribution fees from
deferred-charge funds increased due to strong fund sales in prior periods and
higher asset levels. Redemption fees increased as clients repositioned
invested assets.
Interest and dividend revenues increased 28% to $12,221 million from $9,578
million in 1994. Interest expense, which includes dividend expense, increased
31% from 1994 to $11,248 million. Net interest and dividend profit was $973
million, virtually unchanged from $969 million in 1994, with increases in net
interest-earning assets offset by declining interest spreads due to the
flattening of the U.S. Treasury yield curve. The change in the yield curve
resulted from long-term interest rates falling more than short-term rates
during 1995.
Principal transactions revenues increased 8% from 1994 to $2,519 million in
1995. Increases in equities and equity derivatives and taxable fixed-income
trading revenues were partially offset by decreases in trading revenues from
municipal securities, foreign exchange and commodities, and interest rate and
currency swaps. Equities and equity derivatives trading revenues, in the
aggregate, increased 46% to $912 million, due primarily to improved volumes in
the convertible, over-the-counter, and international equities markets,
partially offset by lower equity derivatives trading revenues. Taxable fixed-
income trading revenues increased 10% to $516 million due, in part, to higher
revenues from corporate bonds and preferred stock, high-yield bonds, and non-
U.S. governments and agencies securities. Trading revenues from mortgage-
backed products were negatively affected by reduced market liquidity, leading
to a loss. Nevertheless, trading results from mortgage-backed products, which
include related net interest revenues, were positive. U.S. Government and
agencies securities trading revenues were down from 1994 due to tighter
spreads between U.S. Treasury securities and related futures hedges, as well
as reduced retail investor demand attributable to lower interest rates.
Municipal securities revenues decreased 28% to $273 million as a result of
decreased investor demand for tax-exempt investments as investors remained
wary of potential tax law changes and sought higher returns in equity and
taxable fixed-income securities. Foreign exchange and commodities revenues, in
the aggregate, declined 22% to $86 million. Commodities trading revenues
decreased due to lower volumes. Increases in foreign exchange trading revenues
resulted from higher customer volume caused by the strengthening of the U.S.
dollar versus other major currencies during 1995. Interest rate and currency
swaps revenues declined 2% to $732 million. Decreases in U.S. dollar-
denominated transactions were substantially offset by increased revenues in
non-dollar-denominated transactions, particularly in Japanese and European
markets.
Investment banking revenues were $1,308 million, up 5% from $1,240 million
in 1994. Strategic services revenues, which include fees for merger and
acquisition activity, debt restructuring, and other advisory services,
5
<PAGE>
increased, as companies worldwide sought strategic partners to promote growth
while cutting costs and increasing efficiencies. Underwriting revenues were
down, as lower revenues from equities, private placements, high-yield debt,
and mortgage-backed securities underwriting were partially offset by increased
underwriting revenues from corporate bonds and preferred stock and defined
asset funds.
Asset management and portfolio service fees rose 9% in 1995 to a record
$1,890 million from $1,739 million in 1994, as a result of higher fees earned
from asset management and other fee-based services. Other revenues decreased
5% from 1994 to $449 million, due to lower net realized investment gains in
1995 compared with 1994.
Non-interest expenses were $8,454 million, up 7% from $7,895 million in the
year-ago period. Compensation and benefits expense, which represented
approximately 62% of non-interest expenses, increased 6% due primarily to
increased production-related and incentive compensation and the addition of
Smith New Court PLC ("Smith New Court") employees. Compensation and benefits
expense as a percentage of net revenues was 51.3% in 1995, compared with 51.5%
in 1994.
Occupancy costs increased 3% from 1994 primarily due to international
growth. Other facilities-related costs, which include communications and
equipment rental expense and depreciation and amortization expenses, rose 13%
primarily due to expanded use of market data services, as well as higher
depreciation expense from the purchase of technology-related assets over the
past year.
Professional fees increased 16% from the year-ago period, due to higher
legal fees and systems development costs related to upgrading technology and
processing capabilities in customer, trading, and transaction processing
systems. Advertising and market development expenses increased 6% from 1994 as
a result of increased advertising, international travel, and sales promotion
primarily related to international growth. Brokerage, clearing, and exchange
fees increased 7% as a result of higher securities volume, particularly in
international markets. Other expenses increased 4% from 1994, due primarily to
a $26 million first quarter charge for the write-off of assets related to a
technology contract and $14 million of goodwill amortization related to Smith
New Court.
