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TABLE OF CONTENTS

PART I

COMPANY OVERVIEW

General Mills, Inc. was incorporated in Delaware in 1928. The terms “General Mills,” “Company” and “Registrant” mean General Mills, Inc. and its subsidiaries unless the context indicates otherwise.

General Mills is a leading producer of packaged consumer foods and operates exclusively in the consumer foods industry. The Company’s businesses are divided into three reportable segments:

The Company’s operating segments are organized generally by product categories. U.S. Retail consists of cereals, meals, refrigerated and frozen dough products, baking products, snacks, yogurt and organic foods. The Bakeries and Foodservice segment consists of products marketed to retail and wholesale bakeries and offered to the commercial and noncommercial foodservice sectors throughout the United States and Canada, such as restaurants and business and school cafeterias. The International segment is made up of retail business outside the United States and foodservice business outside of the United States and Canada. A more detailed description of the product categories for each reportable segment is set forth below.

On October 31, 2001, General Mills completed the acquisition of the worldwide businesses of The Pillsbury Company from Diageo plc (“Diageo”). With the Pillsbury acquisition, the Company added established, market-leading brands to its U.S. retail business, more than doubled its foodservice business, significantly increased its international presence and created opportunities for productivity improvement and cost synergies. For a more detailed description of the Pillsbury acquisition, please see Note Two to the Consolidated Financial Statements appearing on page 28 in Item Eight of this report.

BUSINESS SEGMENTS

U.S. RETAIL. In the United States, General Mills markets its retail products primarily through its own sales organization, supported by advertising and other promotional activities. These products primarily are distributed directly to retail food chains, cooperatives, membership stores and wholesalers. Certain food products are also sold through distributors and brokers. The Company’s principal product categories in the U.S. Retail segment are as follows:

Big G Cereals. General Mills produces and sells a number of ready-to-eat cereals, including such brands as: Cheerios, Honey Nut Cheerios, Frosted Cheerios, Apple Cinnamon Cheerios, MultiGrain Cheerios, Berry Burst Cheerios, Team Cheerios, Wheaties, Wheaties Energy Crunch, Lucky Charms, Total Corn Flakes, Whole Grain Total, Total Raisin Bran, Brown Sugar and Oat Total, Trix, Golden Grahams, Wheat Chex, Corn Chex, Rice Chex, Multi-Bran Chex, Honey Nut Chex, Kix, Berry Berry Kix, Fiber One, Reese’s Puffs, Cocoa Puffs, Cookie Crisp, Cinnamon Toast Crunch, French Toast Crunch, Peanut Butter Toast Crunch, Clusters, Oatmeal Crisp, Basic 4, and Raisin Nut Bran.

Meals. General Mills manufactures and sells several lines of convenient dinner products, including Betty Crocker dry packaged dinner mixes under the Hamburger Helper, Tuna Helper, Chicken Helper and Pork Helper trademarks, Old El Paso Mexican foods and dinner kits, Progresso soups and ingredients, Green Giant canned and frozen vegetables and meal starters, and a line of refrigerated barbeque products under the Lloyd’s Barbeque name. Also under the Betty Crocker trademark, the Company sells dry packaged specialty potatoes, Potato Buds instant mashed potatoes, Suddenly Salad and Bac*O’s salad topping. The Company also manufactures and markets shelf stable microwave meals under the Betty Crocker Bowl Appetit! trademark and packaged meals under the Betty Crocker Complete Meals trademark.

Pillsbury USA. General Mills manufactures and sells refrigerated and frozen dough products, frozen breakfast products, and frozen pizza and snack products. Refrigerated dough products marketed under the Pillsbury brand include Grands! biscuits and sweet rolls, Golden Layers biscuits, Pillsbury Ready To Bake! and Big Deluxe Classics cookies, and Pillsbury rolls, biscuits, cookies, breads and pie crust. Frozen dough product offerings include Home Baked Classics biscuits, rolls and other bakery goods. Breakfast products sold under the Pillsbury trademark include Toaster Strudel pastries, Toaster Scrambles pastries and Pillsbury frozen pancakes, waffles and waffle sticks. All the breakfast and refrigerated and frozen dough products incorporate the well-known Doughboy logo. Frozen pizza and snack products are marketed under the Totino’s and Jeno’s trademarks.

Baking Products. General Mills makes and sells a line of dessert mixes under the Betty Crocker trademark, including SuperMoist cake mixes, Rich & Creamy and Soft Whipped ready-to-spread frostings, Supreme brownie and dessert bar mixes, muffin mixes and other mixes used to prepare dessert and baking items. The Company markets a variety of baking mixes under the Bisquick trademark, sells pouch mixes under the Betty Crocker name, and produces family flour under the Gold Medal brand introduced in 1880.

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Snacks. General Mills markets Milk n’Cereal bars; Pop•Secret microwave popcorn; a line of grain snacks including Nature Valley granola bars; a line of fruit snacks including Fruit Roll-Ups, Fruit By The Foot and Gushers; a line of snack mix products including Chex Mix and Gardetto’s snack mix; savory snacks marketed under the name Bugles; and carbohydrate management bars marketed under the name Momentum.

Yoplait-Colombo. General Mills manufactures and sells yogurt products, including Yoplait Original, Yoplait Light, Custard Style, Trix, Yumsters, Go-GURT — yogurt-in-a-tube, Yoplait Whips! — a mousse-like yogurt, Yoplait Nouriche — a meal replacement yogurt drink, and Yoplait Ultra — a yogurt with fewer carbohydrates than regular low-fat yogurt. The Company also manufactures and sells a variety of refrigerated cup yogurt products under the Colombo brand name.

Organic. General Mills markets organic frozen fruits and vegetables, meals and entrees, a wide variety of canned tomato products including tomatoes and spaghetti sauce, frozen juice concentrates, fruit spreads, frozen desserts and cereal under its Cascadian Farm and Muir Glen trademarks.

