Pricing Supplement No. 3 Filing under Rule 424(b)(3) with respect to
Dated February 5, 1998 Registration Statement No. 333-00745
CUSIP No.: 37033LEY8
(To Prospectus dated February 23, 1996 and
Prospectus Supplement dated February 28, 1996)
$500,000,000
GENERAL MILLS, INC.
MEDIUM-TERM NOTES, SERIES E
$100,000,000
5.82% REset Put Securities ("REPS Service Mark")*
Principal Amount: US $100,000,000
Fixed Initial Public Offering Price
(as a percentage of principal amount): 100%
Original Issue Date: February 5, 1998
Interest Rate: Prior to February 5, 2003,
5.82%, payable semi-annually on
February 5th and August 5th of each
year, commencing August 5, 1998 on
30/360 day basis, subject to
reset from and after February 5, 2003,
as described under "Additional
Terms - Coupon Reset Process
if Notes are Called"
Callable by Morgan Stanley & Co.
International Limited: See "Additional Terms - Call Option;
Put Option"
Repayable upon Exercise
of the Put Option: See "Additional Terms - Call Option;
Put Option"
Extension Periods: N/A
Final Maturity: February 5, 2023
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: 0.495%
Proceeds to the Company
(as a percentage of principal amount): 103.725%
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 $268,000,000.
* REPS is a service mark of Morgan Stanley, Dean Witter, Discover & Co.
<PAGE>
ADDITIONAL TERMS
These Additional Terms constitute a part of Pricing Supplement No. 3
dated February 5, 1998 of General Mills, Inc. and contains a description of
additional terms and provisions applicable to the 5.82% REset Put Securities
(the "Notes") constituting a tranche of Medium-Term Notes, Series E. 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 Notes are Fixed
Rate Notes as described in the Prospectus Supplement, subject to and as modified
by the Coupon Reset Process and other provisions described below. 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 Rate and Interest Payment Dates
The Notes will bear interest at the rate of 5.82% from February 5, 1998
to but excluding February 5, 2003 (the "First Coupon Reset Date"). The First
Coupon Reset Date, February 5, 2008, February 5, 2013 and February 5, 2018 are
each referred to herein as a "Coupon Reset Date." To the extent that the Company
has not purchased the aggregate principal amount of the Notes, in whole, the
nearest Coupon Reset Date is referred to herein as the "Applicable Coupon Reset
Date." Interest on the Notes is payable semi-annually on February 5th and August
5th of each year, commencing August 5, 1998 (each an "Interest Payment Date").
Interest will be calculated based on a 360 day year consisting of twelve 30 day
months. On each Interest Payment Date, interest shall be payable to the Holders
in whose name the Notes are registered on the books of the Trustee on on the
fifteenth calendar day (whether or not a Business Day) immediately preceding the
related Interest Payment Date (each a "Record Date"). "Business Day" means any
day other than a Saturday, a Sunday or a day on which banking institutions in
The City of New York are authorized or required by law or regulation to be
closed.
If the Callholder (as defined below) elects to purchase the principal
amount of Notes pursuant to its Call Option (as defined below), the Calculation
Agent (as defined below) will reset the interest rate effective on the
Applicable Coupon Reset Date for the Notes, pursuant to the Coupon Reset Process
described below. In such circumstance, (i) the principal amount of Notes will be
purchased by the Callholder at 100% of the principal amount thereof on the
Applicable Coupon Reset Date, on the terms and subject to the conditions
described herein (interest accrued to but excluding the Applicable Coupon Reset
Date will be paid by the Company on such date to the Holders on the most recent
Record Date), and (ii) on and after the Applicable Coupon Reset Date, the Notes
will bear interest at the rate determined by the Calculation Agent in accordance
with the procedures set forth under "Coupon Reset Process if Notes are Called"
below.
<PAGE>
Maturity Date
The Notes will mature on February 5, 2023 (the "Maturity Date"). On the
Applicable Coupon Reset Date, Holders of the Notes will be entitled to receive
100% of the principal amount thereof either from (i) the Callholder, if the
Callholder purchases the Notes pursuant to its Call Option or (ii) the Company,
by the exercise of the Put Option (as defined below) by the Trustee for and on
behalf of the holders of the Notes, if the Callholder does not purchase the
Notes pursuant to the Call Option. If the Call Option is not exercised or if the
Call Option otherwise terminates, the Trustee is required to exercise the Put
Option without the consent of, or notice to, the holders of the Notes. See "Call
Option; Put Option" below.