Income tax expense totaled $697 million in 1995. The effective tax rate in
1995 was 38.5%, compared with 41.2% in 1994. The decrease in the effective tax
rate was attributable to lower state income taxes, expanded international
business activities in jurisdictions with lower tax rates, and increases in
deductions for dividends received.
In 1995 the Company acquired Smith New Court, a U.K.-based global securities
firm, for approximately $800 million. The Company recorded approximately $530
million of goodwill related to the acquisition, which is being amortized on a
straight-line basis over 15 years. The Company's 1995 results include those of
Smith New Court since mid-August 1995.
CERTAIN BALANCE SHEET INFORMATION AS OF DECEMBER 29, 1995
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.
In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its investment banking,
market-making, and derivative structuring activities. These activities are
subject to risks related to the creditworthiness of the issuers of, and the
liquidity of the market for, such securities, in addition to the usual risks
associated with investing in, financing, underwriting, and trading in
investment grade instruments.
At December 29, 1995, the fair value of long and short non-investment grade
trading inventories amounted to $5,489 million and $353 million, respectively,
and in the aggregate (i.e. the sum of long and short trading inventories)
represented 6.3% of aggregate consolidated trading inventories.
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At December 29, 1995, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $489 million
(excluding unutilized revolving lines of credit and other lending commitments
of $127 million), consisting primarily of senior term and subordinated
financings to 30 medium-sized corporations. At December 29, 1995, the Company
had no bridge loans outstanding. Loans to highly leveraged corporations are
carried at unpaid principal balances less a reserve for estimated losses. The
allowance for loan losses is estimated based on a review of each loan, and
consideration of economic, market, and credit conditions. Direct equity
investments made in conjunction with the Company's investment and merchant
banking activities aggregated $211 million at December 29, 1995, representing
investments in 62 enterprises. Equity investments in privately-held companies
for which sale is restricted by government or contractual requirements are
carried at the lower of cost or estimated net realizable value. At December
29, 1995, the Company held interests in partnerships, totaling $91 million
(recorded on the cost basis), that invest in highly leveraged transactions and
non-investment grade securities. At December 29, 1995, the Company also
committed to invest an additional $79 million in partnerships that invest in
leveraged transactions.
The Company's insurance subsidiaries hold non-investment grade securities.
Non-investment grade securities were 4.2% of total insurance investments at
December 29, 1995. Non-investment grade securities of insurance subsidiaries
are classified as available-for-sale and are carried at fair value.
At December 29, 1995, the largest non-investment grade concentration
consisted of various issues of a South American sovereign totaling $674
million, of which $672 million represented on-balance-sheet hedges for off-
balance-sheet financial instruments. No one industry sector accounted for more
than 35% of total non-investment grade positions. At December 29, 1995, the
Company held an aggregate carrying value of $164 million in debt and equity
securities of issuers in various stages of bankruptcy proceedings or in
default, of which 75% resulted from the Company's market-making activities in
such securities.
FIRST QUARTER 1996
Global financial markets were generally strong during 1995, led by a stable
U.S. economy, declining interest rates, and heightened investor activity.
Market expectations for additional declines in interest rates continued
through February 1996, fueling further market advances, strong investor and
issuer activity, higher fee-based revenues, and improved trading profits
industrywide. In March 1996, inflationary fears were stirred by the release of
U.S. economic statistics indicating stronger than anticipated growth and the
Federal Reserve's decision to hold short-term interest rates at current
levels. This led to increases in long-term interest rates and greater market
volatility, although interest rates remained low relative to the year-ago
period.
Net earnings for the 1996 first quarter were a record $409 million, up 80%
from 1995 first quarter net earnings of $228 million. Earnings per common
share were $2.03 primary and fully diluted in the 1996 first quarter, compared
with $1.08 primary and fully diluted in the 1995 first quarter. Total revenues
were a record $6,019 million in the first quarter of 1996, up 16% from the
1995 first quarter. Net revenues (revenues after interest expense) totaled
$3,261 million in the first quarter of 1996, up 35% from the 1995 first
quarter.
