General Mills Annual Report 2008

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FY2008 Annual Report · General Mills

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General Mills
General Mills

Annual Report 2008
Annual Report 2008
Continuing Growth
Continuing Growth

Welcome to General Mills

Net Sales by U.S. Retail Division
$9.1 billion in total

22% Big G Cereals

22% Meals

19% Pillsbury USA

14% Yoplait

13% Snacks

8% Baking Products

Small Planet Foods/Other

Net Sales by International Region
$2.6 billion in total

35% Europe

27% Canada

23% Asia/Paciﬁ c

15% Latin America and South Africa

Net Sales by Foodservice
Customer Segment
$2.0 billion in total

46% Bakery Channels

45% Distributors/Restaurants
9% Convenience Stores/Vending

U.S. Retail

Our U.S. Retail business segment includes the major marketing divisions
listed to the left. We market our products in a variety of domestic retail
outlets including traditional grocery stores, natural food chains, mass
merchandisers and membership stores. This segment accounts for
66 percent of total company sales.

international

We market our products in more than 100 countries outside of the
United States. Our largest international brands are Häagen-Dazs ice
cream, Old El Paso Mexican foods and Nature Valley granola bars. This
business segment accounts for 19 percent of total company sales.

Bakeries And Foodservice

We customize packaging of our retail products and market them to
convenience stores and foodservice outlets such as schools, restaurants
and hotels. We sell baking mixes and frozen dough-based products to
supermarket, retail and wholesale bakeries. We also sell branded food
products to foodservice operators, wholesale distributors and bakeries.
This segment accounts for 15 percent of total company sales.

Net Sales by Joint Venture
(not consolidated)
$1.2 billion proportionate share

84% Cereal Partners Worldwide (CPW)

16% Häagen-Dazs

Ongoing Joint Ventures

We are partners in several joint ventures. Cereal Partners Worldwide is
our 50/50 joint venture with Nestlé and markets breakfast cereals in
130 countries around the globe. We also participate in Häagen-Dazs joint
ventures in Japan and Korea.

Financial Highlights

In Millions, Except per Share Data
Net Sales
Segment Operating Proﬁ ta
Net Earnings
Diluted Earnings per Share
Diluted Earnings per Share Excluding Certain Commodity and Tax Itemsa
Average Diluted Shares Outstanding
Dividends per Share

Fiscal Year Ended

May 25, 2008
$ 13,652
2,406
1,295
3.71
3.52
347
$ 1.57

May 27, 2007
$ 12,442
2,260
1,144
3.18
3.18
360
$ 1.44

Change

+10%
+(cid:13)6
+13
+17
+11
–(cid:13)4
+(cid:13)9

Net Sales
(dollars in millions)

Segment Operating Proﬁ ta
(dollars in millions)

Diluted Earnings per Share
(dollars)

Return on Average Total Capitala
(percent)

2
5
6
3
1

2
4
4
2
1

1
1
7
,
1
1

8
0
3
,
1
1

2
2
1
,
1
1

6
0
4
2

0
6
2
2

3
5
0
2

6
1
0
2

2
1
1
,
2

1
7
3

8
0
3

0
9
2

8
1
.
3

2 c
5
3

0
6
2

4
.
1
1

1
.
1
1

5
0
1

0
0
1

1
.
2
1

6 c

.
1
1

05b

a See page 89 for discussion of non-GAAP measures.
b Results include $197 million net gain after tax from divestitures and debt repurchase costs.
c Results exclude certain commodity and tax items. See page 89 for discussion of non-GAAP measures.

Table of contents

To Our Shareholders,

Fiscal 2008 was a strong year for General Mills. We generated broad-based sales
and earnings growth, and strengthened our position in markets around the
globe. We’re pleased to give you this report on our progress in 2008, and our
plans for continuing growth in ﬁ scal 2009 and beyond.

Our results in 2008 reﬂ ect particularly good sales performance.
Net sales for the year ended May 25, 2008, increased 10 percent
to $13.7 billion. This was strong growth on top of a 6 percent
sales increase the previous year. And each of our major operat-
ing divisions contributed to this year’s sales gain, as shown in
the table below.

Diluted earnings per share grew 17 percent to reach $3.71. This
ﬁ gure includes non-cash gains totaling 19 cents per share from
mark-to-market valuation of certain commodity positions and a
favorable court decision related to a tax matter. Excluding these
non-cash items from ﬁ scal 2008 results, diluted earnings per share
would total $3.52, up 11 percent from $3.18 per share last year.

Broad-based Sales Growth

Operating Division/Segment
Big G Cereals
Meals
Pillsbury USA
Small Planet Foods
Baking Products
Yoplait
Bakeries and Foodservice
Snacks
International
Total General Mills

2008 Net Sales % Change
+(cid:13)5
+(cid:13)5
+(cid:13)5
+(cid:13)6
+(cid:13)9
+10
+11
+12
+21
+10

Costs for food ingredients, packaging and energy were signiﬁ -
cantly higher in 2008. We worked to off set this inﬂ ation with
comprehensive cost-saving eff orts and price increases where
necessary. We also increased our spending on advertising and
other consumer marketing programs, which help generate con-
sumer awareness and purchase of our brands. Companywide,
consumer marketing investment grew 13 percent in 2008. Even
with this increased marketing spending and the higher input
costs, operating proﬁ ts from our business segments grew
6 percent to exceed $2.4 billion.

These sales and proﬁ t results exceeded our original ﬁ nancial tar-
gets for ﬁ scal 2008. They also measure up very well against the
goals we established three years ago for General Mills’ long-term
growth. Our model calls for low single-digit compound growth
in net sales, mid single-digit growth in segment operating proﬁ ts
and high single-digit growth in diluted earnings per share. We
believe that this sales and proﬁ t growth, coupled with a dividend
yield of between 2 and 3 percent of our stock price, should result
in returns to our shareholders that meet or exceed the broader
market’s return over time.

General Mills Long-term Growth Model

Net Sales
Segment Operating Proﬁ t
Earnings per Share
+ Dividend Yield
Total Return to Shareholders

Compound Annual Growth Target
Low single-digit
Mid single-digit
High single-digit

Double-digit

For the three-year period through ﬁ scal 2008, total return to
General Mills shareholders (stock price appreciation plus rein-
vested dividends) averaged 10.1 percent. The average annual
return by the S&P 500 stock index over that same time period
was 6.7 percent, and the return for our food company peer group
averaged 4.4 percent.

General Mills

Steve Sanger (left) and
Ken Powell (right).

Our long-term performance goals also include a commitment to
increase the return we generate on capital invested in the busi-
ness. Speciﬁ cally, our goal is to increase return on average total
capital (ROC) by 50 basis points per year. We’ve kept pace with
that goal in recent years. For 2008, reported results exceeded that
goal, and excluding the beneﬁ ts of our non-cash commodity and
tax gains, we met our 50-basis point improvement target.

Beyond this capital investment, we return a signiﬁ cant portion
of the cash our businesses generate to shareholders. Dividends
in ﬁ scal 2008 totaled $1.57 per share, up 9 percent for the year.
Our ongoing share repurchase program has a goal of reducing
the number of shares outstanding by an average of 2 percent
per year. In ﬁ scal 2008 we exceeded that target: Average shares
outstanding were 347 million, down nearly 4 percent from
360 million shares the previous year.

The key to our improving return on capital is strong earnings
growth. But we’re also improving ROC by taking a disciplined
approach to how much capital we invest in the business. In 2008,
we invested $522 million (3.8 percent of net sales) in ﬁ xed assets
that will support business growth or productivity projects. We
expect capital investments to average just under 4 percent of net
sales in the years ahead.

Superior Returns to Shareholders
(percent growth, stock price appreciation plus dividends)

Fiscal 2008

Last 3 Years (compound growth)

+10.1

+6.7

+4.4

GIS

S&P 500 Index

S&P Packaged Foods Index

–3.0

–7.4

In summary, ﬁ scal 2008 was a year of strong performance and
progress at General Mills. And we believe our prospects for
continued good growth and increasing returns are excellent.

The Drivers of our Continuing Growth

We’re building strong brands. Our brands are generating
increasing sales in markets all around the world. In the
United States, we hold the No. 1 or No. 2 market position in a wide
variety of shelf-stable, refrigerated and frozen food categories.

We work continuously to improve our established brands and to
create successful new products. We ask consumers to regularly
taste test our products, head-to-head with competitive off erings
including private label. Our goal is to have at least 60 percent
of consumers prefer our brand, and we work to improve those
brands that fall short. We’re also improving the nutritional pro-
ﬁ le of our products by reducing fat, sodium or sugar, and adding
ingredients such as ﬁ ber and whole grains. Since 2005, we have
improved the nutritional attributes for products representing
40 percent of our U.S. Retail business.

Annual Report 2008

U.S. Retail Leading Market Positions

Category
Dry Dinner Mixes
Refrigerated Dough
Fruit Snacks
Dessert Mixes
Refrigerated Yogurt
Ready-to-serve Soup
Ready-to-eat Cereal
Granola Bars/Grain Snacks
Frozen Hot Snacks
Microwave Popcorn
Frozen Vegetables
Mexican Products

ACNielsen measured outlets

2008 Dollar Share %
78
70
54
42
36
34
30
27
26
25
20
18

Rank
1
1
1
1
2
2
2
2
2
2
2
2

International Net Sales
(dollars in millions)

Net sales for our wholly owned
international businesses
combined with our proportionate
share of ongoing joint venture net
sales exceeded $3.7 billion in 2008.

1
6
7
3

9
0
1
,
0 3
1
7
2

4
8
5
2

1
2
3
2

Our Share of CPW and
Häagen-Dazs Joint Ventures*

Wholly Owned Businesses

*
Not consolidated. See page 89 for
discussion of non-GAAP measures.

07 08

New products are an important contributor to our growth. We’re
working to identify bigger ideas, and new items whose sales
will be largely incremental to our existing business. In 2008,
we had several standout new products, including Progresso Light
soups and Fiber One snack bars in the U.S. and Dolce frozen
desserts in Japan. In total, new products accounted for more
than 5 percent of U.S. Retail net sales in 2008, and we estimate
that over half of those sales were incremental to our existing
business. For our International business segment, new products
contributed 8 percent of net sales in 2008.

We’re supporting our new and established brands with
increased levels of consumer marketing investment. Consumer-
directed marketing reinforces those key attributes that distin-
guish our brands from competitors’ products. This investment
also supports growth in sales for our brands at everyday prices,
rather than at promotional discounts. In 2008, baseline (or non-
promoted) sales for our major U.S. Retail product lines grew
4 percent overall, with stronger increases in categories such as
yogurt, grain snacks and ready-to-serve soup.

We’re partnering with our retail and foodservice customers
more eff ectively than ever before. In 2008, we generated mid
single-digit sales growth in traditional U.S. grocery store accounts.
Our sales grew at double-digit rates in retail channels such as
supercenters, drug and discount stores, and dollar format stores.
In addition, we are a major supplier to foodservice operators such
as schools, hotels, bakeries, restaurants and health care facilities.
Creating winning strategies that generate proﬁ table sales growth
across these diff erent channels and retail formats is a key
growth driver for us.

We’re rapidly growing sales for our brands in international
markets. Just ﬁ ve years ago, our sales outside the U.S. totaled
$1.3 billion. In 2008, net sales for our International business seg-
ment reached nearly $2.6 billion. And these businesses gener-
ated more than one-third of our total sales and operating proﬁ t
growth for the year. General Mills brands such as Häagen-Dazs,
Old El Paso, Nature Valley and Betty Crocker can be found through-
out Europe, Asia and South America— we currently compete
in more than 100 markets worldwide. That’s without including
our international joint ventures, Cereal Partners Worldwide and
Häagen-Dazs JVs in Japan and Korea, which together contributed
$112 million in after-tax earnings to General Mills this past year.
And we’re really just getting going when it comes to building our
business outside the U.S. We expect continuing international
expansion to be a key driver of sales and proﬁ t increases for us in
the years ahead.

Our companywide focus on protecting margins is generating
industry-leading results. We concluded several years ago that
the trend of rising commodity and energy costs was likely to
continue for some time, given growing world demand for food
and fuel. That meant we would need to generate a higher level
of productivity and cost savings than we’d done in the past in
order to protect our margins. Our companywide approach to this
challenge, which we call holistic margin management (HMM),
engages people from marketing to R&D to the plant ﬂ oor in iden-
tifying costs in our products that don’t add value for consumers.
We eliminate those costs, and use the savings to off set higher
input costs and reinvest in our brands. This HMM focus is our
ﬁ rst line of defense for our margins, and we believe this approach
should continue to help us keep price increases moderate.

General Mills

protecting margins and building brands

Over the last four ﬁ scal years, we’ve experienced sustained pressure
from rising input costs, including 7 percent inﬂ ation in 2008. We’ve
also steadily increased our consumer marketing spending to support
our brands. Yet we’ve largely maintained our segment proﬁ t margin
since 2005.

Fiscal Year
Input Cost Inﬂ ation
Consumer Marketing Expense
Segment Operating Proﬁ t Margin*
(% of net sales)

+6%

+5%

+4% +(cid:17)7%

–5%

+5%

+8% +13%

17.8

18.0

18.2

17.6

On-trend Product Portfolio
(General Mills Fiscal 2008 Worldwide Net Sales of $14.9 Billion*)

39% Inherently Nutritious Foods

Ready-to-eat Cereal, Yogurt, Vegetables
and Organic Foods

14% Better-for-you Choices

Ready-to-serve Soup and Snacks

47% Quick and Convenient Options

Refrigerated Dough, Dinner Mixes,
Dessert Mixes, Mexican Products,
Super-premium Ice Cream, Frozen Pizza
and Snacks

See page 89 for discussion of
non-GAAP measures.

*Includes $1.2 billion proportionate share of joint venture net sales.
See page 89 for discussion of non-GAAP measures.

in recent months. You’ll ﬁ nd each of these individuals pictured
along with current members of the board and our senior leader-
ship team on pages 21 to 23.

We’re excited about the future growth prospects for General
Mills in markets around the world. We look forward to reporting
on our continuing progress, and we thank you for your investment
in General Mills.

Sincerely,

Stephen W. Sanger
Chairman of the Board
Retired May 23, 2008

Kendall J. Powell
Chairman of the Board and
Chief Executive Offi cer

July 28, 2008

We compete in growing categories. Consumers today want food
choices that off er great taste and convenience, along with health
and wellness beneﬁ ts. That makes categories like ready-to-eat
cereal, ready-to-serve soup, frozen vegetables, yogurt, grain snack
bars and organic foods advantaged places to compete. We
believe our global business portfolio is a true strategic advantage,
because these on-trend categories are great places to innovate.

We hold ourselves to high standards of corporate citizenship
and corporate governance. These two dimensions of corporate
performance are every bit as critical to our continuing growth
as the business drivers outlined above. We are actively engaged
in the communities where we operate, and we have established
sustainability initiatives designed to minimize our environmental
footprint. Our corporate governance practices have evolved over
many years and are reviewed regularly to ensure they support
an empowered and independent board of directors working with
management for the beneﬁ t of all shareholders.

The following pages of this report will tell you more about the
growth drivers we’ve just highlighted, and show you some of
the 29,500 talented General Mills people who are building our
brands around the world. Our people are our most powerful
competitive advantage, and we thank them all for their contribu-
tions to the company. We also thank Mike Spence, who is retiring
from the General Mills Board of Directors after 16 years, for his
valued counsel, and we welcome to the board both Lois Quam
and Brad Anderson. In addition, we want to acknowledge
the lasting contributions of Ken Thome, Siri Marshall and
Randy Darcy, who announced their retirements from the company

Annual Report 2008

Our Thanks to Steve

Steve Sanger joined General Mills in 1974 as an assistant product
manager for Wheaties cereal. By 1995, he was chairman and chief
executive offi cer. Over the next 13 years, Steve fostered a company
culture that attracted and developed great people. He sharpened our
focus on superior product quality and innovation. He extended
General Mills’ legacy of dedicated corporate citizenship. And he
drove ﬁ nancial performance that resulted in 13 consecutive years of
positive total returns to shareholders. We’ll miss Steve’s insight,
warmth and wit, and we thank him very much for his important and
lasting con tributions to General Mills.

A Note from Steve

It’s been an honor for me to be part of General Mills for 34 years,
and to lead this tremendous organization over the last 13 years.
I’ve passed the baton to Ken and his team with great conﬁ dence
in our company’s future. General Mills is in a new phase of its
long-term growth, and I think this might be the best one yet.

There have been several diff erent growth phases in General Mills’
80-year history. When I joined the company in the 1970s, we
were operating in 13 diff erent industry areas, ranging from fashion
to furniture. By 1995, when I became chairman and chief execu-
tive offi cer, we were back to a singular focus on our oldest and
best business— consumer foods. We were competing in large and
growing categories of the U.S. grocery industry, and our brands
held leading market positions there. But we were generating less
than $200 million in sales outside the U.S., and the bulk of that
was in Canada. It was clear that to be a top-tier performer in the
21st century food industry, we needed to unlock the opportunity
for our brands to grow in markets beyond North America.

We created a winning international growth vehicle for our cereal
business. Cereal Partners Worldwide, our 50/50 joint venture
with Nestlé, began operations in four European countries in 1991.
Today, CPW generates $2 billion in sales and operates in more
than 130 international markets. Our share of CPW’s after-tax
proﬁ t is a meaningful part of General Mills’ earnings today, and
it will be an even bigger part of our future results.

Beyond cereal, it was the acquisition of Pillsbury in 2001 that
opened the door for our international growth. Today, our Inter-
national business segment generates $2.6 billion in net sales.

Those sales are growing at a double-digit rate, and operating
proﬁ ts are growing even faster. One of the last business functions
I attended this spring was a dinner held at our headquarters for
the directors and offi cers who lead our International organization.
Just 13 years ago, that would have been an intimate gathering of
people from Canada and our export operations. This was a din-
ner for 250 men and women headquartered across the globe in
cities ranging from Caracas to Paris to Shanghai. And it’s just
the beginning— the vast majority of our international growth still
lies ahead.

General Mills has a great many strengths to leverage in this new
phase of growth. None is more powerful than the collective tal-
ent, passion and commitment of General Mills people. Ken and
his team have tremendous abilities, and they lead a Company of
Champions. I spent my career working with remarkable people
every day, and it was a joy and a privilege. I look forward to
watching General Mills’ continuing growth and success in the
years ahead.

Steve Sanger

More Than Before: Building a Multinational Food Company

Net Sales (as reported)
Net Earnings
Assets
Employees
Equity Market Value

1995
$5 billion
$0.3 billion
$3 billion
9,900
$8 billion

2008
$14 billion
$1.3 billion
$19 billion
29,500
$21 billion

General Mills

Our Plans for Continuing Growth

All across the company, General Mills people are building
on our record of continuing growth. We’re developing
innovative new products, increasing our productivity, and
expanding into new outlets and markets around the
world. The following pages highlight some of these eff orts.

Annual Report 2008

Investing In Our Brands

We market some of the best-selling brands in the food business.
We’re building those brands with new varieties that attract
new consumers to our categories, or extend our brands to new
eating occasions. And we’re investing behind our products with
more advertising, sampling and other consumer marketing pro-
grams. | For example, we are rapidly extending the Fiber One
brand. Consumers know instantly that this brand stands for
high-ﬁ ber products that taste great. Original Fiber One cereal was
introduced in 1985. In recent years, we’ve added new varieties,
and in 2008 retail sales for this cereal line grew more than 40 per-
cent. In 2007, we launched Fiber One snack bars, and they gener-
ated more than $100 million in year-one retail sales. This January,
we launched Fiber One yogurt. It’s creamy smooth, but contains
20 percent of your recommended daily ﬁ ber intake. We have

more new Fiber One products coming in 2009, including toaster
pastries. | We're building our Progresso brand with strong new
product innovation. In 2008, we created a light segment in the
ready-to-serve soup category. Endorsed by Weight Watchers®,
Progresso Light zero POINTS® value per serving soups are on pace
to generate more than $100 million in ﬁ rst-year retail sales. We
just launched a line of one POINTS® value per serving soups that
contain meat. Nearly 75 percent of the soup eaten in the U.S.
contains meat, so this extends our Light ﬂ avors into a bigger part
of the soup category. These new products will build on Progresso
soup’s 13 percent retail sales growth in 2008. | Some of our
new products extend brands to new eating occasions. For
example, Warm Delights Minis, a microwaveable single-serving
dessert with just 150 calories, makes a great afternoon snack.

General Mills

Watching Your Weight with Progresso Soup

What could be better than zero when you’re tracking Weight Watchers®
POINTS® values? New Progresso Light soups were a hit with consumers
and contributed to nearly three points in market share gain for Progresso
ready-to-serve soups in 2008.

General Mills Consumer
Marketing Spending
(percent growth)

Progresso Ready-to-serve
Soup Market Share
(percent of category sales)

9
–
7

3
1

0
4
3

3
.
1
3

4
.
1
3

0
0
3

1
.
8
2

09 Target

ACNielsen measured outlets

Annual Report 2008

appealing to a multicultural audience

We’ve increased our resources dedicated to multicultural marketing. For
example, our Hispanic marketing program, Que Rica Vida™, means “what
a rich, wonderful life.” Through our quarterly magazine and Web site, we
provide Hispanic mothers with advice about nutrition and health.

Investing In Our Brands

Warm Delights Minis contributed to 9 percent net sales growth
for our Baking Products division in 2008. Cheerios Snack Mix
introduced an iconic brand to the snack aisle and generated
nearly $20 million in retail sales last year. We’re now adding a
Honey Nut Cheerios variety to the line. | Consumer-directed mar-
keting programs increase awareness of our brands and drive sales
growth. We raised worldwide consumer marketing spending
behind our brands 13 percent in 2008. And we increased spend-
ing on advertising alone by 16 percent to $628 million, which
helped stimulate sales gains for many of our brands. For example,
television advertising for Pillsbury Toaster Strudel pastries and
MultiGrain Cheerios contributed to double-digit retail sales growth
for each of these brands in 2008. Advertising also is contributing
to good growth on many of our international brands, including
Old El Paso dinner kits and Nature Valley granola bars. | We’re
reaching consumers in new and diff erent ways today. Through
Web sites, such as eatbetteramerica.com and bettycrocker.com,
our products are reaching consumers online. We’re also increas-
ing our advertising on television programs and in magazines
and publications that appeal to Hispanic and African-American
consumers. | In 2009, we plan to introduce more than 300 new
products companywide. Our plans call for a high single-digit
increase in consumer marketing spending to support these new
introductions as well as our established brands.

General Mills

The 1 and Only Cheerios

More Ways to Get Your Fiber

Cheerios is the best-selling ready-to-eat cereal brand in the U.S.
Together, our Cheerios varieties account for 12 percent of the category’s
$8 billion in retail sales. We reinforced the cholesterol-lowering beneﬁ ts
of these whole-grain cereals in television advertising and on packaging,
driving 8 percent retail sales growth for this franchise in ﬁ scal 2008.

We’ve expanded the Fiber One brand from cereal to snack bars, muffi n
mixes and now yogurt. Our television advertising reminds consumers
that they can enjoy ﬁ ber-rich products that taste great, too.

2008 Cheerios Retail Sales Growth

Yellow Box
Honey Nut
MultiGrain
Total Cheerios Franchise (9 Varieties)

ACNielsen measured outlets plus Wal-Mart

+(cid:13)7%
+12%
+14%
+(cid:13)8%

Annual Report 2008

More of What's in Stores

Our sales in non-traditional grocery outlets are growing at strong rates.
Whether it’s the ethnic ﬂ are of Bowl Appétit! Asian bowls, the health
beneﬁ ts of Yoplait yogurt, or the wholesomeness of Cheerios, our prod-
ucts appeal to consumers at a variety of retailers.

More Outlets for our Brands

By focusing on key customer segments within the foodservice industry,
we’re increasing sales and proﬁ ts for our brands. Our products can
be found in a variety of outlets where consumers eat away from home,
ranging from school cafeterias to hospitals to convenience stores.

Leading Customer Growth

We build our business when we help our customers grow. About
60 percent of our U.S. Retail sales are generated through tradi-
tional grocery stores. In 2008, our sales in this channel grew at
a mid single-digit rate. The remaining 40 percent of our sales
are in other retail formats, including supercenters, club and drug
stores, and mass merchandisers. Our sales in these outlets grew
at double-digit rates last year. | We partner with retailers to
create innovative promotions that appeal to their shoppers, and
we develop products that meet diff erent consumer needs. For
example, we customized an Earth Day promotion with some of
our retailers, giving away reusable shopping bags with product
purchases. Asian varieties of Bowl Appétit! microwaveable rice
bowls appeal to customers who want food with an ethnic ﬂ avor.
| Cascadian Farm and Muir Glen are leading brands in natural and
organic food stores. Net sales for these brands in all outlets
grew 6 percent in 2008. We recently added the Lärabar brand
to our portfolio. These fruit-and-nut-based energy bars are a
leader in the $100 million nutrition bar segment in natural and
organic outlets. | We’re also expanding our branded products in
a variety of foodservice outlets. More than $500 billion is spent
on food eaten away from home in the U.S., so foodservice chan-
nels represent a good growth opportunity for us. Our cereals
are now available in more health care and lodging facilities. Our
yogurt products can be found in schools and cafeterias. And our
snacks continue to be popular with convenience store customers.
In total, sales for our Bakeries and Foodservice segment grew
11 percent in 2008. | So whether you’re shopping in a retail store
or eating away from home, you'll ﬁ nd more of our products.

General Mills 2008 Net Sales Growth in Select Channels
(percent)

Club Stores

Drug, Dollar and
Discount Stores

Supercenters

C-Stores/Vending

Traditional Grocery

DD = Double-digit
MSD = Mid Single-digit

+DD

+MSD

General Mills

Annual Report 2008

Growing around the Globe

We compete in more than 100 countries outside of the U.S.
In 2008, sales for our International business segment grew 21 per-
cent to $2.6 billion. Operating proﬁ t grew even faster. In fact, our
International segment generated 36 percent of our sales growth
and 37 percent of our operating proﬁ t growth last year. And we
still see plenty of growth ahead. | We market Häagen-Dazs, our
largest international brand, in 60 countries. Through sales in
grocery stores, foodservice channels and Häagen-Dazs cafés,
we’re expanding the reach of this super-premium ice cream
brand every year. In 2008, we increased our presence in Germany,
Turkey and China. We’re planning to open more shops in these
countries in 2009, including entering ﬁ ve new cities in China.
| Consumers around the world are interested in better-for-you

snacks. We’ve launched Nature Valley crunchy granola bars in
54 markets, and they've been a hit everywhere. In 2008, we added
the United Kingdom to the list. In 2009, we’ll expand further in
Europe and Latin America, and we’ll introduce Nature Valley chewy
Trail Mix bars into select international markets. | We’re also
expanding our brands of world cuisine. Old El Paso Mexican prod-
ucts are available in 20 countries around the world. In China,
sales for Wanchai Ferry dumplings grew 30 percent in 2008 as we
entered 10 new cities and regions across the country. | With these
global brands and a number of strong regional brands throughout
Europe, Asia and Latin America, we have built a strong foundation
for international growth. We see great opportunities to expand our
international business in the years ahead.

General Mills

International Segment
Operating Proﬁ t
(dollars in millions)

Net Sales Growth by
Geographic Region

Fiscal 2008 % Change
+14
+19
+25
+31
+21

Canada
Europe
Asia/Paciﬁ c
Latin America and South Africa
Total International

9
6
2

6
1
2

4
9
1

4
6
1

Annual Report 2008

Where's Your Nature Valley?

Nature Valley granola bars are a wholesome, all-natural snack that appeals
to active consumers everywhere. In Canada, we launched Fibre Source bars
in 2008. These bars are high in ﬁ ber, contain omega-3 and contributed to
11 percent net sales growth for our Canadian grain snacks business in 2008.

Partnering for International Growth

We’re partners in several international joint ventures that
generated $112 million in after-tax earnings for General Mills
in 2008. Cereal Partners Worldwide (CPW), our partnership
with Nestlé, began operating in just four countries in 1991. Today,
CPW is in 130 markets around the world with total net sales top-
ping $2 billion. | CPW is the clear No. 2 cereal company outside of
North America. We have strong share positions in many estab-
lished markets, including the United Kingdom, France, Australia
and Mexico. CPW also has a strong presence in several emerging
markets, with leading share positions in Southeast Asia, Russia
and Poland. Per capita cereal consumption is still quite low in
many international markets, so we see great growth opportuni-
ties ahead for CPW. | We participate in two Häagen-Dazs ice
cream joint ventures in Asia, the largest of which is in Japan. Our
super-premium ice cream is available in grocery stores and more
than 60 Häagen-Dazs cafés across Japan. Total joint-venture
sales in Japan grew to nearly $400 million in 2008 as consum-
ers enjoyed new ice cream flavors and confections, including
our successful Dolce line of frozen desserts. We’ll be adding new
ﬂ avors to this line in 2009. | As these joint ventures continue
to grow, they will be increasingly important contributors to
General Mills' growth in the years ahead.

After-tax Earnings from
Ongoing Joint Ventures*
(dollars in millions)

CPW Net Sales
(our proportionate share,
dollars in millions)

2
1
1

6
3 7
7

9
6

9
0
0
,
1

8
1
8

4
9
6

6
6
6

* See page 89 for discussion of
non-GAAP measures.

Cereal around the World

Net sales for Cereal Partners Worldwide have grown at a 15 percent
compound rate over the past three years. Health news has been driving
growth on some of our biggest brands. For example, our “School Fuel”
program in Europe and Asia promoted the beneﬁ ts of whole grains on
many cereal brands, such as Nesquik, and contributed to 23 percent sales
growth for CPW in 2008.

The Scoop on Häagen-Dazs

Many of the most successful Häagen-Dazs ice cream confections origi-
nated in Japan, where the brand is synonymous with aff ordable luxury.
Our newest off ering is the Dolce line of frozen desserts in ﬂ avors such
as Tiramisu and Millefeuille, which are well-known European desserts.
The Dolce line contributed to 16 percent sales growth for our ice cream
joint ventures in 2008.

General Mills

Focusing on Quality and Innovation

Consumers want great-tasting foods that also off er health and
wellness beneﬁ ts. We’re continually improving our products to
provide more nutritional beneﬁ ts. Four years ago, we set a goal
to make meaningful health improvements on 20 percent of our
U.S. Retail portfolio by the end of ﬁ scal 2007. We met that goal
a full year ahead of schedule. And we’ve set a new goal: 45 per-
cent of our product lines will have health improvements by the
end of ﬁ scal 2010. | We're also making health improvements on
our International products, such as introducing whole-wheat
Old El Paso tortillas in Europe. And in Canada we launched
Nature Valley Fibre Source bars that contain 5 grams of ﬁ ber per
serving. | We want to provide high-quality products that con-
sumers prefer over competitive off erings, including private label.
So we regularly test our products to ensure they are preferred by
at least 60 percent of consumers. | When developing new prod-
ucts, we are looking for bigger and better ideas, and we measure
each new item against a series of criteria. For example, we con-
sider the product’s likely contribution to ongoing sales, and we
also consider whether the product will bring new users to a brand
or extend an existing product to new eating occasions. Cheerios
Snack Mix is a great example. It extends our leading breakfast
cereal brand to a snacking occasion, generating additional sales.
| In 2008, our new products accounted for more than 5 percent
of U.S. Retail net sales, and 8 percent of Inter national net sales.
We’ll build on this good performance with our lineup of more
than 300 new products planned around the world in 2009.