For persons holding the Notes (or an interest therein) on the Applicable
Coupon Reset Date, the effect of the operation of the Call Option and Put Option
will be that such holders will receive 100% of the principal amount of such
Notes on the Applicable Coupon Reset Date.
Call Option; Put Option
(i) Call Option. In connection with the original issuance of the Notes,
the "Callholder" will be Morgan Stanley & Co. International Limited. As
described below, while the Notes are oustanding, the Callholder, by giving
notice to the Trustee (the "Call Notice"), has the right to purchase the
aggregate principal amount of Notes, in whole but not in part (the "Call
Option"), on the Applicable Coupon Reset Date, at a price equal to 100% of the
principal amount thereof (the "Call Price") (interest accrued to but excluding
the Applicable Coupon Reset Date to be paid by the Company on such date to the
Holders on the most recent Record Date). The Call Notice shall be given to the
Trustee, in writing, prior to 4:00 p.m., New York time, no later than fifteen
calendar days prior to the Applicable Coupon Reset Date.
In the event the Callholder exercises its rights under the Call Option,
unless terminated in accordance with its terms, (i) not later than 2:00 p.m.,
New York time on the Business Day prior to the Applicable Coupon Reset Date, the
Callholder shall deliver the Call Price in immediately available funds to the
Trustee for payment of the Call Price on the Applicable Coupon Reset Date and
(ii) the holders of the Notes will be required to deliver and will be deemed to
have delivered the Notes to the Callholder against payment therefor on the
Applicable Coupon Reset Date through the facilities of the Depositary. No holder
of any Notes or any interest therein shall have any right or claim against the
Callholder as a result of the Callholder's decision whether or not to exercise
the Call Option or performance of its obligations thereunder.
The Call Option provides for certain circumstances under which the Call
Option may be terminated (as set forth below). If the Call Option is terminated,
notice of such termination shall be immediately given in writing to the Trustee
by the Callholder or the Company, as the case may be. If the Call Option is not
exercised or if the Call Option otherwise terminates, the Trustee is required to
exercise the Put Option described below.
Except as otherwise specified in clause (i) below, the Call Option will
automatically and immediately terminate, no payment will be due hereunder from
the Callholder, and the Coupon Reset Process will terminate, if any of the
following occurs: (i) an Event of Default occurs under Sections 501(1), 501(2),
501(3) or 501(4), respectively, under the Indenture (in such event, termination
is at the Callholder's option) or under Sections 501(5) or 501(6) under the
Indenture (in such event, termination is automatic), (ii) the Callholder fails
to deliver the Call Notice to the Trustee prior to 4:00 p.m., New York time, on
the fifteenth calendar day prior to the Applicable Coupon Reset Date; (iii) the
Company reacquires all rights under the Call Option, as referenced in the Note;
(iv) on the Bid Date (as defined below), fewer than two Dealers submit timely
Bids (as defined below) substantially as provided below; or (v) the Callholder
fails to pay the Call Price by 2:00 p.m., New York time, on the Business Day
prior to the Applicable Coupon Reset Date.
(ii) Put Option. If the Call Option is not exercised or if the Call
Option otherwise terminates, the Trustee is required to exercise the right of
the Holders of the Notes to require the Company to purchase the aggregate
principal amount of Notes, in whole but not in part (the "Put Option"), on the
Applicable Coupon Reset Date at a price equal to 100% of the principal amount
thereof (the "Put Price"), plus accrued but unpaid interest to but excluding
such Applicable Coupon Reset Date, in each case, to be paid by the Company to
such Holders on the Applicable Coupon Reset Date. If the Trustee exercises the
Put Option then the Company shall deliver the Put Price in immediately available
funds to the Trustee by no later than 12:00 p.m. New York time on the Applicable
Coupon Reset Date and the holders of the Notes will be required to deliver and
will be deemed to have delivered the Notes to the Company against payment
therefor on the Applicable Coupon Reset Date through the facilities of the
Depositary. By its purchase of Notes, each holder irrevocably agrees that the
Trustee shall exercise the Put Option relating to such Notes for or on behalf of
such Notes as provided herein. No holder of any Notes or any interest therein
has the right to consent or object to the exercise of the Trustee's duties under
the Put Option.
The transactions described above will be executed on the Applicable
Coupon Reset Date through the Depositary in accordance with the procedures of
the Depositary, and the accounts of participants will be debited and credited
and the Notes delivered by book-entry as necessary to effect the purchases and
sales thereof. For further information with respect to transfers and settlement
through the Depositary, see "Description of the Notes--Book-Entry System" in the
above-referenced Prospectus Supplement.