Commissions revenues rose 44% to a record $989 million from $685 million in
the 1995 first quarter. Commissions revenues from listed and over-the-counter
securities increased to record levels due to higher trading volumes on most
major U.S. and international exchanges. Mutual fund commissions advanced to
record levels due to strong sales of both domestic and offshore funds.
Interest and dividend revenues decreased to $3,010 million from $3,030
million in the 1995 first quarter. Interest expense, which includes dividend
expense, decreased to $2,758 million from $2,783 million in the year-
ago quarter. Net interest and dividend profit was $252 million, up slightly
from $247 million in 1995, with increases in net interest-earning assets
substantially offset by the effect of lower interest rates.
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Principal transactions revenues increased 46% from the 1995 first quarter to
a record $982 million, as higher investor activity and market volatility led
to increases in virtually all trading products. Equities and equity
derivatives trading revenues, in the aggregate, were up 109% to $347 million.
Trading revenues from most equity products increased, due primarily to higher
trading volume and rising stock prices. International equities trading
revenues, in particular, benefited from the addition of Smith New Court
trading activity. Taxable fixed-income trading revenues rose 62% to $265
million due primarily to higher revenues from non-U.S. governments and
agencies, mortgage-backed securities, and high-yield bonds. Non-U.S.
governments and agencies trading revenues advanced due to improved results
from trading of Japanese Government Bonds, as well as increased trading volume
in certain Latin American emerging markets as credit ratings improved and
investors sought higher returns. Mortgage-backed securities trading revenues
increased due primarily to improved liquidity and increased customer demand
compared with the year-ago period. Trading revenues from high-yield bonds were
up due to lower interest rates and improved credit ratings of certain issuers.
Interest rate and currency swap trading revenues increased 9% to $255 million
due to higher trading revenues from non-U.S. dollar-denominated transactions,
partially offset by decreases in revenues from U.S. dollar-denominated
transactions. Foreign exchange and commodities trading revenues, in the
aggregate, rose 94% from the 1995 first quarter to $40 million, as foreign
exchange trading revenues continued to benefit from the strengthening of the
U.S. dollar versus other major currencies. Municipal securities trading
revenues declined 17% to $75 million, primarily due to continued weak investor
demand for tax-exempt investments.
Investment banking revenues were $378 million, up 52% from $249 million in
the 1995 first quarter. Underwriting revenues increased 82%, benefiting from
strong levels of debt and equity underwriting industrywide, with higher fees
from convertibles, corporate bonds and preferred stock, equities, and high-
yield securities. Strategic services revenues were down slightly from a year
ago, but remained comparable to record 1995 levels, benefiting from continued
strong merger and acquisition activity.
Asset management and portfolio service fees rose 20% in 1996 to a record
$538 million from $448 million in the first quarter of 1995, primarily as a
result of strong inflows of client assets. Other revenues were $122 million,
up 4% from $117 million reported in the 1995 first quarter.
Non-interest expenses were $2,590 million, up 27% from $2,041 million in the
year-ago period. Compensation and benefits expense, which represented
approximately 65% of non-interest expenses, increased 33% due primarily to
higher incentive and production-related compensation as well as a 6% increase
in the number of full-time employees, largely due to acquisitions.
Compensation and benefits expense as a percentage of net revenues was 51.8% in
the first quarter of 1996, compared with 52.5% in the 1995 first quarter.
Occupancy costs increased 5% from the 1995 first quarter primarily due to
international growth. Other facilities-related costs, which include
communications and equipment rental expense and depreciation and amortization
expense, rose 16% primarily due to higher levels of business activity and
increased use of market data services, as well as higher depreciation expense
from the purchase of technology-related assets over the past year.
Professional fees increased 32% from the year ago period, primarily as a
result of higher systems development costs related to upgrading technology and
processing capabilities. Advertising and market development expenses increased
33% from the 1995 first quarter. Increased international travel and higher
advertising and client promotion costs contributed to this advance. Brokerage,
clearing, and exchange fees rose 27% as a result of higher trading volume,
particularly in international markets. Other expenses increased 4% from 1995,
primarily due to goodwill amortization related to Smith New Court.
