Pricing Supplement No. 1 Filing under Rule 424(b)(3) with respect to
Dated October 15, 1997 Registration Statement No. 333-00745
(To Prospectus dated February 23, 1996 and Prospectus Supplement dated February
28, 1996)
$500,000,000
GENERAL MILLS, INC.
MEDIUM-TERM NOTES, SERIES E
Principal Amount: US $100,000,000
Issue Price: 100%
Original Issue Date: October 15, 1997
Interest Rate: 1 month LIBOR minus 58 basis points,
reset on the fifteenth day of each month
and compounded at 1 month LIBOR minus 58
basis points and paid quarterly on an
Actual/360 day basis, subject to the
Modified Following Business Day
Convention and subject to reset as
described under "Additional Terms - Reset
of Interest Rate for Fixed Rate Periods"
Redeemable by the Company
on or after: See "Additional Terms - Reset of Interest
Rate for Fixed Rate Periods"
Callable by the Calculation Agent: See "Additional Terms - Call Option"
Repayable at the Option
of the Holder on: See "Additional Terms - Put Option"
Extension Periods: N/A
Final Maturity: October 15, 2022
Repurchase Price (for Original
Discount Notes): N/A
Type of Note (Check One):
Book-Entry Note X
Certificated Note
Underwriter: Morgan Stanley & Co. Incorporated
Discount: 0.50%
Calculation Agent: Morgan Stanley & Co. Incorporated
"N/A" as used herein means "Not Applicable." "A/S" as used herein means "as
stated in the Prospectus Supplement referred to above."
As of the date of this Pricing Supplement, the aggregate initial public
offering price (or its equivalent in other currencies) of the Debt Securities
(as defined in the Prospectus) which have been sold (including the Notes to
which this Pricing Supplement relates) is $100,000,000.
ADDITIONAL TERMS
The Notes are described in the Prospectus and the Prospectus Supplement for
the Medium-Term Notes, Series E referenced above, and reference is made thereto
for a detailed summary of additional provisions of the Notes. The description of
the particular terms of the Notes set forth in this Pricing Supplement
supplements, and to the extent inconsistent therewith replaces, the description
of the terms and provisions of the "Debt Securities" in the Prospectus and the
"Notes" in the Prospectus Supplement. Capitalized terms used but undefined
herein shall have the meanings given such terms in such Prospectus and
Prospectus Supplement.
INTEREST RATES
During the period commencing with the Original Issue Date to but excluding
October 15, 2002, the Notes outstanding will bear interest at a rate of 1 month
LIBOR less 58 basis points per annum, reset on the fifteenth day of each month
subject to the Modified Following Business Day Convention, as defined in the
1991 ISDA Definitions published by the International Swaps and Derivatives
Association, Inc. and compounded monthly at 1 month LIBOR less 58 basis points
and paid quarterly on January 15, April 15, July 15 and October 15 of each year
on an Actual/360 day count basis subject to the Modified Following Business Day
Convention. The initial interest rate setting for the period beginning October
15, 1997 is 5.045%.
The Calculation Agent has the right to purchase all the Notes from the
Holders of the Notes on October 15, 2002 with fifteen calendar days' notice, and
then every two years thereafter (see "Call Option" as defined below). If the
Calculation Agent has not given the Call Notice (as defined below), then each
Holder has the right to require the Company to repurchase all of the Notes held
by such Holder on October 15, 2002 with 10 calendar days notice and then every
two years thereafter (see "Put Option" as defined below). If the Calculation
Agent exercises its call or if any Holder has not given the Put Notice (as
defined below), then during the period from and including October 15, 2002 and
then every 2 years thereafter to but excluding October 15, 2022, the Notes will
be reset and bear interest at a fixed rate calculated as described below (see
"Reset of Interest Rate for Fixed Rate Periods" below).