BAKERIES AND FOODSERVICE. General Mills markets mixes and unbaked, par-baked and fully baked frozen dough products to retail, supermarket and wholesale bakeries under the Pillsbury and Gold Medal trademarks. In addition, the Company sells flour to bakery, foodservice and manufacturing customers. The Company also markets frozen dough products, branded baking mixes, cereals, snacks, dinner and side dish products, refrigerated and soft-serve frozen yogurt, and custom food items to quick serve chains and other restaurants, business and school cafeterias, convenience stores and vending companies.

INTERNATIONAL. General Mills’ international businesses consist of operations and sales in Canada, Latin America, Europe and the Asia/Pacific region. Outside the U.S., the Company manufactures its products in 15 countries and distributes them in over 100 countries. In Canada, the Company markets products in many categories, including cereals, meals, refrigerated dough products, baking products and snacks. Outside of North America, the Company offers numerous local brands in addition to such internationally recognized brands as Häagen-Dazs ice cream, Old El Paso Mexican foods, Green Giant vegetables, Pillsbury dough products and mixes, Betty Crocker mixes and Bugles snacks. The Company also sells mixes and dough products to bakery and foodservice customers outside of the United States and Canada. These international businesses are managed through wholly owned subsidiaries and joint ventures with sales and marketing organizations in 33 countries.

For additional geographic information please see Note Eighteen to the Consolidated Financial Statements appearing on pages 46 through 47 in Item Eight of this report.

FINANCIAL INFORMATION ABOUT REPORTABLE SEGMENTS

The following tables set forth the percentage of net sales and operating profit from each reportable segment:

Percent of Net Sales

Percent of Operating Profit

Financial information for the Company’s reportable business segments is set forth in Note Eighteen to the Consolidated Financial Statements appearing on pages 46 through 47 in Item Eight of this report.

JOINT VENTURES

In addition to its consolidated operations, the Company manufactures and sells products through several joint ventures.

DOMESTIC JOINT VENTURE.   The Company has a 50 percent equity interest in 8th Continent, LLC, a joint venture formed with DuPont to develop and market soy-based products. This venture began marketing a line of 8th Continent soymilk to limited markets in July 2001 and nationally in June 2003.

INTERNATIONAL JOINT VENTURES.   The Company has a 50 percent equity interest in Cereal Partners Worldwide (CPW), a joint venture with Nestlé S.A., that distributes products in more than 130 countries and republics. The cereal products marketed by CPW under the umbrella Nestlé trademark in fiscal 2004 included: Chocapic, Corn Flakes, Crunch, Fitness, Fitness and Fruit, Honey Nut Cheerios, Cheerios, Nesquik, Shredded Wheat, and Shreddies. CPW also markets cereal bars in several European countries and manufactures private label cereals for customers in the United Kingdom.

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Snack Ventures Europe (SVE), the Company’s joint venture with PepsiCo, Inc., manufactures and sells snack foods in Holland, France, Belgium, Spain, Portugal, Greece, the Baltics, Hungary and Russia. The Company has a 40.5 percent equity interest in SVE. The products marketed by SVE in fiscal 2004 included: 3-Ds, Bugles, Doritos, Fritos, Hamka’s, Lay’s, Ruffles and Dippas.

The Company has a 50 percent interest in each of four joint ventures for the manufacture, distribution and marketing of Häagen-Dazs frozen ice cream products and novelties in Japan, Korea, Thailand and the Philippines. The Company also has a 50 percent interest in Seretram, a joint venture with Co-op de Pau for the production of Green Giant canned corn in France.

See Note Four to the Consolidated Financial Statements appearing on page 31 in Item Eight of this report.

COMPETITION

The consumer foods market is highly competitive, with numerous manufacturers of varying sizes in the United States and throughout the world. The Company’s principal strategies for competing in each of its segments include superior product quality, innovative advertising, product promotion, product innovations and price. In most product categories, the Company competes not only with other widely advertised branded products of major companies, but also with generic products and private label products, which are generally sold at lower prices. Internationally, the Company primarily competes with local manufacturers, and each country includes a unique group of competitors.

CUSTOMERS

During fiscal 2004, one customer, Wal-Mart Stores, Inc., accounted for approximately 14 percent of the Company’s consolidated net sales and 19 percent of the Company’s sales in the U.S. Retail segment. No other customer accounted for 10 percent or more of the Company’s consolidated net sales. The top five customers of our U.S. Retail segment accounted for approximately 43 percent of the segment’s fiscal 2004 net sales. For the Bakeries and Foodservice segment, the top five customers accounted for approximately 34 percent of the segment’s fiscal 2004 net sales.

SEASONALITY

In general, demand for the Company’s products is evenly balanced throughout the year. However, demand for the Company’s refrigerated dough, frozen baked goods and baking products is stronger in the fourth calendar quarter. Demand for Progresso soup is higher during the fall and winter months. Internationally, demand for Häagen-Dazs ice cream is higher during the summer months and demand for the baking mix and dough products increases during winter months. Due to the offsetting impact of these demand trends, as well as the different seasons in the northern and southern hemispheres, the Company’s international net sales are generally evenly balanced throughout the year.

GENERAL INFORMATION

Trademarks and Patents. Trademarks and service marks are vital to the Company’s businesses. The Company’s products are marketed under trademarks and service marks that are owned by or licensed to the Company. The most significant trademarks and service marks used in the Company’s businesses are set forth in italics in the business discussions above. These marks include the trademarks used in our international joint ventures that are owned by or licensed to the joint ventures. In addition, some of the Company’s products are marketed under or in combination with trademarks that have been licensed from others, including Yoplait yogurt, Reese’s Puffs cereal, Hershey’s chocolate included with a variety of products, and a variety of characters and brands used on fruit snacks, including Sunkist, Shrek, and various Warner Bros. and Sesame Workshop characters.