A Healthier Product Mix

Green Giant Valley Fresh Steamers make it even easier to prepare frozen
vegetables with natural sauces. You can improve your digestive health
with Green Giant vegetables or Yo-Plus yogurt. Bisquick Heart Smart is low
in fat and naturally cholesterol-free. And we added omega-3 DHA to
Yoplait Kids yogurt to support healthy brain development.

U.S. Retail Health
Improvement Progress
(percent of products improved)

Since 2005, we've made health
improvements on 40 percent of
our U.S. Retail products, and we’re
not stopping there. Our goal is to
improve the health attributes of
45 percent of our product portfolio
by the end of ﬁ scal 2010.

5
4

0
4

0
3

1
2

6
1

2010 Goal

Annual Report 2008

Holistic Margin Management

Holistic Margin Management, or HMM, is our approach to iden-
tifying non-value added costs in our business. We eliminate them
and use the savings to off set input cost inﬂ ation and fuel growth
through investment in our brands. | HMM is a broad, cross-
functional eff ort with employees in our plants working together
with people in product development, marketing, ﬁ nance and
consumer insights. These teams use a number of tools to identify
HMM opportunities. Continuous improvement, for example,
examines our processes — from plant lines to new product intro-
ductions — and encourages ongoing improvements in the way
we do things. Together, these tools help us identify cost savings
opportunities and stay focused on what our consumers value.
| HMM is an integral part of how we do business, especially in

this time of rising ingredient and energy prices. Raw materials
make up slightly more than half of General Mills’ total cost of
sales. And energy prices impact our cost to manufacture and
distribute our products. In total, inﬂ ation drove supply chain costs
up 7 percent in 2008, and we expect these costs will increase
another 9 percent in 2009. | HMM is our ﬁ rst line of defense to
off set these rising costs. When combined with price increases
as needed and improved product mix, we believe HMM will
help keep our business healthy. It has helped us hold our gross
margin relatively steady despite more than four years of rising
costs. | HMM protects our bottom line, and it also helps drive
sales growth by generating resources we can invest in brand-
building initiatives.

General Mills

An Example of HMM

Our Yoplait cups used to have diff erent color foil lids—red for Original
Yoplait, blue for Light and gold for Thick & Creamy. Consumers told us
the lid color didn't matter to them. So we simpliﬁ ed to one color and
saved $2 million last year. We invested this savings, helping to fuel Yoplait
division sales growth of more than 10 percent in 2008.

snacks productivity

Our Snacks division brought several cross-functional teams together to
identify cost-savings opportunities on everything from raw materials
to getting product to store shelves. In total, Snacks HMM initiatives
generated more than $40 million in cost savings last year.

General Mills Gross
Margin Trend
(percent of net sales)

General Mills 2008
Cost of Sales
(percent of total)

2
5
3

6
5
3

1
.
6
3

7
5
3

Raw Materials

Manufacturing

Logistics

Annual Report 2008

Corporate Citizenship

In addition to providing good returns for our shareholders,
we’re also committed to making a positive impact on our com-
munities and the world. Our Box Tops for Education program
is in its 12th year and has raised more than $250 million for
K-8 schools across the U.S. Over the past 10 years, Yoplait and
General Mills have donated more than $19 million to promote
breast cancer research, including the Save Lids to Save Lives pro-
gram. | The General Mills Foundation provides grants targeting
youth nutrition and ﬁ tness, education, social services, and arts
and culture. In 2008, these grants totaled $21 million. And we
made $18 million in product donations last year. | In 2008, the
Foundation expanded its inter national grants, helping people in
countries from Brazil to India. We also began a new initiative to
aid in the battle against hunger in Africa. We have committed
$5 million over the next three years to help women as farmers,
food processors and providers in Malawi and Tanzania. | We
are committed to sustaining a healthy environ ment and have set
measurable goals to reduce energy usage, greenhouse gas emis-
sions and solid waste generation rates by 2010. We also have a
goal to reduce our water usage rate by 5 percent by 2011, and have
implemented water conservation programs in many of our manu-
facturing facilities. For example, at our plant in Covington, Ga., we
installed a water purifying system that reduced the plant’s water
usage by more than 40 percent annually. | Our Corporate Social
Responsibility Report, available online, has more details on these
and other aspects of our corporate citizenship.

Fiscal 2008 General Mills Contributions
(dollars in millions)

$18

Product
Donations

$21

Foundation
Grants

$48

Corporate
Contributions

Doing Well while Doing Good

Review our Corporate Social Responsibility Report

Through our Box Tops for Education program, we’ve donated to 90,000 U.S.
K-8 schools over the past 12 years. Our Spoonfuls of Stories initiative has
been promoting childhood literacy for the past six years by distributing
30 million free books inside Cheerios boxes. And in 2008, the Yoplait Save
Lids to Save Lives initiative to raise breast cancer awareness was expanded
to a Pink for the Cure promotion that included 15 General Mills brands.

Our 2008 Corporate Social Responsibility Report provides an update on
our corporate citizenship initiatives, including our environmental eff orts.
You can read more about how we’re serving the needs of our consumers,
our shareholders and our employees. This report is available online at
www.generalmills.com.

General Mills

Board of Directors

1 Bradbury H. Anderson
Vice Chairman and
Chief Executive Offi cer
Best Buy Co., Inc.
(electronics retailer)
Minneapolis, Minnesota

2 Paul Danos

Dean, Tuck School of Business and
Laurence F. Whittemore Professor
of Business Administration,
Dartmouth College
Hanover, New Hampshire

7 Hilda Ochoa-Brillembourg
Founder, President and
Chief Executive Ofﬁcer,
Strategic Investment Group
(investment management)
Arlington, Virginia

8 Steve Odland
Chairman and
Chief Executive Ofﬁcer,
Ofﬁce Depot, Inc.
(ofﬁce products retailer)
Delray Beach, Florida

3 William T. Esrey

9 Kendall J. Powell

Chairman Emeritus,
Sprint Corporation
(telecommunication systems)
Vail, Colorado

4 Raymond V. Gilmartin

Professor of Management
Practice, Harvard Business School;
Retired Chairman, President and
Chief Executive Ofﬁcer,
Merck & Company, Inc.
(pharmaceuticals)
Woodcliff Lake, New Jersey

5 Judith Richards Hope

Distinguished Visitor from
Practice, Georgetown University
Law Center
Washington, D.C.

6 Heidi G. Miller

Executive Vice President and chief
executive ofﬁcer, Treasury &
Security Services, J.P. Morgan
Chase & Co.
(banking and ﬁ nancial services)
New York, New York

Chairman of the Board and
Chief Executive Ofﬁcer,
General Mills, Inc.

10 Lois E. Quam

Managing Director of
Alternative Investments,
Piper Jaff ray
(ﬁ nancial services)
Minneapolis, Minnesota

11 Michael D. Rose

Chairman of the Board,
First Horizon National Corporation
(banking and ﬁnancial services)
Memphis, Tennessee

12 Robert L. Ryan

Retired Senior Vice President and
Chief Financial Ofﬁcer,
Medtronic, Inc.
(medical technology)
Minneapolis, Minnesota

13 Dorothy A. Terrell
Limited Partner,
First Light Capital
(venture capital)
Boston, Massachusetts

retiring from our Board

Mike Spence is retiring from our board, where he served with distinction
over the past 16 years. We thank him for his valuable advice and counsel.

A. Michael Spence
Partner, Oak Hill Investment
Management Partners;
Professor Emeritus and Former Dean,
Graduate School of Business,
Stanford University, Stanford, California

Annual Report 2008

Senior Management

General Mills

1 Mark W. Addicks

8 Michael L. Davis

Senior Vice President,
Chief Marketing Offi cer

Senior Vice President,
Global Human Resources

14 Richard O. Lund
Vice President,
Controller

21 Kimberly A. Nelson

27 Kendall J. Powell

Senior Vice President;
President, Snacks Unlimited

Chairman of the Board and
Chief Executive Offi cer

9 David E. Dudick Sr.
Vice President,
U.S. Channels Sales

10 Peter C. Erickson

Senior Vice President,
Innovation, Technology
and Quality

11 Ian R. Friendly

Executive Vice President;
Chief Operating Offi cer,
U.S. Retail

12 Jeff rey L. Harmening

Vice President;
President, Big G Cereals

13 David P. Homer

Senior Vice President;
President, Canada

2 Y. Marc Belton

Executive Vice President,
Worldwide Health,
Brand and New Business
Development

3 Peter J. Capell

Senior Vice President,
International Marketing
and Sales

4 Gary Chu

Senior Vice President;
President, Greater China

5 Juliana L. Chugg

Senior Vice President;
President, Pillsbury USA

6 John R. Church

Senior Vice President,
Supply Chain

7 Giuseppe A. D’Angelo
Senior Vice President;
President, Europe, Latin
America and Africa

15 John T. Machuzick

Senior Vice President;
President, Bakeries and
Foodservice

16 Luis Gabriel Merizalde

Vice President;
Managing Director,
Australasia

17 Michele S. Meyer
Vice President;
President, Small Planet
Foods

18 Maria S. Morgan
Vice President;
President, Foodservice

19 Donal L. Mulligan

Executive Vice President,
Chief Financial Offi cer

20 James H. Murphy
Vice President;
President, Meals

22 Shawn P. O’Grady
Vice President;
President, U.S. Retail Sales

23 Christopher D. O’Leary

Executive Vice President;
Chief Operating Offi cer,
International

24 Roderick A. Palmore

Executive Vice President,
General Counsel, Chief
Corporate and Risk
Management Offi cer
and Secretary

25 Michael A. Peel

Executive Vice President,
Human Resources and
Business Services

26 Daralyn B. Peifer

Vice President, Treasurer

28 Jeff rey J. Rotsch

Executive Vice President,
Worldwide Sales and
Channel Development

29 Christina L. Shea

Senior Vice President,
External Relations and
President, General Mills
Foundation

30 Ann W.H. Simonds
Vice President;
President, Baking Products

31 Christi L. Strauss

Senior Vice President;
Chief Executive Offi cer,
Cereal Partners Worldwide

32 Robert F. Waldron

Senior Vice President;
President, Yoplait

33 Keith A. Woodward

Senior Vice President,
Financial Operations

retiring from General Mills

Randy Darcy, Siri Marshall and Ken Thome announced
their retirements from General Mills in recent months.
They have been invaluable members of our senior
management team, and we appreciate the many
contributions they have made to our company.

Randy G. Darcy
Executive Vice President,
Worldwide Operations
and Technology

Siri S. Marshall
Senior Vice President,
General Counsel,
Chief Governance and
Compliance Offi cer and
Secretary

Kenneth L. Thome
Senior Vice President,
Deputy Chief Financial
Offi cer

Annual Report 2008

Uses of Cash

In ﬁ scal 2008, our cash ﬂ ow from operations totaled more than
$1.7 billion. We reinvested a portion of this cash in capital projects
to support the growth of our business worldwide and increase
productivity. And we returned $2 billion in cash to General Mills
shareholders through dividends and share repurchases.

Our investments in capital projects totaled $522 million in 2008,
or 3.8 percent of sales. In 2009, our plans call for capital expendi-
tures of $550 million and include projects to add capacity for our
rapidly growing yogurt and grain snacks businesses. Over any
three-year period, we expect our capital investments to average
just under 4 percent of sales.

General Mills has a strong tradition of returning cash to share-
holders through dividends. In fact, General Mills and its prede-
cessor firm have paid regular dividends without interruption
or reduction for 110 years. During 2008, dividends per share

increased 9 percent to $1.57. As 2009 began, our board of direc-
tors approved an additional 3-cent increase in the quarterly rate
to 43 cents per share, eff ective with the Aug. 1, 2008, payment.
With the new annualized rate of $1.72 per share, we will have
grown dividends at a 9 percent compound rate since 2005. Our
goal is to continue paying dividends roughly in line with the pay-
out ratios of our peer group, and to increase dividends over time
as our earnings grow.

In 2008, we repurchased 25 million shares of General Mills
stock. Our goal is to reduce shares outstanding by an aver-
age of 2 percent per year. We’ve exceeded this target over the
past three years, with average diluted shares outstanding down
9 percent from 2005, excluding shares related to convertible
debentures. We plan to continue our share repurchase activity in
ﬁ scal 2009 with a goal of reducing average shares outstanding
by a net 1 percent in 2009.

Capital Expenditures
(dollars in millions)

Dividends per Share
(dollars)

0
5
5

2
2
5

0
6
4

4
3
4

0
6
3

2
7
7 1
5
.
1

4
4
.
1

4
3
.
1

4
2
.
1

Average Diluted
Shares Outstanding
(shares in millions)

Fiscal 2005 and 2006
exclude shares related to
convertible debentures.
See page 89 for discussion
of non-GAAP measures.

0
8
3

6
6
3

0
6
3

7
4
3

5
4
3

09 Estimate

09 Annualized Rate

09 Target

General Mills

Celebrating 80 Years

Financial Review

C O N T I N U I N G G R O W T H

T A B L E O F C O N T E N T S

In 2008, we’re celebrating our 80th year as a publicly traded
company, and we’re proud of our history of strong performance
and returns for shareholders. Since we first traded on the New
York Stock Exchange on Nov. 30, 1928, our stock price appreci-
ation has averaged 7.5 percent per year, significantly outpacing
the broader market, as represented by the Dow Jones Industrial
Average index (DJIA). General Mills and its predecessor firm have
paid regular dividends without interruption or reduction for
110 years. We remain committed to delivering superior growth
and returns for shareholders in the years ahead.

Price Performance 1928–2008
Indexed: November 30, 1928 = 1.0

309

80-Year Compound Growth
GIS: 7.5%*
DJIA: 4.8%

*Adjusted for Stock Splits and Spin-offs
Dow Jones & Company, Inc.

Annual Report 2008

Financial Summary
Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Reports of Management and Independent Registered

Public Accounting Firm

Consolidated Financial Statements
Notes to Consolidated Financial Statements

1 Basis of Presentation and Reclassifications
2 Summary of Significant Accounting Policies
3 Acquisitions and Divestitures
4 Restructuring, Impairment, and Other Exit Costs
5 Investments in Joint Ventures
6 Goodwill and Other Intangible Assets
7 Financial Instruments and Risk Management

Activities

8 Debt
9 Minority Interests
10 Stockholders’ Equity
11 Stock Plans
12 Earnings Per Share
13 Retirement and Postemployment Benefits
14 Income Taxes
15 Leases and Other Commitments
16 Business Segment and Geographic Information
17 Supplemental Information
18 Quarterly Data

Glossary
Reconciliation of Non-GAAP Measures
Total Return to Stockholders

52
54
58
58
58
63
63
65
66

67
70
71
73
74
76
77
82
84
84
86
87
88
89
91

Financial Summary

2008

2007

Fiscal Year
........................................................................................................................................................
2006
2004
In Millions, Except per Share Data, Percentages and Ratios
............................................................................................................................................................................................................................................................................................................................................................................................
Operating data:
Net sales
Gross margin(a)
Selling, general, and administrative expenses
Segment operating profit(b)
Divestitures (gain)
Debt Repurchase Costs
After-tax earnings from joint ventures
Net earnings
Depreciation and amortization
Advertising and media expense
Research and development expense
Average shares outstanding:

$11,307.8
3,982.6
1,998.6
2,016.4
(489.9)
137.0
93.9
1,240.0
443.1
480.8
165.3

$12,441.5
4,486.4
2,389.3
2,260.1
—
—
72.7
1,143.9
417.8
543.3
191.1

$11,122.2
4,088.1
2,052.2
2,052.9
—
—
78.5
1,055.2
399.0
514.3
157.6

$11,711.3
4,166.5
2,177.7
2,111.6
—
—
69.2
1,090.3
423.9
524.0
178.4

$13,652.1
4,873.8
2,625.0
2,405.5
—
—
110.8
1,294.7
459.2
628.0
204.7

2005

Basic
Diluted

Net earnings per share:

Basic
Diluted

Operating ratios:
Gross margin as a percentage of net sales
Selling, general, and administrative expenses as a percentage of net sales
Segment operating profit as a percentage of net sales(b)
Effective income tax rate
Return on average total capital(a)(b)
Balance sheet data:
Land, buildings, and equipment
Total assets
Long-term debt, excluding current portion
Total debt(a)
Minority interests
Stockholders’ equity
Cash flow data:
Net cash provided by operating activities
Capital expenditures
Net cash provided (used) by investing activities
Net cash used by financing activities
Fixed charge coverage ratio
Operating cash flow to debt ratio(a)
Share data:
Low stock price
High stock price
Closing stock price
Cash dividends per common share
Number of full- and part-time employees

Fiscal 2004 was a 53-week year; all other fiscal years were 52 weeks.

333.0
346.9

346.5
360.2

357.7
378.8

371.2
408.7

374.7
412.8

3.86
3.71

3.30
3.18

3.05
2.90

3.34
3.08

2.82
2.60

35.7%
19.2
17.6
34.4
12.1

36.1%
19.2
18.2
34.3
11.1

35.6%
18.6
18.0
34.5
10.5

35.2%
17.7
17.8
36.6
11.4

36.8%
18.5
18.5
35.0
10.0

$ 3,108.1
19,041.6
4,348.7
6,999.5
242.3
6,215.8

$ 3,013.9
18,183.7
3,217.7
6,206.1
1,138.8
5,319.1

$ 2,997.1
18,075.3
2,414.7
6,049.3
1,136.2
5,772.3

$ 3,111.9
17,924.0
4,255.2
6,193.1
1,133.2
5,676.4

$ 3,197.4
18,330.9
7,409.9
8,226.0
299.0
5,247.6

1,729.9
522.0
(442.4)
1,093.0
4.87
24.7%

1,751.2
460.2
(597.1)
1,398.1
4.37
28.2%

1,843.5
360.0
(370.0)
1,404.3
4.54
30.5%

1,785.9
434.0
413.0
2,385.0
4.61
28.8%

1,521.0
653.0
(530.0)
943.0
3.74
18.5%

51.43
62.50
61.09
1.57
29,500

49.27
61.11
60.15
1.44
28,580

44.67
52.16
51.79
1.34
28,147

43.01
53.89
49.68
1.24
27,804

43.75
49.66
46.05
1.10
27,580

In fiscal 2007, we adopted Statement of Financial Accounting Standards (SFAS) No. 158, “Employers’Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans an
amendment of Financial Accounting Standards Board (FASB) Statements No. 87, 88, 106 and 132(R)”, resulting in an after-tax reduction to stockholders’ equity of $440.4 million, and
SFAS No. 123R, “Share Based Payment”, resulting in a decrease to fiscal 2007 net earnings of $42.9 million, and a decrease to fiscal 2007 cash flows from operations and corresponding
decrease to cash flows used by financing activities of $73.1 million. See Notes 2 and 13 to the Consolidated Financial Statements.

(a) See Glossary on page 88 of this report for definition.

(b) See page 89 for our discussion of non-GAAP measures.

General Mills

Management’s Discussion and Analysis of Financial
Condition and Results of Operations

EXECUTIVE OVERVIEW
We are a global consumer foods company. We develop distinc-
tive food products and market these value-added products under
unique brand names. We work continuously to improve our
established brands and to create new products that meet con-
sumers’ evolving needs and preferences. In addition, we build the
equity of our brands over time with strong consumer-directed
marketing and innovative merchandising. We believe our brand-
building strategy is the key to winning and sustaining leading
share positions in markets around the globe.

Our fundamental business goal is to generate superior returns
for our stockholders over the long term. We believe that increases
in net sales, segment operating profits, earnings per share (EPS),
and return on average total capital are the key measures of
financial performance for our businesses. See the “Reconciliation
of Non-GAAP Measures” section on page 89 for our discussion of
segment operating profit and return on average total capital,
which are not defined by generally accepted accounting princi-
ples (GAAP). Our objectives are to consistently deliver:
• low single-digit annual growth in net sales;
• mid single-digit annual growth in total segment operating profit;
• high single-digit annual growth in EPS; and
• on average, at least a 50 basis point annual increase in return

on average total capital.
We believe that this financial performance, coupled with an
attractive dividend yield, should result in long-term value creation
for stockholders. We also return a substantial amount of cash
annually to stockholders through share repurchases.

For the fiscal year ended May 25, 2008, our net sales grew
9.7 percent, total segment operating profit grew 6.4 percent,
diluted EPS grew 16.7 percent, and our return on average total
capital
improved by 100 basis points. These results met or
exceeded our long-term targets. Diluted EPS for fiscal 2008
includes a $0.10 net gain from mark-to-market valuation of certain
commodity positions and a $0.09 benefit associated with a
favorable court decision on a discrete tax matter. Net cash
provided by operations totaled $1.7 billion in fiscal 2008, enabling
us to increase our annual dividend payments per share by 9.0 per-
cent from fiscal 2007 and continue returning cash to stockholders
through share repurchases, which totaled $1,384.6 million in fiscal
2008. We also made significant capital
investments totaling
$522.0 million in fiscal 2008, an increase of 13.4 percent from
fiscal 2007, to support future growth and productivity.

We achieved each of our four key operating objectives for

fiscal 2008:
• We generated broad-based growth in net sales across our
businesses. All of our U.S. Retail divisions, International geo-
graphic regions, and Bakeries and Foodservice customer seg-
ments posted net sales gains in fiscal 2008. We generated 2.9
points of growth from volume, generated 5.3 points of growth
from net price realization and product mix, and realized 1.5 points
of foreign currency exchange benefit.
• Our cost savings initiatives helped to partially offset input cost
inflation in fiscal 2008. We took steps to manage raw material
costs, especially with significant commodity price increases in
fiscal 2008, and we initiated several restructuring actions to
rationalize and simplify our product portfolio, allowing us to focus
on higher margin products.
• We invested a significant amount in media and other brand-
building marketing programs, which contributed to sales growth
across our businesses.
• We also recorded increases in EPS well above our target, even
excluding the effects of non-cash, mark-to-market gains and a
discrete tax item.

Details of our financial results are provided in the “Fiscal 2008

Consolidated Results of Operations” section below.

In fiscal 2009, input cost inflation will remain a challenge for us.
We plan to offset a significant portion of this cost inflation with
our holistic margin management (HMM) efforts, which include
cost-savings initiatives, marketing spending efficiencies, and
profitable sales mix strategies. We have also raised prices on a
number of our product lines. We believe our HMM efforts help us
keep our price increases moderate and expand our margins over
the long term. In addition, our HMM savings generate resources
for increased advertising and other brand-building consumer
marketing initiatives. Our plans call for a high single digit increase
in consumer marketing support in fiscal 2009. We believe this
support is a key factor in generating net sales growth, as we
believe it builds consumer loyalty, increases our market share,
and defends against private-label offerings.

In addition to protecting and expanding our margins over time,
and investing in brand-building marketing initiatives, our key
operating objectives for fiscal 2009 include plans for introducing
new products and extending existing brands to new markets. We
are exploring innovative ways to partner with customers includ-
ing traditional food retailers, new retail formats, and various

Annual Report 2008

away-from-home channels. We will continue to grow our busi-
ness in international markets, focusing on our core platforms of
super-premium ice cream, world cuisine, and healthy snacking.
Our plans also call for $550 million of expenditures for capital
projects and a significant amount of cash returned to stockhold-
ers through share repurchases and dividends. Our long-term
objective is to reduce outstanding shares by a net 2 percent
per year. We intend to continue repurchasing shares in fiscal
2009, with a goal of reducing average diluted shares outstanding a
net 1 percent. On June 23, 2008, our board of directors approved a
dividend increase to an annual rate of $1.72 per share. This
represents a 9 percent compound annual growth rate in dividends
from fiscal 2005 to fiscal 2009.

Certain terms used throughout this report are defined in a

glossary on page 88 of this report.

FISCAL 2008 CONSOLIDATED RESULTS OF OPERATIONS
For fiscal 2008, we reported diluted EPS of $3.71, up 16.7 percent
from $3.18 per share earned in fiscal 2007. Earnings after tax were
$1,294.7 million in fiscal 2008, up 13.2 percent from $1,143.9 million
in fiscal 2007.

The components of net sales growth are shown in the

following table:

Components of Net Sales Growth

Fiscal 2008
vs. 2007
.........................................................................................................................................................................................
2.9 pts

Contributions from volume growth(a)
5.3 pts
Net price realization and product mix
1.5 pts
Foreign currency exchange
.........................................................................................................................................................................................
9.7 pts
Net sales growth

(a) Measured in tons based on the stated weight of our product shipments.

Net sales for fiscal 2008 grew 9.7 percent to $13.7 billion, driven
by 2.9 percentage points from volume growth, mainly in our
U.S. Retail and International segments, and 5.3 percentage points
of growth from net price realization and product mix across many
of our businesses. In addition, foreign currency exchange effects
added 1.5 percentage points of growth. During the second quarter
of fiscal 2008, we voluntarily recalled all pepperoni varieties of
Totino’s and Jeno’s frozen pizza manufactured on or before Octo-
ber 30, 2007 due to potential contamination. We also voluntarily
recalled one flavor of Progresso soup during the third quarter of

fiscal 2008. The frozen pizza and soup recalls did not significantly
impact our net sales for fiscal 2008.

Cost of sales was up $823.2 million in fiscal 2008 versus fiscal
2007. Cost of sales as a percent of net sales increased from
63.9 percent in fiscal 2007 to 64.3 percent in fiscal 2008. Higher
volume drove $206.9 million of this increase. Higher input costs
and changes in mix increased cost of sales by $632.1 million. We
recorded net mark-to-market gains of $59.6 million related to
hedges on open commodity positions that will mitigate future
input cost inflation, and a $2.6 million loss from the revaluation of
certain grain inventories to market. We also recorded $18.5 million
of charges to cost of sales, primarily accelerated depreciation on
long-lived assets associated with previously announced restruc-
turing actions. Our La Salteña pasta manufacturing plant in
Argentina was destroyed by a fire resulting in a loss of $1.3 million,
net of insurance proceeds, from the write off of inventory and
property, plant, and equipment, and severance expense related to
this event. Cost of sales for fiscal 2008 also includes $21.4 million
of costs, including product write offs, logistics, and other costs
related to the voluntary recalls.

Gross margin grew 8.6 percent in fiscal 2008 versus fiscal
2007, driven by higher volume, cost savings initiatives and net
price realization. Gross margin as a percent of net sales declined
40 basis points from fiscal 2007 to fiscal 2008. This primarily
reflects declines in our Bakeries and Foodservice segment, where
we took price increases designed to offset cost increases on a
dollar basis, but gross margin as a percent of net sales declined.
Selling, general, and administrative (SG&A) expenses
increased by $235.7 million in fiscal 2008 versus fiscal 2007.
The increase in SG&A expenses from fiscal 2007 was largely
the result of a 13.2 percent increase in media and other consumer
marketing spending consistent with our brand-building strategy,
$30.1 million more foreign exchange losses than a year ago, higher
levels of compensation and benefits, a 7.1 percent increase in
research and development expense supporting our innovation
initiatives, and $9.2 million of costs associated with the remar-
keting of the Class A and Series B-1 Interests in our subsidiary
General Mills Cereals, LLC (GMC). SG&A expense as a percent of
net sales was essentially flat compared to fiscal 2007.

Net interest for fiscal 2008 totaled $421.7 million, $4.8 million
lower than fiscal 2007. Average interest-bearing instruments
increased $467.3 million leading to a $29.3 million increase in
net interest, while average interest rates decreased 50 basis

General Mills

points generating a $34.1 million decrease in net interest. Net
interest includes preferred distributions paid on minority inter-
ests. The average rate on our total outstanding debt and minority
interests was 5.8 percent in fiscal 2008 compared to 6.3 percent
in fiscal 2007.

Restructuring,

impairment, and other exit costs totaled

$21.0 million in fiscal 2008 as follows:

Expense (Income), In Millions
.........................................................................................................................................................................................
$ 2.7

Closure of Poplar, Wisconsin plant

Closure and sale of Allentown, Pennsylvania frozen waffle plant

Closure of leased Trenton, Ontario frozen dough plant
Restructuring of production scheduling and discontinuation of cake

product line at Chanhassen, Minnesota plant

Gain on sale of previously closed Vallejo, California plant
Charges associated with restructuring actions previously

9.4

10.9

1.6

(7.1)

announced

3.5
.........................................................................................................................................................................................
$21.0
Total

We approved a plan to transfer Old El Paso production from our
Poplar, Wisconsin facility to other plants and to close the Poplar
facility to improve capacity utilization and reduce costs. This
action affects 113 employees at the Poplar facility and resulted
in a charge of $2.7 million consisting entirely of employee sev-
erance. Due to declining financial results, we decided to exit our
frozen waffle product line (retail and foodservice) and to close
our frozen waffle plant in Allentown, Pennsylvania, affecting
111 employees. We recorded a charge consisting of $3.5 million
of employee severance and a $5.9 million non-cash impairment
charge against long-lived assets at the plant. We also completed
an analysis of the viability of our Bakeries and Foodservice frozen
dough facility in Trenton, Ontario, and decided to close the
facility, affecting 470 employees. We recorded a charge consist-
ing of $8.4 million for employee expenses and $2.5 million in
charges for shutdown and decommissioning costs. We lease the
Trenton plant under an agreement expiring in fiscal 2013. We
expect to make limited use of the plant during fiscal 2009 while
we evaluate sublease or lease termination options. These actions,
including the anticipated timing of the disposition of the plants we
will close, are expected to be completed by the end of the third
quarter of fiscal 2009. We also restructured our production
scheduling and discontinued our cake production line at our
Chanhassen, Minnesota Bakeries and Foodservice plant. These
actions affected 125 employees, and we recorded a $3.0 million

charge for employee severance, partially offset by a $1.4 million
gain from the sale of long-lived assets during the fourth quarter of
fiscal 2008. This action is expected to be completed by the end of
the first quarter of fiscal 2009. Finally, we recorded additional
charges of $3.5 million primarily related to previously announced
Bakeries and Foodservice segment restructuring actions including
employee severance for 38 employees.

Collectively, the charges we expect to incur with respect to
these fiscal 2008 restructuring actions total $65 million, of which
$43.3 million has been recognized in fiscal 2008. This includes a
$17.7 million non-cash charge related to accelerated depreciation
on long-lived assets at our plant in Trenton, Ontario and $0.8 mil-
lion of inventory write offs at our plants in Chanhassen, Minne-
sota and Allentown, Pennsylvania. The accelerated depreciation
charge is recorded in cost of sales in our Consolidated Statements
of Earnings and in unallocated corporate items in our
segment results.

Our consolidated effective income tax rate is influenced by tax
planning opportunities available to us in the various jurisdictions
in which we operate. The effective tax rate for fiscal 2008 was
34.4 percent compared to 34.3 percent for the same period of
fiscal 2007. The 0.1 percentage point increase is the result of an
increase in the state income tax rate due to more income in higher
rate jurisdictions and lower foreign tax credits. These items were
offset by a favorable U.S. Federal District Court decision on an
uncertain tax matter that reduced our liability for uncertain tax
positions and related accrued interest by $30.7 million. The IRS
has appealed the District Court decision, and accordingly, its
ultimate resolution is subject to change.