Income tax expense totaled $262 million in the 1996 first quarter. The
effective tax rate in the 1996 first quarter was 39.0%, compared with 40.0% in
the first quarter of 1995. The decrease in the effective tax rate was
primarily attributable to increases in dividends qualifying for the Federal
dividends received deduction, lower state taxes, and expanded international
business activities.
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CERTAIN BALANCE SHEET INFORMATION AS OF MARCH 29, 1996
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.
In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its investment banking,
market-making, and derivative structuring activities. These activities are
subject to additional risks related to the creditworthiness of the issuers and
the liquidity of the market for such securities.
At March 29, 1996, the fair value of long and short non-investment grade
trading inventories amounted to $6,026 million and $529 million, respectively,
and in the aggregate (i.e., the sum of long and short trading inventories)
represented 6.6% of aggregate consolidated trading inventories.
At March 29, 1996, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $517 million
(excluding unutilized revolving lines of credit and other lending commitments
of $75 million), consisting primarily of senior term and subordinated
financings to 34 medium-sized corporations. In addition, at March 29, 1996,
the Company had an outstanding bridge loan of $90 million, and as of May 6,
1996, the Company had an outstanding bridge loan commitment for $100 million.
Direct equity investments made in conjunction with the Company's investment
and merchant banking activities aggregated $189 million at March 29, 1996,
representing investments in 62 enterprises. At March 29, 1996, the Company
held interests in partnerships, totaling $82 million, that invest in highly
leveraged transactions and non-investment grade securities. At March 29, 1996,
the Company also committed to invest an additional $83 million in partnerships
that invest in leveraged transactions.
The Company's insurance subsidiaries hold non-investment grade securities.
Non-investment grade securities were 4.7% of total insurance investments at
March 29, 1996. Non-investment grade securities of insurance subsidiaries are
classified as available-for-sale and are carried at fair value.
At March 29, 1996, the largest non-investment grade concentration consisted
of various issues of a South American sovereign totaling $764 million, which
primarily represented on-balance-sheet hedges for off-balance-sheet financial
instruments. No one industry sector accounted for more than 31% of total non-
investment grade positions. At March 29, 1996, the Company held an aggregate
carrying value of $169 million in debt and equity securities of issuers in
various stages of bankruptcy proceedings or in default, of which 80% resulted
from the Company's market-making activities in such securities.
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DESCRIPTION OF THE STRYPES
Each issue of STRYPES will be a series of Senior Debt Securities to be
issued under an indenture (the "Chemical Indenture"), dated as of April 1,
1983, as amended and restated, between the Company and Chemical Bank
(successor by merger to Manufacturers Hanover Trust Company), as trustee (the
"Trustee"), as further amended and supplemented by a supplemental indenture to
be entered into by the Company and the Trustee relating to each series of
STRYPES (the "Supplemental Indenture") (the Chemical Indenture, as so amended
and supplemented by the Supplemental Indenture with respect to each series of
STRYPES, the "Indenture"). The following summary of certain provisions of the
Indenture does not purport to be complete and is qualified in its entirety by
reference to the Indenture. All capitalized terms not otherwise defined herein
have the meanings specified in the Indenture. Whenever defined terms of the
Indenture are referred to herein, such defined terms are incorporated by
reference herein.
GENERAL
The Supplemental Indenture will provide that STRYPES of the related series
may be issued from time to time under the Indenture, up to a specified
aggregate issue price, upon satisfaction of certain conditions precedent. The
Supplemental Indenture will establish the terms of the related series of
STRYPES, including: (1) the issue price per STRYPES; (2) the date on which
such STRYPES will mature; (3) the consideration deliverable or payable with
respect to such STRYPES, whether at maturity or upon earlier acceleration, and
the formula or other method by which the amount of such consideration will be
determined; (4) the rate or rates per annum (which may be fixed or variable)
at which such STRYPES will bear interest, if any; (5) the dates on which such
interest, if any, will be payable; (6) the provisions for redemption of such
STRYPES, if any, the redemption price and any remarketing arrangements
relating thereto; (7) the sinking fund requirements, if any, with respect to
such STRYPES; (8) whether such STRYPES are denominated or provide for payment
in United States dollars or a foreign currency or units of two or more of such
foreign currencies; (9) whether and under what circumstances the Company will
pay additional amounts ("Additional Amounts") in respect of such STRYPES held
by a person who is not a U.S. person (as defined in the Prospectus Supplement,
as applicable) in respect of specified taxes, assessments or other
governmental charges and whether the Company has the option to redeem the
affected STRYPES rather than pay such Additional Amounts; (10) the title of
the STRYPES and the series of which such STRYPES shall be a part; and (11) the
obligation of the Company to pay and discharge such STRYPES at maturity by
delivery of Underlying Securities (or cash with an equal value), the formula
or other method by which the amount of such Underlying Securities will be
determined, and the terms and conditions upon which such payment and discharge
shall be effected. Reference is made to the Prospectus Supplement for the
terms of the STRYPES being offered thereby.