As part of the fiscal 2002 sale to International Multifoods Corporation (IMC) of certain Pillsbury dessert and specialty product businesses, IMC received an exclusive royalty-free license to use the Doughboy trademark and Pillsbury brand in the desserts and baking mix categories. The licenses are renewable without cost in 20-year increments at IMC’s discretion. In June 2004, J. M. Smucker Company acquired IMC and now has the right to use the marks under the terms of the licenses.

The Company considers the collective rights under its various patents, which expire from time to time, a valuable asset, but the Company does not believe that its businesses are materially dependent upon any single patent or group of related patents.

Raw Materials and Supplies. The principal raw materials used by General Mills are cereal grains, sugar, dairy products, vegetables, fruits, meats, other agricultural products, vegetable oils, plastic and paper packaging materials, operating supplies and energy. The Company has some long-term fixed price contracts, but the majority of such raw materials are purchased on the open market. The Company believes that it will be able to obtain an adequate supply of needed ingredients and packaging materials. Occasionally and where possible, the Company makes advance purchases of items significant to its business in order to ensure continuity of operations. The Company’s objective is to procure materials meeting both the company’s quality standards and its production needs at the lowest total cost to the Company.

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The Company’s strategy is to buy these materials at price levels that allow a targeted profit margin. Since commodities generally represent the largest variable cost in manufacturing the Company’s products, to the extent possible, the Company hedges the risk associated with adverse price movements using exchange-traded futures and options, forward cash contracts and over-the-counter hedging mechanisms. These tools enable the Company to manage the related commodity price risk over periods of time that exceed the period of time in which the physical commodity is available. Accordingly, the Company uses these hedging tools to mitigate the risks associated with adverse price movements and not to speculate in the marketplace. See also Note Seven to the Consolidated Financial Statements appearing on pages 34 through 35 in Item Eight of this report and the “Market Risk Management” section of Management’s Discussion and Analysis of Financial Condition and Results of Operation appearing on page 19 in Item Seven of this report.

Capital Expenditures. During the fiscal year ended May 30, 2004, General Mills’ aggregate capital expenditures for fixed assets and intangibles amounted to $653 million, including construction costs to consolidate the Company’s headquarters and expenditures associated with the acquisition and integration of Pillsbury. The Company expects to spend approximately $450-500 million for capital projects in fiscal 2005, primarily for fixed assets to support further growth and increase supply chain productivity.

Research and Development. Major research and development facilities are located at the Riverside Technical Center in Minneapolis, Minnesota and the James Ford Bell Technical Center in Golden Valley (suburban Minneapolis), Minnesota. General Mills’ research and development resources are focused on new product development, product improvement, process design and improvement, packaging, and exploratory research in new business areas. Research and development expenditures amounted to $158 million in fiscal 2004, $149 million in fiscal 2003 and $131 million in fiscal 2002.

Employees. At May 30, 2004, General Mills had approximately 27,580 employees.

Food Quality and Safety Regulation. The manufacture and sale of consumer food products is highly regulated. In the United States, the Company’s activities are subject to regulation by various government agencies, including the Food and Drug Administration, United States Department of Agriculture, Federal Trade Commission and Department of Commerce, as well as various state and local agencies. The Company’s business is also regulated by similar agencies outside of the United States.

Environmental Matters. As of June 2004, General Mills was involved with the following active cleanup sites associated with the alleged release or threatened release of hazardous substances or wastes:

These matters involve several different actions, including litigation initiated by governmental authorities and/or private parties, administrative proceedings commenced by regulatory agencies, and demand letters issued by regulatory agencies and/or private parties. Of the 16 matters in the table above, the Company is a party to current litigation related to two cleanup sites:

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action under the terms of an indemnification agreement. The amount of the cleanup liability has not been determined.

The Company recognizes that its potential exposure with respect to any of these sites may be joint and several, but has concluded that its probable aggregate exposure is not material. This conclusion is based upon, among other things, the Company’s payments and/or accruals with respect to each site; the number, ranking, and financial strength of other potentially responsible parties identified at each of the sites; the status of the proceedings, including various settlement agreements, consent decrees or court orders; allocations of volumetric waste contributions and allocations of relative responsibility among potentially responsible parties developed by regulatory agencies and by private parties; remediation cost estimates prepared by governmental authorities or private technical consultants; and the Company’s historical experience in negotiating and settling disputes with respect to similar sites.

The Company’s operations are subject to the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation and Liability Act, and the Federal Insecticide, Fungicide and Rodenticide Act, and all similar state environmental laws applicable to the jurisdictions in which we operate.

Based on current facts and circumstances, the Company believes that neither the results of its environmental proceedings nor its compliance in general with environmental laws or regulations will have a material adverse effect upon the capital expenditures, earnings or competitive position of the Company.

EXECUTIVE OFFICERS OF THE REGISTRANT

The section below summarizes the executive officers of General Mills, together with their ages and business experience:

Randy G. Darcy, age 53, is Senior Vice President, Chief Technical Officer with responsibilities for Supply Chain, Research and Development, and Quality and Regulatory Operations. Mr. Darcy joined the Company in 1987, was named Vice President, Director of Manufacturing, Technology and Operations in 1989, served as Senior Vice President, Supply Chain from 1994 to 2003 and was named to his present position in 2003. Mr. Darcy was employed by Procter & Gamble from 1973 to 1987, serving in a variety of management positions. Mr. Darcy is a director of NorthWestern Corporation.

Rory A. M. Delaney, age 59, is Senior Vice President, Strategic Technology Development. Mr. Delaney joined the Company in this position in 2001 from The Pillsbury Company where he spent a total of eight years, last serving as Senior Vice President of Technology, responsible for the development and application of food technologies for Pillsbury’s global operations. Prior to joining The Pillsbury Company, Mr. Delaney spent 18 years with PepsiCo, last serving as Senior Vice President of Technology for Frito-Lay North America.

