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 fiscal 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 operating divisions contributed to this year’s sales gain, as shown in the table below.

Costs for food ingredients, packaging and energy were significantly higher in 2008. We worked to off set this inflation with comprehensive cost-saving efforts and price increases where necessary. We also increased our spending on advertising and other consumer marketing programs, which help generate consumer 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.

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 fiscal 2008 results, diluted earnings per share would total $3.52, up 11 percent from $3.18 per share last year.

These sales and profi t results exceeded our original fi nancial targets for fiscal 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 profits and high single-digit growth in diluted earnings per share. We believe that this sales and profit 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.

For the three-year period through fiscal 2008, total return to General Mills shareholders (stock price appreciation plus reinvested 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.

Our long-term performance goals also include a commitment to increase the return we generate on capital invested in the business. Specifically, 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.

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 fixed 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.

Beyond this capital investment, we return a signifi cant portion of the cash our businesses generate to shareholders. Dividends in fiscal 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 fiscal 2008 we exceeded that target: Average shares outstanding were 347 million, down nearly 4 percent from 360 million shares the previous year.

In summary, fiscal 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. ...

Download General Mills Annual Report 2008

PDF format, 5.5MB, 96Pages.

General Mills
Number One General Mills Boulevard
Minneapolis, MN 55426-1347
763.764.7600
www.generalmills.com

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 efforts.

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