Under the Indenture, the Company will have the ability, in addition to the
ability to issue STRYPES with terms different from those of STRYPES previously
issued, to "reopen" a previous series of STRYPES and issue additional STRYPES
of such series.
Issue price and interest, premium and Additional Amounts, if any, and
Underlying Securities will be payable or deliverable in the manner, at the
places and subject to the restrictions set forth in the Indenture, the STRYPES
and the Prospectus Supplement relating thereto, provided that payment of any
interest and any Additional Amounts may be made at the option of the Company
by check mailed to the holders of registered STRYPES at their registered
addresses.
STRYPES may be presented for exchange, and registered STRYPES may be
presented for transfer, in the manner, at the places and subject to the
restrictions set forth in the Indenture, the STRYPES and the Prospectus
Supplement relating thereto. No service charge will be made for any transfer
or exchange of STRYPES, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
RANKING
The STRYPES will be unsecured obligations and will rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. Since the
Company is a holding company, the right of the
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Company, and hence the right of creditors of the Company (including the
holders of the STRYPES), to participate in any distribution of the assets of
any subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary, except
to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances from
certain subsidiaries, including MLPF&S, to the Company are restricted by net
capital requirements under the Exchange Act and under rules of certain
exchanges and other regulatory bodies.
SECURITIES DEPOSITORY
Upon issuance, each series of STRYPES will be represented by one or more
fully registered global securities (the "Global Notes"). Each such Global Note
will be deposited with, or on behalf of, The Depository Trust Company, as
Securities Depository (the "Securities Depository"), and registered in the
name of the Securities Depository or a nominee thereof. Unless and until it is
exchanged in whole or in part for STRYPES in definitive form under the limited
circumstances described below, no Global Note may be transferred except as a
whole by the Securities Depository to a nominee of such Securities Depository
or by a nominee of such Securities Depository to such Securities Depository or
another nominee of such Securities Depository or by such Securities Depository
or any such nominee to a successor of such Securities Depository or a nominee
of such successor.
The Securities Depository has advised the Company as follows: The Securities
Depository is a limited-purpose trust company organized under the Banking Law
of the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York 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 Securities Depository was
created to hold securities of its participants ("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. The Securities Depository's Participants
include securities brokers and dealers (including MLPF&S), banks, trust
companies, clearing corporations, and certain other organizations.
The Securities Depository is owned by a number of Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the Securities
Depository'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
("Indirect Participants").
Purchases of STRYPES must be made by or through Participants, which will
receive a credit on the records of the Securities Depository. The ownership
interest of each actual purchaser of each STRYPES ("Beneficial Owner") is in
turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners will not receive written confirmations from the Securities
Depository of their purchase, but Beneficial Owners are expected to receive
written confirmation providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Ownership of
beneficial interest in such Global Note will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained by
the Securities Depository (with respect to interests of Participants) and on
the records of Participants (with respect to interests of persons held 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 Global Notes.
So long as the Securities Depository, or its nominee, is the registered
owner of a Global Note, the Securities Depository or its nominee, as the case
may be, will be considered the sole owner or holder of the STRYPES represented
by such Global Note for all purposes under the Indenture. Except as provided
below, Beneficial Owners in a Global Note will not be entitled to have the
STRYPES represented by such Global Notes registered in their names, will not
receive or be entitled to receive physical delivery of the STRYPES in
definitive form and
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will not be considered the owners or holders thereof under the Indenture.