CALL OPTION
The Calculation Agent has the right to repurchase all of the Notes in
whole on October 15, 2002, and each second October 15 thereafter (biannually)
until and including October 15, 2020 (each, a "Call Date"), at a price equal to
100% of the principal amount thereof, plus accrued but unpaid interest to but
excluding such Call Date (the "Call Redemption Price") by giving notice
telephonically followed by written notice (the "Call Notice") thereof to the
Holders of the Notes or to the Final Dealer (as defined below). In the event the
Call Notice is timely given, the Holders of the Notes shall sell the Notes to
the Calculation Agent at the Call Redemption Price. Such Call Notice shall be
given no later than 10:00 am (New York time) fifteen calendar days prior to the
Call Date.
PUT OPTION
If the Call Notice has not been timely given, then each Holder has the
right to require the Company to repurchase any or all of the Notes of such
Holder on October 15, 2002 and each second October 15 thereafter (biannually)
until and including October 15, 2020 (each, a "Put Date") at a purchase price
equal to 100% of the principal amount thereof, plus accrued but unpaid interest
to but excluding such Put Date (the "Put Redemption Price"), by delivering
written notice thereof to the Company (the "Put Notice"). Such Put Notice shall
be given no later than 10:00 a.m. (New York time) ten calendar days prior to
such Put Date. In the event the Put Notice is timely given, the Company shall
repurchase the Notes at the Redemption Price on the applicable Put Date.
RESET OF INTEREST RATE FOR FIXED RATE PERIODS
If the Calculation Agent has called the Notes as set forth under "Call
Option" above or if the Holders of the Notes have not delivered the Put Notice
to the Company in accordance with the terms set forth under "Put Option" above,
the Company and the Calculation Agent, on ten calendar days prior to the Put
Date, shall undertake the following actions to calculate the fixed rate of
interest to be paid on the Notes from and including such Put Date to but
excluding the next Put Date (or, if there are no more Put Dates, to but
excluding Final Maturity), (each such two year period, a "Fixed Rate Period").
All references to specific hours are references to prevailing New York time.
Each notice shall be given telephonically and shall be confirmed as soon as
possible by facsimile to each of the Calculation Agent and the Company. The
times set forth below are guidelines for action by the Company and the
Calculation Agent, and each shall use its best efforts to adhere to such times.
The Company shall use reasonable efforts to cause the Reference Dealers to take
all actions contemplated below in as timely a manner as possible.
(a) At 11:00 a.m., the Company shall provide to the Calculation Agent
the names of three financial institutions including the Calculation
Agent that deal in the Company's debt securities and have agreed to
participate as Reference Dealers in accordance with the terms set
forth below (the "Reference Dealers"), including acknowledging in
writing the Call Option of the Calculation Agent. For each
Reference Dealer, the Company will provide the name of and
telephone and facsimile numbers for one individual who will
represent such Reference Dealer.
(b) At 12:00 p.m. the Calculation Agent shall:
(i) provide to the Company the approximate 2-year U.S. Treasury
bond yield determined by the Calculation Agent at or about
such time (the "Designated Treasury Yield") based on the then
current 2-year U.S. Treasury bond (the "Designated Treasury
Bond"); and
(ii) calculate and provide to the Reference Dealers an approximate
price of the Notes which shall equal par plus the "Premium."
The Premium shall be calculated by taking the Treasury Rate
Difference applied over 4 semi-annual periods from the
beginning of the applicable Fixed Rate Period to the next Put
Date (or, if there are no more Put Dates, to Final Maturity),
discounted at the Discount Rate divided by two where:
"Treasury Rate Difference" means the difference between 5.80%
(the "Initial Treasury Yield") minus the Designated Treasury
Yield; and
"Discount Rate" means the Designated Treasury Yield.
(c) The Calculation Agent immediately thereafter shall contact each of
the Reference Dealers and request that each Reference Dealer
provide to the Calculation Agent the following firm bid (which bid
shall remain firm for 30 minutes):
(i) a firm bid (on an all-in basis), expressed as a spread (a
"Spread") to the Designated Treasury Bond (using for such
purposes, the Designated Treasury Yield), at which time such
Reference Dealer would purchase $100,000,000 of Notes which is
callable every 2 years by the Calculation Agent and, if not
called, puttable every 2 years at the option of the Holder of
the Notes and is offered at a price equal to par plus the
Premium for settlement on the Put Date.