Stephen R. Demeritt, age 60, is Vice Chairman of the Company, with responsibility for Big G Cereals, Snacks, Yoplait-Colombo, General Mills Canada, Consumer Insights and Advertising, Small Planet Foods, and the 8th Continent, Cereal Partners Worldwide and Snack Ventures Europe joint ventures. He has served as Vice Chairman since October 1999. Mr. Demeritt joined General Mills in 1969 and served in a variety of consumer food marketing positions. He was President of International Foods from 1991 to 1993 and from 1993 to 1999 was Chief Executive Officer of Cereal Partners Worldwide, our global cereal joint venture with Nestlé. Mr. Demeritt is a director of Eastman Chemical Company.

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James A. Lawrence, age 51, is Executive Vice President, Chief Financial Officer, with additional responsibility for international operations. Mr. Lawrence joined the Company as Chief Financial Officer in 1998 from Northwest Airlines where he was Executive Vice President, Chief Financial Officer. Prior to joining Northwest Airlines in 1996, he was at Pepsi-Cola International, serving initially as Executive Vice President and subsequently as President and Chief Executive Officer for its operations in Asia, the Middle East and Africa. Mr. Lawrence is a director of St. Paul Travelers Companies and Avnet, Inc.

Siri S. Marshall, age 56, is Senior Vice President, Corporate Affairs, General Counsel and Secretary. Ms. Marshall joined the Company in 1994 as Senior Vice President, General Counsel and Secretary from Avon Products, Inc. where she spent 15 years, last serving as Senior Vice President, General Counsel and Secretary.

Michael A. Peel, age 54, is Senior Vice President, Human Resources and Corporate Services. Mr. Peel joined the Company in this position in 1991 from PepsiCo where he spent 14 years, last serving as Senior Vice President, Human Resources, responsible for PepsiCo Worldwide Foods. Mr. Peel is a director of Select Comfort Corporation.

Jeffrey J. Rotsch, age 54, is Senior Vice President, President, Consumer Foods Sales. Mr. Rotsch joined the Company in 1974 and served as the president of several divisions, including Betty Crocker and Big G cereals. He was elected Senior Vice President in 1993 and named President, Consumer Foods Sales, in November 1997.

Stephen W. Sanger, age 58, has been Chairman of the Board and Chief Executive Officer of General Mills since 1995. Mr. Sanger joined the Company in 1974 and served as the head of several business units, including Yoplait USA and Big G cereals. He was elected a Senior Vice President in 1989, an Executive Vice President in 1991, Vice Chairman in 1992 and President in 1993. He is a director of Target Corporation, Wells Fargo & Company and Grocery Manufacturers of America.

Kenneth L. Thome, age 56, is Senior Vice President, Financial Operations. Mr. Thome joined the Company in 1969 and was named Vice President, Controller for Convenience and International Foods Group in 1985, Vice President, Controller for International Foods in 1989, Vice President, Director of Information Systems in 1991 and was elected to his present position in 1993.

Raymond G. Viault, age 59, is Vice Chairman of the Company with responsibility for the Meals, Baking Products, Pillsbury USA and Bakeries and Foodservice businesses. Mr. Viault joined the Company as Vice Chairman in 1996 from Philip Morris, where he had been based in Zurich, Switzerland, serving since 1990 as President of Kraft Jacobs Suchard. Mr. Viault was with Kraft General Foods a total of 20 years, serving in a variety of major marketing and general management positions. Mr. Viault has announced his intention to retire from the Company on October 1, 2004. Mr. Viault is a director of VF Corporation and Newell Rubbermaid Inc.

AVAILABLE INFORMATION

Availability of Reports. General Mills is a reporting company under the Securities Exchange Act of 1934, as amended (the 1934 Act), and files reports, proxy statements and other information with the Securities and Exchange Commission (the SEC). The public may read and copy any Company filings at the SEC’s Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Because the Company makes filings to the SEC electronically, you may access this information at the SEC’s internet site: www.sec.gov. This site contains reports, proxies and information statements and other information regarding issuers that file electronically with the SEC.

Web Site Access. Our internet Web site address is www.generalmills.com. We make available, free of charge at the “Investor Information” portion of this Web site, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the 1934 Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Reports of beneficial ownership filed pursuant to Section 16(a) of the 1934 Act are also available on our Web site.

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 with respect to annual or long-term goals of the Company. The Company and its representatives also may from time to time make written or oral forward-looking statements, including statements contained in the Company’s filings with the Commission and in its reports to stockholders.

The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project” or similar expressions identify “forward-looking statements” within the meaning of the Private Securities Litigation

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Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.

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

The Company’s future results could be affected by a variety of factors, such as:

The Company’s predictions about future debt reduction could be affected by a variety of factors, including items listed above that could impact future earnings. The debt reduction goals could also be affected by changes in economic conditions or capital market conditions, including interest rates, laws and regulations. The Company specifically declines to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events.

The Company’s debt securities are rated by rating organizations. Investors should note that a security rating is not a recommendation to buy, sell or hold securities, that it is subject to revision or withdrawal at any time by the assigning rating agency, and that each rating should be evaluated independently of any other rating.

General Mills’ principal executive offices and main research facilities are Company-owned, and are located in the Minneapolis, Minnesota metropolitan area. The Company owns and operates numerous manufacturing facilities, and maintains many sales and administrative offices and warehouses, mainly in the United States. Other facilities are operated in Canada and elsewhere around the world.

As of May 2004, General Mills operated 63 facilities for the production of a wide variety of food products. Of these plants, 36 are located in the United States, nine in Asia/Pacific, seven in Canada and Mexico, six in Europe, four in Latin America and one in South Africa.

The Company owns flour mills at eight locations: Avon, Iowa; Buffalo, New York; Great Falls, Montana; Kansas City, Missouri; Minneapolis, Minnesota (2); Vallejo, California; and Vernon, California. The Company operates seven terminal grain elevators and has country grain elevators in eight locations, plus additional seasonal elevators, primarily in Idaho.