Accordingly, each Person owning a beneficial interest in a Global Note must
rely on the procedures of the Securities Depository 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 Indenture. The
Company understands that under existing industry practices, in the event that
the Company requests any action of holders or that an owner of a beneficial
interest in such a Global Note desires to give or take any action which a
holder is entitled to give or take under the Indenture, the Securities
Depository 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. Conveyance
of notices and other communications by the Securities Depository to
Participants, by Participants to Indirect Participants, and by Participants
and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Payment of any amount with respect to STRYPES registered in the name of the
Securities Depository or its nominee will be made to the Securities Depository
or its nominee, as the case may be, as the holder of the Global Notes
representing such STRYPES. 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 or for supervising or reviewing any
records relating to such beneficial ownership interests. The Company expects
that the Securities Depository, upon receipt of any payment in respect of a
Global Note, will credit the accounts of the Participants with payment in
amounts proportionate to their respective holdings of beneficial interest in
such Global Note as shown on the records of the Securities Depository. The
Company also expects that payments by Participants to Beneficial Owners will
be governed by standing customer instructions and customary practices, as is
now the case with securities held for the accounts of customers in bearer form
or registered in "street name", and will be the responsibility of such
Participants.
If, with respect to a series of STRYPES, (x) the Securities Depository is at
any time unwilling or unable to continue as Securities Depository and a
successor depository is not appointed by the Company within 60 days, (y) the
Company executes and delivers to the Trustee a Company Order to the effect
that the Global Notes shall be exchangeable or (z) an Event of Default has
occurred and is continuing with respect to any STRYPES of that series, the
Company will issue STRYPES in definitive form in exchange for all of the
Global Notes representing the STRYPES of that series. Such definitive STRYPES
shall be registered in such name or names as the Securities Depository shall
instruct the Trustee. It is expected that such instructions may be based upon
directions received by the Securities Depository from Participants with
respect to ownership of beneficial interests in such Global Notes.
MERGER AND CONSOLIDATION
The Company may consolidate or merge with or into any other corporation, and
the Company may sell, lease or convey all or substantially all of its assets
to any corporation, provided that (i) the corporation (if other than the
Company) formed by or resulting from any such consolidation or merger or which
shall have received such assets shall be a corporation organized and existing
under the laws of the United States of America or a state thereof and shall
assume the due and punctual delivery or payment of the Underlying Securities
(or cash with an equal value) in respect of, any interest and Additional
Amounts on, and any other amounts payable with respect to, the STRYPES of each
series and the due and punctual performance and observance of all of the
covenants and conditions of the Indenture to be performed or observed by the
Company, and (ii) the Company or such successor corporation, as the case may
be, shall not immediately thereafter be in default under the Indenture.
LIMITATIONS UPON LIENS
The Indenture provides that the Company may not, and may not permit any
Subsidiary (defined in the Indenture as any corporation of which at the time
of determination the Company and/or one or more Subsidiaries owns or controls
directly or indirectly 50% of the shares of Voting Stock of such corporation)
to, create, assume,
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incur or permit to exist any indebtedness for borrowed money secured by a
pledge, lien or other encumbrance (except for certain liens specifically
permitted by the Indenture) on the Voting Stock owned directly or indirectly
by the Company of any Subsidiary (other than a Subsidiary which, at the time
of incurrence of such secured indebtedness, has a net worth of less than
$3,000,000) without making effective provision whereby the Outstanding STRYPES
will be secured equally and ratably with such secured indebtedness.
LIMITATIONS ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or otherwise
dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue, sell or
otherwise dispose of any of its Voting Stock, unless, after giving effect to
any such transaction, MLPF&S remains a Controlled Subsidiary (defined in the
Indenture to mean a corporation more than 80% of the outstanding shares of
Voting Stock of which are owned directly or indirectly by the Company). In
addition, the Indenture provides that the Company may not permit MLPF&S to (i)
merge or consolidate, unless the surviving company is a Controlled Subsidiary,
or (ii) convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
EVENTS OF DEFAULT
Unless otherwise specified in a Prospectus Supplement, each of the following
will constitute an Event of Default under the Indenture with respect to each
series of STRYPES: (a) failure to pay and discharge the STRYPES of that series
with the Underlying Securities or, if the Company so elects, to pay an
equivalent amount in cash in lieu thereof when due; (b) failure to pay the
Redemption Price or any redemption premium with respect to any STRYPES of that
series when due; (c) failure to deposit any sinking fund payment, when and as
due by the terms of any STRYPES of that series; (d) failure to pay any
interest on or any Additional Amounts in respect of any STRYPES of that series
when due, continued for 30 days; (e) failure to perform any other covenant of
the Company contained in the Indenture for the benefit of that series or in
the STRYPES of that series, continued for 60 days after written notice has
been given to the Company by the Trustee, or to the Company and the Trustee by
the holders of at least 10% of the aggregate issue price of the Outstanding
STRYPES of that series, as provided in the Indenture; (f) certain events in
bankruptcy, insolvency or reorganization of the Company; and (g) any other
Event of Default provided with respect to STRYPES of that series.
