2014 ANNUAL REPORT General Mills PUTTING THE CONSUMER Our Fiscal 2014 Financial Highlights In millions, except per share and 52 weeks ended 52 weeks ended return on capital data May 25, 2014 May 26, 2013 Change Net Sales $ 17,910 $ 17,774 + 1% Adjusted Segment Operating Profit* $ 3,154 $ 3,223 − 2% Net Earnings Attributable to General Mills $ 1,824 $ 1,855 − 2% Diluted Earnings per Share (EPS) $ 2.83 $ 2.79 + 1% Adjusted Diluted EPS, Excluding Certain Items Affecting Comparability* $ 2.82 $ 2.72 + 4% Return on Average Total Capital* 11.6% 12.0% −40 basis pts. Average Diluted Shares Outstanding 646 666 − 3% Dividends per Share $ 1.55 $ 1.32 + 17% NET SALES ADJUSTED SEGMENT OPERATING PROFIT* Dollars in millions Dollars in millions 2010 14,636 2010 2,854 201 1 14,880 201 1 2,946 2012 16,658 2012 3,012 2013 17,774 2013 3,223 2014 17,910 2014 3,154 ADJUSTED DILUTED EARNINGS DIVIDENDS PER SHARE PER SHARE* Dollars Dollars 2010 2.31 2010 0.96 201 1 2.48 201 1 1.12 2012 2.56 2012 1.22 2013 2.72 2013 1.32 2014 2.82 2014 1.55 *See page 87 for discussion of non-GAAP measures. Putting the General Mills at a Glance Consumer First 3% 12% 3% 12% 3% 22% 12% 22% U.S. RETAIL 22% Net Sales by Division At General Mills, our key strategy for 14% 14% 14% $10.6 Billion growing our worldwide food businesses 17% 17% is to Put the Consumer First. We work to 15% 17% 22% Big G Cereals 15% 15% 17% 17% Baking Products connect with consumers and develop deep 17% 17% Snacks 17% insight into what they like to eat, where 15% Frozen Foods 14% Meals they shop for food, and how they approach 12% Yoplait USA 3% Small Planet Foods cooking today. From product development to manufacturing to distribution, 18% marketing and sales, our focus is on 18% INTERNATIONAL 18% Net Sales by Region 41% meeting consumers’ evolving preferences 41% 41% 19% $5.4 Billion and needs for high-quality, nutritious, 19% 19% convenient and great-tasting food. 41% Europe* 22% Canada 22% 19% Latin America 22% 22% 18% Asia/Pacifi c** *Includes Australia and New Zealand **Includes the Middle East and Africa 14% 14% 14% CONVENIENCE STORES AND FOODSERVICE Net Sales by Brand Type 31% 55% 31% 55% 31% 55% $1.9 Billion 55% Branded to Foodservice Operators 31% Branded to Consumers 14% Unbranded 15% 15% 15% JOINT VENTURES Net Sales by Joint Venture (not consolidated, proportionate share) 85% $1.3 Billion 85% 85% 85% Cereal Partners Worldwide (CPW) 15% Häagen-Dazs Japan (HDJ) 2014 ANNUAL REPORT 1 To Our Shareholders KEN POWELL Chairman and Chief Executive Offi cer Our plans for the fi scal year ended May 25, 2014, called for sales and earnings growth consistent with our long-term business model, and increased cash returns to our shareholders. We made good progress building our worldwide food businesses in both developed and emerging markets. And we returned more than $2.7 billion in cash to shareholders through a 17 percent dividend increase and signifi cant share repurchases. But sales and profi t results fell short of our targets. Fiscal 2014 net sales increased 1 percent to $17.9 billion, industry sales growth over the past fi ve years. Input costs including three incremental months of contribution from the were a headwind for most food companies during the year; Yoki Alimentos (Brazil) and Yoplait Canada businesses added in our case, input costs were up 4 percent. during the previous year. Gross margin declined in 2014, as increased promotional spending generated less volume than Net sales for our U.S. Retail operating segment essentially planned and international operations became a larger part of matched year-ago results at $10.6 billion. Our Snacks divi- overall business mix. Adjusted segment operating profi t was sion, Small Planet Foods (which markets organic and natural 2 percent lower for the year. On the bottom line, fi scal 2014 products), and our Big G Cereals division led U.S. Retail sales net earnings attributable to General Mills totaled $1.8 billion performance for the year. New products launched during and diluted earnings per share (EPS) totaled $2.83. Adjusted 2014 contributed more than 5 percent of annual shipment diluted EPS, which excludes certain items aff ecting compara- volume. Yoplait Greek 100 calorie yogurt, Fiber One snack bility, grew 4 percent to $2.82. bars, Vanilla Chex gluten-free cereal, Old El Paso frozen entrees and Nature Valley Protein granola made particularly The operating environment for food manufacturers in 2014 strong contributions to annual sales growth. Our brands held was characterized by slow rates of sales growth in developed or gained dollar market share in categories representing markets, with better