The Company also owns or leases warehouse space aggregating approximately 10,500,000 square feet, of which approximately 8,600,000 square feet are leased. A number of sales and administrative offices are maintained by the Company in the United States, Canada, and elsewhere around the world, totaling approximately 3,000,000 square feet.

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In management’s opinion, there were no claims or litigation pending as of May 30, 2004, that could have a material adverse effect on the consolidated financial position or results of operations of the Company. See the information contained under the section entitled “Environmental Matters,” on pages 4 and 5 of this report, for a discussion of environmental matters in which the Company is involved.

On October 15, 2003, the Company announced that the Securities and Exchange Commission (SEC) had issued a formal request for information concerning the Company’s sales practices and related accounting. On February 3, 2004, the Company announced that the Staff of the SEC had issued a Wells notice reflecting the Staff’s intention to recommend that the SEC bring a civil action against the Company, its Chief Executive Officer, and its Chief Financial Officer.

The Staff indicated to the Company that its intended recommendation focused on at least two disclosure issues related to the U.S. Retail division. First, the Staff believed that the Company does not adequately disclose the practice of “loading” at the end of fiscal quarters to help meet internal sales targets or the impact of such quarter-end “loading” on current and future period results of operations. The Company understands the term “loading” in this context to mean the use of discounts or other promotional programs to encourage retailers and wholesalers to increase their purchases of Company products. Second, the Staff believed that the Company had misstated its policy on product returns. The Staff also informed the Company that its investigation is ongoing.

The Company, its Chief Executive Officer, and its Chief Financial Officer responded to the Wells notice with a written submission explaining the factual and legal bases for the Company’s belief that its sales practices comply with all applicable regulations. The SEC subsequently issued a formal request for additional information in connection with its investigation. At this time, it is not possible to predict how long the investigation will continue or whether the SEC will bring any legal action against the Company.

No matters require disclosure here.

PART II

The Company’s common stock is listed on the New York Stock Exchange. On July 20, 2004, there were approximately 37,013 record holders of the Company’s common stock. Information regarding the market prices for the Company’s common stock and dividend payments for the two most recent fiscal years is set forth in Note Nineteen to the Consolidated Financial Statements on page 47 in Item Eight of this report.

The following table sets forth information with respect to shares of common stock of the Company purchased by the Company during the three fiscal months ended May 30, 2004.

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The acquisition of Pillsbury, on October 31, 2001, significantly affected our financial condition and results of operations beginning in fiscal 2002. See Note Two to the consolidated financial statements on page 28 in Item Eight of this report.

EXECUTIVE OVERVIEW

General Mills is a global consumer foods company. We develop differentiated food products and market these value-added products under unique brand names. We work continuously on product innovation to improve our established brands and to create new products that meet consumers’ 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 businesses are organized into three segments. Our U.S. Retail segment accounted for approximately 70 percent of our fiscal 2004 net sales, and reflects business with a wide variety of grocery stores, specialty stores, drug and discount chains, and mass merchandisers operating throughout the United States. Our major product categories in this business segment are ready-to-eat cereals, meals, refrigerated and frozen dough products, baking products, snacks, yogurt and organic foods. Our Bakeries and Foodservice segment generated approximately 16 percent of fiscal 2004 net sales. This business segment consists of products marketed to retail and wholesale bakeries, and to commercial and noncommercial foodservice distributors and operators throughout the United States and Canada. The remaining 14 percent of our fiscal 2004 net sales was generated by our consolidated International businesses. These include a retail business in Canada that largely mirrors our U.S. retail product mix, along with retail and foodservice businesses competing in key markets in Europe, Latin America and the Asia/Pacific region.

In addition to these consolidated operations, we participate in several joint ventures. We record our proportionate share of after-tax earnings or losses from these ventures. In fiscal 2004, joint ventures accounted for $74 million of our after-tax earnings.

Our fundamental business goal is to generate superior returns for our shareholders over the long term by delivering consistent growth in sales and earnings, coupled with an attractive dividend yield. We have met this objective over the most recent five-year period (fiscal 1999 to 2004), as General Mills’ total return to shareholders has averaged 5 percent while the S&P 500 Index has posted a negative 2 percent average annual return over this period. However, in the most recent fiscal year the 22 percent return of the S&P 500 Index outperformed our 1 percent return.

We achieved good sales and earnings gains in fiscal 2004, which included the benefit of an extra week. For the 53-week period ended May 30, 2004, our net sales grew 5 percent and diluted earnings per share grew 13 percent. Details of our financial results are provided in the Results of Operations section below. Our cash flow in 2004 was strong, enabling us to pay out almost 40 percent of earnings as dividends, make significant fixed asset investments to support future growth and productivity, and reduce the balance of our adjusted debt plus minority interests by $572 million (see definition of adjusted debt on page 14 of this report). We have prioritized debt repayment as a use of cash for the three-year period through fiscal 2006. Our goal is to reduce the balance of our adjusted debt plus minority interests by a cumulative $2 billion by the end of 2006, and thereby improve our fixed charge coverage to the levels we demonstrated prior to our acquisition of Pillsbury in October 2001.

While our earnings results in 2004 were good overall, they fell short of our initial expectations for the year due to three principal factors. First, higher commodity costs reduced our gross margin. Second, the recent popularity of low-carbohydrate diets slowed sales in several of our major product categories. And finally, our Bakeries and Foodservice business fell well short of targeted results, due in part to the low-carbohydrate trend and higher supply chain costs. These results also reflect disruption caused by our own manufacturing realignment actions and decisions to eliminate low-margin product lines in a number of customer categories.