Unless otherwise specified in a Prospectus Supplement, if an Event of
Default (other than an Event of Default described in clause (f) of the
immediately preceding paragraph) with respect to the STRYPES of any series
shall occur and be continuing, either the Trustee or the holders of at least
25% of the aggregate issue price of the Outstanding STRYPES of that series by
notice as provided in the Indenture may declare an amount equal to the
aggregate issue price of all the STRYPES of that series and the interest
accrued thereon and Additional Amounts payable in respect thereof, if any, to
be immediately due and payable in cash. If an Event of Default described in
said clause (f) shall occur, an amount equal to the aggregate issue price of
all the STRYPES of that series and the interest accrued thereon and Additional
Amounts payable in respect thereof, if any, will become immediately due and
payable in cash without any declaration or other action on the part of the
Trustee or any holder. After such acceleration, but before a judgment or
decree based on acceleration, the holders of a majority of the aggregate issue
price of the Outstanding STRYPES of that series may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the non-payment of the amount equal to the aggregate issue price of
all the STRYPES of that series due by reason of such acceleration, have been
cured or waived as provided in the Indenture. See "Modification and Waiver"
below.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the holders of
STRYPES of any series, unless such holders of that series shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in compliance with such request
or direction. Subject to such provisions for the indemnification of the
Trustee, the holders of a majority of the aggregate issue price of the STRYPES
of any series will have the right to direct the time, method and place of
conducting any proceeding
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for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the STRYPES of that series.
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their
knowledge, is in default in the fulfillment of any of its obligations under
the Indenture and, if so, specifying all such known defaults.
The STRYPES and other series of Senior Debt Securities issued under the
Indenture will not have the benefit of any cross-default provisions with other
indebtedness of the Company.
MODIFICATION AND WAIVER
Unless otherwise specified in a Prospectus Supplement, modifications of and
amendments to the Indenture affecting a series of STRYPES may be made by the
Company and the Trustee with the consent of the holders of 66 2/3% of the
aggregate issue price of the Outstanding STRYPES of such series; provided,
however, that no such modification or amendment may, without the consent of
the holder of each Outstanding STRYPES of such series affected thereby, (a)
change the Maturity Date or the Stated Maturity of any installment of interest
or Additional Amounts on any STRYPES or any premium payable on the redemption
thereof, or change the Redemption Price, (b) reduce the amount of Underlying
Securities payable with respect to any STRYPES (or reduce the amount of cash
payable in lieu thereof), (c) reduce the amount of interest or Additional
Amounts payable on any STRYPES or reduce the amount of cash payable with
respect to any STRYPES upon acceleration of the maturity thereof, (d) change
the place or currency of payment of interest or Additional Amounts on, or any
amount of cash payable with respect to, any STRYPES, (e) impair the right to
institute suit for the enforcement of any payment on or with respect to any
STRYPES, including the payment of Underlying Securities with respect to any
STRYPES, (f) reduce the percentage of the aggregate issue price of Outstanding
STRYPES of such series, the consent of whose holders is required to modify or
amend the Indenture, (g) reduce the percentage of the aggregate issue price of
Outstanding STRYPES of such series necessary for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults or (h)
modify such provisions with respect to modification and waiver. Except as
provided in the Indenture, no modification of or amendment to the Indenture
may adversely affect the rights of a holder of any other Senior Debt Security
without the consent of such holder.