Notice to Holders by Trustee
In anticipation of the exercise of the Call Option or the Put Option on
the Applicable Coupon Reset Date, the Trustee shall notify the Holders of the
Notes, not less than 30 days nor more than 60 days prior to the Applicable
Coupon Reset Date, that all Notes shall be delivered on the Applicable Coupon
Reset Date through the facilities of the Depositary against payment of the Call
Price by the Callholder under the Call Option or payment of the Put Price by the
Company under the Put Option. The Trustee shall notify the Holders of the Notes
once it is determined whether the Call Price or the Put Price shall be
delivered.
Coupon Reset Process if Notes are Called
The following discussion describes the steps to be taken in order to
determine the interest rate to be paid on the Notes on and after the Applicable
Coupon Reset Date in the event the Call Option has been exercised with respect
to the Notes.
Under the Notes and pursuant to a Calculation Agency Agreement, Morgan
Stanley & Co. Incorporated has been appointed the calculation agent for the
Notes in connection with the Call Option (in such capacity as calculation agent,
the "Calculation Agent"). If the Callholder has exercised the Call Option as set
forth above under "Call Option; Put Option", then the following steps (the
"Coupon Reset Process") shall be taken in order to determine the interest rate
to be paid on such Notes from and including such Applicable Coupon Reset Date to
but excluding the next Applicable Coupon Reset Date or, if there are no more
Applicable Coupon Reset Dates, the Maturity Date. The Company and the
Calculation Agent shall use reasonable efforts to cause the actions contemplated
below to be completed in as timely a manner as possible.
(a) The Company shall provide the Calculation Agent with (a) a
list (the "Dealer List"), no later than five Business Days prior to the
Applicable Coupon Reset Date, containing the names and addresses of
three dealers, one of which shall be Morgan Stanley & Co. Incorporated,
from which the Company desires the Calculation Agent to obtain the Bids
for the purchase of the Notes and (b) a copy of any other material
reasonably requested by the Calculation Agent to facilitate a successful
Coupon Reset Process.
(b) Within one Business Day following receipt by the Calculation
Agent of the Dealer List, the Calculation Agent shall provide to each
dealer ("Dealer") on the Dealer List (i) a copy of the Pricing
Supplement dated February 5, 1998, together with the Prospectus
Supplement dated February 28, 1996 and Prospectus dated February 23,
1996, relating to the offering of the Notes (collectively, the "Pricing
Supplement"), (ii) a copy of the form of Notes and (iii) a written
request that each such dealer submit a Bid to the Calculation Agent by
12:00 noon, New York time, on the third Business Day prior to the
Applicable Coupon Reset Date (the "Bid Date"). "Bid" shall mean an
irrevocable written offer given by a Dealer for the purchase of all of
the Notes, settling on the Applicable Coupon Reset Date, and shall be
quoted by such Dealer as a stated yield to maturity on the Notes ("Yield
to Maturity"). Each Dealer shall also be provided with (i) the name of
the Company, (ii) an estimate of the Purchase Price (which shall be
stated as a US Dollar amount and be calculated by the Calculation Agent
in accordance with clause (c) below), (iii) the principal amount and
Maturity Date of the Notes and (iv) the method by which interest will be
calculated on the Notes.
(c) The purchase price for the Notes in connection with the
exercise of the Call Option (the "Purchase Price") shall be equal to (i)
the principal amount of the Notes, plus (ii) a premium (the "Notes
Premium") which shall be equal to the difference, if any, of (A) the
discounted present value to the Applicable Coupon Reset Date of a bond
with a maturity of five years from the Applicable Coupon Reset Date
which has an interest rate of 5.35%, semi-annual interest payments on
each February 5th and August 5th, commencing the August 5 following the
Applicable Coupon Reset Date, and a principal amount equal to the
principal amount of the Notes, and assuming a discount rate equal to the
Treasury Rate minus (B) such principal amount of Notes. The "Treasury
Rate" means the per annum rate equal to the offer side yield to maturity
of the current on-the-run 5-year United States Treasury security per
Telerate page 500 at 11:00 a.m., New York time, on the Bid Date (or such
other date that may be agreed upon by the Company and the Calculation
Agent) or, if such rate does not appear on Telerate page 500 at such
time, the rate on any agreed upon successor page at 11:00 a.m., New York
time, on the Bid Date (or such other date and time that may be agreed
upon by the Company and the Calculation Agent).
