<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>10
<FILENAME>genmills023880_ex13.txt
<DESCRIPTION>2002 ANNUAL REPORT TO STOCKHOLDERS
<TEXT>
                                                                      EXHIBIT 13


MANAGEMENT'S DISCUSSION AND ANALYSIS
................................................................................

General Mills is a global consumer foods company. We compete in markets around
the world by developing differentiated food products that consumers recognize as
superior to alternative offerings. We market our value-added products under
unique brand names, and build the equity of those brands with strong
consumer-directed advertising and innovative merchandising. We believe this
brand-building strategy is the key to winning and sustaining market share
leadership. With the addition of the Pillsbury businesses, we have expanded our
portfolio of leading consumer brands. We believe that this portfolio will
generate superior financial returns for our share holders over the long term.

Our financial performance is determined by how well we execute the key elements
of our business model. These business drivers are: unit volume growth, which is
the single most critical element; productivity initiatives, to mitigate the
effects of cost inflation; efficient utilization of capital; and prudent
management of risk. This section of the annual report discusses our critical
accounting policies, the results of our operations, our liquidity and financial
condition, and our risk management practices.

CRITICAL ACCOUNTING POLICIES For a complete description of our significant
accounting policies, please see Note One on page 24 of this report. Our critical
accounting policies are those that have meaningful impact on the reporting of
our financial condition and results, and that require significant management
judgment and estimates. These policies include our accounting for (a) trade and
consumer promotion activities; (b) asset impairments; and (c) income taxes.

The amount and timing of expense recognition for trade and consumer promotion
activities involve management judgment related to estimated participation and
performance levels. The vast majority of year-end liabilities associated with
these activities are resolved within the following fiscal year and therefore do
not require highly uncertain long-term estimates.

Evaluating the impairment of long-lived assets, including goodwill, involves
management judgment in estimating the fair values and future cash flows related
to these assets. Although the predictability of long-term cash flows may be
somewhat uncertain, our evaluations indicate fair values of assets significantly
in excess of stated book values. Therefore, we believe the risk of unrecognized
impairment is low.

Income tax expense involves management judgment as to the ultimate resolution of
any tax issues. Historically, our assessments of the ultimate resolution of tax
issues have been reasonably accurate. The current open issues are not dissimilar
from historical items.

NEW ACCOUNTING RULES ADOPTED In fiscal 2002, we adopted four new accounting
policies, all required by new accounting standards. Each of these new rules is
discussed in more detail in Note One (N) to the consolidated financial
statements.

At the beginning of the year, we adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which requires all derivatives to be recorded at fair value on the
balance sheet and establishes new accounting rules for hedging. The cumulative
effect of adopting this accounting change was a $3 million after-tax charge to
earnings and a $158 million after-tax charge to Accumulated Other Comprehensive
Income, recorded in the first quarter of fiscal 2002.

SFAS No. 141, "Business Combinations," requires all business combinations to be
accounted for using the purchase method. The Pillsbury transaction was accounted
for as a purchase. Under SFAS No. 142, "Goodwill and Other Intangible Assets,"
the amortization of goodwill is eliminated and goodwill is tested for
impairment. We completed our assessment of goodwill in the second quarter of
2002 and found no impairment.

In the fourth quarter of 2002, we adopted Emerging Issues Task Force (EITF)
Issue 01-09, which resulted in the reclassification of certain coupon and trade
promotion expenses from selling, general and administrative expenses to a
reduction of net sales. All sales and selling, general and administrative
expenses throughout this report and our consolidated financial statements
reflect the adoption of Issue 01-09.


12
<PAGE>


................................................................................

RESULTS OF OPERATIONS - 2002 VS. 2001 The acquisition of The Pillsbury Company,
on Oct. 31, 2001, significantly affected fiscal 2002 comparisons for our results
of operations. Annual net sales rose 46 percent, to $7.95 billion, including
seven months of Pillsbury results. Worldwide unit volume for fiscal 2002 was 49
percent above last year's. However, on a comparable basis, as if General Mills
had owned Pillsbury for all of fiscal 2001 and 2002, worldwide unit volume grew
only slightly. This performance, caused by the initial disruption of combining
General Mills' and Pillsbury's organizations, was significantly below General
Mills' historical trends and reduced our earnings in fiscal 2002.

The Pillsbury acquisition also materially altered our business structure. Our
Bakeries and Foodservice and International business segments, which now
represent larger portions of our sales and earnings, have lower gross margins
than General Mills' historical margin. These businesses also are generally
supported with lower marketing spending as a percent of sales.

Cost of goods sold as a percent of sales rose from 52 percent in fiscal 2001 to
60 percent in 2002. The increase was due to our new business structure, along
with weak unit volume trends that greatly reduced operating leverage.