In fiscal 2005, we face several challenges that will hinder earnings growth. The first obvious hurdle is the fact that we

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will have one less week of business in 2005 going up against 53-week results in 2004. But beyond that, commodity prices continue to rise — our 2005 business plan assumes a significant increase in commodity costs compared to our 2004 expense. Energy costs and our salary and benefit expense are expected to be higher. And from an operations perspective, we need to stabilize trends in our Bakeries and Foodservice segment.

To partially offset the higher input costs we are experiencing, we have increased list prices on certain product lines. We also plan to increase merchandised price points for certain products. However, these actions won’t entirely cover our increased costs. We plan to capture additional supply chain productivity during 2005, and we will continue to control administrative costs companywide. We also have identified opportunities to reconfigure certain manufacturing activities to improve our cost structure.

We believe the key driver of our results in 2005 will be the success of our product innovation, which is critical to achieving unit volume growth. Our business plans include new product activity and innovations that respond to consumers’ interest in health and nutrition, convenience and new flavor varieties.

RESULTS OF OPERATIONS — 2004 vs. 2003

Net sales for the company increased 5 percent for the year compared to sales in fiscal 2003. Excluding the effect of the 53rd week, net sales increased 4 percent. The components of net sales growth are shown in the following table:

Components of Net Sales Growth
Fiscal 2004 vs. Fiscal 2003

The unit volume growth in fiscal 2004 contributed approximately $130 million in gross margin improvement (net sales less cost of sales) over fiscal 2003. However, gross margin increased by only $89 million. Increased cost of sales, driven primarily by more than $100 million in commodity cost increases, could not be fully covered by net pricing realization. As a result, gross margin as a percent of net sales decreased from 42 percent in fiscal 2003 to 41 percent in fiscal 2004.

Selling, general and administrative costs decreased by $29 million from fiscal 2003 to fiscal 2004, driven by a $36 million decrease in merger-related costs. These merger-related costs are infrequently occurring items related to the planning and execution of the integration of Pillsbury, including consulting, system conversions, relocation, training and communications.

Net interest expense decreased 7 percent from $547 million in fiscal 2003 to $508 million in fiscal 2004, primarily due to favorable interest rates. We have in place a net amount of interest rate swaps that convert $79 million of floating rate debt to fixed rates. Our portfolio of interest rate swaps has an average life of 4.0 years and has an average fixed rate of 5.3 percent. Taking into account the effect of all of our interest rate swaps, the average interest rate on our total outstanding debt as of May 30, 2004 was approximately 5.8 percent.

Restructuring and other exit costs were $26 million in fiscal 2004, as described in more detail in Note Three to the consolidated financial statements. Approximately $11 million was related to plant closures in the Netherlands, Brazil and California. We recorded an additional $7 million primarily related to adjustments of costs associated with previously announced closures of manufacturing facilities. In addition, we recorded $8 million for severance, primarily related to realignment actions in our Bakeries and Foodservice organization. Our fiscal 2003 results included restructuring and other exit costs of $62 million. These costs also are discussed in Note Three.

Our effective income tax rate was 35 percent in fiscal 2004 and 2003.

After-tax earnings from joint venture operations grew 21 percent to reach $74 million in fiscal 2004, compared with $61 million reported a year earlier. Profits for Cereal Partners Worldwide (CPW), our joint venture with Nestlé, and Snack Ventures Europe (SVE), our joint venture with PepsiCo, together grew to $58 million, 29 percent higher than last year’s profits. Häagen-Dazs joint ventures profits were partially offset by continued marketing investment for 8th Continent, the Company’s soy products joint venture with DuPont. These two ventures combined for $16 million of profit. General Mills’ proportionate share of joint venture net sales grew to $1.2 billion, compared to $1.0 billion in fiscal 2003.

Average diluted shares outstanding were 384 million in fiscal 2004, up 2 percent from 378 million in fiscal 2003 primarily due to stock option exercises.

Net income increased to $1,055 million in fiscal 2004, from $917 million in 2003. Net income per diluted share of $2.75 in 2004 was up 13 percent from $2.43 in 2003 as a result of the increased income from operations. We exceeded our debt reduction goal for the year, retiring $572 million of

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adjusted debt plus minority interests, a key internal measure that we define in our Capital Structure table on page 14.

Operating Segment Results

U.S. Retail Segment

Net sales for our U.S. Retail operations totaled $7.76 billion in fiscal 2004, compared to $7.41 billion in fiscal 2003. The components of net sales growth are shown in the following table:

Components of U.S. Retail Net Sales Growth
Fiscal 2004 vs. Fiscal 2003

Unit volume grew 4 percent versus fiscal 2003 fueled by an increase in product and marketing innovation. Without the 53rd week, unit volume grew 2 percent. All of our U.S. Retail divisions experienced volume growth for the year:

U.S. Retail Unit Volume Growth
Fiscal 2004 vs. Fiscal 2003

Big G cereal volume grew 2 percent in 2004, with contributions from new products including Berry Burst Cheerios, and gains by several key established brands such as Honey Nut Cheerios and Reese’s Puffs. Yoplait yogurt volume increased 10 percent with continued growth from established lines plus contributions from Yoplait Nouriche yogurt beverages. Snacks division volume was up 5 percent, led by growth in fruit snacks and granola bars. Meals division unit volume rose 3 percent with contributions from the line of Progresso Rich & Hearty soups introduced during the year, and from Betty Crocker dinner mixes. Unit volume growth of 2 percent for Pillsbury USA reflected gains for Totino’s pizza and hot snacks, frozen breakfast items (toaster strudel, waffles) and frozen baked goods. Baking Products division unit volume was up 4 percent.

Retail dollar sales for the Company’s major brands also grew 2 percent overall on a 52 vs. 52-week basis as measured by ACNielsen plus projections for Wal-Mart:

Retail Dollar Sales Growth (52 vs. 52-week Basis)
Fiscal 2004 vs. Fiscal 2003

Source: ACNielsen plus Wal-Mart Projections

The unit volume growth in fiscal 2004 contributed approximately $125 million in gross margin improvement over fiscal 2003, but gross margin increased by only $54 million. Increased cost of sales, driven primarily by more than $90 million in commodity cost increases, could not be fully covered by net pricing realization. As a result, gross margin as a percent of net sales decreased from 48 percent in fiscal 2003 to 46 percent in fiscal 2004.