(d) The Calculation Agent shall provide written notice to the
Company by 12:30 p.m., New York time, on the Bid Date, setting forth (i)
the names of each of the Dealers from whom the Calculation Agent
received Bids on the Bid Date, (ii) the Bid submitted by each such
Dealer and (iii) the Purchase Price as determined pursuant to paragraph
(c) hereof. The Calculation Agent shall thereafter select from the Bids
received the Bid with the lowest Yield to Maturity (the "Selected Bid");
provided, however, that if the Calculation Agent has not received a
timely Bid from a Dealer on or before the Bid Date, the Selected Bid
shall be the lowest of all Bids received by such time; provided further
that if any two or more of the lowest Bids submitted are equivalent, the
Company shall in its sole discretion select any of such equivalent Bids
(and such selected Bid shall be the Selected Bid). In all cases, the
Calculation Agent has the right to match the Bid with the lowest Yield
to Maturity, whereby the Calculation Agent's Bid becomes the Selected
Bid. The Calculation Agent shall set the Coupon Reset Rate equal to the
interest rate which would amortize the Notes Premium fully over the term
of the Notes at the Yield to Maturity indicated by the Selected Bid (the
"Coupon Reset Rate"). The Calculation Agent will notify the Dealer that
submitted the Selected Bid by 4:00 p.m., New York time, on the Bid Date
that its Bid was determined to be the Selected Bid.
(e) Immediately after calculating the Coupon Reset Rate for the
Notes, the Calculation Agent shall provide written notice to the Company
and the Trustee, setting forth the Coupon Reset Rate. The Coupon Reset
Rate will be effective from and including the Applicable Coupon Reset
Date to but excluding the next Applicable Coupon Reset Date or, if there
are no more Applicable Coupon Reset Dates, the Maturity Date.
(f) The Callholder shall sell the Notes to the Dealer that made
the Selected Bid at the Purchase Price, such sale to be settled on the
Applicable Coupon Reset Date in immediately available funds.
The Calculation Agency Agreement provides that the Calculation Agent for
the Notes may resign at any time as Calculation Agent, such resignation to be
effective ten Business Days after the delivery to the Company and the Trustee of
notice of such resignation. The Company may terminate the incumbent Calculation
Agent if reasonable cause (as defined in the Calculation Agency Agreement)
exists at such time by giving written notice to such incumbent Calculation
Agent. In either case, the Company may appoint a successor Calculation Agent for
the Notes.
The Calculation Agent, in its individual capacity, may buy, sell, hold
and deal in the Notes and may exercise any vote or join in any action which any
holder of the Notes may be entitled to exercise or take as if it were not the
Calculation Agent. The Calculation Agent, in its individual capacity, may also
engage in any transaction with the Company as if it were not the Calculation
Agent.
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States Federal income tax
considerations relating to the purchase, ownership and disposition of the Notes
by an initial holder of the Notes who purchases the Notes on the Original Issue
Date. This summary is based upon current provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), existing and proposed Treasury, regulations
promulgated thereunder and current administrative rulings and court decisions
currently in effect, all of which are subject to change, possibly with
retroactive effect. The discussion does not deal with all Federal tax
considerations applicable to all categories of investors (including insurance
companies, tax-exempt organizations, financial institutions or broker-dealers),
some of which may be subject to special rules. In addition, this summary is
limited to holders who will hold the Notes as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Code.
This summary only addresses the United States Federal income tax considerations
of the Notes until the First Coupon Reset Date.
Investors are urged to consult their own tax advisors to determine the
Federal, state, local, foreign, and other tax consequences relating to the
purchase, ownership and disposition of the Notes.
Prospective investors should note that no rulings have been or are
expected to be sought from the Internal Revenue Service (the "Service") with
respect to any of the Federal income tax considerations discussed below, and no
assurance can be given that the Service will not take contrary positions.
Treatment of Notes
Although there is no authority on point characterizing instruments such
as the Notes, and the matter is not free from doubt, the Company intends to
treat the Notes as fixed rate debt instruments that mature on the First Coupon
Reset Date for United States Federal income tax purposes. The issue price of the
Notes will be equal to the first price at which a substantial amount of the
Notes are sold for money (excluding sales to bond houses, brokers or similar
persons or organizations acting in the capacity as underwriters, placement
agents or wholesalers) without regard to any amount paid by the Callholder as
option premium with respect to the Call Option. So viewed, each holder must
include in gross income the stated interest paid or accrued on the Notes in
accordance with its usual method of accounting. Upon the sale, exchange,
redemption or other disposition by a holder of Notes, the holder should
recognize capital gain or loss equal to the difference between the amount
realized from the disposition of the Notes (exclusive of amounts attributable to
the payment of accrued interest not previously included in income, which will be
taxable as ordinary income) and the holder's adjusted tax basis in the Notes at
the time of the sale, exchange, redemption or other disposition. A holder's
adjusted tax basis in the Notes generally will equal the holder's purchase price
for such Notes. Pursuant to the Taxpayer Relief Act of 1997, in the case of an
individual holder, any capital gain recognized on the disposition of the Notes
will generally be subject to U.S. Federal income tax at a stated maximum rate of
(i) 20%, if the holder's holding period in the Notes was more than 18 months at
the time of such sale, exchange, redemption or other disposition, or (ii) 28%,
if the holder's holding period in such Notes was more than one year, but not
more than 18 months, at the time of such sale, exchange, redemption, or other
disposition. The ability to use capital losses to offset ordinary income in
determining taxable income is generally limited.