Selling, general and administrative costs declined as a percent of sales, from
26 percent in fiscal 2001 to 24 percent in fiscal 2002. This reflects lower
marketing spending levels in Bakeries and Foodservice and International, and the
benefit of administrative cost synergies achieved in the second half of the
year.

Earnings before interest, taxes and unusual items (EBIT) grew 9 percent to $1.27
billion. Earnings after tax declined 10 percent before unusual items, reflecting
the impact of additional interest expense associated with the Pillsbury
acquisition. Average diluted shares outstanding were 342 million in 2002, up 17
percent from 292 million in fiscal 2001 due to the additional shares issued to
Diageo. Diluted earnings per share excluding unusual items and the effect of
adopting SFAS No. 133 discussed earlier were $1.70, 25 percent lower than the
$2.28 earned in 2001 (comparable for the elimination of goodwill amortization).

Our fiscal 2002 net results included unusual items expense of $190 million
pretax, $120 million after tax, or 35 cents per diluted share. After unusual
items and the accounting change, our net diluted EPS was $1.34 compared to $2.28
in fiscal 2001. These unusual expenses primarily were related to Pillsbury
transaction and integration costs, and costs for reconfiguring General Mills'
cereal manufacturing necessitated by the sale of our Toledo, Ohio, plant as
required to obtain regulatory clearance for the acquisition of Pillsbury. Other
fiscal 2002 unusual items included expenses related to our decision in fiscal
2001 to exit the Squeezit beverage business, flour mill restructuring/closing
charges and expenses net of insurance recovery associated with a flash flood in
July 2001 at our Cincinnati, Ohio, cereal plant. These expenses were partially
offset by insurance settlement proceeds related to a 1994 oats handling
incident. We anticipate additional unusual expense related to Pillsbury
transaction and integration activities in fiscal 2003. Our current estimate of
this unusual expense is approximately $100 million pretax.

FISCAL 2002
OPERATING PROFIT
BY SEGMENT
(before unusual items)

[PIE CHART]

U.S. Retail                85%
Bakeries and Foodservice   12%
International               3%

U.S. RETAIL SEGMENT Our U.S. Retail segment includes Big G cereals, Meals,
Pillsbury USA, Baking Products, Snacks, Yoplait-Colombo and Small Planet Foods.
Net sales for these operations totaled $6.14 billion in fiscal 2002, compared to
$4.79 billion in fiscal 2001. Operating profits before unusual items totaled
$1.07 billion, up 1 percent from the prior year. Comparable unit volume was 1
percent below the prior year, primarily due to the disruption caused by our
sales force integration, as well as a reduced level of new products and
promotional activity during the integration period. Volume gains in
Yoplait-Colombo, Snacks and Pillsbury USA were more than offset by declines in
Big G cereals, Meals and Baking Products.

BAKERIES AND FOODSERVICE SEGMENT Our Bakeries and Foodservice business includes
sales to wholesale and retail bakeries, foodservice distributors, convenience
stores, vending and foodservice operators. Net sales for our Bakeries and
Foodservice operations reached $1.03 billion in fiscal 2002 compared to $397
million in fiscal 2001, and operating profits before unusual items rose 60
percent to $146 million, reflecting the incremental contribution from
Pillsbury's operations and good growth in General Mills' foodservice business.
Comparable unit volume was essentially unchanged, reflecting overall weak
foodservice industry trends and lower results for our in-store retail bakery
segment.


                                                                              13
<PAGE>


INTERNATIONAL SEGMENT Our International operations include our business in
Canada, as well as our consolidated operations in Europe, Asia and Latin
America. With the addition of Pillsbury's international businesses, net sales
for our International operations totaled $778 million in fiscal 2002 compared to
$263 million in 2001. Operating profits before unusual items grew to $45
million, more than double last year's $17 million total. Comparable unit volume
rose 4 percent for the year, driven by good growth in Canada, Europe and Asia.

CORPORATE ITEMS Interest expense roughly doubled in fiscal 2002 to $416 million,
as we incurred additional debt related to our Pillsbury acquisition and our
repurchase of 55 million shares from Diageo. We have entered into interest rate
swap contracts to lock in our interest rate on floating-rate debt. These
contracts total a net $3.5 billion in notional amount and convert floating-rate
debt to an average fixed rate of approximately 6 percent with maturities
averaging three years. Taking into account the effect of these interest rate
swaps, the average interest rate on our total debt is approximately 6 1/2
percent. For fiscal 2003, we estimate our interest expense will be approximately
$600 million. Our effective tax rate in fiscal 2002 was 36 percent. We expect
our tax rate for fiscal 2003 to be a maximum of 35 1/2 percent, and we may be
able to reduce it further during the year.