trends in the world’s emerging markets. nearly two-thirds of our retail sales in Nielsen-measured In our core market — the United States — retail food and bev- outlets. Operating profi t for the U.S. Retail segment totaled erage industry sales grew just 1.5 percent across channels $2.3 billion, down 3 percent. tracked by Nielsen. This compares to 3.5 percent average 2 GENERAL MILLS U.S. RETAIL MARKET SHARE TRENDS INTERNATIONAL PERFORMANCE BY Dollars in billions, fiscal 2014 GEOGRAPHIC REGION Dollars in millions, fiscal 2014 Share Category Our Dollar Change vs. % Growth in Category Retail Sales Share Prior Year Net Sales Constant Currency* Grain Snacks $ 3.2 41.3% + 3.8 pts. Europe $ 2,189 -4% Frozen Hot Snacks $ 2.1 24.4% + 1.0 Canada $ 1,195 +5% Fruit Snacks $ 1.0 47.7% +0.9 Latin America $ 1,020 +38% Ready-to-serve Soup $ 1.9 39.5% +0.7 Asia/Pacific $ 982 +9% Mexican Products* $ 2.7 17.4% +0.5 Total International Segment $ 5,386 +8% Frozen Pizza $ 4.3 9.1% +0.5 *See page 87 for discussion of non-GAAP measures. Ready-to-eat Cereal $ 9.0 31.0% +0.3 Beyond these three operating segments, General Mills Refrigerated Baked Goods $ 2.0 70.0% 0.0 holds 50-percent non-consolidated interests in two joint Dessert Mixes $ 1.8 39.7% -0.9 ventures outside North America. Together, Cereal Partners Dry Packaged Dinners $ 2.4 16.3% -1.8 Worldwide (CPW) and Häagen-Dazs Japan (HDJ) contributed Yogurt $ 7.2 24.1% -2.3 $90 million in after-tax earnings in 2014. This was 9 percent below prior-year results, reflecting higher consumer marketing *Excludes snack aisle Source: Nielsen Expanded All Outlets investment by CPW and negative foreign currency exchange effects for HDJ. Our Convenience Stores and Foodservice segment competes primarily in U.S. channels for food eaten away General Mills has a strong track record of returning cash to from home. In 2014, net sales for this segment totaled shareholders and, by any measure, 2014 was a banner year $1.9 billion, 2 percent below prior-year results. Operating in this regard. We returned more than $2.7 billion in cash profit of $307 million also was down 2 percent. Over the last to our equity holders through dividends of $1.55 per share several years, we have been re-shaping this business port- and share repurchases that reduced our average number of folio to focus on six key platforms: cereal, snacks, yogurt, diluted shares outstanding by 3 percent. We most recently mixes, biscuits and frozen breakfast items. These priority increased the quarterly dividend for General Mills common businesses, which account for more than two-thirds of the stock effective with the May 2014 payment. The current annu- segment’s operating profit, posted combined sales growth alized rate of $1.64 per share represents a yield of roughly of 4 percent for the year. 3 percent at recent market prices for General Mills stock. General Mills and its predecessor firm have paid shareholder Net sales for our International segment grew 4 percent in dividends without interruption or reduction for 115 years. 2014 to $5.4 billion. Adjusted operating profit, which excludes the effects of Venezuelan currency devaluation, also grew 4 percent to $535 million. Foreign exchange translation TOTAL SHAREHOLDER RETURNS reduced these reported sales and earnings growth rates; on Stock price appreciation plus reinvested dividends, a constant-currency basis, International sales grew 8 percent percent growth and adjusted operating profit rose 10 percent. Net sales for our Latin American region crossed the $1 billion threshold, FISCAL 2014 with strong growth on the base business and a full year of GIS 13% Yoki operations included in 2014. And sales in the Asia/ S&P 500 Index 18% Pacific region grew 9 percent on a constant-currency basis, S&P Packaged 12% powered by another year of double-digit sales growth in Foods Index Greater China. LAST FIVE FISCAL YEARS Compound annual growth GIS 20% S&P 500 Index 18% S&P Packaged 20% Foods Index Source: Bloomberg 2014 ANNUAL REPORT 3 Our Business Portfolio Is a Strategic Advantage The combination of consistent earnings per share growth, which drives stock price appreciation over time, plus an 2% attractive dividend yield has resulted in double-digit returns 5% to General Mills shareholders over virtually any extended 20% 10% time period. In fiscal 2014, total return to General Mills share- holders through stock price appreciation and dividends was 13 percent. Over the last five years, the compound annual return to holders of GIS stock was 20 percent, outpacing the 10% S&P 500 Index. We remain committed to delivering superior returns to our shareholders in the years ahead.