Selling, general and administrative costs decreased by $1 million from fiscal 2003 to fiscal 2004.

Operating profits grew to $1.81 billion, up from $1.75 billion in fiscal 2003.

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Bakeries and Foodservice Segment

Net sales for our Bakeries and Foodservice operations fell to $1.76 billion in fiscal 2004 compared to $1.80 billion in fiscal 2003. The components of net sales growth are shown in the following table:

Components of Bakeries and Foodservice Net Sales
Growth Fiscal 2004 vs. Fiscal 2003

Unit volume was down 3 percent, or down 4 percent on a comparable basis, reflecting softness in our bakery business due to the popularity of diets low in carbohydrates and elimination of low-margin product lines. Unit volume by major customer category was:

Bakeries and Foodservice Unit Volume Growth
Fiscal 2004 vs. Fiscal 2003

The unit volume decline in fiscal 2004 reduced gross margin by approximately $11 million compared to 2003. However, gross margin declined by $46 million. Increased cost of sales, driven primarily by $35 million in increased manufacturing expense, could not be fully covered by net pricing realization. As a result, gross margin as a percent of net sales decreased from 25 percent in fiscal 2003 to 23 percent in fiscal 2004.

Selling, general and administrative costs decreased by $22 million from fiscal 2003 to fiscal 2004, driven primarily by an $8 million reduction in consumer marketing expense and an $8 million reduction in general administrative expense.

Operating profits fell from $156 million in fiscal 2003 to $132 million in fiscal 2004.

International Segment

Net sales for our International operations totaled $1.55 billion in fiscal 2004 compared to $1.30 billion in 2003. The components of net sales growth are shown in the following table:

Components of International Net Sales Growth
Fiscal 2004 vs. Fiscal 2003

Unit volume grew 5 percent for the year and comparable 52-week volume was up 4 percent. Canada and export operations each had 53-week years; our operations in Europe, Asia and Latin America are reported on a 12 calendar-month basis ended April 30, and therefore did not have the benefit of the 53rd week. International unit volume growth was driven by 12 percent growth in the Asia/Pacific region:

International Unit Volume Growth
Fiscal 2004 vs. Fiscal 2003

Using constant exchange rates to translate components of earnings, the unit volume increase in fiscal 2004 improved gross margin by approximately $20 million; total gross margin increased by $32 million, as net price realization maintained gross margin as a percent of sales; selling, general and administrative costs increased $18 million; and operating profit increased $14 million, or 15 percent over fiscal 2003.

Operating profits including the effects of foreign currency rate changes grew to $119 million, 31 percent above last year’s $91 million.

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Unallocated Corporate Expense

Unallocated corporate expense decreased from $76 million in fiscal 2003 to $17 million in fiscal 2004, driven primarily by a $36 million decrease in merger-related costs as the integration of Pillsbury was completed during the year.

Joint Ventures

Our share of after-tax joint venture earnings increased from $61 million in fiscal 2003 to $74 million in fiscal 2004, primarily due to unit volume gains, as follows:

Joint Ventures Unit Volume Growth
Fiscal 2004 vs. Fiscal 2003

Our joint ventures do not share our fiscal year, and therefore did not have the benefit of a 53rd week in fiscal 2004.

RESULTS OF OPERATIONS — 2003 vs. 2002

The acquisition of Pillsbury, on Oct. 31, 2001, significantly affected fiscal 2003 comparisons for our results of operations, as our fiscal 2002 results include only seven months of ownership of the Pillsbury businesses. Net earnings (including cumulative effect of change in accounting principle, adopted in fiscal 2002, as described in more detail in the section below titled “New Accounting Rules”) were $917 million, up 100 percent from fiscal 2002. Diluted earnings per share were $2.43 compared to $1.34 in fiscal 2002. Annual net sales rose 32 percent, to $10.5 billion, driven by a 30 percent increase in worldwide unit volume for fiscal 2003. The balance of the net sales growth was primarily attributable to promotional efficiencies. On a comparable basis, as if General Mills had owned Pillsbury for all of fiscal 2002, worldwide unit volume grew 3 percent. This performance reflected improvement in our U.S. Retail segment, but was constrained by economic factors limiting growth in our Bakeries and Foodservice segment and Latin American operations in our International segment.

U.S. Retail unit volume comparable for Pillsbury grew 4 percent in fiscal 2003. All of our U.S. Retail divisions experienced volume growth except Baking Products, which declined due to significant competitive promotional activity. Net sales for these operations totaled $7.41 billion in fiscal 2003, compared to $5.91 billion in fiscal 2002. Operating profits totaled $1.75 billion, up 66 percent from the prior year.

Bakeries and Foodservice results in fiscal 2003 included unit volume comparable for Pillsbury that was essentially unchanged from fiscal 2002, reflecting overall weak foodservice industry trends. Net sales reached $1.80 billion in fiscal 2003 compared to $1.26 billion in fiscal 2002, while operating profit was $156 million, up only 1 percent from the prior year in spite of the inclusion of twelve months of Pillsbury results in fiscal 2003 compared to seven months of results included in fiscal 2002.

International unit volume comparable for Pillsbury declined 1 percent in fiscal 2003, driven by a 20 percent decline in Latin America that was nearly offset by volume growth in Canada, Europe and Asia. Net sales totaled $1.30 billion in fiscal 2003 compared to $778 million in 2002, and operating profits grew to $91 million, more than double the prior year’s $45 million total.

IMPACT OF INFLATION

It is our view that changes in the general rate of inflation have not had a significant effect on profitability over the three most recent years other than as noted above related to commodities. We attempt to minimize the effects of inflation through appropriate planning and operating practices. Our market risk management practices are discussed later in this section.

