General Mills at a Glance

gen2007er annualal reportmills continuing growth contents 2 Letter to Shareholders | 6 Growth Drivers 18 Corporate Citizenship | 20 Corporate Directory | 22 Selected Financial Information 25 Financial Review | Back Cover: Shareholder Information General Mills at a Glance Net Sales by Division u.s. retail $8.5 billion in total Our U.S. Retail business segment includes the major market- 23% Big G Cereals ing divisions listed to the left. We market our products in a 22% Meals 19% Pillsbury USA variety of domestic retail outlets including traditional grocery 14% Yoplait stores, natural food chains, mass merchandisers and member- 13% Snacks ship stores. This segment accounts for 68 percent of total 8% Baking Products company sales. 1% Small Planet Foods Net Sales by Region international $2.1 billion in total We market our products in more than 100 countries outside 36% Europe the United States. Our largest international brands are Häagen- 29% Canada 22% Asia/Pacific Dazs ice cream, Green Giant vegetables and Old El Paso 13% Latin America Mexican foods. This business segment accounts for 17 percent of total company sales. Net Sales by bakeries and foodservice Customer Segment $1.8 billion in total We customize packaging of our retail products and market 48% Distributors/ them to convenience stores and foodservice outlets such as Restaurants schools, restaurants and hotels. We sell baking mixes and frozen 42% Bakery Channels dough-based products to super market, retail and wholesale 10% Convenience Stores/ Vending 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 joint ventures (not consolidated) $1.0 billion We are partners in several joint ventures. Cereal Partners proportionate share Worldwide is our 50/50 joint venture with Nestlé and markets 81% Cereal Partners breakfast cereals in 130 countries around the globe. We partici- Worldwide (CPW) pate in several Häagen-Dazs joint ventures, the largest of which 17% Häagen-Dazs 2% 8th Continent is in Japan. And we are partners with DuPont in 8th Continent, which produces soy beverages in the United States. 2007 Financial Highlights Fiscal Year Ended In Millions, Except per Share Data May 27, 2007 May 28, 2006 Change Net Sales $12,442 $11,712 + 6% Segment Operating Profit 2,260 2,111 + 7 Net Earnings 1,144 1,090 + 5 Diluted Earnings per Share 3.18 2.90 +10 Average Diluted Shares Outstanding 360 379 – 5 Dividends per Share $ 1.44 $ 1.34 + 7 Net Sales Segment Operating Profit* (dollars in millions) (dollars in millions) 12,442 2,260 11,712 2,111 11,308 2,053 11,122 1,995 2,016 10,544 03 04 05 06 07 03 04 05 06 07 Diluted Earnings per Share Return on Average Total Capital* (dollars) (percent) 3.18 11.4 3.08 11.1 2.90 10.5 10.0 2.60 9.5 2.35 03 04 05** 06 07 03 04 05** 06 07 * See page 47 for discussion of these non-GAAP measures. ** Results include $197 million net gain after tax from divestitures and debt repurchase costs. 2 Letter to Shareholders shareToh Ourolders we’re pleased to report that general mills had a good year in fiscal 2007. sales and earnings growth exceeded our targets, and these results fueled a strong return to shareholders. Net sales for the year ended May 27, 2007, grew 6 percent initiatives by 8 percent – ahead of the rate of sales growth. to reach $12.4 billion, and our unit volume increased 4 percent. Productivity initiatives, strong plant performance and Performance was strong across our business portfolio. As pricing combined to offset these increased expenses. As a shown in the table below, every one of General Mills’ major result, our segment operating profit margin improved to operating divisions posted a sales increase, including double- 18.2 percent of sales. digit gains for Snacks, International and the Small Planet Earnings per share (EPS) grew 10 percent to reach $3.18. Foods organic division. This was above our 2007 guidance and above our long-term 2007 Net Sales growth target, which calls for high single-digit growth in EPS. Operating Division / Segment % Change Big G Cereals + 2 We coupled this sales and earnings growth with an increased Pillsbury USA + 3 return on invested capital. We have a goal of improving our Baking Products + 3 return on average total capital (ROC) by 50 basis points per Meals + 5 year. We beat that target in 2007, as ROC increased 60 basis Bakeries and Foodservice Segment + 5 Yoplait + 6 points to 11.1 percent. Snacks + 10 Cash dividends paid to General Mills shareholders grew International Segment + 16 Small Planet Foods + 21 7.5 percent in 2007 to $1.44 per share. The market price for Total General Mills + 6 GIS shares increased 16 percent in 2007 and total return to shareholders, including dividends, exceeded 19 percent. Segment operating profits grew 7 percent to nearly strong fundamentals $2.3 billion. This operating