It is possible that the Service will disagree with or that a court will
not uphold the foregoing treatment of the Notes. In particular, the Service
could seek to treat the Notes as maturing on the Maturity Date rather than the
First Coupon Reset Date, in which case the issue price of the Notes would
include the premium paid by the Callholder with respect to the Call Option.
Because of the Coupon Reset Process, if the Notes are treated as maturing on the
Maturity Date, holders would be subject to certain Treasury Regulations dealing
with contingent payment debt instruments (the "Contingent Debt Regulations").
Under the Contingent Debt Regulations, each holder would be required (regardless
of such holder's usual method of accounting) to include in gross income original
issue discount for each interest accrual period in an amount equal to the
product of the adjusted issue price of the Notes at the beginning of each
interest accrual period and a projected yield to maturity of the Notes. The
projected yield to maturity would be based on the "comparable yield" (i.e., the
yield at which the Company would issue a fixed rate debt instrument maturing on
the Maturity Date, with terms and conditions otherwise similar to those of the
Notes), which will be higher than the stated interest rate on the Notes prior to
the First Coupon Reset Date. In addition, the character of any gain or loss
recognized on the sale, exchange, retirement or other disposition of the Notes
could differ from that set forth in the preceding paragraph. For example, if the
Contingent Debt Regulations applied, any gain recognized on the sale of the
Notes would be treated as interest income, while any losses would generally be
ordinary to the extent of previously accrued original issue discount, and any
excess would be capital loss. The ability to use capital losses to offset
ordinary income in determining taxable income is generally limited.
Foreign Holders of Notes
Interest paid with respect to the Notes to a holder that is not a United
States person (a "Foreign Holder") generally will not be subject to the 30%
withholding tax generally imposed with respect to U.S. source interest paid to
such persons, provided that such holder is not engaged in a trade or business in
the United States in connection with which it holds such Notes, does not bear
certain relationships to the Company and fulfills certain certification
requirements. Under such certification requirements, the holder must certify,
under penalties of perjury, that it is not a "United States person" and is the
beneficial owner of the Notes, and must provide its name and address. For this
purpose, "United States person" means a citizen or resident of the United
States, a corporation, partnership, or other entity created or organized in or
under the laws of the United States or any State thereof (including the District
of Columbia), an estate the income of which is includible in gross income for
United States Federal income tax purposes, regardless of its source, or a trust
subject to the primary supervision of a court within the United States and the
control of one or more U.S. persons with respect to all substantial decisions.
A Foreign Holder generally will not be subject to United States Federal
income tax with respect to any gain recognized upon the disposition of Notes
unless (i) such gain is effectively connected with the conduct by the Foreign
Holder of a trade or business in the United States, (ii) in the case of any
individual holder, such Foreign Holder is present in the United States for 183
days or more in the taxable year during which the disposition occurs and certain
other conditions are met or (iii) the Notes are treated as subject to the
Contingent Debt Regulations and the holder fails to satisfy the certification
requirements of the preceding paragraph.
Backup Withholding
Payments made on the Notes and proceeds from the sale of Notes will not
be subject to a "backup" withholding tax of 31% unless, in general, the holder
fails to comply with certain reporting procedures and is not an exempt recipient
under applicable provisions of the Code.
Recently issued Treasury regulations (the "Final Withholding
Regulations"), which are generally effective with respect to payments made after
December 31, 1998, consolidate and modify the current certification requirements
and means by which holders may claim exemption from United States federal income
tax withholding on foreign persons and from backup withholding. Foreign Holders
claiming benefits under an income tax treaty may be required to obtain a
taxpayer identification number and to certify their eligibility under the
treaty's limitation of benefits article in order to comply with the Final
Withholding Regulations. Because the application of the Final Withholding
Regulations will vary depending upon a holder's particular circumstances, all
holders are urged to consult their own tax advisors regarding the application of
the Final Withholding Regulations to them.
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.