After-tax earnings from joint ventures totaled $110.8 million in
fiscal 2008, compared to $72.7 million in fiscal 2007. In fiscal
2008, net sales for Cereal Partners Worldwide (CPW) grew
23.3 percent driven by higher volume, key new product introduc-
tions including Oats & More in the United Kingdom and Nesquik
Duo across a number of regions, favorable foreign currency
effects, and the benefit of a full year of sales from the Uncle
Tobys acquisition, which closed in July 2006. Our fiscal 2008
after-tax earnings from joint ventures was benefited by $15.9 mil-
lion for our share of a gain on the sale of a CPW property in the
United Kingdom. Net sales for our Ha¨agen-Dazs joint ventures in
Asia increased 15.7 percent in fiscal 2008 as a result of favorable
foreign exchange and introductory product shipments. During the
third quarter of fiscal 2008, the 8th Continent soymilk business

Annual Report 2008

was sold. Our 50 percent share of the after-tax gain on the sale
was $2.2 million. During fiscal 2008, we recognized $1.7 million of
this gain in after-tax earnings from joint ventures. We will record
an additional after-tax gain of up to $0.5 million in the first quarter
of fiscal 2010 if certain conditions are satisfied.

Average diluted shares outstanding decreased by 13.3 million
from fiscal 2007 due to our repurchase of 23.9 million shares of
stock during fiscal 2008, partially offset by the issuance of
14.3 million shares to settle a forward purchase contract with
an affiliate of Lehman Brothers, Inc. (Lehman Brothers), the
issuance of shares upon stock option exercises, the issuance of
annual stock awards, and the vesting of restricted stock units.

FISCAL 2008 CONSOLIDATED BALANCE SHEET
ANALYSIS
Cash and cash equivalents increased $243.9 million from fiscal
2007, as discussed in the “Liquidity” section below.

Receivables increased $128.7 million from fiscal 2007, mainly
driven by higher international sales levels and foreign exchange
translation. The allowance for doubtful accounts was unchanged
from fiscal 2007.

Inventories increased $193.4 million from fiscal 2007 due to an
increase in the prices and levels of grain inventories, as well as a
higher level of finished goods. These increases were partially
offset by an increase in the reserve for the excess of first in, first
out (FIFO) inventory costs over last in, first out (LIFO) inventory
costs of $47.7 million.

Prepaid expenses and other current assets increased $67.5 mil-
lion, as derivative and other receivables increased $91.3 million,
partially offset by a $13.2 million decrease in interest rate swap
receivables.

Land, buildings, and equipment increased $94.2 million, as
capital expenditures of $522.0 million were partially offset by
depreciation expense of $455.1 million,
including accelerated
depreciation charges against long-lived assets related to restruc-
tured facilities in Trenton, Ontario and Poplar, Wisconsin. In
addition, our Lanus, Argentina plant was destroyed by fire and
we sold facilities in Allentown, Pennsylvania and Vallejo, Califor-
nia in fiscal 2008.

Goodwill and other intangible assets increased $33.9 million
from fiscal 2007 as increases from foreign currency translation of
$170.5 million and the finalization of purchase accounting for the
Saxby Bros. Limited and Uncle Tobys acquisitions of $15.3 million

were partially offset by a $151.9 million decrease due to the
adoption of Financial Accounting Standards Board (FASB) Inter-
pretation No. (FIN) 48, “Accounting for Uncertainty in Income
Taxes—an Interpretation of FASB Statement No. 109” (FIN 48).
Other assets increased $163.5 million from fiscal 2007, driven
by a $91.6 million increase in our prepaid pension asset following
our annual update of assumptions and fiscal 2008 asset perfor-
mance, and a $92.1 million increase in interest rate derivative
receivables resulting from a decrease in interest rates.

Accounts payable increased $159.4 million to $937.3 million in
fiscal 2008 from higher vendor payables associated with
increases in inventories and payables for construction in
progress, as well as foreign exchange translation.

Long-term debt, including current portion, and notes payable
together increased $793.4 million from fiscal 2007 due to bor-
rowings utilized for the repurchase of $843.0 million of Series B-1
limited membership interests in GMC.

The current and noncurrent portions of deferred income taxes
increased $117.1 million to $1,483.0 million due to increases in our
pension asset and the beneficial tax treatment for certain inven-
tories and investments, partially offset by increases in our
deferred compensation deferred tax asset. We also incurred
$98.1 million of deferred income tax expense in fiscal 2008.

Other

current

liabilities decreased $839.0 million to
$1,239.8 million, reflecting the adoption of FIN 48, which required
us to reclassify $810.6 million of accrued taxes and related
interest from current to noncurrent based on the expected timing
of any required future payments.

Other liabilities increased $694.0 million, driven by increases
to accrued taxes of $628.6 million from the adoption of FIN 48
and increases in interest rate swap liabilities of $66.6 million.

Our minority interests decreased by $896.5 million mainly as a
result of our repurchase of the Series B-1 limited membership
interests in GMC and the preferred stock of General Mills Capital,
Inc., net of proceeds from the sale of additional Class A interests
in GMC.

Retained earnings increased $765.4 million, reflecting fiscal
2008 net earnings of $1,294.7 million less dividends of $529.7 mil-
lion. Treasury stock decreased $4,539.6 million due to the retire-
ment of $5,080.8 million of treasury stock and a $581.8 million
decrease related to the settlement of a forward purchase contract
with Lehman Brothers, offset by share repurchases of
$1,384.6 million. Additional
decreased

capital

paid

General Mills

$4,692.2 million due to a $5,068.3 million decrease from the
treasury stock retirement, offset by increases of $168.2 million
related to the Lehman Brothers contract and $133.2 million related
to stock compensation expense recognized in fiscal 2008 earn-
ings. Accumulated other comprehensive income (loss) increased
by $296.4 million after-tax, driven by favorable foreign exchange
translation of $246.3 million.

FISCAL 2007 CONSOLIDATED RESULTS OF OPERATIONS
For fiscal 2007, we reported diluted EPS of $3.18, up 9.7 percent
from $2.90 per share earned in fiscal 2006. Earnings after tax were
$1,143.9 million in fiscal 2007, up 4.9 percent from $1,090.3 million
in fiscal 2006.

The components of net sales growth are shown in the

following table:

Components of Net Sales Growth

Fiscal 2007
vs. 2006
.........................................................................................................................................................................................
3.4 pts
2.2 pts

Contributions from volume growth(a)
Net price realization and product mix

0.6 pts
Foreign currency exchange
.........................................................................................................................................................................................
6.2 pts
Net sales growth

(a) Measured in tons based on the stated weight of our product shipments.

Net sales for fiscal 2007 grew 6.2 percent to $12.4 billion, driven
by 3.4 percentage points from volume growth, mainly in our
U.S. Retail and International segments, and 2.2 percentage points
of growth from net price realization and product mix across many
of our businesses. In addition, foreign currency exchange effects
added 0.6 percentage points of growth.

Cost of sales was up $410.3 million in fiscal 2007 versus fiscal
2006. Higher volume drove $264.4 million of this increase along
with an increase of $145.9 million in input costs and changes in
mix. Cost of sales as a percent of net sales decreased from
64.4 percent in fiscal 2006 to 63.9 percent in fiscal 2007 as
$115.0 million of higher ingredient (mostly grains and dairy) and
energy costs were more than offset by efficiency gains at our
manufacturing facilities.

SG&A expenses increased by $211.6 million in fiscal 2007
versus fiscal 2006. SG&A expense as a percent of net sales
increased from 18.6 percent in fiscal 2006 to 19.2 percent in fiscal
2007. The increase in SG&A expense from fiscal 2006 was largely

the result of an 8.2 percent increase in media and brand-building
consumer marketing spending and $68.8 million of incremental
stock compensation expense resulting from our adoption of
SFAS No. 123 (Revised), “Share-Based Payment” (SFAS 123R).

Net interest for fiscal 2007 totaled $426.5 million, $26.9 million
higher than net interest for fiscal 2006. Higher interest rates
caused nearly all of the increase. Net interest includes preferred
distributions paid on minority interests. The average rate on our
total outstanding debt and minority interests was 6.3 percent in
fiscal 2007, compared to 5.8 percent in fiscal 2006.

Restructuring,

impairment, and other exit costs totaled

$39.3 million in fiscal 2007 as follows:

Non-cash impairment charge for certain Bakeries and Foodservice

product lines

Gain from our previously closed plant in San Adrian, Spain

Loss from divestitures of our par-baked bread and frozen pie

product lines

$36.7
(7.3)

9.6

Charges associated with restructuring actions previously

announced

0.3
.........................................................................................................................................................................................
$39.3
Total

In fiscal 2007, we concluded that the future cash flows gen-
erated by certain product lines in our Bakeries and Foodservice
segment would not be sufficient to recover the net book value of
the related long-lived assets, and we recorded a noncash impair-
ment charge against these assets.

The effective income tax rate was 34.3 percent for fiscal 2007,
including an increase of $29.4 million in benefits from our inter-
national tax structure and benefits from the settlement of tax
audits. In fiscal 2006, our effective income tax rate was 34.5 per-
cent,
including the benefit of $11.0 million of adjustments to
deferred tax liabilities associated with our International seg-
ment’s brand intangibles.

After-tax earnings from joint ventures totaled $72.7 million in
fiscal 2007, compared to $69.2 million in fiscal 2006. In fiscal
2007, net sales for CPW grew 17.9 percent, including 5.5 points of
incremental sales from the Uncle Tobys cereal business it
In February 2006, CPW announced a
acquired in Australia.
restructuring of its manufacturing plants in the United Kingdom.
Our after-tax earnings from joint ventures were reduced by
$8.2 million in both fiscal 2007 and 2006 for our share of the
restructuring costs, mainly accelerated depreciation and

Annual Report 2008

severance. Net sales for our Ha¨agen-Dazs joint ventures in Asia
declined 6.8 percent in fiscal 2007, reflecting a change in our
reporting period for these joint ventures. We changed this report-
ing period to include results through March 31. In previous years,
we included results for the twelve months ended April 30.
Accordingly, fiscal 2007 included only 11 months of results from
these joint ventures, compared to 12 months in fiscal 2006. The

impact of this change was not material to our consolidated results
restate prior periods for
of operations, so we did not
comparability.

Average diluted shares outstanding decreased by 18.6 million
from fiscal 2006 due to our repurchase of 25.3 million shares of
stock during fiscal 2007, partially offset by increases in diluted
shares outstanding from the issuance of annual stock awards.

RESULTS OF SEGMENT OPERATIONS
Our businesses are organized into three operating segments: U.S. Retail; International; and Bakeries and Foodservice.

The following tables provide the dollar amount and percentage of net sales and operating profit from each reportable segment for

fiscal years 2008, 2007, and 2006:

Net Sales

In Millions
............................................................................................................................................................................................................................................................................................................................................................................................
$ 9,072.0

$ 8,491.3

$ 8,136.3

66.5%

68.2%

2008

69.5%

U.S. Retail

Net Sales

Percent of
Net Sales

Percent of
Net Sales
..................................................................................................................................................................................................
Fiscal Year
..................................................................................................................................................................................................
2007

Percent of
Net Sales

Net Sales

2006

International

2,558.8

18.7

2,123.4

17.1

1,837.0

15.7

14.8
Bakeries and Foodservice
............................................................................................................................................................................................................................................................................................................................................................................................
$13,652.1

$11,711.3

$12,441.5

100.0%

2,021.3

1,738.0

1,826.8

14.8

14.7

100.0%

Total

Segment Operating Profit

2006

Segment
Operating
Profit

Percent of
Segment
Operating
Profit

Percent of
Segment
Operating
Profit
.........................................................................................................................................................................................
Fiscal Year
.........................................................................................................................................................................................
2007

Percent of
Segment
Operating
Profit

Segment
Operating
Profit

2008

U.S. Retail

International

$1,971.2

268.9

81.9%

$1,896.6

84.0%

$1,801.4

11.2

215.7

9.5

193.9

85.3%

9.2

5.5
Bakeries and Foodservice
............................................................................................................................................................................................................................................................................................................................................................................................
100.0%
Total

116.3
$2,111.6

165.4
$2,405.5

147.8
$2,260.1

6.9
100.0%

6.5
100.0%

Segment operating profit excludes unallocated corporate items
of $156.7 million for fiscal 2008, $163.0 million for fiscal 2007, and
$122.8 million for fiscal 2006; and also excludes restructuring,
impairment, and other exit costs because these items affecting
operating profit are centrally managed at the corporate level and
are excluded from the measure of segment profitability reviewed
by our executive management.

chains operating throughout the United States. Our major prod-
uct categories in this business segment are ready-to-eat cereals,
refrigerated yogurt, ready-to-serve soup, dry dinners, shelf stable
and frozen vegetables, refrigerated and frozen dough products,
dessert and baking mixes, frozen pizza and pizza snacks, grain,
fruit and savory snacks, microwave popcorn, and a wide variety of
organic products including soup, granola bars, and cereal.

U.S. Retail Segment Our U.S. Retail segment reflects business
with a wide variety of grocery stores, mass merchandisers, mem-
bership stores, natural food chains, and drug, dollar and discount

General Mills

The components of the changes in net sales are shown in the

U.S. Retail Change in Net Sales by Division

following table:

Components of U.S. Retail Net Sales Growth

Contributions from volume growth(a)
2.1 pts
Net price realization and product mix
.........................................................................................................................................................................................
4.4 pts
Change in Net Sales

Fiscal 2008
vs. 2007

3.5 pts

3.3 pts

6.8 pts

(a) Measured in tons based on the stated weight of our product shipments.

In fiscal 2008, net sales for our U.S. Retail segment were
$9.1 billion, up 6.8 percent from fiscal 2007. This growth in net
sales was the result of a 3.5 percentage point benefit from net
price realization and product mix as well as a 3.3 percentage point
increase in volume, led by strong growth in our grain snacks and
yogurt businesses.

Net sales for this segment totaled $8.5 billion in fiscal 2007 and
$8.1 billion in fiscal 2006. Volume increased 2.3 percentage points
in fiscal 2007 versus fiscal 2006, led by strong growth in our grain
snacks business as well as volume increases in our Yoplait, Meals,
and Pillsbury divisions. The volume increase was largely driven by
higher levels of consumer marketing spending and new product
innovation, resulting in higher sales to key customers.

All of our U.S. Retail divisions experienced net sales growth in

fiscal 2008 as shown in the tables below:

U.S. Retail Net Sales by Division

Fiscal Year
...............................................................................
2007
2006
In Millions
.........................................................................................................................................................................................
$1,902.3

$2,028.0

$1,932.9

2008

Big G

Meals
Pillsbury

Yoplait

Snacks
Baking Products

2,006.1
1,673.4

1,293.1

1,197.6
723.3

1,909.2
1,591.4

1,170.7

1,066.5
666.7

1,815.4
1,549.8

1,099.4

967.3
650.2

151.9
Small Planet Foods and Other
.........................................................................................................................................................................................
$8,136.3
Total

$9,072.0

$8,491.3

150.5

153.9

Fiscal 2008
vs. 2007

Big G
Meals

Pillsbury

Yoplait
Snacks

Baking Products

4.9%
5.1

5.2

10.5
12.3

8.5

1.6%
5.2

2.7

6.5
10.3

2.5

21.3
Small Planet Foods
.........................................................................................................................................................................................
Total

6.3
6.8%

4.4%

In fiscal 2008, Big G cereals net sales grew 4.9 percent, driven
by strong performance in core brands including Cheerios varieties
and Fiber One cereals. Net sales for Meals grew by 5.1 percent led
by Progresso ready-to-serve soups. Pillsbury net sales increased
5.2 percent led by Totino’s frozen pizza and hot snacks and
Pillsbury refrigerated baked goods.Yoplait net sales grew 10.5 per-
cent due to strong performance by Yoplait Light yogurt and new
products including Yo-Plus and Fiber One yogurt. Net sales for
Snacks grew 12.3 percent led by continued strong sales for Nature
Valley grain snacks and Fiber One bars. Baking Products net sales
grew 8.5 percent due to increases in Betty Crocker cookie mixes,
Gold Medal flour, and the launch of Warm Delights Minis.

For fiscal 2007, Big G cereals net sales grew 1.6 percent as a
result of new product launches such as Fruity Cheerios and Nature
Valley cereals, and continued strong performance of the Cheerios
franchise. Net sales for Meals grew 5.2 percent led by the intro-
duction of Progresso reduced sodium soups and Hamburger Helper
Microwave Singles and the continued strong performance of our
other Hamburger Helper and Progresso offerings. Net sales for
Pillsbury increased 2.7 percent as core refrigerated dough prod-
ucts, Totino’s Pizza Rolls pizza snacks, and Toaster Strudel pastries
all generated solid growth. Yoplait net sales grew 6.5 percent due
to strong performance by Yoplait Light, Go-GURT, and Yoplait Kids
yogurt. Net sales for Snacks grew 10.3 percent led by continuing
growth for Nature Valley granola bars and the introduction of Fiber
One bars. Baking Products net sales grew 2.5 percent reflecting
greater focus on product lines such as Bisquick baking mix and
Warm Delights microwaveable desserts.

Segment operating profit of $2.0 billion in fiscal 2008 improved
$74.6 million, or 3.9 percent, over fiscal 2007. Net price realization
increased segment operating profit by $317.0 million and volume
growth increased segment operating profit by $95.4 million.

Annual Report 2008

These were offset by increased supply chain input costs of
$181.0 million, higher administrative costs, and an 11.7 percent
increase in consumer marketing expense consistent with our
brand-building strategy. Voluntary product recalls reduced seg-
ment operating profit by $24.0 million.

Segment operating profit of $1.9 billion in fiscal 2007 improved
$95.2 million, or 5.3 percent, over fiscal 2006. Unit volume
increased segment operating profit by $90.3 million, and inflation
in ingredients (mostly grains and dairy), energy, and labor costs
was more than offset by efficiency gains at our manufacturing
facilities resulting from cost-saving capital projects, changes to
product formulations, and continued actions to reduce low-turn-
ing products. These increases in segment operating profit were
partially offset by a 5.7 percent increase in brand-building con-
sumer marketing spending.

International Segment In Canada, our major product categories
are ready-to-eat cereals, shelf stable and frozen vegetables, dry
dinners, refrigerated and frozen dough products, dessert and
baking mixes, frozen pizza snacks, and grain, fruit and savory
snacks. In markets outside North America, our product categories
include super-premium ice cream, grain snacks, shelf stable and
frozen vegetables, dough products, and dry dinners. Our Inter-
national segment also includes products manufactured in the
United States for export, mainly to Caribbean and Latin American
markets, as well as products we manufacture for sale to our
international joint ventures. Revenues from export activities are
reported in the region or country where the end customer is
located. These international businesses are managed through 34
sales and marketing offices.

The components of net sales growth are shown in the

following table:

Components of International Net Sales Growth

Fiscal 2008
vs. 2007

5.9 pts

Contributions from volume growth(a)
Net price realization and product mix

5.6 pts

3.9 pts

4.2 pts
Foreign currency exchange
.........................................................................................................................................................................................
15.6 pts
Net sales growth

9.0 pts
20.5 pts

(a) Measured in tons based on the stated weight of our product shipments.

For fiscal 2008, net sales for our International segment were
$2.6 billion, up 20.5 percent from fiscal 2007. Net sales totaled
$2.1 billion in fiscal 2007, up 15.6 percent from $1.8 billion in fiscal
2006.

Net sales growth for our International segment by geographic

region is shown in the following tables:

International Net Sales by Geographic Region

$ 756.3

$ 898.5

2008

Europe

Canada
Asia/Pacific

697.0
577.4

610.4
462.0

565.9
404.5

238.3
Latin America and South Africa
.........................................................................................................................................................................................
$1,837.0
Total

$2,558.8

$2,123.4

294.7

385.9

International Change in Net Sales by Geographic Region

Fiscal 2008
vs. 2007

Europe

Canada

18.8%

14.2

20.4%

7.9

14.2
Asia/Pacific
23.7
Latin America and South Africa
.........................................................................................................................................................................................
Total

25.0
30.9

20.5%

15.6%

In fiscal 2008, net sales in Europe increased 18.8 percent
reflecting strong performance from Old El Paso and Ha¨agen-Dazs
in the United Kingdom. Continued success from the launch of
Nature Valley granola bars in several European markets and
favorable foreign exchange also contributed to the region’s
growth. Net sales in Canada increased 14.2 percent including
favorable foreign exchange. In the Asia/Pacific region, net sales
increased 25.0 percent led by double-digit growth for Ha¨agen-
Dazs ice cream and Wanchai Ferry dumplings and meal kits in
China. In Latin America and South Africa, net sales increased
30.9 percent led by Diablitos canned meat spread in Venezuela
and pricing actions taken in other countries.

In fiscal 2007, net sales in Europe grew 20.4 percent reflecting
14.6 percent growth in net sales of Ha¨agen-Dazs ice cream and
continued strong performance from Old El Paso and Green Giant
across the region, and especially in the United Kingdom. The
acquisition of Saxby Bros. Limited, a chilled pastry company in the

General Mills

United Kingdom, contributed less than 1 point of net sales growth.
Net sales in Canada increased 7.9 percent, led by 34.8 percent net
sales growth on Nature Valley snack bars, 6.0 percent net sales
growth in cereals, and 10.6 percent net sales growth on Old El Paso
products. Asia/Pacific net sales increased 14.2 percent led by
16.5 percent net sales growth for Ha¨agen-Dazs in China. Latin
America and South Africa net sales increased 23.7 percent led by
19.6 percent growth in our Diablitos product line and the re-launch
of Ha¨agen-Dazs in Latin America.

Segment operating profit for fiscal 2008 grew to $268.9 million,
up 24.7 percent from fiscal 2007, with foreign currency exchange
contributing 9.1 points of that growth. Segment operating profit
increased by $37.5 million mainly from higher volumes. Net price
realization more than offset higher supply chain input costs, a
21.7 percent increase in consumer marketing expense, and admin-
istrative cost increases.

Segment operating profit for fiscal 2007 grew to $215.7 million,
up 11.2 percent from fiscal 2006, with foreign currency exchange
contributing 4.5 points of that growth. The growth was led by a
$45.6 million increase from higher volumes driven by increases in
consumer marketing spending. Net price realization offset supply
chain and administrative cost increases.

Bakeries and Foodservice Segment In our Bakeries and Foodser-
vice segment we sell branded ready-to-eat cereals, snacks, dinner
and side dish products, refrigerated and soft-serve frozen yogurt,
frozen dough products, branded baking mixes, and custom food
items. Our customers include foodservice distributors and oper-
ators, convenience stores, vending machine operators, quick
service and other restaurant operators, and business and school
cafeterias in the United States and Canada. In addition, we market
mixes and unbaked and fully baked frozen dough products
throughout the United States and Canada to retail, supermarket,
and wholesale bakeries.

The components of the change in net sales are shown in the

following table:

Components of Bakeries and Foodservice Net Sales Growth

Fiscal 2008
vs. 2007

Contributions from volume growth on continuing

businesses(a)

(1.3) pts

3.9 pts

3.1 pts
Net price realization and product mix
(1.9) pts
Divested product lines
.........................................................................................................................................................................................
5.1 pts
Net sales growth

15.8 pts
(3.9) pts

10.6 pts

(a) Measured in tons based on the stated weight of our product shipments.

For fiscal 2008, net sales for our Bakeries and Foodservice
segment increased 10.6 percent to $2.0 billion.The growth in fiscal
2008 net sales was driven mainly by 15.8 percentage points of
benefit from net price realization and product mix, as we took
price increases to offset higher supply chain input costs. This was
partially offset by a 1.3 percentage point decline in volume on
continuing businesses, mainly in the distributors and restaurants
customer channel, and a 3.9 percentage point decline due to the
effects of divested product lines.

Net sales increased 5.1 percent from fiscal 2006 to fiscal 2007.
Fiscal 2007 volume grew 3.9 percentage points compared to fiscal
2006, driven by: increased sales of higher margin, branded prod-
ucts and the introduction of new products to customers such as
schools, hotels, restaurants, and convenience stores; improved
innovation in foodservice products; and favorable net price
realization.

Net sales growth for our Bakeries and Foodservice segment by

customer segment is shown in the following tables:

Bakeries and Foodservice Net Sales by Customer Segment

Distributors and restaurants
Bakery channels

$ 864.8
780.5

$ 902.0
927.8

2008

162.9
Convenience stores and vending
.........................................................................................................................................................................................
$1,738.0
Total

$2,021.3

$1,826.8

191.5

181.5

Annual Report 2008

Bakeries and Foodservice Change in Net Sales by Customer Segment

Fiscal 2008
vs. 2007

Distributors and restaurants
Bakery channels

4.3%

18.9

(2.5)%
13.4

11.4
Convenience stores and vending
.........................................................................................................................................................................................
Total

10.6%

5.5

5.1%

In fiscal 2008, segment operating profits were $165.4 million, up
11.9 percent from $147.8 million in fiscal 2007. The increase for the
year was driven by grain merchandising activities and benefits
from prior restructuring activities. Net price realization offset
higher supply chain input costs and a decrease in volume.

Segment operating profits were $147.8 million in fiscal 2007, up
27.1 percent from $116.3 million in fiscal 2006. The business was
able to offset high levels of input cost inflation with a combination
of pricing actions, sourcing productivity, and manufacturing
improvements.

Items Unallocated corporate items
Unallocated Corporate
include variances to planned corporate overhead expenses, vari-
ances to planned domestic employee benefits and incentives, all
stock compensation costs, annual contributions to the General
Mills Foundation, and other items that are not part of our mea-
surement of segment operating performance. This includes
restructuring, impairment, and other exit costs, as well as gains
and losses from mark-to-market valuation of certain commodity
positions until passed back to our operating segments in accor-
dance with our internal hedge documentation as discussed in
Note 7 of the Consolidated Financial Statements on page 67 of
this report.

For fiscal 2008, unallocated corporate items totaled $156.7 mil-
lion of expense compared to $163.0 million for the same period
last year. During fiscal 2008, we recognized a net gain of $59.6 mil-
lion related to the mark-to-market valuation of certain commod-
ity positions and a previously deferred gain of $10.8 million on the
sale of a corporate investment. These gains were offset by
$25.6 million of unfavorable foreign exchange, $18.5 million of
charges to cost of sales, primarily accelerated depreciation on
long-lived assets associated with previously announced restruc-
turing actions, and $9.2 million of expense related to the remar-
keting of minority interests in our GMC subsidiary.

Unallocated corporate items were $163.0 million in fiscal 2007
compared to $122.8 million in fiscal 2006. Fiscal 2007 included
$68.8 million of incremental expense relating to the impact of the
adoption of SFAS 123R, and fiscal 2006 included $32.7 million of
charges related to increases in environmental reserves and a
write-down of the asset value of a low-income housing invest-
ment. Excluding these items, unallocated corporate items were
essentially unchanged from fiscal 2006.

Joint Ventures In addition to our consolidated operations, we
participate in several joint ventures.

International Joint Ventures We have a 50 percent equity interest
in CPW, which manufactures and markets ready-to-eat cereal
products in more than 130 countries and republics outside the
United States and Canada. CPW also markets cereal bars in
several European countries and manufactures private label cere-
als for customers in the United Kingdom. Results from our CPW
joint venture are reported for the 12 months ended March 31. On
July 14, 2006, CPW acquired the Uncle Tobys cereal business in
Australia for $385.6 million. We funded our 50 percent share of
the purchase price by making additional advances to and equity
contributions in CPW totaling $135.1 million (classified as invest-
ments in affiliates, net on the Consolidated Statements of Cash
Flows) and by acquiring a 50 percent undivided interest in certain
intellectual property for $57.7 million (classified as acquisitions on
the Consolidated Statements of Cash Flows). We funded the
advances to and our equity contribution in CPW from cash
generated by our international operations, including our interna-
tional joint ventures.

We have 50 percent equity interests in Ha¨agen-Dazs Japan,
Inc. and Ha¨agen-Dazs Korea Company. These joint ventures
manufacture, distribute, and market Ha¨agen-Dazs ice cream
products and frozen novelties. In fiscal 2007, we changed the
reporting period for the Ha¨agen-Dazs joint ventures. Accordingly,
fiscal 2007 includes only 11 months of results from these joint
ventures compared to 12 months in fiscal 2008 and fiscal 2006.

Domestic Joint Venture During fiscal 2008, the 8th Continent soy
milk business was sold, and our 50 percent share of the after-tax
gain on the sale was $2.2 million, of which $1.7 million was
recorded in fiscal 2008. We will record an additional gain in

General Mills

the first quarter of fiscal 2010 if certain conditions related to the
sale are satisfied.

Our share of after-tax joint venture earnings increased from
$72.7 million in fiscal 2007 to $110.8 million in fiscal 2008. This
growth was largely driven by strong sales growth, favorable foreign
exchange, and our share of the gain from the sale of a property.
Our after-tax share of CPW restructuring, impairment, and
other exit costs pursuant to approved plans during fiscal 2008 and
prior years was as follows:

Fiscal Year
.....................................................
2007
2006
Expense (Income), In Millions
.........................................................................................................................................................................................
$ — $ —

Gain on sale of property

$(15.9)

2008

Accelerated depreciation charges and severance

associated with previously announced

restructuring actions

Other charges resulting from fiscal 2008

4.5

8.2

8.0

restructuring actions

$ (8.2)

$8.2

3.2

—

Our share of after-tax joint venture earnings increased from
$69.2 million in fiscal 2006 to $72.7 million in fiscal 2007. This
growth was largely driven by strong core brand volume and
organic net sales growth, new product innovation, and increases
in brand-building consumer marketing spending, partially offset
by a $2.0 million impact of the change in reporting period for the
Ha¨agen-Dazs joint ventures and a $8.2 million restructuring
charge in 2007.

The change in net sales for each joint venture is set forth in the

following table:

Joint Ventures Change in Net Sales

Fiscal 2008
vs. 2007

CPW
Ha¨agen-Dazs (11 months in fiscal 2007 and
12 months in fiscal 2008 and fiscal 2006)

23.3%

17.9%

15.7

(6.8)

2.5
8th Continent
.........................................................................................................................................................................................
12.6%
Joint Ventures

NM
20.6%

For fiscal 2008, CPW net sales grew by 23.3 percent reflecting
higher volume, key new product introductions including Oats &
More in the United Kingdom and Nesquik Duo across a number of
regions, favorable foreign currency effects, and the benefit of a

full year of sales from the fiscal 2007 Uncle Tobys acquisition. Net
sales for our Ha¨agen-Dazs joint ventures increased 15.7 percent
from fiscal 2007, as a result of favorable foreign exchange and
introductory product shipments.

For fiscal 2007, CPW net sales grew by 17.9 percent reflecting
the introduction of new products and favorable currency trans-
lation.The acquisition of Uncle Tobys in Australia also contributed
5.5 points of CPW’s net sales growth. Net sales for our Ha¨agen-
Dazs joint ventures declined 6.8 percent from fiscal 2006, reflect-
ing the change in our reporting period for these joint ventures.
Selected cash flows from our joint ventures are set forth in the

following table:

Selected Cash Flows from Joint Ventures

Fiscal Year
.................................................................
2007
2006
Inflow (Outflow), In Millions
.........................................................................................................................................................................................