(d) At 12:30 p.m., the following shall occur following receipt of the
bids requested in paragraph (c) above:
(i) the Calculation Agent shall determine the final Designated
Treasury Yield and calculate and provide to the Reference
Dealers the final price of the Notes, which shall equal par
plus the Premium (the "Final Price");
(ii) the Reference Dealer providing the lowest all-in Spread to the
final Designated Treasury Yield (the "Note Yield") shall be
deemed the "Final Dealer"; provided that the Calculation Agent
has the right to match the lowest all-in Spread and would
thereby become the Final Dealer;
(iii)the Final Dealer shall purchase the Notes at the Final Price
assuming the Note Yield and the Adjusted Coupon (defined
below);
(iv) the Calculation Agent shall calculate and provide to the
Company the "Adjusted Coupon", which shall be the semi-annual
bond equivalent fixed coupon rate on the Notes required to
produce a semi-annual bond equivalent yield on the Notes equal
to the sum of the Designated Treasury Yield and the Spread
given a purchase price of 100% plus the Premium and assuming
redemption of the Notes at par in two years; and
(v) the Interest Rate on the Notes shall be adjusted and shall
equal, effective from and including the applicable Put Date,
to but excluding the next Put Date or Final Maturity Date, the
Adjusted Coupon, payable semi-annually each April 15 and
October 15.
If the Calculation Agent determines that (i) a Market Disruption Event (as
defined below) has occurred or (ii) two or more of the Reference Dealers have
failed to provide indicative or firm bids or offers in a timely manner
substantially as provided above, the steps contemplated above shall be delayed
until the next trading day on which there is no Market Disruption Event and no
such failure by two or more Reference Dealers. "Market Disruption Event" shall
mean any of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or the establishment of
minimum prices on such exchange; (ii) a general moratorium on commercial banking
activities declared by either federal or New York State authorities; (iii) any
material adverse change in the existing financial, political or economic
conditions in the United States of America; (iv) an outbreak or escalation of
major hostilities involving the United States of America or the declaration of a
national emergency or war by the United States of America; or (v) any material
disruption of the U.S. government securities market, U.S. corporate bond market
and/or U.S. federal wire system.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL INCOME TAX AND ANY OTHER TAX TREATMENT OF
THE NOTES.
The following summary of the principal United States federal income tax
consequences of ownership of the Notes deals only with a Note held as a capital
asset by an initial purchaser who or that is a U.S. Holder (as defined in the
Prospectus Supplement). It does not discuss the rules that may apply to special
classes of holders such as life insurance companies, tax-exempt organizations,
banks, dealers in securities, currencies or commodities, persons that hold Notes
as a hedge or hedges against interest rate risks or that are part of a straddle
or conversion transaction, or persons whose functional currency is not the U.S.
dollar. The summary is based on current provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), its legislative history, existing and proposed
regulations thereunder, published rulings and court decisions, all as in effect
on the date hereof and all subject to change at any time, perhaps with
retroactive effect.
The Notes will be subject to the special rules, set out in Treasury
Regulations (the "Regulations"), governing contingent payment debt obligations.
Under the Regulations, a U.S. Holder will be required annually to include
interest in income in respect of the Notes determined by reference to (i) the
annual yield the Company would pay, as of the Original Issue Date, on a fixed
rate note with no contingent payments, but with terms and conditions otherwise
comparable to those of the Notes (the "comparable yield") and (ii) a "projected
payment schedule" constructed for the Notes (as described below). Using this
comparable yield and the projected payment schedule, rules are applied that are
similar to the rules that apply for accruing original issue discount on a
noncontingent debt instrument with that yield.
In certain taxable years, these rules will have the effect of requiring
U.S. Holders to include interest in income related to the Notes prior to, and in
excess of, the receipt of cash attributable to such income.
More specifically, the amount of interest includable in income for a
taxable year by a U.S. Holder will be the sum of the "daily portions" of
interest with respect to the Note for each day during the taxable year or
portion of the taxable year during which the U.S. Holder owns the Note. The
"daily portion" is determined by allocating to each day in any "accrual period"
a pro rata portion of the interest allocable to the accrual period. The accrual
period may be any length selected by a U.S. Holder and may vary over the term of
the Note so long as no accrual period is longer than one year.