The holders of a majority of the aggregate issue price of each series of
STRYPES may waive compliance by the Company with certain restrictive
provisions of the Indenture. The holders of a majority of the aggregate issue
price of each series of STRYPES may waive any past default under the
Indenture, except a default in the payment of the Underlying Securities with
respect to any STRYPES of that series, or of cash payable in lieu thereof, or
in the payment of any premium, interest or Additional Amounts on any STRYPES
of that series for which payment had not been subsequently made or in respect
of a covenant and provision of the Indenture which cannot be modified or
amended without the consent of the holder of each Outstanding STRYPES of such
series affected.
GOVERNING LAW
The Indenture and the STRYPES will be governed by, and construed in
accordance with, the laws of the State of New York.
14
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell STRYPES to the public through MLPF&S. The accompanying
Prospectus Supplement describes the terms of the STRYPES offered thereby,
including the public offering or purchase price, any discounts and commissions
to be allowed or paid to MLPF&S, all other items constituting underwriting
compensation, the discounts and commissions to be allowed or paid to dealers,
if any, and the exchanges, if any, on which the STRYPES will be listed. Only
MLPF&S will act as an underwriter in connection with the STRYPES. Under
certain circumstances, the Company may repurchase STRYPES and reoffer them to
the public as set forth above. The Company may also arrange for repurchases
and resales of such STRYPES by dealers.
The underwriting of STRYPES will conform to the requirements set forth in
the applicable sections of Schedule E to the By-Laws of the National
Association of Securities Dealers, Inc.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1995 Annual Report on Form 10-K, and incorporated
by reference in this Prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The information under the caption "Summary Financial Information" for
each of the five years in the period ended December 29, 1995 included in this
Prospectus and the Selected Financial Data under the captions "Operating
Results," "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 29, 1995 included in the 1995 Annual Report
to Stockholders of the Company, and incorporated by reference herein, has been
derived from consolidated financial statements audited by Deloitte & Touche
LLP, as set forth in their reports included as an exhibit to the Registration
Statement or incorporated by reference herein. Such consolidated financial
statements and related financial statement schedules, such Summary Financial
Information and Selected Financial Data appearing or incorporated by reference
in this Prospectus and the Registration Statement of which this Prospectus is
a part, have been included or incorporated herein by reference in reliance
upon such reports of Deloitte & Touche LLP given upon their authority as
experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in the Quarterly Reports on Form 10-Q which are incorporated herein
by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their report included in any such Quarterly Report on
Form 10-Q and incorporated by reference herein, they did not audit and they do
not express an opinion on such interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted
in light of the limited nature of the review procedures applied. Deloitte &
Touche LLP are not subject to the liability provisions of Section 11 of the
Securities Act of 1933, as amended, (the "Act") for any such report on
unaudited interim financial information because any such report is not a
"report" or a "part" of the Registration Statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the Act.
15
<PAGE>
===============================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPEC-
TUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
ANY SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY OR OF ANY SECURI-
TIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSE-
QUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................... S-3
Risk Factors............................................................... S-9
SunAmerica Inc............................................................. S-13
Price Range of SunAmerica Common Stock and Dividends....................... S-14
Supplemental Use of Proceeds............................................... S-14
Supplemental Description of the STRYPES.................................... S-15
Certain Arrangements With The Selling Stockholder.......................... S-20
Certain United States Federal Income Tax Considerations.................... S-21
Underwriting............................................................... S-28
Validity of the STRYPES.................................................... S-28
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by
Reference................................................................. 2
Merrill Lynch & Co., Inc................................................... 3
Use of Proceeds............................................................ 3
Summary Financial Information.............................................. 4
Description of the STRYPES................................................. 10
Plan of Distribution....................................................... 15
Experts.................................................................... 15
</TABLE>
PROSPECTUS RELATING TO COMMON STOCK OF
SUNAMERICA INC.
================================================================================
================================================================================
3,000,000 STRYPES(SM)
[LOGO of Merrill Lynch & Co., Inc.]
MERRILL LYNCH & CO., INC.
7 1/4% STRYPES(SM)
DUE JUNE 15, 1999
PAYABLE WITH SHARES OF COMMON STOCK OF
[LOGO of SunAnerica Inc.]
SUNAMERICA INC.
(OR IN CASH)
----------------------
PROSPECTUS SUPPLEMENT
----------------------
MERRILL LYNCH & CO.
JUNE 6, 1996
(SM)Service mark of Merrill Lynch & Co., Inc.
================================================================================