2008

Advances to joint ventures

Repayments of advances
Dividends received

$ (20.6)

$(141.4)

$ (7.0)

95.8
108.7

38.0
45.2

—
77.4

IMPACT OF INFLATION
We have experienced strong levels of input cost inflation since
fiscal 2006. Our gross margin performance in fiscal 2008 reflects
the impact of significant input cost inflation, primarily from
commodities and energy inputs.

For fiscal 2009, we expect inflationary trends to accelerate,
with input costs (fuel, energy, commodities, and employee ben-
efits) forecasted to be 9 percent higher than fiscal 2008 levels.
We expect to mitigate this inflationary pressure through cost
saving initiatives and pricing.

We attempt to minimize the effects of inflation through appro-
priate planning and operating practices. Our risk management
practices are discussed on pages 50 and 51 of this report.

LIQUIDITY
The primary source of our liquidity is cash flow from operations.
Over the most recent three-year period, our operations have
generated $5.3 billion in cash. A substantial portion of this oper-
ating cash flow has been returned to stockholders annually
through share repurchases and dividends.We also use this source
of liquidity to fund our annual capital expenditures. We typically
use a combination of available cash, notes payable, and long-term
debt to finance acquisitions and major capital expansions.

Annual Report 2008

Cash Flows from Operations

Cash Flows from Investing Activities

Fiscal Year
........................................................................
2007
2006
In Millions
.........................................................................................................................................................................................

2008

Purchases of land, buildings, and

equipment

(69.2)

Acquisitions

Investments in affiliates, net
Proceeds from disposal of land, buildings,

$(522.0)

$(460.2)

$(360.0)

0.6

64.6

(83.4)

(100.5)

(26.5)

0.3

and equipment

25.9

13.8

11.3

—
Proceeds from disposal of product lines
4.9
Other, net
.........................................................................................................................................................................................
Net cash used by investing activities

—
(11.5)

13.5
19.7

$(442.4)

$(597.1)

$(370.0)

In fiscal 2008, cash used by investing activities decreased by
$154.7 million from fiscal 2007 when we funded our share of
CPW’s acquisition of the Uncle Tobys cereal business in Australia
(reflected in acquisitions and investments in affiliates, net),
acquired Saxby Bros. Limited, and acquired our master franchisee
of Ha¨agen-Dazs shops in Greece. During fiscal 2008, we sold our
former production facilities in Vallejo, California and Allentown,
Pennsylvania, while in fiscal 2007 we sold our frozen pie product
line, including a plant in Rochester, New York, and our par-baked
bread product line, including plants in Chelsea, Massachusetts
and Tempe, Arizona. Capital investment for land, buildings, and
equipment increased by $61.8 million, as we continued to increase
manufacturing capacity for our snack bars and yogurt products
and began consolidating manufacturing for our Old El Paso busi-
ness. We expect capital expenditures to increase to approxi-
mately $550 million in fiscal 2009, including initiatives that will:
increase manufacturing capacity for Yoplait yogurt, Nature Valley
bars, and Progresso soup; increase productivity throughout the
supply chain; and continue upgrades to our International seg-
ment’s information technology systems.

Net earnings
Depreciation and amortization

$1,143.9
417.8

$1,294.7
459.2

2008

After-tax earnings from joint ventures

Stock-based compensation
Deferred income taxes

Distributions of earnings from joint

ventures

Tax benefit on exercised options

Pension, other postretirement, and

postemployment benefit costs

Restructuring, impairment, and other

exit costs (income)

Changes in current assets and liabilities

(110.8)

133.2
98.1

108.7
(55.7)

(72.7)

127.1
26.0

45.2
(73.1)

44.6
25.9

77.4
40.9

(24.8)

(53.6)

(74.2)

(1.7)

(126.7)

39.1

149.1

29.8

183.9

70.2
Other, net
.........................................................................................................................................................................................
Net cash provided by operating

(44.3)

2.4

activities

$1,729.9

$1,751.2

$1,843.5

Our cash flow from operations decreased $21.3 million from
fiscal 2007 to fiscal 2008 as a $150.8 million increase in net
earnings and the $72.1 million effect of changes in deferred
income taxes were more than offset by an increase of $275.8 mil-
lion in working capital compared to the prior year. Accounts
receivable was a $69.9 million increased use of cash, partially
offset by a $37.3 million increase in cash from accounts payable,
and inventory was a $49.1 million increased use of cash in fiscal
2008. Working capital also includes $59.6 million of mark-to-
market gains on our commodity derivatives. In addition, other
current liabilities had a $173.1 million reduction to the source of
cash driven by cash taxes paid in fiscal 2008.

We strive to grow a key measure, core working capital, at or
below our growth in net sales. For fiscal 2008, core working
capital grew 12.1 percent, more than our net sales growth of
9.7 percent, largely driven by the effect of increases in commodity
prices on inventories and an increase in accounts receivable. In
fiscal 2007, core working capital grew 4.2 percent, less than net
sales growth of 6.2 percent, and in fiscal 2006, core working
capital grew 5.0 percent and net sales grew 3.6 percent.

The $92.3 million decrease in cash flows from operations from
fiscal 2006 to fiscal 2007 was the result of a reduction in our cash
flows from working capital and a decrease in distributions of
earnings from joint ventures, offset by an increase in net earnings.

General Mills

Cash Flows from Financing Activities

Fiscal Year
.....................................................................................
2007
2006
In Millions
.........................................................................................................................................................................................
$ 1,197.4
—

Change in notes payable
Issuance of long-term debt

$ (280.4)
2,650.0

946.6
1,450.0

2008

Payment of long-term debt

Settlement of Lehman Brothers
forward purchase contract

Repurchase of Series B-1 limited

membership interests in GMC
Repurchase of General Mills Capital,

Inc. preferred stock

Proceeds from sale of Class A

limited membership interests in
GMC

Common stock issued

Tax benefit on exercised options
Purchases of common stock for

(1,623.4)

(2,323.2)

(1,386.0)

750.0

(843.0)

(150.0)

—

92.3

191.4

55.7

—

317.4

73.1

—

157.1

—

treasury

(1,432.4)

(1,320.7)

(884.8)

Dividends paid
Other, net
.........................................................................................................................................................................................
Net cash used by financing activities

$(1,398.1)

$(1,093.0)

(529.7)
(0.5)

(505.2)
(9.1)

(484.9)
(3.1)

$(1,404.3)

Net cash used by financing activities decreased by $305.1 mil-
lion in fiscal 2008. Further details for fiscal 2008 and fiscal 2007
financing actions are described in Note 8 to the Consolidated
Financial Statements on page 70.

On April 11, 2007, we issued $1.15 billion aggregate principal
amount of floating-rate convertible senior notes. On April 11,
2008, the holders of those notes put $1.14 billion of the aggregate
principal amount to us for repurchase. We issued commercial
paper to fund the repurchase.

On March 17, 2008, we sold $750.0 million of 5.2 percent fixed-
rate notes due March 17, 2015 and on August 29, 2007, we sold
$700.0 million of 5.65 percent fixed-rate notes due September 10,
2012. The proceeds of the notes were used to repay outstanding
commercial paper. Interest on the notes is payable semi-annually
in arrears. The notes may be redeemed at our option at any time
for a specified make-whole amount. The notes are senior unse-
cured, unsubordinated obligations and contain a change of con-
trol provision, as defined in the instruments governing the notes.
On October 15, 2007, we settled the forward contract estab-
lished with Lehman Brothers in October 2004 in conjunction with
the issuance by Lehman Brothers of $750.0 million of notes that
were mandatorily exchangeable for shares of our common stock.

In settlement of that forward contract, we issued 14.3 million
shares of our common stock and received $750.0 million in cash
from Lehman Brothers. We used the cash received to reduce
outstanding commercial paper balances.

On August 7, 2007, we repurchased for a net amount of
$843.0 million all of the outstanding Series B-1 Interests in
GMC as part of a required remarketing of those interests. The
purchase price reflected the Series B-1 Interests’ original capital
account balance of $835.0 million and $8.0 million of capital
account appreciation attributable and paid to the third party
holder of the Series B-1 Interests. The capital appreciation paid
to the third party holder of the Series B-1 Interests was recorded
as a reduction to retained earnings, a component of stockholders’
equity, on the Consolidated Balance Sheets, and reduced net
earnings available to common stockholders in our basic and
diluted EPS calculations.

We and the third party holder of all of GMC’s outstanding
Class A limited membership interests (Class A Interests) agreed
to reset, effective on June 28, 2007, the preferred rate of return
applicable to the Class A Interests to the sum of three- month
LIBOR plus 65 basis points. On June 28, 2007, we sold $92.3 million
of additional Class A Interests to the same third party. There was
no gain or loss associated with these transactions. As of May 25,
2008, the carrying value of all outstanding Class A Interests on
our Consolidated Balance Sheets was $242.3 million, and the
capital account balance of the Class A Interests upon which
preferred distributions are calculated was $248.1 million.

On June 28, 2007, we repurchased for $150.0 million all of the
outstanding Series A preferred stock of our subsidiary General
Mills Capital, Inc. using proceeds from the sale of the Class A
Interests and commercial paper. There was no gain or loss
associated with this repurchase.

During fiscal 2008, we repurchased 23.6 million shares of our
common stock for an aggregate purchase price of $1,368.0 million,
of which $0.1 million settled after the end of our fiscal year. In
fiscal 2007, our Board of Directors authorized the repurchase of
up to 75 million shares of our common stock. Purchases under the
authorization can be made in the open market or in privately
negotiated transactions, including the use of call options and
other derivative instruments, Rule 10b5-1 trading plans, and accel-
erated repurchase programs. The authorization has no specified
termination date. During fiscal 2007, we repurchased 25.3 million
shares for an aggregate purchase price of $1,385.2 million, of

Annual Report 2008

which $64.5 million settled after the end of our fiscal year. In fiscal
2006, we repurchased 18.8 million shares of common stock for an
aggregate purchase price of $892.3 million.

Dividends paid in fiscal 2008 totaled $529.7 million, or $1.57 per
share, a 9.0 percent per share increase from fiscal 2007. Divi-
dends paid in fiscal 2007 totaled $505.2 million, or $1.44 per share,
a 7.5 percent per share increase from fiscal 2006 dividends of
$1.34 per share. Our board of directors approved a quarterly
dividend increase from $0.40 per share to $0.43 per share effec-
tive with the dividend payable on August 1, 2008.

CAPITAL RESOURCES

Notes payable
Current portion of long-term debt

$ 2,208.8
442.0

May 25,
2008

3,217.7
Long-term debt
.........................................................................................................................................................................................
6,206.1
1,138.8

Total debt
Minority interests

6,999.5
242.3

4,348.7

5,319.1
Stockholders’ equity
.........................................................................................................................................................................................
$12,664.0
Total capital

$13,457.6

6,215.8

The following table details the fee-paid committed credit lines

we had available as of May 25, 2008:

In Billions
Amount
.........................................................................................................................................................................................

Credit facility expiring:

October 2010

$1.1

1.9
October 2012
.........................................................................................................................................................................................
$3.0
Total committed credit facilities

Commercial paper is a continuing source of short-term financ-
ing. We can issue commercial paper in the United States, Canada,
and Europe. Our commercial paper borrowings are supported by
$3.0 billion of fee-paid committed credit lines and $403.8 million
in uncommitted lines. As of May 25, 2008, there were no amounts
outstanding on the fee-paid committed credit lines and $133.8 mil-
lion was drawn on the uncommitted lines, all by our
international operations.

In October 2007, we entered into a new five-year credit agree-
ment with an initial aggregate revolving commitment of $1.9 billion
which is scheduled to expire in October 2012. Concurrent with the
execution of the new credit agreement, we terminated our five-
year credit agreement dated January 20, 2004, which provided

$750.0 million of revolving credit and was scheduled to expire in
January 2009, and our amended and restated credit agreement
dated October 17, 2006, which provided $1.1 billion of revolving
credit and was scheduled to expire in October 2007. We then
terminated our credit agreement dated August 3, 2007, which
provided an aggregate revolving commitment of $750.0 million
and was scheduled to expire on December 6, 2007.

Our credit facilities, certain of our long-term debt agreements,
and our minority interests contain restrictive covenants. As of
May 25, 2008, we were in compliance with all of these covenants.
We have $442.0 million of long-term debt maturing in the next
12 months that is classified as current, including $109.5 million of
notes that may mature based on the put rights of the note
holders. We also have classified $150.6 million of long-term debt
as current based on our intention to redeem the debt within the
next 12 months. We believe that cash flows from operations,
together with available short- and long-term debt financing, will
be adequate to meet our liquidity and capital needs for at least the
next 12 months.

As of May 25, 2008, our total debt, including the impact of
derivative instruments designated as hedges, was 65.7 percent in
fixed-rate and 34.3 percent in floating-rate instruments compared
to 50.0 percent each in fixed-rate and floating-rate instruments as
of May 27, 2007. The change in the fixed-rate and floating-rate
percentages were driven by the refinancing of $1.5 billion of
commercial paper and minority interests with fixed-rate notes,
and the new swap of $500.0 million of floating-rate debt to fixed-
rate during fiscal 2008.

The board of directors approved the retirement of 125.0 million
shares of common stock in treasury effective December 10, 2007.
This action reduced common stock by $12.5 million, reduced
additional paid-in capital by $5,068.3 million, and reduced com-
mon stock in treasury by $5,080.8 million on our Consolidated
Balance Sheets.

We have an effective shelf registration statement on file with
the Securities and Exchange Commission (SEC) covering the sale
of debt securities, common stock, preference stock, depository
shares, securities warrants, purchase contracts, purchase units,
and units. As of May 25, 2008, $2.2 billion remained available
under the shelf registration for future use.

We believe that growth in return on average total capital is a
key performance measure. Return on average total capital
improved from 11.1 percent in fiscal 2007 to 12.1 percent in fiscal

General Mills

2008 due to higher operating results, the impact of net mark-to-
market gains on certain commodity positions, and the effect of a
discrete tax item. We also believe important measures of financial
strength are the ratio of fixed charge coverage and the ratio of
operating cash flow to debt. Our fixed charge coverage ratio in
fiscal 2008 was 4.87 compared to 4.37 in fiscal 2007. The measure
increased from fiscal 2007 as earnings before income taxes and
after-tax earnings from joint ventures increased by $174.8 million
and fixed charges decreased by $2.2 million. Our operating cash
flow to debt ratio decreased 3.5 percent to 24.7 percent in fiscal
2008, driven by a slight decrease in cash flows from operations
and an increase in our year-end debt balance.

Currently, Standard and Poor’s (S&P) has ratings of BBB+ on
our publicly held long-term debt and A-2 on our commercial
paper. Moody’s Investors Services (Moody’s) has ratings of Baa1
for our long-term debt and P-2 for our commercial paper. Fitch
Ratings (Fitch) rates our long-term debt BBB+ and our commer-
cial paper F-2. These ratings are not a recommendation to buy,
sell or hold securities, are subject to revision or withdrawal at any
time by the rating organization, and should be evaluated inde-
pendently of any other rating. We intend to manage our financial
condition and ratios to maintain these ratings levels for the
foreseeable future.

In April 2002, we contributed assets with an aggregate fair
market value of $4.2 billion to our subsidiary GMC. The contrib-
uted assets consist primarily of manufacturing assets and intel-
lectual property associated with the production and retail sale of
Big G cereals, Progresso soups, and Old El Paso products in the
United States. In exchange for the contribution of these assets,
GMC issued its managing membership interest and its limited
preferred membership interests to certain of our wholly owned
subsidiaries. We continue to hold the entire managing member-
ship interest, and therefore direct the operations of GMC. Other
than the right to consent to certain actions, holders of the limited
preferred membership interests do not participate in the man-
agement of GMC. We currently hold all interests in GMC other
than the Class A Interests.

The terms of the Class A Interests are described in the Fifth
Amended and Restated Limited Liability Company Agreement of
GMC (the LLC Agreement). The holder of the Class A Interests
receives quarterly preferred distributions from available net
income based on the application of a floating preferred return
rate, currently equal to the sum of three-month LIBOR plus

65 basis points, to the holder’s capital account balance estab-
lished in the most recent mark-to-market valuation (currently
$248.1 million). The LLC Agreement requires that the preferred
return rate of the Class A Interests be adjusted every five years
through a negotiated agreement between the Class A Interest
holder and GMC, or through a remarketing auction. The next
remarketing is scheduled to occur in June 2012 and thereafter in
five-year intervals. Upon a failed remarketing, the preferred
return rate over three-month LIBOR will be increased by 75 basis
points until the next remarketing, which will occur in 3 month
intervals until a successful remarketing occurs or the managing
member purchases the Class A Interests. The managing member
may at any time elect to purchase all of the Class A Interests for
an amount equal to the holder’s capital account balance (as
adjusted in a mark-to-market valuation), plus any accrued but
unpaid preferred returns and the prescribed make-whole amount.
Holders of the Class A Interests may initiate a liquidation of
GMC under certain circumstances, including, without limitation,
the bankruptcy of GMC or its subsidiaries, GMC’s failure to
deliver the preferred distributions on the Class A Interests,
GMC’s failure to comply with portfolio requirements, breaches
of certain covenants, lowering of our senior debt rating below
either Baa3 by Moody’s or BBB- by S&P, and a failed attempt to
remarket the Class A Interests as a result of GMC’s failure to
assist in such remarketing. In the event of a liquidation of GMC,
each member of GMC will receive the amount of its then current
capital account balance. The managing member may avoid liq-
uidation by exercising its option to purchase the Class A Interests.
For financial reporting purposes, the assets, liabilities, results of
operations, and cash flows of GMC are included in our Consol-
idated Financial Statements. The return to the third party investor
is reflected in net interest in the Consolidated Statements of
Earnings.The third party investor’s interests in GMC are classified
as minority interests on our Consolidated Balance Sheets. As
discussed above, we may exercise our option to purchase the
Class A Interests for consideration equal to the then current
capital account value, plus any unpaid preferred return and the
prescribed make-whole amount. If we purchase these interests,
any change in the unrelated third party investor’s capital account
from its original value will be charged directly to retained earnings
and will increase or decrease the net earnings used to calculate
EPS in that period.

Annual Report 2008

OFF-BALANCE SHEET ARRANGEMENTS AND
CONTRACTUAL OBLIGATIONS
As of May 25, 2008, we have issued guarantees and comfort
letters of $670.1 million for the debt and other obligations of
consolidated subsidiaries, and guarantees and comfort letters of
$340.3 million for the debt and other obligations of non-consol-
idated affiliates, mainly CPW.
In addition, off-balance sheet
arrangements are generally limited to the future payments under
non-cancelable operating leases, which totaled $315.3 million as of
May 25, 2008.

As of May 25, 2008, we had invested in three variable interest
entities (VIEs). We have an interest in a contract manufacturer at
our former facility in Geneva, Illinois. We are the primary ben-
eficiary (PB) and have consolidated this entity as of May 25, 2008.
This entity had property and equipment with a carrying value of
$31.0 million and long-term debt of $31.8 million as of May 25,
2008. We also have an interest in a contract manufacturer in
Greece that is a VIE. Although we are the PB, we have not
consolidated this entity because it is not material to our results
of operations, financial condition, or liquidity as of and for the year
ended May 25, 2008. This entity had assets of $4.2 million and
liabilities of $0.9 million as of May 25, 2008. We are not the PB of
the remaining VIE. Our maximum exposure to loss from the three
VIEs is limited to the $31.8 million of long-term debt of the
contract manufacturer in Geneva, Illinois and our $1.1 million
equity investment in the VIE of which we are not the PB.

On August 17, 2006, the Pension Protection Act (PPA) became
law in the United States. The PPA revised the basis and meth-
odology for determining defined benefit plan minimum funding
requirements as well as maximum contributions to and benefits
paid from tax-qualified plans. Most of these provisions are first
applicable to our domestic defined benefit pension plans in fiscal
2009 on a phased-in basis. The PPA may ultimately require us to
make additional contributions to our domestic plans. However,
due to our historical funding practices and current funded status,
we do not expect to have significant statutory or contractual
funding requirements for our major defined benefit plans during
the next several years. No fiscal 2009 domestic plan contributions
are currently expected. Actual fiscal 2009 contributions could
exceed our current projections, and may be influenced by our
decision to undertake discretionary funding of our benefit trusts
versus other competing investment priorities, or by future
requirements. Additionally, our
changes

in government

projections concerning timing of the PPA funding requirements
are subject to change and may be influenced by factors such as
general market conditions affecting trust asset performance,
interest rates, and our future decisions regarding certain elective
provisions of the PPA.

The following table summarizes our future estimated cash
payments under existing contractual obligations, including pay-
ments due by period:

Payments Due by Fiscal Year
...........................................................................................................................
2014 and
In Millions
Thereafter
.........................................................................................................................................................................................
$1,782.5

$4,789.8 $ 437.6 $511.4 $2,058.3

2012–13

2010–11

Total

2009

146.8

315.3

146.8

—

94.3

120.7

—

80.7

—

19.6

Long-term debt(a)
Accrued interest

Operating leases

3.0
23.7
Capital leases
54.3
Purchase obligations(b) 2,770.9
.........................................................................................................................................................................................
$1,859.4
Total

$8,046.5 $3,008.5 $919.9 $2,258.7

5.7
2,324.1

8.0
279.8

7.0
112.7

(a) Excludes $19.8 million related to capital leases and $18.9 million of bond premium and

original issue discount.

(b) Subsequent to May 25, 2008, we entered into sourcing contracts with contractual
obligations of $391.1 million in 2009, $782.2 million in 2010-11, and $22.8 million in
2012-13.

Principal payments due on long-term debt are based on stated
contractual maturities or put rights of certain note holders. The
majority of the purchase obligations represent commitments for
raw material and packaging to be utilized in the normal course of
business and for consumer marketing spending commitments
that support our brands. The fair value of our interest rate and
equity swaps with a payable position to the counterparty was
$220.1 million as of May 25, 2008, based on fair market values as
of that date. Future changes in market values will impact the
amount of cash ultimately paid or received to settle those instru-
ments in the future. Other long-term obligations mainly consist of
liabilities for uncertain income tax positions, accrued compen-
sation and benefits, including the underfunded status of certain of
our defined benefit pension, other postretirement benefit, and
postemployment benefit plans, and miscellaneous liabilities. We
expect to pay $16.6 million of benefits from our unfunded post-
employment benefit plans in fiscal 2009. Further information on
all of these plans is included in Note 13 to the Consolidated
Financial Statements beginning on page 77 of this report.

General Mills

SIGNIFICANT ACCOUNTING ESTIMATES
For a complete description of our significant accounting policies,
see Note 2 to the Consolidated Financial Statements beginning on
page 58 of this report. Our significant accounting estimates are
those that have meaningful impact on the reporting of our finan-
cial condition and results of operations. These estimates include
our accounting for promotional expenditures, intangible assets,
stock compensation, income taxes, and defined benefit pension,
other postretirement and postemployment benefits.

Promotional Expenditures Our promotional activities are con-
ducted through our customers and directly or indirectly with
end consumers. These activities include: payments to customers
to perform merchandising activities on our behalf, such as adver-
tising or in-store displays; discounts to our list prices to lower
retail shelf prices and payments to gain distribution of new
products; coupons, contests, and other incentives; and media
and advertising expenditures. The media and advertising expen-
ditures are recognized as expense when the advertisement airs.
The cost of payments to customers and other consumer activities
are recognized as the related revenue is recorded, which generally
precedes the actual cash expenditure. The recognition of these
costs requires estimation of customer participation and perfor-
mance levels. These estimates are made based on the forecasted
customer sales, the timing and forecasted costs of promotional
activities, and other factors. Differences between estimated
expenses and actual costs are normally insignificant and are
recognized as a change in management estimate in a subsequent
period. Our accrued trade, coupon, and consumer marketing
liabilities were $446.0 million as of May 25, 2008, and $410.1 mil-
lion as of May 27, 2007. Because our total promotional expen-
ditures (including amounts classified as a reduction of revenues)
are significant, if our estimates are inaccurate we would have to
make adjustments that could have a material effect on our results
of operations.

Valuation of Long-Lived Assets Long-lived assets are reviewed
for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset (or asset group)
may not be recoverable. An impairment loss would be recognized
when estimated undiscounted future cash flows from the oper-
ation and disposition of the asset group are less than the carrying
amount of the asset group. Asset groups have identifiable cash

flows independent of other asset groups. Measurement of an
impairment loss would be based on the excess of the carrying
amount of the asset group over its fair value. Fair value is
measured using discounted cash flows or independent appraisals,
as appropriate.

Intangible Assets Goodwill is not subject to amortization and is
tested for impairment annually and whenever events or changes
in circumstances indicate that impairment may have occurred.
Impairment testing is performed for each of our reporting units.
We compare the carrying value of a reporting unit, including
goodwill, to the fair value of the unit. Carrying value is based on
the assets and liabilities associated with the operations of that
reporting unit, which often requires allocation of shared or cor-
porate items among reporting units. If the carrying amount of a
reporting unit exceeds its fair value, we revalue all assets and
liabilities of the reporting unit, excluding goodwill, to determine if
the fair value of the net assets is greater than the net assets
including goodwill. If the fair value of the net assets is less than
the net assets including goodwill, impairment has occurred. Our
estimates of fair value are determined based on a discounted
cash flow model. Growth rates for sales and profits are deter-
mined using inputs from our annual long-range planning process.
We also make estimates of discount rates, perpetuity growth
assumptions, market comparables, and other factors.

We evaluate the useful lives of our other intangible assets,
mainly intangible assets associated with the Pillsbury, Totino’s,
Progresso, Green Giant, Old El Paso, Ha¨agen-Dazs and Uncle Tobys
brands, to determine if they are finite or indefinite-lived. Reaching
a determination on useful life requires significant judgments and
assumptions regarding the future effects of obsolescence,
demand, competition, other economic factors (such as the sta-
bility of the industry, known technological advances, legislative
action that results in an uncertain or changing regulatory envi-
ronment, and expected changes in distribution channels), the
level of required maintenance expenditures, and the expected
lives of other related groups of assets.

Our indefinite-lived intangible assets, mainly brands, are also
tested for impairment annually and whenever events or changes
in circumstances indicate that their carrying value may not be
recoverable. We performed our fiscal 2008 assessment of our
brand intangibles as of December 1, 2007. Our estimate of the fair
value of the brands was based on a discounted cash flow model

Annual Report 2008

using inputs which included: projected revenues from our annual
long-range plan; assumed royalty rates that could be payable if
we did not own the brands; and a discount rate. All brand
intangibles had fair values in excess of their carrying values by
at least 20 percent, except for the Pillsbury brand, which we
estimated had a fair value 3 percent higher than its carrying
value.This brand comprises nearly one-half of our total indefinite-
lived intangible assets.

If the growth rate for the global revenue from all uses of the
Pillsbury brand decreases 50 basis points from the current
planned growth rate, fair value would be reduced by approxi-
mately $150 million, assuming all other components of the fair
value estimate remain unchanged. If the assumed royalty rate for
all uses of the Pillsbury brand decreases by 50 basis points, fair
value would be reduced by approximately $130 million, assuming
all other components of
the fair value estimate remain
unchanged. If the applicable discount rate increases by 50 basis
points, fair value of the Pillsbury brand would be reduced by
approximately $170 million, assuming all other components of the
fair value estimate remain unchanged. As of May 25, 2008, we
reviewed each of the assumptions used in the annual impairment
assessment performed as of December 1, 2007, and found them
to still be appropriate.

As of May 25, 2008, we had $10.6 billion of goodwill and
indefinite-lived intangible assets. While we currently believe that
the fair value of each intangible exceeds its carrying value and
that those intangibles so classified will contribute indefinitely to
our cash flows, materially different assumptions regarding future
performance of our businesses could result in significant impair-
ment losses and amortization expense.

Stock Compensation Effective May 29, 2006, we adopted
SFAS 123R, which changed the accounting for compensation
expense associated with stock options, restricted stock awards,
and other forms of equity compensation. We elected the modified
prospective transition method as permitted by SFAS 123R; accord-
ingly, results from prior periods were not restated. Under this
method, stock-based compensation expense for fiscal 2007 was
$127.1 million, which included amortization related to the remaining
unvested portion of all equity compensation awards granted prior
to May 29, 2006, based on the grant-date fair value estimated in
accordance with the original provisions of SFAS No. 123, “Account-
ing for Stock-Based Compensation” (SFAS 123), and amortization

related to all equity compensation awards granted on or subse-
quent to May 29, 2006, based on the grant-date fair value esti-
mated in accordance with the provisions of SFAS 123R. The incre-
mental effect on net earnings in fiscal 2007 of our adoption of
SFAS 123R was $68.8 million of expense ($42.9 million after-tax).
All our stock compensation expense is recorded in SG&A expense
in the Consolidated Statements of Earnings.

Prior to May 29, 2006, we used the intrinsic value method for
measuring the cost of compensation paid in our common stock.
No compensation expense for stock options was recognized in
our Consolidated Statements of Earnings prior to fiscal 2007, as
the exercise price was equal to the market price of our stock at
the date of grant. Expense attributable to other types of share-
based awards was recognized in our results under SFAS 123. The
estimated weighted-average fair values of stock options granted
and the assumptions used for the Black-Scholes option-pricing
model were as follows:

Fiscal Year
..................................................................................
2007
2006
.........................................................................................................................................................................................

2008

Estimated fair values of stock options

granted

Assumptions:

Risk-free interest rate
Expected term

Expected volatility

Dividend yield

$10.55

$10.74

$8.04

5.1%

5.3%

4.3%

8.5 years

8.0 years

7.0 years

15.6%

2.7%

19.7%

2.8%

20.0%

2.9%

The valuation of stock options is a significant accounting
estimate which requires us to use judgments and assumptions
that are likely to have a material impact on our financial state-
ments. Annually, we make predictive assumptions regarding
future stock price volatility, employee exercise behavior, and
dividend yield.

General Mills

than six months, is insufficient to provide a reliable measure of
expected volatility. If all other assumptions are held constant, a
one percentage point increase in our fiscal 2008 volatility
assumption would increase the grant-date fair value of our fiscal
2008 option awards by 4.3 percent.

impact on future years’ financing cash flow will depend, in part, on
the volume of employee stock option exercises during a particular
year and the relationship between the exercise-date market value
of the underlying stock and the original grant-date fair value
previously determined for financial reporting purposes.

For fiscal 2007 and all prior periods, our estimate of expected
stock price volatility is based on historical volatility determined on
a daily basis over the expected term of the options. We consid-
ered but did not use implied volatility because we believed
historical volatility provided an appropriate expectation for our
volatility in the future.

Our expected term represents the period of time that options
granted are expected to be outstanding based on historical data
to estimate option exercise and employee termination within the
valuation model. Separate groups of employees have similar
historical exercise behavior and therefore were aggregated into
a single pool for valuation purposes. The weighted-average
expected term for all employee groups is presented in the table
above. An increase in the expected term by one year, leaving all
other assumptions constant, would change the grant date fair
value by significantly less than 1 percent. Our valuation model
assumes that dividends and our share price increase in line with
earnings, resulting in a constant dividend yield. The risk-free
interest rate for periods during the expected term of the options
is based on the U.S. Treasury zero-coupon yield curve in effect at
the time of grant.