performance was noteworthy because our input costs, particularly ingredients, were We believe our 2007 results and current momentum are the up significantly. In addition, we increased our spending result of good execution on top of strong fundamentals. The on advertising and other consumer-focused marketing fundamentals begin with our business portfolio. Consumers 2007 | Annual Report 3 Price Appreciation Dividends per Share Total Shareholder (year-end Return closing stock price) (price appreciation plus reinvested dividends) $60.15 $1.44 19.2% $1.34 $51.79 $1.24 $49.68 10.7% 7.2% 05 06 07 05 06 07 05 06 07 today want food choices that offer great taste and conven- 4 percent to nearly $8.5 billion, and segment operating profits ience, along with health and wellness benefits. That makes rose 5 percent to reach nearly $1.9 billion. International seg- categories like ready-to-eat cereal, ready-to-serve soup, frozen ment net sales grew 16 percent to exceed $2.1 billion, and vegetables, yogurt, grain snacks and organic foods advantaged operating profits increased 11 percent to $216 million. places to compete. And our brands hold leading positions Bakeries and Foodservice net sales grew 5 percent to exceed in these on-trend, in-demand categories. $1.8 billion, and operating profits rose 28 percent to $148 million. Joint venture earnings, which are reported We’re increasing sales and market share for our brands all on a separate line of our income statement, grew 6 percent around the world. For example, our largest global business – to reach $73 million after tax. ready-to-eat cereals – grew in nearly every channel and major geography where we compete, as shown in the table continuing growth below. If you include our 50 percent share of sales from Two years ago, we adopted a long-term growth model that Cereal Partners Worldwide, the joint venture with Nestlé, calls for low single-digit compound growth in net sales, mid our worldwide cereal sales exceed $3 billion today. single-digit compound growth in segment operating profits, 2007 Net Sales and high single-digit compound growth in earnings per Cereal Business % Growth share. We believe that this financial performance, coupled Big G cereals + 2 with an attractive dividend yield, should result in superior Cascadian Farm organic cereals + 53 returns to our shareholders. Foodservice cereals – 2 Canada cereals + 6 We see five key drivers of our business growth: product Cereal Partners Worldwide + 18 innovation, channel expansion, international expansion, Worldwide Cereal Net Sales + 6 margin expansion and brand-building investment. Our wholly owned businesses are organized in three operating Our product innovation efforts focus on offering foods that segments. In 2007, net sales for the U.S. Retail segment grew taste great, are quick to prepare, and fit with consumers’ 4 Letter to Shareholders our broad product portfolio drove solid sales growth in 2007. increasing interest in health and wellness. Taste comes first, sales for this line came from new users. Successes like these because history shows that consumers won’t eat foods – increase our sales and expand our product categories. no matter how healthy or convenient – that don’t taste good. Channel expansion, beyond traditional grocery stores, is a We ask consumers to regularly taste-test our products, key growth opportunity for our leading brands. In 2007, we head-to-head with competitive offerings. Our goal is to have generated double-digit volume gains in retail channels such at least 60 percent of consumers prefer our product. If they as supercenters, drug and discount stores, and convenience don’t, we go to work on improving our brand. In 2007, stores. In addition, we are a major player in the foodservice 60 percent of our major U.S. Retail products met or exceeded industry with sales to schools, hotel operators, bakeries, this ambitious standard for consumer preference. At the same restaurants and health care facilities. We see significant growth time, we’re improving the nutrition profile of our products opportunities ahead in these channels. by reducing fat, sodium or sugar, and adding ingredients such as fiber, whole grains and calcium. Since 2004, we have We are generating strong international sales and profit improved the nutritional attributes for products representing growth for our brands. Today, we have 25 plants, more than 30 percent of our U.S. Retail business, and our goal is to 10,000 talented people and more than $2.1 billion in sales increase that to 40 percent by the end of this decade. outside the United States. That’s without including our share of international joint venture sales, which would add another We’re focused on creating products that attract new con- $1 billion to the total.

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