CASH FLOWS

Sources and uses of cash in the past three years are shown in the following table. Over the most recent three-year period, General Mills’ operations have generated $4.0 billion in cash. In 2004, cash flow from operations totaled nearly $1.5 billion. That was down from the previous year as a $218 million increase in operating earnings before depreciation, amortization, deferred income taxes and restructuring and other exit costs was more than offset by an increase in working capital of $186 million in 2004 versus a decrease of $246 million in 2003. The increase in the use of working capital in fiscal 2004 was due primarily to three factors. One of the factors was that the accounts payable balance as of May 30, 2004 was $158 million below last year’s balance primarily due to lower accrued liabilities, such as trade promotion liabilities, driven by faster cash payments. A second factor was a reduction in miscellaneous other current liabilities of $119 million due primarily to payments against integration and restructuring liabilities. The third factor was net income tax payments in 2004 of $225 million versus net payments of $139 million in 2003.

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Cash Sources (Uses)

In fiscal 2004, capital investment for land, buildings and equipment, and intangibles fell to $653 million from $750 million last year, and included expenditures for the completion of new facilities at our Minneapolis headquarters campus and expenditures associated with the acquisition and integration of Pillsbury. We expect capital expenditures to decrease further in fiscal 2005, to between $450 and $500 million.

Dividends in 2004 totaled $1.10 per share, a payout of 40 percent of diluted earnings per share. The board of directors announced a 13 percent increase in dividends to an annual rate of $1.24 per share, effective with the dividend payable on Aug. 2, 2004.

We did not repurchase a significant number of shares in fiscal 2004, nor do we expect to repurchase a significant number of shares in fiscal 2005.

FINANCIAL CONDITION

Our notes payable and total long-term debt totaled $8.2 billion as of May 30, 2004. We also consider our leases and deferred income taxes related to tax leases as part of our debt structure, and we use a measurement of “adjusted debt plus minority interests,” as shown in the table below. This adjusted debt plus minority interests declined by $572 million, to $8.4 billion, and our stockholders’ equity grew to $5.2 billion. The market value of General Mills stockholders’ equity increased as well, as an increase in shares outstanding was partially offset by a slight decline in share price. As of May 30, 2004, our equity market capitalization was $17.5 billion, based on a price of $46.05 per share and 379 million basic shares outstanding. Our total market capitalization, including adjusted debt, minority interests and equity capital, fell from $26.2 billion as of May 25, 2003 to $25.9 billion as of May 30, 2004.

Capital Structure

In fiscal 2004 we refinanced $575 million of our short-term debt through the following issuances: $500 million of 2 percent 3-year notes that were subsequently swapped to 1-month LIBOR plus 11 basis points, and a $75 million 5-year term loan at 1-month LIBOR plus 15 basis points.

We consider our leases and deferred income taxes related to tax leases as part of our fixed-rate obligations. The next table, when reviewed in conjunction with the capital structure table, shows the composition of our debt structure including the impact of using derivative instruments.

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Debt Structure

At the end of fiscal 2004, approximately 85 percent of our adjusted debt plus minority interests was long-term.

Commercial paper is a continuing source of short-term financing. We can issue commercial paper in the United States and Canada, as well as in Europe, through a program established in fiscal 1999. Our commercial paper borrowings are supported by $1.85 billion in committed credit lines. Currently, we have no outstanding borrowings under these credit lines. The following table details the fee-paid credit lines we had available as of May 30, 2004.

Committed Credit Facilities

On June 23, 2004, we filed a Universal Shelf Registration Statement (the shelf) with the Securities and Exchange Commission covering the sale of up to $5.943 billion of debt securities, common stock, preference stock, depository shares, securities warrants, purchase contracts, purchase units and units (all described in the shelf). In addition, the shelf covers resales of an aggregate of 49,907,680 shares of our common stock owned by an affiliate of Diageo plc. When the shelf becomes effective, our existing shelf registration will be incorporated therein.

We believe that two important measures of financial strength are the ratios of fixed charge coverage and cash flow to adjusted debt plus minority interests. Our fixed charge coverage in fiscal 2004 was 3.8 times compared to 3.2 times in fiscal 2003, and cash flow to adjusted debt plus minority interests was 20 percent compared to 15 percent in fiscal 2003. We expect to pay down at least $625 million of adjusted debt plus minority interests in fiscal 2005, as part of a cumulative $2.0 billion reduction in adjusted debt plus minority interests planned over the three-year period ending in fiscal 2006. Our goal is to return to a mid single-A rating for our long-term debt, and to the top tier short-term rating, where we were prior to our announcement of the Pillsbury acquisition.

Currently, Standard and Poor’s Corporation has ratings of “BBB+” on our publicly held long-term debt and “A-2” on our commercial paper. Moody’s Investors Services, Inc. has ratings of “Baa2” for our long-term debt and “P-2” for our commercial paper. Fitch Ratings, Inc. rates our long-term debt “BBB+” and our commercial paper “F-2.” Dominion Bond Rating Service in Canada currently rates General Mills as “A-low.”

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

It is not our general business practice to enter into off-balance sheet arrangements nor is it our policy to issue guarantees to third parties. We have, however, issued guarantees of approximately $199 million for the debt and other obligations of unconsolidated affiliates, primarily CPW and SVE. In addition, off-balance sheet arrangements are generally limited to the future payments under noncancelable operating leases, which totaled approximately $435 million at May 30, 2004.

The following table summarizes our future estimated cash payments under existing contractual obligations, including payments due by period. The majority of the purchase obligations represent commitments for projected raw material and packaging needs to be utilized in the normal course of business and for consumer-directed marketing commitments that support our brands. Information concerning other long-term liabilities that consist primarily of retirement and other postretirement benefits and the fair value of outstanding interest hedges has been provided in Note Fourteen and Note Seven, respectively.