To the extent that actual outcomes differ from our assumptions,
we are not required to true up grant-date fair value-based expense
to final intrinsic values. However, these differences can impact the
classification of cash tax benefits realized upon exercise of stock
options, as explained in the following two paragraphs. Furthermore,
historical data has a significant bearing on our forward-looking
assumptions. Significant variances between actual and predicted
experience could lead to prospective revisions in our assumptions,
which could then significantly impact the year-over-year compa-
rability of stock-based compensation expense.

SFAS 123R also provides that any corporate income tax benefit
realized upon exercise or vesting of an award in excess of that
previously recognized in earnings (referred to as a “windfall tax
benefit”) is presented in the Consolidated Statements of Cash
Flows as a financing (rather than an operating) cash flow. For
fiscal 2008 and fiscal 2007, the windfall tax benefits classified as
financing cash flow were $55.7 million and $73.1 million.The actual

Realized windfall tax benefits are credited to additional paid-in
capital within the Consolidated Balance Sheet. Realized shortfall
tax benefits (amounts which are less than that previously rec-
ognized in earnings) are first offset against the cumulative bal-
ance of windfall tax benefits, if any, and then charged directly to
income tax expense, potentially resulting in volatility in our con-
solidated effective income tax rate. We calculated a cumulative
amount of windfall tax benefits from post-1995 fiscal years for the
purpose of accounting for future shortfall tax benefits and cur-
rently have sufficient cumulative windfall tax benefits to absorb
projected arising shortfalls, such that we do not currently expect
future earnings to be affected by this provision. However, as
employee stock option exercise behavior is not within our control,
it is possible that materially different reported results could occur
if different assumptions or conditions were to prevail.

Income Taxes We adopted the provisions of FIN 48 as of the
beginning of fiscal 2008. Prior to adoption, our policy was to
establish reserves that reflected the probable outcome of known
tax contingencies. The effects of final resolution, if any, were
recognized as changes to the effective income tax rate in the
period of resolution. FIN 48 requires application of a more likely
than not threshold to the recognition and derecognition of uncer-
tain tax positions. FIN 48 permits us to recognize the amount of
tax benefit that has a greater than 50 percent likelihood of being
ultimately realized upon settlement. It further requires that a
change in judgment related to the expected ultimate resolution of
uncertain tax positions be recognized in earnings in the quarter of
such change.

Annually we file more than 350 income tax returns in approx-
imately 100 global taxing jurisdictions. A number of years may
elapse before an uncertain tax position is audited and finally
resolved. While it is often difficult to predict the final outcome or
the timing of resolution of any particular uncertain tax position,
we believe that our reserves for income taxes reflect the most
likely outcome. We adjust these reserves, as well as the related
interest, in light of changing facts and circumstances. Settlement
of any particular position would usually require the use of cash.

Annual Report 2008

The number of years with open tax audits varies depending on
the tax jurisdiction. Our major taxing jurisdictions include the
United States (federal and state) and Canada. We are no longer
subject to United States federal examinations by the IRS for fiscal
years before 2002. During fiscal 2008, we received a favorable
District Court decision on an uncertain tax matter related to the
fiscal years prior to 2002 and reduced our liability for uncertain
tax positions by $21.0 million and related accrued interest by
$9.7 million. The IRS has appealed the District Court decision, and
accordingly, its ultimate resolution is subject to change. During
the fiscal 2008, we also concluded various matters for fiscal years
1998-2001 which included a payment of $31.7 million. The IRS
recently concluded field examinations for our 2002 and 2003
fiscal years. A payment of $24.8 million was made to cover the
additional tax liability plus interest related to all agreed adjust-
ments for this audit cycle. The IRS also proposed additional
adjustments for the 2002-2003 audit cycle including several
adjustments to the tax benefits associated with the sale of
minority interests in our GMC subsidiary. We believe we have
meritorious defenses and intend to vigorously defend our posi-
tion. Our potential
liability for this matter is significant and,
notwithstanding our reserves against this potential liability, an
unfavorable resolution could have a material adverse impact on
our results of operations and cash flows from operations. We do
not expect the amount of our tax reserves for these issues to
materially change in the next 12 months. The IRS initiated its audit
of our fiscal 2004 through 2006 tax years during fiscal 2008.

Various tax examinations by United States state taxing author-
ities could be conducted for any open tax year, which vary by
jurisdiction, but are generally from 3 to 5 years. Currently, several
state examinations are in progress. The Canada Revenue Agency
is conducting an audit of our income tax returns in Canada for
fiscal years 2003 (which is our earliest tax year still open for
examination) through 2005. We do not anticipate that any United
States state tax or Canadian tax adjustments will have a signif-
icant impact on our financial position or results of operations.

Defined Benefit Pension, Other Postretirement, and Postemployment
Benefit Plans We have defined benefit pension plans covering
most domestic, Canadian, and United Kingdom employees.
Benefits for salaried employees are based on length of service
and final average compensation. Benefits for hourly employees
include various monthly amounts for each year of credited

service. Our funding policy is consistent with the requirements
of applicable laws. We made $14.2 million of voluntary
contributions to these plans in fiscal 2008. Our principal
domestic retirement plan covering salaried employees has a
provision that any excess pension assets would vest if the plan
is terminated within five years of a change in control.

We also sponsor plans that provide health care benefits to the
majority of our domestic and Canadian retirees. The salaried
contributory, with retiree
health care benefit plan is
contributions based on years of service. We fund related trusts
for certain employees and retirees on an annual basis. We did not
make voluntary contributions to these plans in fiscal 2008.

Under certain circumstances, we also provide accruable
benefits to former or inactive employees in the United States,
Canada, and Mexico, and members of our Board of Directors,
including severance and certain other benefits payable upon
death. We recognize an obligation for any of these benefits
that vest or accumulate with service. Postemployment benefits
that do not vest or accumulate with service (such as severance
based solely on annual pay rather than years of service) are
charged to expense when incurred. Our postemployment benefit
plans are unfunded.

We recognize benefits provided during retirement or following
employment over the plan participants’ active working life.
Accordingly, we make various assumptions to predict and
to the
measure costs and obligations many years prior
settlement of our obligations. Assumptions that
require
significant management judgment and have a material impact
on the measurement of our net periodic benefit expense or
income and accumulated benefit obligations include the long-
term rates of return on plan assets, the interest rates used to
discount the obligations for our benefit plans, and the health care
cost trend rates.

Expected Rate of Return on Plan Assets Our expected rate of
return on plan assets is determined by our asset allocation,
our historical long-term investment performance, our estimate
of future long-term returns by asset class (using input from our
actuaries, investment services, and investment managers), and
long-term inflation assumptions. We review this assumption
annually for each plan, however, our annual
investment
performance for one particular year does not, by itself,
significantly influence our evaluation.

General Mills

The investment objective for our defined benefit pension and
other postretirement benefit plans is to secure the benefit
obligations to participants at a reasonable cost to us. Our goal
is to optimize the long-term return on plan assets at a moderate
level of risk. The defined benefit pension and other postretirement
portfolios are broadly diversified across asset classes. Within
the portfolios are further diversified across
asset classes,
investment styles and investment organizations. For
the
defined benefit pension and other postretirement benefit plans,
the long-term investment policy allocations are: 30 percent to
equities in the United States; 20 percent to international equities;
10 percent to private equities; 30 percent to fixed income; and
10 percent to real assets (real estate, energy and timber). The
actual allocations to these asset classes may vary tactically
around the long-term policy allocations based on relative
market valuations.

Our historical investment returns (compound annual growth
rates) for our United States defined benefit pension and other
postretirement plan assets were 4 percent, 15 percent, 10 percent,
11 percent, and 12 percent for the 1, 5, 10, 15, and 20 year periods
ended May 25, 2008.

For fiscal 2008, we assumed, on a weighted-average basis for
all defined benefit plans, a rate of return of 9.4 percent. For fiscal
2007, we assumed, on a weighted-average basis for all defined
benefit plans, a rate of return of 9.4 percent. For fiscal 2006, we
assumed, on a weighted-average basis for all defined benefit plan
assets, a rate of return of 9.6 percent. Our principal defined
benefit pension and other postretirement plans in the United
States have an expected return on plan assets of 9.6 percent.
During fiscal 2007, we lowered the expected rate of return on one
of our other postretirement plans in the United States based on
costs associated with insurance contracts owned by that plan.
Lowering the expected long-term rate of return on assets by
50 basis points would increase our net pension and postretirement
expense by $21 million for fiscal 2009. A 50 basis point shortfall
between the assumed and actual rate of return on plan assets for
fiscal 2009 would result in a similar amount of arising asset-
experience loss. Any arising asset-experience loss is recognized
on a market-related valuation basis, which reduces year-to-year
volatility. This market-related valuation recognizes investment
gains or losses over a five-year period from the year in which
they occur. Investment gains or losses for this purpose are the
difference between the expected return calculated using the

market-related value of assets and the actual return based on
the market-related value of assets. Since the market-related value
of assets recognizes gains or losses over a five-year period, the
future value of assets will be impacted as previously deferred gains
or losses are recorded. Our outside actuaries perform these
calculations as part of our determination of annual expense or
income.

benefit

defined

pension,

determine

Discount Rates Our discount rate assumptions are determined
annually as of the last day of our fiscal year for all of our defined
benefit pension, other postretirement, and postemployment
benefit plan obligations. Those same discount rates also are
other
used
postretirement, and postemployment benefit plan income and
expense for the following fiscal year. We work with our actuaries
to determine the timing and amount of expected future cash
outflows to plan participants and, using the top quartile of AA-
rated corporate bond yields, to develop a forward interest rate
curve, including a margin to that index based on our credit risk.
This forward interest rate curve is applied to our expected future
cash outflows to determine our discount rate assumptions.
Our weighted-average discount rates were as follows:

Weighted-Average Discount Rates

Defined
Benefit
Postemployment
Pension
Benefit
Plans
Plans
.........................................................................................................................................................................................

Other
Postretirement
Benefit
Plans

Obligation as of May 25, 2008,

and fiscal 2009 expense

Obligation as of May 27, 2007,
and fiscal 2008 expense

Fiscal 2007 expense

6.88%

6.90%

6.64%

6.18

6.45

6.15

6.50

6.05

6.44

Lowering the discount rates by 50 basis points would increase
our net defined benefit pension, other postretirement, and
postemployment benefit plan expense for
fiscal 2009 by
approximately $18 million. All obligation-related experience
gains and losses are amortized using a straight-line method
the average remaining service period of active plan
over
participants.

Health Care Cost Trend Rates We review our health care trend
rates annually. Our review is based on data we collect about our

Annual Report 2008

health care claims experience and information provided by our
actuaries. This information includes recent plan experience, plan
design, overall
industry experience and projections, and
assumptions used by other similar organizations. Our initial
health care cost trend rate is adjusted as necessary to remain
consistent with this review, recent experiences, and short-term
expectations. Our initial health care cost trend rate assumption is
10.25 percent for retirees age 65 and over and 9.25 percent for
retirees under age 65. These rates are graded down annually until
the ultimate trend rate of 5.2 percent is reached in 2016 for all
retirees. The trend rates are applicable for calculations only if the
retirees’ benefits increase as a result of health care inflation. The
to
ultimate trend rate is adjusted annually, as necessary,
approximate the current economic view on the rate of long-
term inflation plus an appropriate health care cost premium.
Assumed trend rates for health care costs have an important
effect on the amounts reported for the other postretirement
benefit plans.

A one percentage point change in the health care cost trend

rate would have the following effects:

One
Percentage
Point
In Millions
Decrease
.........................................................................................................................................................................................

One
Percentage
Point
Increase

Effect on the aggregate of the service and

interest cost components in fiscal 2009

Effect on the other postretirement accumulated

$ 7.6

$ (6.6)

benefit obligation as of May 25, 2008

84.2

(74.3)

Any arising health care claims cost-related experience gain or
loss is recognized in the calculation of expected future claims.
Once recognized, experience gains and losses are amortized
using a straight-line method over 15 years, resulting in at least
the minimum amortization required being recorded.

other

benefit

pension,

postretirement,

Financial Statement Impact In fiscal 2008, we recorded net
defined
and
postemployment benefit plan expense of
$18.9 million
compared to $36.2 million in fiscal 2007 and $29.7 million in
fiscal 2006. As of May 25, 2008, we had cumulative unrecognized
actuarial net losses of $276.8 million on our defined benefit
pension plans, $115.6 million on our other postretirement
benefit plans, and $8.0 million on our postemployment benefit
plans, mainly as the result of decreases in our discount rate

assumptions. These unrecognized actuarial net losses will result
in decreases in our future pension income and increases in
postretirement expense since they currently exceed the
corridors defined by GAAP.

We use the Retirement Plans (RP) 2000 Mortality Table
projected forward to our plans’ measurement dates for
calculating the year-end defined benefit pension, other
postretirement, and postemployment benefit obligations and
annual expense.

net

future

Actual

benefit

pension,

other
defined
postretirement, and postemployment benefit plan income or
expense will depend on investment performance, changes in
future discount rates, changes in health care trend rates, and
various other factors related to the populations participating in
these plans.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
142-3,
In April 2008, the FASB finalized Staff Position No.
“Determination of
Intangible Assets”
the Useful Life of
(FSP 142-3). This position amends the factors that should be
considered in developing renewal or extension assumptions used
to determine the useful life of a recognized intangible asset under
SFAS No. 142, “Goodwill and Other Intangible Assets”. FSP 142-3
applies to intangible assets that are acquired individually or with a
group of other assets and both intangible assets acquired in
business combinations and asset acquisitions. This position is
effective for fiscal years beginning after December 15, 2008,
fiscal 2010. We are
which for us is the first quarter of
evaluating the impact of FSP 142-3 on our results of operations
and financial condition.

In March 2008, the FASB approved the issuance of Emerging
Issues Task Force Issue No. 07-5, “Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s
Own Stock” (EITF 07-5). EITF 07-5 defines when adjustment
features within contracts are considered to be equity-indexed
and will be effective for us in the first quarter of fiscal 2010. We are
evaluating the impact of EITF 07-5 on our results of operations
and financial condition.

In December 2007, the FASB approved the issuance of
Statement of Financial Accounting Standards (SFAS) No. 141
(revised
141R).
SFAS 141R establishes principles and requirements for how the
acquirer in a business combination recognizes and measures in its

“Business Combinations”

2007),

(SFAS

General Mills

financial statements the identifiable assets acquired, the liabilities
assumed, and any controlling interest; recognizes and measures
the goodwill acquired in the business combination or a gain from
a bargain purchase; and determines what information to disclose
to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. SFAS 141R
applies to business combinations for which the acquisition
date is on or after December 15, 2008. SFAS 141R also changes
contingencies,
the accounting for acquisition-related tax
requiring all such changes in these contingency reserves to be
recorded in earnings after the effective date. We have significant
unrecognized tax positions related to our acquisition of Pillsbury.
Adjustments to these liabilities after the adoption of SFAS 141R
could be material to our net earnings.

160,

to ARB No.

“Noncontrolling Interests

Statements – an amendment

In December 2007, the FASB approved the issuance of
SFAS No.
in Consolidated
51”
Financial
(SFAS 160). SFAS 160 establishes accounting and reporting
standards that require the ownership interest in subsidiaries
held by parties other than the parent be clearly identified and
presented in the Consolidated Balance Sheets within equity, but
separate from the parent’s equity; the amount of consolidated net
income attributable to the parent and the non-controlling interest
the
be clearly identified and presented on the face of
Consolidated Statement of Earnings; and changes in a parent’s
retains its controlling
ownership interest while the parent
financial
for
accounted
interest
fiscal years
consistently. This statement
beginning on or after December 15, 2008, which for us is the
first quarter of fiscal 2010. We are evaluating the impact of
SFAS 160 on our results of operations and financial condition.

is effective for

subsidiary

its

requires that

In June 2007, the FASB approved the issuance of Emerging
Issues Task Force Issue No. 06-11, “Accounting for Income Tax
Benefits of Dividends on Share-Based Payment Awards”
tax benefits from
(EITF 06-11). EITF 06-11
dividends paid on unvested restricted shares be charged
directly to stockholders’ equity instead of benefiting income
tax expense. EITF 06-11, which will be effective for us in the
first quarter of fiscal 2009, is expected to increase our effective
income tax rate by 20 basis points, or from 34.4 percent to
34.6 percent based on our actual 2008 effective tax rate.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities – Including an

that

choose

Amendment of SFAS No. 115” (SFAS 159). This statement provides
companies with an option to measure, at specified election dates,
many financial instruments and certain other items at fair value
that are not currently measured at fair value. A company that
adopts SFAS 159 will report unrealized gains and losses on items
for which the fair value option has been elected in earnings at
each subsequent reporting date. This statement also establishes
presentation and disclosure requirements designed to facilitate
different
entities
between
comparisons
measurement attributes for similar
types of assets and
liabilities. This statement is effective for fiscal years beginning
after November 15, 2007, which for us is the first quarter of fiscal
2009. We do not believe that the adoption of SFAS 159 will have a
material impact on our results of operations or financial condition.
In September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements” (SFAS 157). This statement provides a single
definition of fair value, a framework for measuring fair value,
and expanded disclosures concerning fair value. Previously,
different definitions of fair value were contained in various
in
accounting
measurement and disclosures. SFAS 157 applies under those
previously issued pronouncements that prescribe fair value as
the relevant measure of value, except SFAS 123R and related
interpretations and pronouncements that require or permit
measurement similar to fair value but are not intended to
measure fair value. This pronouncement is effective for fiscal
years beginning after November 15, 2007, which for us is the first
quarter of fiscal 2009. However, SFAS 157 as it relates to fair value
measurement requirements for non-financial assets and liabilities
that are not remeasured at fair value on a recurring basis is
effective for fiscal years beginning after November 15, 2008,
which for us is the first quarter of
fiscal 2010. We are
evaluating the impact of SFAS 157 on our results of operations
and financial condition.

pronouncements

inconsistencies

creating

CAUTIONARY STATEMENT RELEVANT TO FORWARD-
LOOKING INFORMATION FOR THE PURPOSE OF “SAFE
HARBOR” PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
This report contains or incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 that are based on our current expectations
and assumptions. We also may make written or oral

Annual Report 2008

forward-looking statements, including statements contained in
our filings with the SEC and in our reports to stockholders.

The words or phrases “will likely result,” “are expected to,” “will
continue,” “is anticipated,” “estimate,” “plan,” “project,” or similar
expressions identify “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from historical
results and those currently anticipated or projected. We wish to
caution you not to place undue reliance on any such forward-
looking statements.

In connection with the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, we are identifying
important factors that could affect our financial performance
and could cause our actual results in future periods to differ
materially from any current opinions or statements.

Our future results could be affected by a variety of factors, such
as: competitive dynamics in the consumer foods industry and the
markets for our products, including new product introductions,
advertising activities, pricing actions, and promotional activities
of our competitors; economic conditions, including changes in
inflation rates, interest rates, or tax rates; product development
and innovation; consumer acceptance of new products and
product improvements; consumer reaction to pricing actions
and changes in promotion levels; acquisitions or dispositions of
businesses or assets; changes in capital structure; changes in
laws and regulations,
including labeling and advertising
impairments in the carrying value of goodwill,
regulations;
other intangible assets, or other long-lived assets, or changes
in the useful
intangible assets; changes in
accounting standards and the impact of significant accounting
estimates; product quality and safety issues, including recalls and
product liability; changes in consumer demand for our products;
effectiveness of advertising, marketing, and promotional
and
programs;
preferences, including weight loss trends; consumer perception
of health-related issues, including obesity; consolidation in the
retail environment; changes in purchasing and inventory levels of
significant customers; fluctuations in the cost and availability of
supply chain resources, including raw materials, packaging, and
energy; disruptions or inefficiencies in the supply chain; volatility
in the market value of derivatives used to hedge price risk for
certain commodities; benefit plan expenses due to changes in

in consumer behavior,

lives of other

changes

trends,

failure of our

plan asset values and discount rates used to determine plan
information technology systems;
liabilities;
resolution of uncertain income tax matters; foreign economic
conditions,
including currency rate fluctuations; and political
unrest in foreign markets and economic uncertainty due to
terrorism or war.

You should also consider the risk factors that we identify in
Item 1A of the 2008 Form 10-K, which could also affect our future
results.

We undertake no obligation to publicly revise any forward-
looking statements to reflect events or circumstances after the
date of
the occurrence of
anticipated or unanticipated events.

those statements or to reflect

Quantitative and Qualitative
Disclosures About Market Risk
We are exposed to market risk stemming from changes in
interest rates, foreign exchange rates, commodity prices, and
equity prices. Changes in these factors could cause fluctuations in
our earnings and cash flows. In the normal course of business, we
actively manage our exposure to these market risks by entering
into various hedging transactions, authorized under established
policies that place clear controls on these activities. The
counterparties in these transactions are generally highly rated
institutions. We establish credit limits for each counterparty. Our
hedging transactions include but are not limited to a variety of
derivative financial instruments.

INTEREST RATE RISK
We are exposed to interest rate volatility with regard to future
issuances of fixed-rate debt, and existing and future issuances of
floating-rate debt. Primary exposures include U.S. Treasury rates,
LIBOR, and commercial paper rates in the United States and
Europe. We use interest rate swaps and forward-starting interest
rate swaps to hedge our exposure to interest rate changes, to
reduce the volatility of our financing costs, and to achieve a
desired proportion of fixed- versus floating-rate debt, based on
current and projected market conditions. Generally under these
swaps, we agree with a counterparty to exchange the difference
between fixed-rate and floating-rate interest amounts based on
an agreed notional principal amount. As of May 25, 2008, we had
$4.1 billion of aggregate notional principal amount outstanding,
with a net notional amount of $425.4 million that converts

General Mills

floating-rate notes to fixed-rates. This includes notional amounts
of offsetting swaps that neutralize our exposure to interest rates
on other interest rate swaps.

FOREIGN EXCHANGE RISK
Foreign currency fluctuations affect our net investments in foreign
subsidiaries and foreign currency cash flows related to third party
purchases, intercompany loans, and product shipments. We are
also exposed to the translation of foreign currency earnings to the
U.S. dollar. Our principal exposures are to the Australian dollar,
British pound sterling, Canadian dollar, Chinese renminbi, euro,
Japanese yen, and Mexican peso. We mainly use foreign currency
forward contracts to selectively hedge our foreign currency cash
flow exposures. We generally do not hedge more than 12 months
forward and generally do not hedge intercompany transactions.
We also have many net investments in foreign subsidiaries that are
these net
denominated in euros. We hedge a portion of
investments by issuing euro-denominated commercial paper. As
of May 25, 2008, we had issued $472.9 million of euro-
denominated commercial paper and foreign exchange forward
contracts that we have designated as a net investment hedge
and thus deferred net foreign currency transaction losses of
$69.6 million to accumulated other comprehensive income (loss).

COMMODITY PRICE RISK
Many commodities we use in the production and distribution of
our products are exposed to market price risks. We utilize
derivatives to hedge price risk for our principal ingredient and
including grains (oats, wheat, and corn), oils
energy costs,
(principally soybean), non-fat dry milk, natural gas, and diesel
fuel. We manage our exposures through a combination of
purchase orders, long-term contracts with suppliers, exchange-
traded futures and options, and over-the-counter options and
swaps. We offset our exposures based on current and projected
market conditions, and generally seek to acquire the inputs at as
close to our planned cost as possible. As of May 25, 2008, the net
notional value of commodity derivatives was $784.8 million, of
which $524.8 million relates to agricultural positions and
$260.0 million relates to energy positions. These hedges relate
to inputs that generally will be utilized within the next 12 months.

EQUITY INSTRUMENTS
Equity price movements affect our compensation expense as
certain investments owned by our employees related to our

deferred compensation plan are revalued. We use equity
swaps to manage this market risk.

VALUE AT RISK
The estimates in the table below are intended to measure the
maximum potential fair value we could lose in one day from
adverse changes in market interest rates, foreign exchange rates,
commodity prices, and equity prices under normal market
conditions. A Monte Carlo value-at-risk (VAR) methodology
was used to quantify the market risk for our exposures. The
models assumed normal market conditions and used a 95 percent
confidence level.

The VAR calculation used historical

interest rates, foreign
exchange rates, and commodity and equity prices from the
past year to estimate the potential volatility and correlation of
these rates in the future. The market data were drawn from the
RiskMetricsTM data set. The calculations are not intended to
represent actual losses in fair value that we expect to incur.
Further, since the hedging instrument (the derivative) inversely
correlates with the underlying exposure, we would expect that
any loss or gain in the fair value of our derivatives would be
generally offset by an increase or decrease in the fair value of the
underlying exposures. The positions included in the calculations
were: debt; investments; interest rate swaps; foreign exchange
forwards; commodity swaps, futures and options; and equity
instruments. The calculations do not include the underlying
foreign exchange and commodities-related positions that are
hedged by these market-risk-sensitive instruments.

The table below presents the estimated maximum potential
VAR arising from a one-day loss in fair value for our interest rate,
foreign currency, commodity, and equity market-risk-sensitive
instruments outstanding as of May 25, 2008, and May 27, 2007,
and the average fair value impact during the year ended
May 25, 2008.

Fair Value Impact
.............................................................................

Interest rate instruments
Foreign currency instruments

$14.0
4.1

$18.9
5.0

May 25,
2008

Average
During
Fiscal 2008

Commodity instruments

Equity instruments

6.3

1.2

4.7

1.0

4.0

0.9

Annual Report 2008

Reports of Management and Independent Registered
Public Accounting Firm

REPORT OF MANAGEMENT RESPONSIBILITIES

information throughout

The management of General Mills, Inc.
is responsible for the
fairness and accuracy of the consolidated financial statements.
The statements have been prepared in accordance with accounting
principles that are generally accepted in the United States, using
management’s best estimates and judgments where appropriate.
The financial
the Annual Report on
Form 10-K is consistent with our consolidated financial statements.
Management has established a system of internal controls that
provides reasonable assurance that assets are adequately
safeguarded and transactions are recorded accurately in all
accordance with management’s
material
authorization. We maintain a strong audit program that
independently evaluates the adequacy and effectiveness of
internal controls. Our internal controls provide for appropriate
separation of duties and responsibilities, and there are
documented policies regarding use of our assets and proper
financial
reporting. These formally stated and regularly
communicated policies demand highly ethical conduct from all
employees.

respects,

internal auditors, and our

The Audit Committee of the Board of Directors meets regularly
with management,
independent
auditors to review internal control, auditing, and financial
reporting matters. The independent auditors, internal auditors,
and employees have full and free access to the Audit Committee
at any time.

The

Audit

financial

statements.

The Audit Committee reviewed and approved the Company’s
annual
Committee
recommended, and the Board of Directors approved, that the
consolidated financial statements be included in the Annual
Report. The Audit Committee also appointed KPMG LLP to
serve as
registered public
accounting firm for fiscal 2009, subject to ratification by the
stockholders at the annual meeting.

the Company’s

independent

K. J. Powell
Chairman of the Board
and Chief Executive Officer

D. L. Mulligan
Executive Vice President
and Chief Financial Officer

July 10, 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

The Board of Directors and Stockholders
General Mills, Inc.:

equity

earnings,

stockholders’

We have audited the accompanying consolidated balance
sheets of General Mills, Inc. and subsidiaries as of May 25,
2008, and May 27, 2007, and the related consolidated
and
statements
comprehensive income, and cash flows for each of the fiscal
years in the three-year period ended May 25, 2008. In connection
with our audits of the consolidated financial statements, we also
have audited the accompanying financial statement schedule. We
also have audited General Mills Inc.’s internal control over
financial reporting as of May 25, 2008, based on criteria
established in Internal Control – Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). General Mills,
is
responsible for these consolidated financial statements and
financial statement schedule, for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting, included
in Management’s Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement
schedule and an opinion on the Company’s internal control
over financial reporting based on our audits.

Inc.’s management

control

financial

We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits to
the financial
obtain reasonable assurance about whether
statements are free of material misstatement and whether
reporting was
over
effective
internal
maintained in all material
the
respects. Our audits of
consolidated financial statements included examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
financial statement presentation. Our
evaluating the overall
audit of
reporting included
obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness

internal control over

financial

General Mills

of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding
the reliability of
financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide
transactions are recorded as
reasonable assurance that
necessary to permit preparation of
financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made
only in accordance with authorizations of management and
the company; and (3) provide reasonable
directors of
timely detection of
assurance
unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.

regarding prevention or

2008, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission.

In fiscal 2008, as disclosed in Note 14 to the consolidated
financial statements, the Company adopted FASB Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes – an
Interpretation of FASB Statement No. 109” on May 28, 2007. In
fiscal 2007, as disclosed in Notes 1 and 2 to the consolidated
financial statements, the Company changed its classification of
shipping costs, changed its annual goodwill
impairment
assessment date to December 1, and adopted SFAS No. 123
(Revised),
158,
“Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Benefit Plans an amendment of FASB Statements
No. 87, 88, 106 and 132(R)”.

“Share-Based Payment”,

and SFAS No.

Minneapolis, Minnesota
July 10, 2008

Because of

its inherent limitations,

internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
the
inadequate because of changes in conditions, or that
degree of compliance with the policies or procedures may
deteriorate.

In our opinion, the consolidated financial statements referred
to above present fairly,
in all material respects, the financial
position of General Mills, Inc. and subsidiaries as of May 25,
2008, and May 27, 2007, and the results of their operations and
their cash flows for each of the fiscal years in the three-year
period ended May 25, 2008,
in conformity with accounting
principles generally accepted in the United States of America.
Also,
in our opinion, the accompanying financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly,
in all
material respects, the information set forth therein. Also in our
opinion, General Mills, Inc. maintained, in all material respects,
effective internal control over financial reporting as of May 25,

Annual Report 2008

Consolidated Statements of Earnings

GENERAL MILLS, INC. AND SUBSIDIARIES

Fiscal Year
........................................................................................
2007
2006
In Millions, Except per Share Data
............................................................................................................................................................................................................................................................................................................................................................................................
$11,711.3

$12,441.5

$13,652.1

2008

Net sales

Cost of sales
Selling, general, and administrative expenses

8,778.3
2,625.0

7,955.1
2,389.3

7,544.8
2,177.7

Restructuring, impairment, and other exit costs

29.8
............................................................................................................................................................................................................................................................................................................................................................................................
1,959.0
Operating profit
399.6
Interest, net
............................................................................................................................................................................................................................................................................................................................................................................................
1,559.4
Earnings before income taxes and after-tax earnings from joint ventures

2,227.8
421.7

2,057.8
426.5

1,631.3

1,806.1

39.3

21.0

538.3
Income taxes
69.2
After-tax earnings from joint ventures
............................................................................................................................................................................................................................................................................................................................................................................................
$ 1,090.3
Net earnings

560.1
72.7

622.2
110.8

$ 1,143.9

$ 1,294.7

Earnings per share – basic

Earnings per share – diluted

Dividends per share

See accompanying notes to consolidated financial statements.