The amount of interest allocable to an accrual period and includable in
income is the product of the Note's "adjusted issue price" at the beginning of
such accrual period and the comparable yield (adjusted for the length of the
accrual period) described above. The "adjusted issue price" of the Note at the
start of any accrual period is the sum of the issue price of such Note plus the
accrued interest for each prior accrual period less any projected payments of
interest deemed received for the prior accrual period, determined in the manner
described below.
The amount of interest deemed received in any accrual period is based on a
"projected payment schedule" for the Notes, which the Company will construct.
The "projected payment schedule" is a hypothetical schedule for payments on the
Notes as of the issue date that would, if paid in the assumed amounts at the
assumed times, produce the comparable yield over the life of the Notes (as
described above). To construct the projected payment schedule, the Company will
use the actual amounts and timing of payments that are known as of the issue
date. Projections of payments that are to be determined based upon the reset
mechanism will be based upon forward interest rates and similar market-based
information.
U.S. Holders are required to compute the difference between the actual
payments made on the Notes during a taxable year and the projected payments for
the year. If the actual payments made during the year exceed the projected
payments, the excess is added to the interest allocated to the accrual period as
computed using the comparable yield (described above). If the actual payments
are less than the projected payments, the difference first reduces the amount of
interest otherwise taken into account for the year computed using the comparable
yield, and any excess (the "excess negative adjustment") is treated as an
ordinary loss for the U.S. Holder to the extent of the interest that was
included in respect of the instrument in prior taxable years (as reduced by
previous negative adjustments). Any remaining excess negative adjustment is
carried forward and treated as a negative adjustment for the succeeding taxable
year. Any excess negative adjustment carry forward not ultimately used to offset
future interest accruals effectively reduces the amount of gain, or increases
the amount of loss, realized at maturity or earlier redemption of the Notes.
The Company's comparable yield and projected payment schedule will be
available from the Corporate Finance Department of the Company (Mail address:
P.O. Box 1113, Minneapolis, MN 55440; via facsimile transmission 612-540-7384).
A U.S. Holder is required to use the comparable yield and projected payment
schedule determined by the Company in determining its interest accruals in
respect of the Notes, unless such U.S. Holder timely discloses and justifies on
its federal income tax return the use of a different comparable yield and
projected payment schedule to the Internal Revenue Service.
THE COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE IS NOT PROVIDED FOR
ANY PURPOSE OTHER THAN THE DETERMINATION OF A U.S. HOLDER'S INTEREST ACCRUALS IN
RESPECT OF THE NOTES, AND THE COMPANY MAKES NO REPRESENTATION REGARDING THE
ACTUAL AMOUNT OF PAYMENTS WITH RESPECT TO THE NOTES, WHICH MAY BE LESS THAN THE
PROJECTED PAYMENTS.
Gain or loss at maturity upon sale or exchange, or earlier redemption of
the Notes will be determined by the difference, if any, between the amount
received by the U.S. Holder at such time and the projected amount of such
payment under the projected payment schedule. Any gain recognized by a U.S.
Holder at maturity, or upon sale or exchange, will be treated as interest
income, and any loss recognized by a U.S. Holder will be treated as ordinary
loss to the extent of the U.S. Holder's prior interest inclusions (reduced by
prior ordinary losses attributable to net negative differences between actual
contingent payments and projections of such payments), and thereafter generally
as capital loss.
In general, information reporting requirements will apply to all payments
in respect of a Note made within the United States to a non-corporate U.S.
Holder and "backup withholding" at a rate of 31% will apply to such payments if
the U.S. Holder fails to provide an accurate taxpayer identification number or
is notified by the Internal Revenue Service that it has failed to report all
interest and dividends required to be shown on its federal income tax returns.
MORGAN STANLEY & CO. INCORPORATED
NORTH CAROLINA
The Commissioner of Insurance of the State of North Carolina has not
approved or disapproved this offering nor has the Commissioner passed upon the
accuracy or adequacy of this Prospectus.