3.86

3.71

1.57

3.30

3.18

1.44

3.05

2.90

1.34

General Mills

Consolidated Balance Sheets

GENERAL MILLS, INC. AND SUBSIDIARIES

May 27,
2007
In Millions
............................................................................................................................................................................................................................................................................................................................................................................................

May 25,
2008

ASSETS

Current assets:

Cash and cash equivalents

Receivables

Inventories
Prepaid expenses and other current assets

661.0

1,081.6

1,366.8
510.6

417.1

952.9

1,173.4
443.1

Deferred income taxes

67.2
............................................................................................................................................................................................................................................................................................................................................................................................
3,053.7
3,013.9

Total current assets
Land, buildings, and equipment

3,620.0
3,108.1

—

Goodwill

6,786.1

6,835.4

3,694.0
Other intangible assets
1,586.7
Other assets
............................................................................................................................................................................................................................................................................................................................................................................................
$18,183.7

3,777.2
1,750.2

$19,041.6

Total assets

LIABILITIES AND EQUITY
Current liabilities:

Accounts payable

Current portion of long-term debt
Notes payable

Other current liabilities

937.3

777.9

442.0
2,208.8

1,239.8

1,734.0
1,254.4

2,078.8

Deferred income taxes

—
............................................................................................................................................................................................................................................................................................................................................................................................
5,845.1
3,217.7

Total current liabilities

4,856.3
4,348.7

28.4

Long-term debt

Deferred income taxes

1,454.6

1,433.1

1,229.9
Other liabilities
............................................................................................................................................................................................................................................................................................................................................................................................
11,725.8
............................................................................................................................................................................................................................................................................................................................................................................................
1,138.8
Minority interests

1,923.9
12,583.5

Total liabilities

242.3

Stockholders’ equity:

Common stock, 377.3 and 502.3 shares issued, $0.10 par value

Additional paid-in capital

Retained earnings
Common stock in treasury, at cost, shares of 39.8 and 161.7

37.7

50.2

1,149.1

5,841.3

6,510.7
(1,658.4)

5,745.3
(6,198.0)

Accumulated other comprehensive income (loss)

(119.7)
............................................................................................................................................................................................................................................................................................................................................................................................
5,319.1
............................................................................................................................................................................................................................................................................................................................................................................................
$18,183.7
Total liabilities and equity

Total stockholders’ equity

6,215.8
$19,041.6

176.7

See accompanying notes to consolidated financial statements.

Annual Report 2008

Consolidated Statements of Stockholders’ Equity and
Comprehensive Income

GENERAL MILLS, INC. AND SUBSIDIARIES

$.10 Par Value Common Stock
(One Billion Shares Authorized)
.....................................................................................................

Accumulated
Other
Comprehensive
Income (Loss)
$

Issued
...........................................................
Additional
Paid-In
Capital Shares

Par
Amount

Treasury
.....................................

Total
In Millions, Except per Share Data
............................................................................................................................................................................................................................................................................................................................................................................................
Balance as of May 29, 2005
8.1 $ 5,676.4
Comprehensive income:
Net earnings
Other comprehensive income, net of tax:

Shares
502.3

1,090.3

Retained
Earnings
$ 50.2 $ 5,690.3 (132.6) $(4,459.9) $4,501.2

Amount

Unearned
Compensation
$(113.5)

Net change on hedge derivatives and securities
Foreign currency translation
Minimum pension liability adjustment

20.4
72.9
24.0
............................................................................................................................................................................................................................................................................................................................................................................................
117.3
Other comprehensive income
1,207.6
Total comprehensive income
............................................................................................................................................................................................................................................................................................................................................................................................
(484.9)
Cash dividends declared ($1.34 per share)
235.6
Stock compensation plans (includes income tax benefits of $40.9)
(892.4)
Shares purchased
(17.0)
Unearned compensation related to restricted stock awards
47.0
Earned compensation and other
............................................................................................................................................................................................................................................................................................................................................................................................
Balance as of May 28, 2006
5,772.3
Comprehensive income:
Net earnings
Other comprehensive income, net of tax:

20.4
72.9
24.0
117.3

(17.0)
47.0
(83.5)

(5,163.0) 5,106.6

189.3
(892.4)

5,736.6 (145.9)

5.5
(18.8)

(484.9)

1,143.9

125.4

502.3

50.2

46.3

Net change on hedge derivatives and securities
Foreign currency translation
Minimum pension liability adjustment

22.3
193.8
(20.8)
............................................................................................................................................................................................................................................................................................................................................................................................
195.3
Other comprehensive income
1,339.2
Total comprehensive income
............................................................................................................................................................................................................................................................................................................................................................................................
—
Adoption of SFAS No. 123R
(440.4)
Adoption of SFAS No. 158
(505.2)
Cash dividends declared ($1.44 per share)
504.0
Stock compensation plans (includes income tax benefits of $73.1)
(1,385.1)
Shares purchased
(95.0)
Unearned compensation related to restricted stock awards
Issuance of shares to settle conversion of zero coupon debentures, net

22.3
193.8
(20.8)
195.3

339.4
(1,385.1)

9.2
(25.3)

(440.4)

(505.2)

(83.5)

(95.0)

164.6

83.5

of tax

(10.7)
129.3

0.3

10.7

129.3
Earned compensation and other
............................................................................................................................................................................................................................................................................................................................................................................................
Balance as of May 27, 2007
5,319.1
Comprehensive income:
Net earnings
Other comprehensive income, net of tax:

(6,198.0) 5,745.3

5,841.3 (161.7)

(119.7)

1,294.7

502.3

50.2

—

Net change on hedge derivatives and securities
Foreign currency translation
Amortization of losses and prior service costs
Minimum pension liability adjustment

(1.8)
246.3
12.5
39.4
............................................................................................................................................................................................................................................................................................................................................................................................
296.4
Other comprehensive income
1,591.1
Total comprehensive income
............................................................................................................................................................................................................................................................................................................................................................................................
(529.7)
Cash dividends declared ($1.57 per share)
382.6
Stock compensation plans (includes income tax benefits of $55.7)
(1,384.6)
Shares purchased
—
Retirement of treasury shares
750.0
Shares issued under forward purchase contract
(104.1)
Unearned compensation related to restricted stock awards
66.2
Adoption of FIN 48
Capital appreciation paid to holders of Series B-1 limited membership

6.5
(23.9)
(5,068.3) 125.0
14.3

261.6
(1,384.6)
5,080.8
581.8

(1.8)
246.3
12.5
39.4
296.4

168.2
(104.1)
57.8

(529.7)

(125.0)

(12.5)

121.0

8.4

interests in General Mills Cereals, LLC (GMC)

(8.0)
133.2
Earned compensation
............................................................................................................................................................................................................................................................................................................................................................................................
$ 176.7 $ 6,215.8
Balance as of May 25, 2008

133.2
$ 37.7 $ 1,149.1

(39.8) $(1,658.4) $6,510.7

377.3

(8.0)

—

See accompanying notes to consolidated financial statements.

General Mills

Consolidated Statements of Cash Flows

GENERAL MILLS, INC. AND SUBSIDIARIES

Fiscal Year
.........................................................................................
2006
2007
In Millions
............................................................................................................................................................................................................................................................................................................................................................................................
Cash Flows – Operating Activities

2008

Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:

$ 1,294.7

$ 1,143.9

$ 1,090.3

Depreciation and amortization
After-tax earnings from joint ventures
Stock-based compensation
Deferred income taxes
Distributions of earnings from joint ventures
Tax benefit on exercised options
Pension, other postretirement, and postemployment benefit costs
Restructuring, impairment, and other exit costs (income)
Changes in current assets and liabilities
Other, net

423.9
(69.2)
44.6
25.9
77.4
40.9
(74.2)
29.8
183.9
70.2
............................................................................................................................................................................................................................................................................................................................................................................................
1,843.5
............................................................................................................................................................................................................................................................................................................................................................................................
Cash Flows – Investing Activities

459.2
(110.8)
133.2
98.1
108.7
(55.7)
(24.8)
(1.7)
(126.7)
(44.3)
1,729.9

417.8
(72.7)
127.1
26.0
45.2
(73.1)
(53.6)
39.1
149.1
2.4
1,751.2

Net cash provided by operating activities

Purchases of land, buildings, and equipment
Acquisitions
Investments in affiliates, net
Proceeds from disposal of land, buildings, and equipment
Proceeds from disposal of product lines
Other, net

(360.0)
(26.5)
0.3
11.3
—
4.9
............................................................................................................................................................................................................................................................................................................................................................................................
(370.0)
............................................................................................................................................................................................................................................................................................................................................................................................
Cash Flows – Financing Activities

(460.2)
(83.4)
(100.5)
13.8
13.5
19.7
(597.1)

(522.0)
0.6
64.6
25.9
—
(11.5)
(442.4)

Net cash used by investing activities

Change in notes payable
Issuance of long-term debt
Payment of long-term debt
Settlement of Lehman Brothers forward purchase contract
Repurchase of Series B-1 limited membership interests in GMC
Repurchase of General Mills Capital, Inc. preferred stock
Proceeds from sale of Class A limited membership interests in GMC
Common stock issued
Tax benefit on exercised options
Purchases of common stock for treasury
Dividends paid
Other, net

1,197.4
—
(1,386.0)
—
—
—
—
157.1
—
(884.8)
(484.9)
(3.1)
............................................................................................................................................................................................................................................................................................................................................................................................
(1,404.3)
Net cash used by financing activities
............................................................................................................................................................................................................................................................................................................................................................................................
4.9
Effect of exchange rate changes on cash and cash equivalents
............................................................................................................................................................................................................................................................................................................................................................................................
74.1
Increase (decrease) in cash and cash equivalents
573.3
Cash and cash equivalents – beginning of year
............................................................................................................................................................................................................................................................................................................................................................................................
647.4
Cash and cash equivalents – end of year

(280.4)
2,650.0
(2,323.2)
—
—
—
—
317.4
73.1
(1,320.7)
(505.2)
(9.1)
(1,398.1)
13.7
(230.3)
647.4
417.1

946.6
1,450.0
(1,623.4)
750.0
(843.0)
(150.0)
92.3
191.4
55.7
(1,432.4)
(529.7)
(0.5)
(1,093.0)
49.4
243.9
417.1
661.0

Cash Flow from Changes in Current Assets and Liabilities

Receivables
Inventories
Prepaid expenses and other current assets
Accounts payable
Other current liabilities

8.9
(5.6)
(35.7)
(27.5)
243.8
............................................................................................................................................................................................................................................................................................................................................................................................
183.9
Changes in current assets and liabilities

(94.1)
(165.1)
(65.9)
125.1
73.3
$ (126.7)

(24.2)
(116.0)
(44.9)
87.8
246.4
149.1

See accompanying notes to consolidated financial statements.

Annual Report 2008

Notes to Consolidated Financial Statements

GENERAL MILLS, INC. AND SUBSIDIARIES

NOTE 1. BASIS OF PRESENTATION AND
RECLASSIFICATIONS

Basis of Presentation Our Consolidated Financial Statements
include the accounts of General Mills, Inc. and all subsidiaries
in which we have a controlling financial interest. Intercompany
transactions and accounts are eliminated in consolidation.

Our fiscal year ends on the last Sunday in May. Fiscal years
2008, 2007, and 2006 each consisted of 52 weeks. Financial
results for our International segment, with the exception of
Canada, its export operations, and its United States and Latin
American headquarters are reported as of and for the 12 calendar
months ended April 30.

financial

Reclassifications During fiscal 2007, we made certain changes in
our reporting of
information. The effects of these
reclassifications on our historical Consolidated Financial
Statements are reflected herein and had no impact on our
consolidated net earnings or earnings per share (EPS).

We made a change in accounting principle to classify shipping
costs associated with the distribution of finished products to our
customers as cost of sales. We previously recorded these costs in
selling, general, and administrative (SG&A) expense. We made
this change in principle because we believe the classification of
these shipping costs in cost of sales better reflects the cost of
producing and distributing our products and aligns our external
financial reporting with the results we use internally to evaluate
segment operating performance. The impact of this change in
principle was an increase to cost of sales of $474.4 million in fiscal
2006, and a corresponding decrease to SG&A expense in the
same period.

We shifted sales responsibility for several customers from our
Bakeries and Foodservice segment to our U.S. Retail segment. Net
sales and segment operating profit for these two segments have
been adjusted to report the results from shifted businesses within
the appropriate segment. The impact of this shift was a decrease
in net sales of our Bakeries and Foodservice segment and an
increase in net sales of our U.S. Retail segment of $55.0 million in
fiscal 2006. The impact of this shift was a decrease of Bakeries
and Foodservice segment operating profit and an increase of
U.S. Retail segment operating profit of $22.1 million in fiscal 2006.
We also reclassified (i) certain trade-related costs and
customer allowances as cost of sales or SG&A expense

(previously recorded as reductions of net sales), (ii) certain
including trade and consumer promotion accruals,
liabilities,
from accounts payable to other current liabilities, (iii) certain
distributions from joint ventures as operating cash flows
(previously reported as investing cash flows), (iv) royalties
from a joint venture to after-tax earnings from joint ventures
(previously recorded as a reduction of SG&A expense),
(v) certain receivables, including accrued interest, derivatives,
and other miscellaneous receivables that were historically
included in receivables,
and
(vi) valuation allowances related to deferred income tax assets
classification. These
between
noncurrent
in the
reclassifications were not material
aggregate. We
reported
reclassified
Consolidated Balance Sheets, Consolidated Statements of
Earnings, and Consolidated Statements of Cash Flows to
conform to the fiscal 2007 presentation.

individually or
previously

to other

current

assets,

have

and

In addition, certain reclassifications to our previously reported
financial information have been made to conform to the current
period presentation.

Change in Reporting Period In fiscal 2007, we changed the
reporting period for our Ha¨agen-Dazs joint ventures in Asia to
include results through March 31. In previous years, we included
results for the twelve months ended April 30. Accordingly, fiscal
2007 results include only 11 months of results from these joint
ventures compared to 12 months in fiscal 2008 and fiscal 2006. The
impact of this change was not material to our results of operations,
thus we did not restate prior period financial statements for
comparability.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Cash and Cash Equivalents We consider all
investments
purchased with an original maturity of three months or less to
be cash equivalents.

Inventories All inventories in the United States other than grain
and certain organic products are valued at the lower of cost, using
the last-in, first-out (LIFO) method, or market. Grain inventories
and all related cash contracts and derivatives are valued at market
with all net changes in value recorded in earnings currently.

General Mills

Inventories outside of the United States are valued at the lower of
cost, using the first-in, first-out (FIFO) method, or market.

Shipping costs associated with the distribution of finished
product to our customers are recorded as cost of sales and
are recognized when the related finished product is shipped to
and accepted by the customer.

Land, Buildings, Equipment, and Depreciation Land is recorded at
historical cost. Buildings and equipment,
including capitalized
interest and internal engineering costs, are recorded at cost
and depreciated over estimated useful lives, primarily using the
straight-line method. Ordinary maintenance and repairs are
charged to cost of sales. Buildings are usually depreciated over
40 to 50 years, and equipment, furniture, and software are usually
depreciated over 3 to 15 years. Fully depreciated assets are
retained in buildings and equipment until disposal. When an
item is sold or retired, the accounts are relieved of its cost and
related accumulated depreciation; the resulting gains and losses,
if any, are recognized in earnings. As of May 25, 2008, assets held
for sale were insignificant.

Long-lived assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of
an asset (or asset group) may not be recoverable. An impairment
loss would be recognized when estimated undiscounted future
cash flows from the operation and disposition of the asset group
are less than the carrying amount of the asset group. Asset groups
have identifiable cash flows and are largely independent of other
asset groups. Measurement of an impairment loss would be based
on the excess of the carrying amount of the asset group over its fair
value. Fair value is measured using a discounted cash flow model or
independent appraisals, as appropriate.

Goodwill and Other Intangible Assets Goodwill is not amortized,
and is tested for impairment annually and whenever events or
changes in circumstances indicate that impairment may have
occurred.
Impairment testing is performed for each of our
reporting units. We compare the carrying value of a reporting
unit, including goodwill, to the fair value of the unit. Carrying value
is based on the assets and liabilities associated with the
operations of
reporting unit, which often requires
allocation of shared or corporate items among reporting units.
If the carrying amount of a reporting unit exceeds its fair value, we
revalue all assets and liabilities of the reporting unit, excluding

that

goodwill, to determine if the fair value of the net assets is greater
than the net assets including goodwill. If the fair value of the net
assets is less than the net assets including goodwill, impairment
has occurred. Our estimates of fair value are determined based on
a discounted cash flow model. Growth rates for sales and profits
are determined using inputs from our annual long-range planning
process. We also make estimates of discount rates, perpetuity
growth assumptions, market comparables, and other factors.

We evaluate the useful lives of our other intangible assets,
primarily intangible assets associated with the Pillsbury, Totino’s,
Progresso, Green Giant, Old El Paso, Ha¨agen-Dazs, and Uncle Tobys
brands, to determine if they are finite or indefinite-lived. We
lives by considering future effects of
determine useful
obsolescence, demand, competition, other economic factors
(such as the stability of the industry, known technological
advances,
legislative action that results in an uncertain or
changing regulatory environment, and expected changes in
distribution channels),
required maintenance
the level of
expenditures, and the expected lives of other related groups of
assets.

Our indefinite-lived intangible assets, primarily brands, also are
tested for impairment annually, and whenever events or changes
in circumstances indicate that their carrying value may not be
recoverable. We performed our fiscal 2008 assessment of our
brand intangibles as of December 1, 2007. Our estimate of the fair
value of the brands was based on a discounted cash flow model
using inputs which included: projected revenues from our annual
long-range plan; assumed royalty rates that could be payable if
we did not own the brands; and a discount rate.

Investments in Joint Ventures Our investments in companies
over which we have the ability to exercise significant influence
are stated at cost plus our share of undistributed earnings or
losses. We receive royalty income from certain joint ventures,
incur various expenses (primarily research and development),
and record the tax impact of certain joint venture operations that
are structured as partnerships. In addition, we make advances to
our joint ventures in the form of loans or capital investments. We
also sell certain raw materials, semi-finished goods, and finished
goods to the joint ventures, generally at market prices.

Variable Interest Entities As of May 25, 2008, we invested in 3
variable interest entities (VIEs). We have an interest in a contract

Annual Report 2008

manufacturer at our former facility in Geneva, Illinois. We are the
primary beneficiary (PB) and have consolidated this entity as of
May 25, 2008. This entity had property and equipment with a
carrying value of $31.0 million and long-term debt of $31.8 million as
of May 25, 2008. We also have an interest in a contract
manufacturer in Greece that is a VIE. Although we are the PB,
we have not consolidated this entity because it is not material to
our results of operations, financial condition, or liquidity as of and
for the year ended May 25, 2008. This entity had assets of
$4.2 million and liabilities of $0.9 million as of May 25, 2008.
We are not
the remaining VIE. Our maximum
exposure to loss from the three VIEs is limited to the
$31.8 million of long-term debt of the contract manufacturer in
Geneva, Illinois and our $1.1 million equity investment in the VIE of
which we are not the PB.

the PB of

Revenue Recognition We recognize sales revenue when the
shipment is accepted by our customer. Sales include shipping
and handling charges billed to the customer and are reported net
of consumer coupon redemption, trade promotion and other
costs,
including estimated allowances for returns, unsalable
product, and prompt pay discounts. Sales, use, value-added,
and other excise taxes are not recognized in revenue. Coupons
are recorded when distributed, based on estimated redemption
rates. Trade promotions are recorded based on estimated
participation and performance levels for offered programs at
the time of sale. We generally do not allow a right of return.
However, on a limited case-by-case basis with prior approval, we
may allow customers to return product. In limited circumstances,
product
returned in saleable condition is resold to other
customers or outlets. Receivables from customers generally do
not bear interest. Terms and collection patterns vary around the
world and by channel. The allowance for doubtful accounts
represents our estimate of probable non-payments and credit
losses in our existing receivables, as determined based on a
review of past due balances and other specific account data.
Account balances are written off against the allowance when we
deem the amount is uncollectible.

Environmental Environmental
existing
conditions caused by past operations that do not contribute to
current or future revenues are expensed. Reserves for liabilities
for anticipated remediation costs are recorded on an

relating

costs

undiscounted basis when they are probable and reasonably
estimable, generally no later than the completion of feasibility
studies or our commitment to a plan of action.

Advertising Production Costs We expense the production costs
of advertising the first time that the advertising takes place.

Research and Development All expenditures for research and
development (R&D) are charged against earnings in the year
incurred. R&D includes expenditures for new product and
manufacturing process innovation, and the annual expenditures
are comprised primarily of internal salaries, wages, consulting,
and other supplies attributable to time spent on R&D activities.
Other costs include depreciation and maintenance of research
facilities, including assets at facilities that are engaged in pilot
plant activities.

all

significant

Foreign Currency Translation For
foreign
operations,
the functional currency is the local currency.
Assets and liabilities of these operations are translated at the
period-end exchange rates.
Income statement accounts are
translated using the average exchange rates prevailing during
reflected within
year. Translation adjustments
the
in
(loss)
comprehensive
accumulated
stockholders’ equity. Gains and losses from foreign currency
transactions are included in net earnings for the period except
for gains and losses on investments in subsidiaries for which
settlement is not planned for the foreseeable future and foreign
exchange gains and losses on instruments designated as net
investment hedges. These gains and losses are recorded in
accumulated other comprehensive income (loss).

income

other

are

requires

Derivative Instruments Application of hedge accounting under
Statement of Financial Accounting Standards (SFAS) No. 133,
“Accounting for Derivative Instruments and Hedging Activities,”
as amended (SFAS 133),
resources,
recordkeeping, and analytical systems. As a result of the rising
compliance costs and the complexity associated with the
application of hedge accounting, we elected to discontinue the
use of hedge accounting for all commodity derivative positions
entered into after the beginning of fiscal 2008. Accordingly, the
changes in the values of these derivatives are recorded currently
in cost of sales in our Consolidated Statements of Earnings.

significant

General Mills

for purposes of measuring

Regardless of designation for accounting purposes, we believe
all our commodity derivatives are economic hedges of our risk
exposures, and as a result we consider these derivatives to be
hedges
segment operating
performance. Thus, these gains and losses are reported in
unallocated corporate items outside of segment operating
results until such time that the exposure we are hedging
affects earnings. At that time we reclassify the hedge gain or
loss from unallocated corporate items to segment operating
profit, allowing our operating segments to realize the economic
the hedge without experiencing any resulting
effects of
mark-to-market
in unallocated
corporate items.

volatility, which remains

We also use derivatives to hedge our exposure to changes in
foreign exchange rates and interest rates. All derivatives are
recognized on the Consolidated Balance Sheets at fair value
based on quoted market prices or management’s estimate of
their fair value and are recorded in either current or noncurrent
assets or liabilities based on their maturity. Changes in the fair
values of derivatives are recorded in net earnings or other
comprehensive income, based on whether the instrument is
designated as a hedge transaction and, if so, the type of hedge
transaction. Gains or losses on derivative instruments reported in
accumulated other comprehensive income (loss) are reclassified
to earnings in the period the hedged item affects earnings. If the
underlying hedged transaction ceases to exist, any associated
amounts reported in accumulated other comprehensive income
time. Any
(loss) are reclassified to earnings at
ineffectiveness is recognized in earnings in the current period.

that

Stock-Based Compensation Effective May 29, 2006, we adopted
SFAS No. 123 (Revised), “Share-Based Payment” (SFAS 123R),
which changed the accounting for compensation expense
associated with stock options, restricted stock awards, and
other forms of equity compensation. We elected the modified
prospective transition method as permitted by SFAS 123R;
accordingly, results from prior periods have not been restated.
Under this method, stock-based compensation expense for fiscal
2007 was $127.1 million, which included amortization related to
the remaining unvested portion of all equity compensation
awards granted prior to May 29, 2006, based on the grant-
date fair value estimated in accordance with the original
123, “Accounting for Stock-Based
provisions of SFAS No.

Compensation” (SFAS 123), and amortization related to all
equity compensation awards granted on or subsequent to
May 29, 2006, based on the grant-date fair value estimated in
accordance with the provisions of SFAS 123R. The incremental
effect on net earnings in fiscal 2007 of our adoption of SFAS 123R
was $68.8 million of expense ($42.9 million after-tax). All of our
stock compensation expense is recorded in SG&A expense in the
Consolidated Statements of Earnings and in unallocated
corporate items in our segment results.

SFAS 123R also requires the benefits of tax deductions in excess
of recognized compensation cost to be reported as a financing
cash flow, rather than as an operating cash flow as previously
thereby reducing net operating cash flows and
required,
increasing net financing cash flows in periods following adoption.
Certain equity-based compensation plans contain provisions
that accelerate vesting of awards upon retirement, disability, or
death of eligible employees and directors. SFAS 123R specifies
that a stock-based award is vested when the employee’s
retention of the award is no longer contingent on providing
subsequent service. Accordingly, beginning in fiscal 2007, we
prospectively revised our expense attribution method so that the
related compensation cost is recognized immediately for awards
granted to retirement-eligible individuals or over the period from
the grant date to the date retirement eligibility is achieved, if less
than the stated vesting period. For fiscal 2006, we generally
recognized stock compensation expense over
the stated
vesting period of the award, with any unamortized expense
recognized immediately if an acceleration event occurred.

The following table illustrates the pro forma effect on net
earnings and EPS for fiscal 2006 if we had applied the fair

Annual Report 2008

value recognition provisions of SFAS 123 to all employee stock-
based compensation, net of estimated forfeitures:

In Millions, Except per Share Data
.........................................................................................................................................................................................
$1,090.3

Net earnings, as reported

Add: After-tax stock-based employee compensation expense

included in reported net earnings

28.5

Deduct: After-tax stock-based employee compensation expense

determined under fair value requirements of SFAS 123

.........................................................................................................................................................................................
$1,070.7
Pro forma net earnings
.........................................................................................................................................................................................
Earnings per share:

(48.1)

Basic – as reported

Basic – pro forma

Diluted – as reported
Diluted – pro forma

$
$

3.05

2.99

2.90
2.84

Other

Benefit

Pension,

Postretirement,

Defined
and
Postemployment Benefit Plans We sponsor several domestic
and foreign defined benefit plans to provide pension, health
care, and other welfare benefits to retired employees. Under
certain circumstances, we also provide accruable benefits to
former or inactive employees in the United States and Canada
and members of our board of directors, including severance and
certain other benefits payable upon death. We recognize an
obligation for any of these benefits that vest or accumulate
with service. Postemployment benefits that do not vest or
accumulate with service (such as severance based solely on
annual pay rather
than years of service) are charged to
expense when incurred. Our postemployment benefit plans are
unfunded.

We recognize the underfunded or overfunded status of a
defined benefit postretirement plan as an asset or liability and
recognize changes in the funded status in the year in which the
changes occur
through accumulated other comprehensive
income (loss), which is a component of stockholders’ equity.

our Consolidated

Estimates Preparing

Use
Financial
Statements in conformity with accounting principles generally
accepted in the United States requires us to make estimates and
reported amounts of assets and
assumptions that affect
liabilities, disclosures of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from our estimates.

Other New Accounting Standards In fiscal 2008, we adopted Staff
Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year
Financial Statements” (SAB 108). SAB 108 provides interpretive
guidance on the process and diversity in practice of quantifying
financial statement misstatements resulting in the potential
carryover of improper amounts on the balance sheet. The SEC
believes that registrants should quantify errors using both a
balance sheet and income statement approach and evaluate
whether either approach results in quantifying a misstatement
that, when all relevant quantitative and qualitative factors are
considered, is material. The adoption of SAB 108 did not have a
material impact on our results of operations or financial condition.
155, “Hybrid
Instruments” (SFAS 155). SFAS 155 amends SFAS No.
133
“Accounting for Derivative Instruments and Hedging Activities”
and SFAS No. 140, “Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities.” SFAS 155 is
effective for all financial instruments acquired or issued after
May 27, 2007. The adoption of SFAS 155 did not have any impact
on our results of operations or financial condition.

Also in fiscal 2008, we adopted SFAS No.

In September 2006, the Financial Accounting Standards Board
(FASB) ratified the consensus of Emerging Issues Task Force Issue
No. 06-5, “Accounting for Purchases of Life Insurance-Determining
the Amount That Could Be Realized in Accordance with FASB
Technical Bulletin No. 85-4” (EITF 06-5). EITF 06-5 requires that a
policyholder consider any additional amounts included in the
contractual terms of the policy in determining the amount that
could be realized under the insurance contract on a policy by policy
basis. We adopted EITF 06-5 in fiscal 2008, and it did not have any
impact on our results of operations or financial condition.

In June 2006, the FASB ratified the consensus of Emerging
Issues Task Force Issue No. 06-3, “How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be
Presented in the Income Statement (That Is, Gross versus Net
Presentation)” (EITF 06-3). EITF 06-3 concluded that
the
presentation
revenue-producing
imposed
transactions (sales, use, value added, and excise taxes) on
either a gross (included in revenues and costs) or a net
(excluded from revenues) basis is an accounting policy that
should be disclosed. We adopted EITF 06-3 in fiscal 2007, and
it did not have any impact on our results of operations or financial
condition.

taxes

General Mills

In fiscal 2007, we adopted SFAS No. 151, “Inventory Costs – An
Amendment of ARB No. 43, Chapter 4” (SFAS 151). SFAS 151
clarifies the accounting for abnormal amounts of idle facility
expense,
and wasted material
(spoilage). The adoption of SFAS 151 did not have any impact
on our results of operations or financial condition.

handling

freight,

costs,

In fiscal 2006, we adopted SFAS No.

153, “Exchanges of
Nonmonetary Assets – An Amendment of APB Opinion No. 29”
(SFAS 153). SFAS 153 eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive
assets and replaces it with an exception for exchanges that do not
have commercial substance. The adoption of SFAS 153 did not have
any impact on our results of operations or financial condition.

In March 2005, the FASB issued FASB Interpretation No. (FIN)
47, “Accounting for Conditional Asset Retirement Obligations”
(FIN 47). FIN 47 requires that liabilities be recognized for the fair
value of a legal obligation to perform asset retirement activities
that are conditional on a future event if the amount can be
reasonably estimated. We adopted FIN 47 in fiscal 2006, and it
did not have a material impact on our results of operations or
financial condition.

NOTE 3. ACQUISITIONS AND DIVESTITURES
Subsequent to our fiscal 2008 year-end, we acquired Humm
Foods, Inc. (Humm), the maker of La¨rabar fruit-and-nut energy
bars. We issued 0.9 million shares of our common stock to the
shareholders of Humm as consideration for the acquisition.

During fiscal 2008, the 8th Continent soymilk business was sold.
Our 50 percent share of the after-tax gain on the sale was
$2.2 million, of which we recognized $1.7 million in after-tax
earnings from joint ventures in fiscal 2008. We will record an
additional after-tax gain of up to $0.5 million in the first quarter of
fiscal 2010 if certain conditions are satisfied. Also during fiscal
2008, we acquired a controlling interest in HD Distributors
(Thailand) Company Limited. Prior to acquiring the controlling
interest, we accounted for our investment as a joint venture.
The purchase price, net of cash acquired,
resulted in a
$1.3 million cash inflow classified in acquisitions on the
Consolidated Statements of Cash Flows.

During fiscal 2007, we sold our Bakeries and Foodservice frozen
pie product line, including a plant in Rochester, New York. We
received $1.2 million in proceeds and recorded a $3.6 million loss
on the sale. We also sold our Bakeries and Foodservice par-baked

bread product line, including plants in Chelsea, Massachusetts
and Tempe, Arizona. We received $12.5 million in proceeds and
recorded a $6.0 million loss on the sale in fiscal 2007, including the
write off of $6.2 million of goodwill.

During fiscal 2007, we completed the acquisition of Saxby Bros.
Limited, a chilled pastry company in the United Kingdom, for
approximately $24.1 million. This business, which had sales of
$23.8 million in calendar 2006, complements our existing frozen
pastry business in the United Kingdom. In addition, we completed
an acquisition in Greece for $2.8 million.

to and equity contributions

During fiscal 2007, our 50 percent joint venture Cereal Partners
Worldwide (CPW) completed the acquisition of the Uncle Tobys
cereal business in Australia for $385.6 million. We funded our
50 percent share of the purchase price by making additional
advances
in CPW totaling
$135.1 million (classified as investments in affiliates, net, on the
Consolidated Statements of Cash Flows) and by acquiring a
50 percent undivided interest in certain intellectual property
for $57.7 million (classified as acquisitions on the Consolidated
Statements of Cash Flows). During fiscal 2008, we completed the
allocation of our purchase price and reclassified $16.3 million from
goodwill to other intangible assets on our Consolidated Balance
Sheets.

During fiscal 2006, we acquired Elysées Consult SAS, the
franchise operator of a Ha¨agen-Dazs shop in France, and
frozen pastry products in
Croissant King, a producer of
Australia. We also acquired a controlling financial
interest in
Pinedale Holdings Pte. Limited, an operator of Ha¨agen-Dazs
cafes in Singapore and Malaysia. The aggregate purchase price
of our fiscal 2006 acquisitions was $26.5 million.

NOTE 4. RESTRUCTURING, IMPAIRMENT, AND OTHER
EXIT COSTS
We view our restructuring activities as a way to meet our long-
term growth targets. Activities we undertake must meet internal
rate of return and net present value targets. Each restructuring
action normally takes one to two years to complete. At
completion (or as each major stage is completed in the case
of multi-year programs), the project begins to deliver cash
savings and/or reduced depreciation. These activities result in
various restructuring costs,
including asset write offs, exit
charges including severance, contract termination fees, and
decommissioning and other costs.

Annual Report 2008

In fiscal 2008, we recorded restructuring,

impairment, and

other exit costs pursuant to approved plans as follows:

Expense (Income), in Millions
.........................................................................................................................................................................................
$ 2.7

Closure of Poplar, Wisconsin plant

Closure and sale of Allentown, Pennsylvania frozen waffle plant

Closure of leased Trenton, Ontario frozen dough plant

Restructuring of production scheduling and discontinuation of cake

product line at Chanhassen, Minnesota plant

Gain on sale of previously closed Vallejo, California plant

9.4

10.9

1.6

(7.1)

3.5
Charges associated with restructuring actions previously announced
.........................................................................................................................................................................................
$21.0

Total

We approved a plan to transfer Old El Paso production from our
Poplar, Wisconsin facility to other plants and close the Poplar
facility to improve capacity utilization and reduce costs. This
action affects 113 employees at the Poplar facility and resulted
in a charge of $2.7 million consisting entirely of employee
severance. Due to declining financial results, we decided to
exit our frozen waffle product line (retail and foodservice) and
to close our frozen waffle plant in Allentown, Pennsylvania,
affecting 111 employees. We recorded a charge consisting of
$3.5 million of employee severance and a $5.9 million non-cash
impairment charge against long-lived assets at the plant. We also
completed an analysis of the viability of our Bakeries and
Foodservice frozen dough facility in Trenton, Ontario, and
decided to close the facility, affecting 470 employees. We
recorded a charge consisting of $8.4 million for employee
severance and $2.5 million in charges for shutdown and
decommissioning costs. We lease the Trenton plant under an
agreement expiring in fiscal 2013. We expect to make limited use
of the plant during fiscal 2009 while we evaluate sublease or lease
termination options. These actions,
including the anticipated
timing of the disposition of the plants we will close, are
expected to be completed by the end of the third quarter of
fiscal 2009. We also restructured our production scheduling and
discontinued our cake production line at our Chanhassen,
Minnesota Bakeries and Foodservice plant. These actions
affected 125 employees, and we recorded a $3.0 million charge
for employee severance that was partially offset by a $1.4 million
gain from the sale of long-lived assets during the fourth quarter of
fiscal 2008. This action is expected to be completed by the end of
the first quarter of fiscal 2009. Finally, we recorded additional
charges of $3.5 million primarily related to previously announced

Bakeries and Foodservice segment restructuring actions including
employee severance for 38 employees.

Collectively, the charges we expect to incur with respect to
these fiscal 2008 restructuring actions total $65 million, of which
$43.3 million has been recognized in fiscal 2008. This includes a
$17.7 million non-cash charge related to accelerated depreciation
on long-lived assets at our plant in Trenton, Ontario and
$0.8 million of
in
Chanhassen, Minnesota and Allentown, Pennsylvania. The
accelerated depreciation charge is recorded in cost of sales in
our Consolidated Statements of Earnings and in unallocated
corporate items in our segment results.

inventory write offs at our plants

During fiscal 2008, we received $16.2 million in proceeds from
the sale of our Allentown, Pennsylvania plant and our previously
closed Vallejo, California plant.

In fiscal 2007, we recorded restructuring,

impairment, and

other exit costs pursuant to approved plans as follows:

Non-cash impairment charge for certain Bakeries and Foodservice

product lines

Gain from our previously closed plant in San Adrian, Spain

Loss from divestitures of our par-baked bread and frozen pie product

lines

$36.7

(7.3)

9.6

0.3
Charges associated with restructuring actions previously announced
.........................................................................................................................................................................................
$39.3

Total

As part of our long-range planning process, we determined that
certain product lines in our Bakeries and Foodservice segment
were underperforming. In late May 2007, we concluded that the
future cash flows generated by these product lines will be
insufficient to recover the net book value of the related long-
lived assets. Accordingly, we recorded a non-cash impairment
charge of $36.7 million against these assets in the fourth quarter
of fiscal 2007.

In fiscal 2006, we recorded restructuring,

impairment, and

other exit costs pursuant to approved plans as follows:

Expense, in Millions
.........................................................................................................................................................................................
$12.9
6.3

Closure of our Swedesboro, New Jersey plant
Closure of a production line at our Montreal, Quebec plant

Restructuring actions at our Allentown, Pennsylvania plant

3.5

3.2
Asset impairment charge at our Rochester, New York plant
3.9
Charges associated with restructuring actions previously announced
.........................................................................................................................................................................................
$29.8

Total

General Mills

The fiscal 2006 initiatives were undertaken to increase asset
utilization and reduce manufacturing costs. The actions included
decisions to: close our leased frozen dough foodservice plant in
Swedesboro, New Jersey, affecting 101 employees; shut down a
portion of our frozen dough foodservice plant in Montreal,
Quebec, affecting 77 employees; realign and modify product
and manufacturing capabilities at our frozen waffle plant in
Allentown, Pennsylvania, affecting 72 employees; and complete
the fiscal 2005 initiative to relocate our frozen baked goods line
from our
affecting
175 employees.

in Chelsea, Massachusetts,

plant

The roll forward of our restructuring and other exit cost

reserves, included in other current liabilities, is as follows:

to our consolidated results of operations, so we did not restate
prior periods for comparability.

During the third quarter of fiscal 2008, the 8th Continent
soymilk business was sold. Our 50 percent share of the after-
tax gain on the sale was $2.2 million, of which we recognized
$1.7 million in after-tax earnings from joint ventures in fiscal 2008.
We will record an additional after-tax gain of up to $0.5 million in
the first quarter of fiscal 2010 if certain conditions are satisfied.
In February 2006, CPW announced a restructuring of its
manufacturing plants in the United Kingdom. Our after-tax
share of CPW restructuring, impairment, and other exit costs
pursuant to approved plans during fiscal 2008 and prior years was
as follows:

Other
Exit Costs

Severance

$ 8.9
6.9
(7.7)

Total
In Millions
.........................................................................................................................................................................................
$ 8.9 $ 17.8
9.6
(12.7)

Reserve balance as of May 29, 2005
2006 charges
Utilized in 2006
.........................................................................................................................................................................................
14.7
Reserve balance as of May 28, 2006
(0.9)
2007 charges
(9.5)
Utilized in 2007
.........................................................................................................................................................................................
4.3
0.9
Reserve balance as of May 27, 2007
— 20.9
2008 charges
(17.3)
Utilized in 2008
.........................................................................................................................................................................................
$ 0.3 $ 7.9
Reserve balance as of May 25, 2008

3.4
20.9
(16.7)

8.1
—
(4.7)

6.6
(0.9)
(4.8)

2.7
(5.0)

$ 7.6

(0.6)

Fiscal Year
.....................................................
2007
2006
Expense (Income), in Millions
.........................................................................................................................................................................................
$ — $ —

Gain on sale of property

$(15.9)

2008

Accelerated depreciation charges and severance

associated with previously announced

restructuring actions

Other charges resulting from fiscal 2008

4.5

8.2

8.0

restructuring actions

—
.........................................................................................................................................................................................
$8.0

$ (8.2)

$8.2

3.2

—

Total

NOTE 5. INVESTMENTS IN JOINT VENTURES
We have a 50 percent equity interest
in CPW, which
manufactures and markets ready-to-eat cereal products in
more than 130 countries and republics outside the United
States and Canada. CPW also markets cereal bars in several
European countries and manufactures private label cereals for
customers in the United Kingdom. We have guaranteed a portion
of CPW’s debt and its pension obligation in the United Kingdom.
Results from our CPW joint venture are reported as of and for the
12 months ended March 31.

We have 50 percent equity interests in Ha¨agen-Dazs Japan,
Inc. and Ha¨agen-Dazs Korea Company Limited. These joint
ventures manufacture, distribute, and market Ha¨agen-Dazs ice
cream products and frozen novelties. In fiscal 2007, we changed
their reporting period to include results through March 31. In
previous years, we included results for the twelve months ended
April 30. Accordingly, fiscal 2007 results include only 11 months of
results from these joint ventures compared to 12 months in fiscal
2008 and fiscal 2006. The impact of this change was not material

During the first quarter of fiscal 2007, CPW acquired the Uncle
Tobys cereal business in Australia for $385.6 million. We funded
advances and an equity contribution to CPW from cash
generated from our
including our
international joint ventures.

international operations,

Our cumulative investment

in these joint ventures was
$278.6 million at the end of fiscal 2008 and $294.6 million at
the end of fiscal 2007. We also have goodwill of $577.0 million
associated with our joint ventures. Our investments in these joint
ventures include aggregate advances of $124.4 million as of
May 25, 2008 and $157.1 million as of May 27, 2007. Our sales
to these joint ventures were $12.8 million in fiscal 2008,
$31.8 million in fiscal 2007, and $34.8 million in fiscal 2006. We
had a net return of capital from the joint ventures of $75.2 million
in fiscal 2008 and made net investments of $103.4 million in fiscal
2007 and $7.0 million in fiscal 2006. We received dividends from
the joint ventures of $108.7 million in fiscal 2008, $45.2 million in
fiscal 2007, and $77.4 million in fiscal 2006.

Annual Report 2008

Summary combined financial information for the joint ventures

The changes in the carrying amount of goodwill for fiscal 2006,

on a 100 percent basis follows:

2007, and 2008 are as follows:

Fiscal Year
......................................................................
2007
2006
In Millions
.........................................................................................................................................................................................
$2,404.2 $2,016.3 $1,795.2
770.3

Net sales
Gross margin

1,008.4

835.4

2008

Earnings before income taxes

Earnings after income taxes

231.7

190.4

167.3

132.0

157.4

120.9

May 25,
2008

Current assets

Noncurrent assets

Current liabilities
Noncurrent liabilities

1,002.0

1,592.6
75.9

898.1

1,227.8
81.7

NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS
The components of goodwill and other intangible assets are as
follows:

May 27,
2007
In Millions
.........................................................................................................................................................................................
$ 6,786.1 $ 6,835.4
Goodwill
.........................................................................................................................................................................................
Other intangible assets:

May 25,
2008

Intangible assets not subject to amortization:

Brands

3,745.6

3,681.9

Intangible assets subject to amortization:

Patents, trademarks, and other finite-lived

intangibles

44.0

19.2

Less accumulated amortization

Total intangible assets subject to amortization

(7.1)
.........................................................................................................................................................................................
12.1
.........................................................................................................................................................................................
3,694.0
Total other intangible assets
.........................................................................................................................................................................................
$10,563.3 $10,529.4
Total goodwill and other intangible assets

(12.4)
31.6

3,777.2

U.S.
Retail

Bakeries
and
Foodservice

Joint
Ventures

Total
In Millions
International
.........................................................................................................................................................................................
Balance as of

May 29, 2005
Acquisitions
Deferred tax

$5,001.8
—

$152.2
15.3

$1,201.1
—

$329.2 $6,684.3
15.3

—

(41.8)

—

(41.8)

.........................................................................................................................................................................................
Balance as of

—

(29.9)

—

24.1

(5.8)

4,960.0

137.6

1,201.1

353.3

6,652.0

216.0
—

—
23.4

(216.0)
—

—
15.0

—
38.4

13.1
—

0.2
—

3.6
(6.9)

1.1
—

18.0
(6.9)

133.9
.........................................................................................................................................................................................
Balance as of

— 139.1

(19.0)

13.8

5,202.9

142.2

981.8

508.5

6,835.4

—

(0.3)

—

(16.3)

(16.6)

(110.9)

(10.6)

(30.4)

— (151.9)

adjustment
related to
Pillsbury
acquisition
Other activity,
primarily
foreign
currency
translation

May 28, 2006
Reclassification
for customer
shift
Acquisitions
Deferred tax

adjustment
resulting from
tax audit
settlement

Divestitures
Other activity,
primarily
foreign
currency
translation

May 27, 2007
Finalization of
purchase
accounting

Adoption of
FIN 48
Other activity,
primarily
foreign
currency
translation

119.2
.........................................................................................................................................................................................
Balance as of

15.1

84.8

15.0

4.3

May 25, 2008

$5,107.0

$146.4

$ 955.7

$577.0 $6,786.1

General Mills

During fiscal 2007 as part of our annual goodwill and brand
intangible impairment assessments, we reviewed our goodwill
and other intangible asset allocations by country within the
International segment and our joint ventures. The resulting
reallocation of these balances across the countries within this
segment and to our joint ventures caused changes in the foreign
currency translation of the balances. As a result of these changes
in foreign currency translation, we increased goodwill by
$136.2 million, other intangible assets by $18.1 million, deferred
income taxes by
$9.2 million, and accumulated other
comprehensive income (loss) by the net of these amounts.

At the beginning of fiscal 2007, we shifted selling responsibility
for several customers from our Bakeries and Foodservice
segment to our U.S. Retail segment. Goodwill of $216.0 million
previously reported in our Bakeries and Foodservice segment as
of May 28, 2006 has now been recorded in the U.S. Retail
segment.

Future purchase price adjustments to goodwill may occur upon

the resolution of certain income tax accounting matters.

The changes in the carrying amount of other intangible assets

for fiscal 2006, 2007, and 2008 are as follows:

In Millions
Total
U.S. Retail
.........................................................................................................................................................................................
$12.4 $3,532.1
$3,178.5

Balance as of May 29, 2005

International

$341.2

Joint
Ventures

Other activity, primarily

foreign currency translation

75.0
.........................................................................................................................................................................................
11.4 3,607.1
Balance as of May 28, 2006

3,175.5

420.2

(3.0)

(1.0)

79.0

Other intangibles acquired
Other activity, primarily

—

1.3

44.5

45.8

foreign currency translation

41.1
.........................................................................................................................................................................................
57.9 3,694.0
Balance as of May 27, 2007

3,175.2

460.9

(0.3)

39.4

2.0

Finalization of purchase

accounting

Other activity, primarily

—

15.6

16.3

31.9

foreign currency translation

—
51.3
.........................................................................................................................................................................................
$83.2 $3,777.2
$3,175.2
Balance as of May 25, 2008

42.3
$518.8

9.0

NOTE 7. FINANCIAL INSTRUMENTS AND RISK
MANAGEMENT ACTIVITIES

derivative

Instruments The carrying values of cash and cash
Financial
receivables, accounts payable, other current
equivalents,
liabilities,
payable
instruments,
approximate fair value. Marketable securities are carried at fair
value. As of May 25, 2008 and May 27, 2007, a comparison of cost
and market values of our marketable debt and equity securities is
as follows:

notes

and

Gross
Losses
.........................
Fiscal Year
.........................
2007 2008 2007 2008 2007
In Millions
.........................................................................................................................................................................................

Market
Value
...............................
Fiscal Year
...............................
2008

Cost
...............................
Fiscal Year
...............................
2008
2007

Gross
Gains
.........................
Fiscal Year
.........................

Available for sale:
Debt securities

$20.5 $17.6 $20.7 $17.9 $0.2 $0.3

$— $—

Equity securities

5.8 — —
.........................................................................................................................................................................................
$— $—

$26.6 $22.1 $34.7 $28.3 $8.1 $6.1

10.4

14.0

4.5

6.1

7.9

Total

specific

identification. Classification

Earnings include insignificant realized gains from sales of
available-for-sale marketable securities. Gains and losses are
determined
of
marketable securities as current or noncurrent is dependent
upon management’s intended holding period, the security’s
maturity date, or both. The aggregate unrealized gains and
losses on available-for-sale securities, net of tax effects, are
classified in accumulated other comprehensive income (loss)
within stockholders’ equity. Scheduled maturities of our
marketable securities are as follows:

Available for
Sale
................................
Market
Value
In Millions
.........................................................................................................................................................................................
$13.0 $13.3

Under 1 year (current)

Cost

From 1 to 3 years
From 4 to 7 years

Over 7 years

0.3
1.6

5.6

0.3
1.5

5.6

14.0
Equity securities
.........................................................................................................................................................................................
$26.6 $34.7

6.1

Total

Marketable securities with a market value of $12.6 million as of
May 25, 2008 were pledged as collateral for certain derivative
contracts.

Annual Report 2008

recorded as net interest. The amount of hedge ineffectiveness
was less than $1 million in each of fiscal 2008, 2007, and 2006.
In anticipation of the Pillsbury acquisition and other financing
needs, we entered into pay-fixed interest rate swap contracts
during fiscal 2001 and 2002 totaling $7.1 billion to lock in our
interest payments on the associated debt. As of May 25, 2008, we
still owned $1.75 billion of Pillsbury-related pay-fixed swaps that
were previously neutralized with offsetting pay-floating swaps in
fiscal 2002.

In advance of a planned debt financing in fiscal 2007, we
entered into $700.0 million pay-fixed, forward-starting interest
rate swaps with an average fixed rate of 5.7 percent. All of these
forward-starting interest rate swaps were cash settled for
$22.5 million coincident with our $1.0 billion 10-year fixed-rate
note debt offering on January 17, 2007. As of May 25, 2008,
$19.4 million pre-tax loss remained in accumulated other
comprehensive income (loss), which will be reclassified to
earnings over the term of the underlying debt.

The following table summarizes the notional amounts and
weighted-average interest rates of our interest rate swaps. As
discussed above, we have neutralized all of our Pillsbury-related
pay-fixed swaps with pay-floating swaps; however, we cannot
present them on a net basis in the following table because the
offsetting occurred with different counterparties. Average
floating rates are based on rates as of the end of the reporting
period.

Pay-floating swaps – notional amount

May 25,
2008

$1,879.5

Average receive rate

Average pay rate

Pay-fixed swaps – notional amount

Average receive rate

Average pay rate

5.8%

2.5%

5.8%

5.3%

$2,250.0

$1,762.3

2.6%

6.4%

5.3%

7.3%

The fair values and carrying amounts of long-term debt,
including the current portion, were $4,926.3 million and
$4,790.7 million as of May 25, 2008, and $4,977.8 million and
$4,951.7 million as of May 27, 2007. The fair value of long-term
debt was estimated using discounted cash flows based on our
current
types of
incremental borrowing rates for similar
instruments.

Risk Management Activities As a part of our ongoing operations,
we are exposed to market risks such as changes in interest rates,
foreign currency exchange rates, and commodity prices. To manage
these risks, we may enter into various derivative transactions (e.g.,
futures, options, and swaps) pursuant to our established policies.

Interest Rate Risk We are exposed to interest rate volatility with
regard to future issuances of fixed-rate debt, and existing and
future issuances of floating-rate debt. Primary exposures include
U.S. Treasury rates, London Interbank Offered Rates (LIBOR), and
commercial paper rates in the United States and Europe. We use
interest rate swaps and forward-starting interest rate swaps to
hedge our exposure to interest rate changes, to reduce the
volatility of our financing costs, and to achieve a desired
proportion of fixed-rate versus floating-rate debt, based on
current and projected market conditions. Generally under
these swaps, we agree with a counterparty to exchange the
difference between fixed-rate
interest
amounts based on an agreed notional principal amount.

and floating-rate

Floating Interest Rate Exposures – Except as discussed below,
floating-to-fixed interest rate swaps are accounted for as cash
flow hedges, as are all hedges of forecasted issuances of debt.
Effectiveness is assessed based on either the perfectly effective
hypothetical derivative method or changes in the present value of
interest payments on the underlying debt. Amounts deferred to
accumulated other comprehensive income (loss) are reclassified
into earnings over the life of the associated debt. The amount of
hedge ineffectiveness was less than $1 million in each of fiscal
2008, 2007, and 2006.

Fixed Interest Rate Exposures – Fixed-to-floating interest rate
swaps are accounted for as fair value hedges with effectiveness
assessed based on changes in the fair value of the underlying
debt, using incremental borrowing rates currently available on
loans with similar terms and maturities. Effective gains and losses
on these derivatives and the underlying hedged items are

General Mills

The swap contracts mature at various dates from 2009 to 2016

as follows:

Fiscal Year
Maturity Date
......................................................
Pay
In Millions
Fixed
.........................................................................................................................................................................................
—
500.0

20.2
18.9

Pay Floating

2009
2010

2011

2012
2013

17.6

1,753.3
14.6

—

1,000.0
750.0

—
Beyond 2013
.........................................................................................................................................................................................
$2,250.0

$1,879.5

54.9

Total

Foreign Exchange Risk Foreign currency fluctuations affect our net
investments in foreign subsidiaries and foreign currency cash
flows related primarily to third-party purchases, intercompany
loans, and product shipments. We are also exposed to the
translation of foreign currency earnings to the U.S. dollar. Our
principal exposures are to the Australian dollar, British pound
sterling, Canadian dollar, Chinese renminbi, euro, Japanese yen
and Mexican peso. We primarily use foreign currency forward
contracts to selectively hedge our foreign currency cash flow
exposures. We generally do not hedge more than 12 months
forward. The amount of hedge ineffectiveness was $1 million or
less in each of fiscal 2008, 2007, and 2006. We also have many net
investments in foreign subsidiaries that are denominated in
euros. We hedge a portion of these net investments by issuing
euro-denominated commercial paper and foreign exchange
forward contracts. As of May 25, 2008, we have issued
$472.9 million of euro-denominated commercial paper and
foreign exchange forward contracts that we have designated
as a net investment hedge and thus deferred net foreign
currency transaction losses of $69.6 million to accumulated
other comprehensive income (loss).

Commodity Price Risk Many commodities we use in the
production and distribution of our products are exposed to
market price risks. We use derivatives to hedge price risk for
our principal raw materials and energy input costs including
grains (wheat, oats, and corn), oils (principally soybean), non-
fat dry milk, natural gas, and diesel fuel. We also operate a grain
merchandising operation, primarily for wheat and oats. This
operation uses futures and options to hedge its net inventory

position to minimize market exposure. We manage our exposures
through a combination of purchase orders, long-term contracts
with suppliers, exchange-traded futures and options, and
over-the-counter options and swaps. We offset our exposures
based on current and projected market conditions, and generally
seek to acquire the inputs at as close to our planned cost as
possible. As discussed in Note 2, beginning in fiscal 2008 we do
not document our commodity derivatives as accounting hedges
and accordingly we record all volatility in unallocated corporate
items until we take delivery of the underlying input, when we then
transfer the gain or loss on the hedge to segment operating profit.
Pursuant to this policy, unallocated corporate items for fiscal
2008 included:

In Millions
.........................................................................................................................................................................................

Mark-to-market net gains on commodity derivative positions,

primarily from agricultural derivatives

$115.3

Net realized gains on hedge positions reclassified to segment

operating profit, primarily agricultural derivatives

.........................................................................................................................................................................................
$ 59.6

Net gain recognized in unallocated corporate items

(55.7)

As of May 25, 2008, the net notional value of commodity
derivatives was $784.8 million, of which $524.8 million relates
to agricultural positions and $260.0 million relates to energy
positions. These hedges relate to inputs that generally will be
utilized within the next 12 months.

Amounts Recorded in Accumulated Other Comprehensive Income
(Loss) Unrealized losses from interest rate cash flow hedges
recorded in accumulated other comprehensive income (loss)
as of May 25, 2008, totaled $39.2 million after tax. These
deferred losses are primarily related to interest rate swaps we
entered into in contemplation of future borrowings and other
financing requirements and are being reclassified into net interest
over the lives of the hedged forecasted transactions. As of
from commodity
May 25, 2008, we had no amounts
derivatives recorded in accumulated other comprehensive
income (loss). Unrealized losses from foreign currency cash
flow hedges recorded in accumulated other comprehensive
income (loss) as of May 25, 2008, were less than $1.0 million
after-tax. The net amount of pre-tax gains and losses in
accumulated other comprehensive income (loss) as of May 25,
2008, that is expected to be reclassified into net earnings within
the next 12 months is $16.1 million of expense.

Annual Report 2008

group

highly

diversified

Concentrations of Credit Risk We enter into interest rate, foreign
exchange, and certain commodity and equity derivatives,
primarily with
rated
counterparties. We continually monitor our positions and the
credit ratings of the counterparties involved and, by policy, limit
the amount of credit exposure to any one party. These
transactions may expose us to potential
losses due to the
risk of nonperformance by these counterparties;
credit
loss and do not
however, we have not incurred a material
anticipate incurring any such material
losses. We also enter
into commodity futures transactions through various regulated
exchanges.

During fiscal 2008, Wal-Mart Stores, Inc. and its affiliates
(Wal-Mart), accounted for 19 percent of our consolidated net
sales and 27 percent of our sales in the U.S. Retail segment. No
other customer accounted for 10 percent or more of our
consolidated net sales. Wal-Mart also represented 5 percent of
our sales in the International segment and 5 percent of our sales
in the Bakeries and Foodservice segment. As of May 25, 2008,
Wal-Mart accounted for 23 percent of our U.S. Retail receivables,
4 percent of our International receivables, and 2 percent of our
Bakeries and Foodservice receivables. The five largest customers
in our U.S. Retail segment accounted for 57 percent of its fiscal
2008 net sales, the five largest customers in our International
segment accounted for 26 percent of its fiscal 2008 net sales, and
the five largest customers in our Bakeries and Foodservice
segment accounted for 39 percent of its fiscal 2008 net sales.

NOTE 8. DEBT

Notes Payable The components of notes payable and their
respective weighted-average interest rates at the end of the
periods were as follows:

May 27, 2007
...................................................
Weighted-
Average
Interest
Rate
In Millions
.........................................................................................................................................................................................

May 25, 2008
...................................................
Weighted-
Average
Interest
Rate

Notes
Payable

U.S. commercial paper
Euro commercial paper

$ 687.5
1,386.3

2.9% $ 476.9
639.0
3.4

5.4%
5.4

9.8
Financial institutions
.........................................................................................................................................................................................
Total notes payable

3.6% $1,254.4

$2,208.8

135.0

138.5

9.6

5.8%

credit

committed

To ensure availability of funds, we maintain bank credit lines
sufficient to cover our outstanding short-term borrowings. Our
commercial paper borrowings are supported by $3.0 billion of
fee-paid
in
uncommitted lines. As of May 25, 2008, there were no amounts
outstanding on the fee-paid committed credit lines and $133.8 million
was drawn on the uncommitted lines, all by our international
operations. Our committed lines consist of a $1.9 billion credit
facility expiring in October 2012 and a $1.1 billion credit facility
expiring in October 2010.

$403.8 million

lines

and

our

credit

five-year

terminated

On October 9, 2007, we entered into a new five-year credit
agreement with an initial aggregate revolving commitment of
$1.9 billion which is scheduled to expire in October 2012.
Concurrent with the execution of the new credit agreement,
we
dated
January 20, 2004, which provided $750.0 million of revolving
credit and was scheduled to expire in January 2009, and our
amended and restated credit agreement dated October 17, 2006,
which provided $1.1 billion of revolving credit and was scheduled
to expire in October 2007. We then terminated our credit
agreement dated August 3, 2007, which provided an aggregate
revolving commitment of $750.0 million and was scheduled to
expire on December 6, 2007.

agreement

Long-Term Debt On April
11, 2007, we issued $1.15 billion
aggregate principal amount of floating-rate convertible senior
notes. On April 11, 2008, the holders of those notes put $1.14 billion
of the aggregate principal amount to us for repurchase. We issued
commercial paper to fund the repurchase.

On April 25, 2007, we redeemed or converted all of our zero
coupon convertible debentures due 2022 for a redemption price
equal to the accreted value of the debentures, which was $734.45
per $1,000 principal amount of the debentures at maturity. The

General Mills

redemption price was settled in cash. For the debentures that
were converted, we delivered cash equal to the accreted value of
the debentures, including $23.3 million of accreted original issue
discount, and issued 284,000 shares of our common stock worth
$17.0 million to settle the conversion value in excess of the
accreted value. This premium was recorded as a reduction to
stockholders’ equity, net of the applicable tax benefit. There was
no gain or loss associated with the redemption or conversions.
We used proceeds from the issuance of commercial paper to
fund the redemption and conversions of the debentures.

In January 24, 2007, we issued $1.0 billion of 5.7 percent fixed-
rate notes due February 15, 2017 and $500.0 million of floating-rate
notes due January 22, 2010. The proceeds of these notes were used
to retire $1.5 billion of fixed-rate notes that matured in February
2007. The floating-rate notes bear interest equal to three-month
LIBOR plus 0.13 percent, subject to quarterly reset. Interest on the
floating-rate notes is payable quarterly in arrears. The floating-rate
notes cannot be called by us prior to maturity. Interest on the fixed-
rate notes is payable semi-annually in arrears. The fixed-rate notes
may be called by us at any time for cash equal to the greater of the
principal amounts of the notes and a specified make-whole
amount, plus,
in each case, accrued and unpaid interest. The
notes are senior unsecured, unsubordinated obligations. We had
previously entered into $700.0 million of pay-fixed, forward-
starting interest rate swaps with an average fixed rate of
5.7 percent in anticipation of the fixed-rate note offering.

Our credit

long-term debt
facilities and certain of our
agreements contain restrictive covenants. As of May 25, 2008,
we were in compliance with all of these covenants.

As of May 25, 2008, the $61.7 million pre-tax loss recorded in
accumulated other comprehensive income (loss) associated with
our previously designated interest rate swaps will be reclassified
to net
the hedged
transactions. The amount expected to be reclassified from
to net
accumulated other comprehensive income (loss)
interest in fiscal 2009 is $16.1 million pre-tax.

the remaining lives of

interest over

A summary of our long-term debt is as follows:

6% notes due February 15, 2012

May 25,
2008

$1,240.3

5.7% notes due February 15, 2017

5.2% notes due March 17, 2015
5.65% notes due September 10, 2012

Floating-rate notes due January 22, 2010

Medium-term notes, 4.8% to 9.1%, due 2008 to

2078(a)

Zero coupon notes, yield 11.1%(b)
Debt of contract manufacturer consolidated under

FIN 46R

Floating-rate convertible senior notes due April 11,

2037

3.875% notes due November 30, 2007

3.901% notes due November 30, 2007

1,000.0

750.0
700.0

500.0

327.3

150.6

—
—

500.0

327.3

134.8

31.8

36.8

9.5
—

—

1,150.0
336.3

135.0

1.4
8.2% ESOP loan guaranty, due June 30, 2007
89.8
Other, including capital leases
.........................................................................................................................................................................................
4,951.7

—
81.2

4,790.7

Less amount due within one year
.........................................................................................................................................................................................
$ 3,217.7

$4,348.7

Total long-term debt

(442.0)

(1,734.0)

(a) $100.0 million of our medium-term notes may mature in fiscal 2009 based on the put

rights of the note holders.

(b) We are redeeming these notes on August 15, 2008. The final payment on that date will

be $154.3 million.

We guaranteed the debt of our Employee Stock Ownership
Plan. Therefore, the guaranteed debt was reflected on our
Consolidated Balance Sheets as long-term debt, with a related
offset in additional paid-in capital in stockholders’ equity. The
debt underlying the guarantee was repaid on June 30, 2007.

Principal payments due on long-term debt in the next five years
based on stated contractual maturities, our intent to redeem, or
put rights of certain note holders are $442.0 million in fiscal 2009,
$508.7 million in fiscal 2010, $9.0 million in fiscal 2011,
$1,249.5 million in fiscal 2012, and $815.0 million in fiscal 2013.

NOTE 9. MINORITY INTERESTS
In April 2002, we contributed assets with an aggregate fair market
value of $4.2 billion to our subsidiary GMC. The contributed
assets
and
intellectual property associated with the production and retail
sale of Big G cereals, Progresso soups, and Old El Paso products in
the United States. In exchange for the contribution of these

of manufacturing

primarily

consist

assets

Annual Report 2008

assets, GMC issued its managing membership interest and its
limited preferred membership interests to certain of our wholly
owned subsidiaries. We continue to hold the managing
membership interest, and therefore direct the operations of
GMC. Other than the right to consent to certain actions,
holders of the limited preferred membership interests do not
participate in the management of GMC.

In May 2002, we sold 150,000 Class A Limited Membership
Interests (Class A Interests) in GMC to an unrelated third-party
investor for $150.0 million. In June 2007, we sold an additional
88,851 Class A Interests to the same unrelated third-party
investor for $92.3 million. As of May 25, 2008, the carrying
value of all outstanding Class A Interests on our Consolidated
Balance Sheets was $242.3 million.

In October 2004, we sold 835,000 Series B-1 Limited
Membership Interests (Series B-1
Interests) in GMC to a
different unrelated third-party investor for $835.0 million. In
August 2007, General Mills Sales,
Inc., our wholly owned
subsidiary, purchased for a net amount of $843.0 million all of
Interests as part of a required
the outstanding Series B-1
remarketing of those interests. The purchase price reflected
the Series B-1 Interests’ original capital account balance of
$835.0 million and $8.0 million of capital account appreciation
attributable and paid to the third party holder of the Series B-1
Interests. The capital appreciation paid to the third party holder of
the Series B-1 Interests was recorded as a reduction to retained
earnings, a component of
stockholders’ equity, on the
Consolidated Balance Sheets, and reduced net earnings
available to common stockholders in our basic and diluted EPS
calculations.

We currently hold all interests in GMC other than the Class A
Interests. The terms of the Class A Interests are described in the
Fifth Amended and Restated Limited Liability Company
Agreement of GMC (the LLC Agreement).

The holder of the Class A Interests receives quarterly preferred
distributions from available net income based on the application
of a floating preferred return rate, currently equal to the sum of
three-month LIBOR plus 65 basis points, to the holder’s capital
account balance established in the most recent mark-to-market
valuation (currently $248.1 million). The LLC Agreement requires
that the preferred return rate of the Class A Interests be adjusted
every five years through a negotiated agreement between the
Class A Interest holder and GMC, or through a remarketing

in five year

auction. The next remarketing is scheduled to occur in June
intervals. Upon a failed
2012 and thereafter
remarketing, the preferred return rate over three-month LIBOR
will be increased by 75 basis points until the next remarketing,
in 3 month intervals until a successful
which will occur
remarketing occurs or the managing member purchases the
Class A Interests. The managing member may at any time
elect to purchase all of the Class A Interests for an amount
equal to the holder’s capital account balance (as adjusted in a
mark-to-market valuation), plus any accrued but unpaid
preferred returns and the prescribed make-whole amount.

Holders of the Class A Interests may initiate a liquidation of
GMC under certain circumstances, including, without limitation,
the bankruptcy of GMC or its subsidiaries, GMC’s failure to
deliver the preferred distributions on the Class A Interests,
GMC’s failure to comply with portfolio requirements, breaches
of certain covenants, lowering of our senior debt rating below
either Baa3 by Moody’s Investors Service or BBB- by Standard &
Poor’s, and a failed attempt to remarket the Class A Interests as a
result of GMC’s failure to assist in such remarketing. In the event
of a liquidation of GMC, each member of GMC will receive the
amount of its then current capital account balance. The managing
member may avoid liquidation by exercising its option to
purchase the Class A Interests.

For financial reporting purposes, the assets, liabilities, results of
operations, and cash flows of GMC are included in our
Consolidated Financial Statements. The return to the third
party investor is reflected in net interest in the Consolidated
Statements of Earnings. The third party investor’s interests in
GMC are classified as minority interests on our Consolidated
Balance Sheets. As discussed above, we may exercise our option
to purchase the Class A Interests for consideration equal to the
then current capital account value, plus any unpaid preferred
return and the prescribed make-whole amount. If we purchase
these interests, any change in the unrelated third party investor’s
capital account from its original value will be charged directly to
retained earnings and will increase or decrease the net earnings
used to calculate EPS in that period.

Our minority interests contain restrictive covenants. As of
May 25, 2008, we were in compliance with all of these covenants.
General Mills Capital, Inc. was formed in July 2002 for the
purpose of purchasing and collecting our
receivables and
previously sold $150.0 million of its Series A preferred stock to

General Mills

an unrelated third-party investor. In June 2007, we redeemed all
of the Series A preferred stock. We used commercial paper
borrowings and proceeds from the sale of
the additional
Class A Interests in GMC to fund the redemption. There was
no gain or loss associated with this transaction.

NOTE 10. STOCKHOLDERS’ EQUITY
Cumulative preference stock of 5.0 million shares, without par
value, is authorized but unissued.

On December 10, 2007, our Board of Directors approved the
retirement of 125.0 million shares of common stock in treasury
effective December 10, 2007. This action reduced common stock
reduced additional paid-in capital by
by
$5,068.3 million, and reduced common stock in treasury by
$5,080.8 million on our Consolidated Balance Sheets.

$12.5 million,

In fiscal 2007, our Board of Directors approved an authorization
to repurchase up to 75 million shares of our common stock. This
replaced a prior authorization, which permitted us to repurchase
shares up to a treasury share balance of 170 million. Purchases
under the new authorization can be made in the open market or in
privately negotiated transactions, including the use of call options
and other derivative instruments, Rule 10b5-1 trading plans, and
accelerated repurchase programs. The authorization has no pre-
established termination date. During fiscal 2008, we repurchased
23.9 million shares for an aggregate purchase price of $1.4 billion,
of which $0.1 million settled after the end of our fiscal year. During
fiscal 2007, we repurchased 25.3 million shares for an aggregate
purchase price of $1.4 billion, of which $64.4 million settled after
the end of our fiscal year.
In fiscal 2006, we repurchased
18.8 million shares of common stock for an aggregate purchase
price of $892.4 million. A total of 39.8 million shares were held in
treasury as of May 25, 2008.

In October 2004, Lehman Brothers Holdings Inc. (Lehman
Brothers)
issued $750.0 million of notes, which were
mandatorily exchangeable for shares of our common stock. In
connection with the issuance of those notes, an affiliate of
Lehman Brothers entered into a forward purchase contract
with us, under which we were obligated to deliver to such
affiliate between 14.0 million and 17.0 million shares of our
common
certain
to
circumstances. We delivered 14.3 million shares in October
in exchange for $750.0 million in cash from Lehman
2007,

adjustment

subject

stock,

under

Brothers. We used the cash to reduce outstanding commercial
paper balances.

The forward purchase contract was considered an equity
instrument. The $42.6 million fee we paid for the forward
to
purchase
stockholders’ equity in fiscal 2005.

contract was

reduction

recorded

The

following

table

provides

details

other

comprehensive income:

Net
In Millions
.........................................................................................................................................................................................

Pretax

Tax

Fiscal 2006:

Foreign currency translation
Minimum pension liability

Other fair value changes:

Securities

Hedge derivatives

Reclassification to earnings:

$ 72.9
37.7

$ — $ 72.9
24.0

(13.7)

2.3

(14.5)

(0.8)

5.4

1.5

(9.1)

Hedge derivatives

28.0
.........................................................................................................................................................................................
$117.3
.........................................................................................................................................................................................
Fiscal 2007:

Other comprehensive income

$(25.2)

$142.5

(16.1)

44.1

Foreign currency translation

Minimum pension liability
Other fair value changes:

Securities

Hedge derivatives

Reclassification to earnings:

$193.8

$ — $193.8

(33.5)

12.7

(20.8)

2.0

11.4

(0.7)

(4.9)

1.3

6.5

Hedge derivatives

14.5
.........................................................................................................................................................................................
$195.3
.........................................................................................................................................................................................
Fiscal 2008:

Other comprehensive income

$ (1.2)

$196.5

(8.3)

22.8

Foreign currency translation

Minimum pension liability
Other fair value changes:

Securities

Hedge derivatives

Reclassification to earnings:

Hedge derivatives

Amortization of losses and prior

$246.3

$ — $246.3

61.4

(22.0)

39.4

1.5

59.6

(0.6)

(21.3)

0.9

38.3

(64.5)

23.5

(41.0)

12.5
.........................................................................................................................................................................................
$296.4

Other comprehensive income

service costs

$(28.5)

$324.9

(8.1)

20.6

Except for reclassifications to earnings, changes in other

comprehensive income are primarily non-cash items.

Annual Report 2008

Accumulated other comprehensive income (loss) balances,

net of tax effects, were as follows:

Foreign currency translation adjustments

May 25,
2008

$ 648.4

Unrealized gain (loss) from:

Securities
Hedge derivatives

Pension, other postretirement, and postemployment

benefits:
Net actuarial loss

4.8
(39.2)

3.9
(36.5)

(400.4)

(448.5)

Prior service costs

$ 176.7

$(119.7)

(36.9)

(40.7)

NOTE 11. STOCK PLANS
to help ensure that
We use broad-based stock plans
management’s
interests are aligned with those of our
stockholders. As of May 25, 2008, a total of 10,310,361 shares
were available for grant in the form of stock options, restricted
shares, restricted stock units, and shares of common stock under
the 2007 Stock Compensation Plan (2007 Plan) and the 2006
Compensation Plan for Non-Employee Directors (2006 Director
Plan). On September 24, 2007, our stockholders approved the
2007 Plan, replacing the 2005 Stock Compensation Plan (2005
Plan). Restricted shares and restricted stock units may also be
granted under our Executive Incentive Plan (EIP) through
September 25, 2010. Stock-based awards now outstanding
include some granted under the 1993, 1995, 1996, 1998 (senior
management), 1998 (employee), 2001, 2003, and 2005 stock
plans, under which no further awards may be granted. The
stock plans provide for
restricted
shares, and restricted stock units upon completion of specified
service periods or in certain circumstances, following a change of
control. As of May 25, 2008, a total of 5,150,669 restricted shares
and restricted stock units were outstanding under all plans.

full vesting of options,

Stock Options The estimated weighted-average fair values of
stock options granted and the assumptions used for the Black-
Scholes option-pricing model were as follows:

2008

Estimated fair values of stock options

granted

Assumptions:

Risk-free interest rate
Expected term

Expected volatility

Dividend yield

$10.55

$10.74

$8.04

5.1%

5.3%

4.3%

8.5 years

8.0 years

7.0 years

15.6%

2.7%

19.7%

2.8%

20.0%

2.9%

The valuation of stock options is a significant accounting estimate
which requires us to use judgments and assumptions that are likely
to have a material impact on our financial statements. Annually, we
make predictive assumptions regarding future stock price volatility,
employee exercise behavior, and dividend yield.

We estimate our future stock price volatility using the historical
volatility over the expected term of the option, excluding time
periods of volatility we believe a marketplace participant would
exclude in estimating our stock price volatility. For the fiscal 2008
grants, we have excluded historical volatility for fiscal 2002 and
prior, primarily because volatility driven by the acquisition of
Pillsbury does not reflect what we believe to be expected future
volatility. We also have considered, but did not use,
implied
volatility in our estimate, because trading activity in options on
our stock, especially those with tenors of greater than six months,
is insufficient to provide a reliable measure of expected volatility.
Our expected term represents the period of time that options
granted are expected to be outstanding based on historical data
to estimate option exercise and employee termination within the
valuation model. Separate groups of employees have similar
historical exercise behavior and therefore were aggregated into
for valuation purposes. The weighted-average
a single pool
expected term for all employee groups is presented in the table
above. Our valuation model assumes that dividends and our share
price increase in line with earnings, resulting in a constant dividend
yield. The risk-free interest rate for periods during the expected
term of the options is based on the U.S.Treasury zero-coupon yield
curve in effect at the time of grant.

Any corporate income tax benefit realized upon exercise or
vesting of an award in excess of that previously recognized in

General Mills

earnings (referred to as a “windfall tax benefit”) is presented in
the Consolidated Statements of Cash Flows as a financing (rather
than an operating) cash flow.

Realized windfall tax benefits are credited to additional paid-in
capital within the Consolidated Balance Sheets. Realized shortfall
tax benefits (amounts which are less than that previously
recognized in earnings) are first offset against the cumulative
balance of windfall tax benefits, if any, and then charged directly
to income tax expense, potentially resulting in volatility in our
consolidated effective income tax rate. We calculated a
cumulative memo balance of windfall tax benefits from post-
1995 fiscal years for the purpose of accounting for future shortfall
tax benefits.

Options may be priced at 100 percent or more of the fair market
value on the date of grant, and generally vest four years after the
date of grant. Options generally expire within 10 years and one
month after the date of grant. Under the 2006 Director Plan,
through fiscal 2008 each nonemployee director received upon
election and re-election to the Board of Directors options to
purchase 10,000 shares of common stock that generally vest
one year, and expire within 10 years, after the date of grant. The
stock options granted to directors will generally vest one year,
and expire within 10 years, after the grant date. Beginning in fiscal
2009, each director will receive stock options valued at $90,000
upon their appointment and each re-election.

Information on stock option activity follows:

Weighted-
Average
Exercise
Price
per Share
.........................................................................................................................................................................................

Weighted-
Average
Exercise
Price
per Share

Options
Exercisable
(Thousands)

Options
Outstanding
(Thousands)

Balance as of

May 29, 2005
Granted(a)
Exercised
Forfeited or

36,506.1

$36.08

64,259.4

$40.68

135.8

(5,572.5)

46.56

32.99

expired

45.67
.........................................................................................................................................................................................
Balance as of

(619.6)

May 28, 2006

Granted

Exercised
Forfeited or

42,071.9

39.93

58,203.1

5,284.9

(9,382.2)

41.45

51.34

37.41

expired

46.11
.........................................................................................................................................................................................
Balance as of

(332.6)

May 27, 2007

Granted

Exercised

39,505.9

41.16

53,773.2

5,499.4

(6,135.1)

43.09

58.76

37.50

Forfeited or
expired

50.42
.........................................................................................................................................................................................
Balance as of

(116.3)

May 25, 2008

38,194.6

$42.46

53,021.2

$45.35

(a) In fiscal 2005, we changed the timing of our annual stock option grant from December
to June. As a result, we did not make an annual stock option grant during fiscal 2006.

Stock-based compensation expense related to stock option
awards was $52.8 million in fiscal 2008 and $54.0 million in
fiscal 2007.

Net cash proceeds from the exercise of stock options less
shares used for withholding taxes and the intrinsic value of
options exercised were as follows:

Fiscal Year
..................................................................
2006
In Millions
.........................................................................................................................................................................................
$163.2

$307.0

$192.0

Net cash proceeds

2007

2008

Intrinsic value of options exercised

134.4

177.3

95.7

Restricted Stock and Restricted Stock Units Stock and units
settled in stock subject to a restricted period and a purchase
price, if any (as determined by the Compensation Committee of
the Board of Directors), may be granted to key employees under
the 2007 Plan. Restricted shares and restricted stock units, up to
50 percent of the value of an individual’s cash incentive award,

Annual Report 2008

may also be granted through the EIP. Certain restricted stock and
restricted stock unit awards require the employee to deposit
personally owned shares (on a one-for-one basis) with us during
the restricted period. Restricted stock and restricted stock units
generally vest and become unrestricted four years after the date
of grant. Participants are entitled to cash dividends on such
awarded shares and units, but the sale or transfer of these
shares and units is restricted during the vesting period.
Participants holding restricted stock, but not restricted stock
units, are entitled to vote on matters submitted to holders of
common stock for a vote. Under the 2006 Director Plan, through
fiscal 2008 each nonemployee director received 1,000 restricted
stock units each time he or she was elected to the board. These
units generally vest one year after the date of grant. Beginning in
fiscal 2009, each director will receive $90,000 in restricted stock
units upon their appointment and each re-election based on the
closing stock price of our common stock on the date of the grant.

Information on restricted stock unit activity follows:

Weighted-Average
Grant-Date Fair Value
.........................................................................................................................................................................................
$48.74
58.62

Non-vested as of May 27, 2007

4,785.9
1,952.2

Units (Thousands)

Granted

Vested

(1,397.9)

46.92

Forfeited or expired

53.19
.........................................................................................................................................................................................
$52.81
Non-vested as of May 25, 2008

(189.5)
5,150.7

Fiscal Year
..........................................................................
2007
2006
.........................................................................................................................................................................................
629.9

1,952.2

1,771.2

2008

Number of units granted (thousands)(a)
Weighted average price per unit

$ 58.62

$ 51.71

$49.75

(a) In fiscal 2005, we changed the timing of our annual restricted stock unit grant from

December to June.

The total grant-date fair value of restricted stock unit awards
that vested during fiscal 2008 was $65.6 million. The total grant-
date fair value of restricted stock unit awards that vested during
fiscal 2007 was $22.7 million.

As of May 25, 2008, unrecognized compensation costs related
to non-vested stock options and restricted stock units was
$172.9 million. This cost will be recognized as a reduction of
earnings over 22 months, on average.

Stock-based compensation expense related to restricted stock
awards was $80.4 million for fiscal 2008, $73.1 million for fiscal
2007, and $44.6 million for fiscal 2006.

NOTE 12. EARNINGS PER SHARE
Basic and diluted EPS were calculated using the following:

Fiscal Year
...............................................................................
2007
2006
In Millions, Except Per Share Data
.........................................................................................................................................................................................
$1,090.3

Net earnings – as reported

$1,143.9

$1,294.7

2008

Capital appreciation paid on

Series B-1 interests in GMC(a)

Interest on zero coupon

(8.0)

—

contingently convertible
debentures, after tax(b)

8.6
—
.........................................................................................................................................................................................
$1,098.9
Net earnings for diluted EPS calculation $1,286.7
.........................................................................................................................................................................................
Average number of common shares –

$1,143.9

—

basic EPS

Incremental share effect from:

Stock options(c)
Restricted stock, restricted stock

units, and other(c)

Forward purchase contract(d)
Zero coupon contingently

333.0

346.5

357.7

10.6

10.7

2.8

0.5

2.0

1.0

6.1

2.1

—

12.9
convertible debentures(b)
.........................................................................................................................................................................................
Average number of common shares –

—

diluted EPS

378.8
.........................................................................................................................................................................................
3.05
EPS – Basic

360.2

346.9

3.30

3.86

EPS – Diluted

(a) See Note 9.

3.71

3.18

2.90

(b) Shares from contingently convertible debentures are reflected using the if-converted
method. On December 12, 2005, we completed a consent solicitation and entered into
a supplemental indenture related to our zero coupon convertible debentures. We also
made an irrevocable election: (i) to satisfy all future obligations to repurchase
debentures solely in cash and (ii) to satisfy all future conversions of debentures
(a) solely in cash up to an amount equal to the accreted value of the debentures and
(b) at our discretion, in cash, stock, or a combination of cash and stock to the extent
the conversion value of the debentures exceeds the accreted value. As a result of
these actions, no shares of common stock underlying the debentures were considered
outstanding after December 12, 2005, for purposes of calculating our diluted EPS. All
outstanding debentures were redeemed or converted as of April 25, 2007.

(c) Incremental shares from stock options, restricted stock, and restricted stock units are
computed by the treasury stock method. Stock options and restricted stock units excluded
from our computation of diluted EPS because they were not dilutive were as follows:

Fiscal Year
................................................
2008
2006
2007
In Millions
.........................................................................................................................................................................................
8.1

Anti-dilutive stock options and restricted stock units

4.7

6.0

(d)On October 15, 2007, we settled a forward purchase contract with Lehman Brothers

by issuing 14.3 million shares of common stock.

General Mills

NOTE 13. RETIREMENT AND POSTEMPLOYMENT
BENEFITS

Defined Benefit Pension Plans We have defined benefit pension
plans covering most domestic, Canadian, and United Kingdom
employees. Benefits for salaried employees are based on length of
service and final average compensation. Benefits for hourly
employees include various monthly amounts for each year of
credited service. Our funding policy is consistent with the
requirements of applicable laws. We made $14.2 million of
voluntary contributions to these plans in fiscal 2008. Our
principal domestic retirement plan covering salaried employees
has a provision that any excess pension assets would vest in plan
participants if the plan is terminated within five years of a change
in control.

Other Postretirement Benefit Plans We sponsor plans that
provide health-care benefits to the majority of our domestic
and Canadian retirees. The salaried health care benefit plan is
contributory, with retiree contributions based on years of service.
We fund related trusts for certain employees and retirees on an
annual basis. We did not make voluntary contributions to these
plans in fiscal 2008. Assumed health care cost trend rates are
as follows:

used by other similar organizations. Our initial health care cost
trend rate is adjusted as necessary to remain consistent with this
review, recent experiences, and short term expectations. Our
current health care cost trend rate assumption is 10.25 percent for
retirees age 65 and over and 9.25 percent for retirees under
age 65. These rates are graded down annually until the ultimate
trend rate of 5.2 percent is reached in 2016 for all retirees. The
trend rates are applicable for calculations only if the retirees’
benefits increase as a result of health care inflation. The ultimate
trend rate is adjusted annually, as necessary, to approximate the
current economic view on the rate of long-term inflation plus an
appropriate health care cost premium. Assumed trend rates for
health care costs have an important effect on the amounts
reported for the other postretirement benefit plans.

A one percentage point change in the health care cost trend

rate would have the following effects:

One
Percentage
Point
Increase

Effect on the aggregate of the service and
interest cost components in fiscal 2009

Effect on the other postretirement accumulated

$ 7.6

$ (6.6)

benefit obligation as of May 25, 2008

84.2

(74.3)

Fiscal Year
.................................................................................................
2008
2007
.........................................................................................................................................................................................

We use our fiscal year end as the measurement date for all our
defined benefit pension and other postretirement benefit plans.

Health care cost trend rate for

next year

9.25% and 10.25% 10.0% and 11.0%

Rate to which the cost trend

rate is assumed to decline

(ultimate rate)

Year that the rate reaches the

ultimate trend rate

5.2%

2016

2014/2015

We review our health care cost trend rates annually. Our
review is based on data we collect about our health care
claims experience and information provided by our actuaries.
This information includes recent plan experience, plan design,
industry experience and projections, and assumptions
overall

Postemployment Benefit Plans Under certain circumstances we
also provide accruable benefits to former or inactive employees in
the United States, Canada, and Mexico and members of our board
including severance and certain other benefits
of directors,
payable upon death. We recognize an obligation for any of
these benefits
accumulate with service.
Postemployment benefits that do not vest or accumulate with
service (such as severance based solely on annual pay rather than
years of service) are charged to expense when incurred. Our
postemployment benefit plans are unfunded.

vest or

that

Annual Report 2008

Summarized financial information about defined benefit pension, other postretirement, and postemployment benefits plans is

presented below:

Postemployment
Benefit Plans
..........................................
Fiscal Year
..........................................
2008
2007
In Millions
............................................................................................................................................................................................................................................................................................................................................................................................

Defined Benefit
Pension Plans
.................................................
Fiscal Year
.................................................
2007

2008

Other
Postretirement
Benefit Plans
.............................................
Fiscal Year
.............................................
2007

Change in Plan Assets:

Fair value at beginning of year
Actual return on assets

Employer contributions

Plan participant contributions
Divestitures/acquisitions

$4,097.8
181.1

$3,620.3
625.9

$ 391.0
1.9

$ 329.1
54.8

14.2

3.6
—

10.6

2.8
2.4

—

10.4
—

50.0

9.8
—

Benefit payments

(52.7)
.......................................................................................................................................................................................................................................................................................................................................
$ 391.0
Fair value at end of year
.......................................................................................................................................................................................................................................................................................................................................

$4,128.7

$4,097.8

$ 349.6

(168.0)

(164.2)

(53.7)

Change in Projected Benefit Obligation:

Benefit obligation at beginning of year

Service cost

Interest cost
Plan amendment

Curtailment/other

Plan participant contributions
Medicare Part D reimbursements

Actuarial loss (gain)

$3,257.5

$2,916.4

$ 980.9

$ 950.1

$ 95.7

$ 92.6

80.1

196.7
1.9

(0.6)

3.6
—

73.1

185.6
0.2

(0.4)

2.8
—

16.4

58.8
—

(0.3)

10.4
4.6

16.3

58.3
—

—

9.8
5.4

5.4

3.7
—

2.3

—
—

4.8

3.9
—

11.1

—
—

(147.1)

244.0

(100.8)

(4.7)

11.6

(0.1)

Benefits payments

(16.6)
............................................................................................................................................................................................................................................................................................................................................................................................
$ 95.7
Projected benefit obligation at end of year
............................................................................................................................................................................................................................................................................................................................................................................................
Plan assets in excess of (less than) benefit obligation

(168.0)
$3,224.1

(164.2)
$3,257.5

(14.1)
$ 104.6

(54.3)
$ 980.9

(58.7)
$ 911.3

as of fiscal year end

$ 904.6

$ 840.3

$(561.7)

$(589.9)

$(104.6)

$(95.7)

The accumulated benefit obligation for all defined benefit plans was $2,914.8 million as of May 25, 2008 and $3,006.6 million as of May 27, 2007.
Amounts recognized in accumulated other comprehensive income (loss) are as follows:

Other
Postretirement
Benefit Plans
.............................................
Fiscal Year
.............................................
2007
$(166.3)
7.7

2008

Postemployment
Benefit Plans
.......................................
Fiscal Year
.......................................
2007
$ (1.3)
(9.9)

Defined Benefit
Pension Plans
.............................................
Fiscal Year
.............................................
2007
$(280.9)
(38.5)

Total
.............................................
Fiscal Year
.............................................
2007
In Millions
............................................................................................................................................................................................................................................................................................................................................................................................
$(448.5)
Net actuarial loss
(40.7)
Prior service (costs) credits
............................................................................................................................................................................................................................................................................................................................................................................................
Amounts recorded in accumulated other comprehensive income

$(400.4)
(36.9)

$(276.8)
(34.7)

$(115.6)
6.9

$ (8.0)
(9.1)

2008

(loss)

$(311.5)

$(319.4)

$(108.7)

$(158.6)

$(17.1)

$(11.2)

$(437.3)

$(489.2)

General Mills

Plans with accumulated benefit obligations in excess of plan assets are as follows:

Postemployment
Benefit Plans
......................................
Fiscal Year
......................................
2008
2007
In Millions
............................................................................................................................................................................................................................................................................................................................................................................................
$ — $ — $ — $ —

Defined Benefit
Pension Plans
.........................................
Fiscal Year
.........................................
2007

$219.2

$182.4

2008

Projected benefit obligation

Other
Postretirement
Benefit Plans
.........................................
Fiscal Year
.........................................
2007

Accumulated benefit obligation
Plan assets at fair value

185.0
18.9

162.7
6.0

911.3
349.6

980.9
391.0

104.6
—

95.7
—

Components of net periodic benefit (income) costs are as follows:

Postemployment
Benefit Plans
........................................................
Fiscal Year
........................................................
2007
2006
In Millions
............................................................................................................................................................................................................................................................................................................................................................................................
$ 2.6

Defined Benefit
Pension Plans
........................................................................
Fiscal Year
........................................................................
2007
2006

Other Postretirement
Benefit Plans
...............................................................
Fiscal Year
...............................................................
2007
2006

$ 80.1

$ 76.0

$ 73.1

$ 18.1

$ 16.4

$ 16.3

$ 5.4

$ 4.8

2008

Service cost

Interest cost

Expected return on plan assets
Amortization of losses(gains)

Amortization of prior service costs (credits)

196.7

(360.6)
22.7

7.5

185.6

(335.2)
12.5

7.8

167.1

(323.0)
37.2

5.3

58.8

(30.3)
15.3

(1.4)

58.3

(27.2)
15.6

(1.6)

50.0

(24.0)
18.9

(1.5)

3.7

—
(0.2)

2.2

3.9

—
(0.2)

2.2

1.5

—
(0.1)

—

—
Other adjustments
—
Settlement or curtailment losses
............................................................................................................................................................................................................................................................................................................................................................................................
$ 4.0
Net (income) expense

(0.3)
—

19.9
—

$ (55.8)

$ (53.3)

$ (37.7)

2.3
—

1.9
—

0.2
0.2

—
0.3

$ 63.4

$ 61.4

$ 58.8

$13.4

$30.6

—
—

We expect to recognize the following amounts in net periodic benefit (income) costs in fiscal 2009:

Postemployment
In Millions
Benefit Plans
............................................................................................................................................................................................................................................................................................................................................................................................
$1.0
2.2

Amortization of losses
Amortization of prior service costs (credits)

Defined Benefit
Pension Plans

$ 7.3
(1.4)

$7.5
7.4