JOINT VENTURE EARNINGS
(after tax, dollars in millions)

[BAR CHART]

98     -9
99    -15
00      3
01     17
02     33

JOINT VENTURES General Mills' proportionate share of joint venture net sales
grew to $777 million, compared to $666 million in fiscal 2001. Total after-tax
earnings from joint venture operations reached $33 million in fiscal 2002,
compared with $17 million reported a year earlier. Profits for Cereal Partners
Worldwide (CPW), our joint venture with Nestle, and Snack Ventures Europe (SVE),
our joint venture with PepsiCo, together grew to $31 million. In addition,
Haagen-Dazs joint ventures established by Pillsbury in Asia contributed profits
for the six months included in our results. These profit gains were partially
offset by introductory marketing expense of 8th Continent, the Company's soymilk
joint venture with DuPont.

FISCAL 2001 RESULTS VS. 2000 In fiscal 2001, net sales grew 5 percent to $5.45
billion. Operating profits grew 6 percent to $1.17 billion before an unusual
gain from a partial insurance settlement related to a 1994 oats handling
incident. Earnings after tax excluding unusual items grew 5 percent to $643
million. Excluding unusual items, diluted earnings per share comparable for
goodwill grew 10 percent to $2.28, up from $2.07 in fiscal 2000. Net earnings
after tax were $665 million in fiscal 2001 compared to $614 million in fiscal
2000. Net earnings per diluted share comparable for goodwill were $2.35 compared
to $2.07 in fiscal 2000. Net earnings per diluted share as reported were $2.28
vs. $2.00 in fiscal 2000.

Total U.S. Retail unit volume grew 4 percent in fiscal 2001, led by gains in Big
G cereals, Yoplait-Colombo and Snacks. Net sales grew 5 percent to $4.79
billion. Operating profits grew 4 percent to $1.06 billion. Foodservice results
in 2001 included 9 percent unit volume growth. Net sales and operating profit
each grew 12 percent, to $397 million and $91 million, respectively.
International unit volume grew 10 percent with gains across our business. Net
sales were up 2 percent to $263 million and operating profit was essentially
flat at $17 million.

Fiscal 2000 earnings before unusual items grew 8 percent to $614 million.
Diluted earnings per share before unusual items and comparable for goodwill grew
12 percent to $2.07 from $1.85. Net earnings after tax grew to $614 million
compared to $535 million for fiscal 1999. Net earnings per diluted share
comparable for goodwill grew to $2.07 from $1.75. Net earnings per diluted share
as reported increased to $2.00 from $1.70 in fiscal 1999. Net sales grew 7
percent to reach $5.2 billion.

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. 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 $2.4 billion in cash. In 2002, cash flow from
operations totaled $916 million. That was up from the previous year due to
higher operating earnings before depreciation, amortization and unusual items,
as well as decreased use of working capital, partially offset by components of
our earnings which did not generate operating cash flows: pension income and
joint venture earnings.

CASH FLOW FROM OPERATIONS
(dollars in millions)

[BAR CHART]

98     805
99     713
00     725
01     740
02     916


14
<PAGE>


CASH SOURCES (USES)

<TABLE>
<CAPTION>
In Millions, Fiscal Year                                         2002        2001        2000
---------------------------------------------------------------------------------------------
<S>                                                          <C>         <C>         <C>
From continuing operations                                   $    916    $    740    $    725
From discontinued operations                                       (3)         (3)         (3)
Fixed assets, net                                                (485)       (306)       (262)
Investments in businesses, intangibles and affiliates, net     (3,688)        (96)       (295)
Change in marketable securities                                    24         (28)         (6)
Proceeds from disposition of businesses                           939          --          --
Other investments, net                                            (61)        (30)         (1)
Increase in outstanding debt, net                               5,746         183         956
Proceeds from minority investors                                  150          --          --
Common stock issued                                               139         107          76
Treasury stock purchases                                       (2,436)       (226)       (820)
Dividends paid                                                   (358)       (312)       (329)
Other                                                              28          10         (20)
---------------------------------------------------------------------------------------------
Increase in Cash and Cash Equivalents                        $    911    $     39    $     21
=============================================================================================
</TABLE>

In fiscal 2002, capital investment for fixed assets grew to $540 million,
including seven months of Pillsbury fixed asset spending. We expect capital
expenditures to increase in fiscal 2003, to approximately $750 million. Regular
capital investment will grow as we support a full year of Pillsbury-related
fixed asset spending. We also plan to add capacity for fast-growing businesses
such as YOPLAIT yogurt. In addition, we have two acquisition-related projects
requiring capital expenditures in 2003. We have construction costs to expand our
headquarters so that we can consolidate at one location. We also are integrating
Pillsbury into General Mills' information systems.

In order to obtain regulatory clearance for the acquisition of Pillsbury, we
arranged to divest certain businesses as described more fully in Note Two on
page 26 of this report. In addition, Nestle USAexercised its right, triggered by
the change of ownership of Pillsbury, to purchase our stake in a joint venture.
Net cash proceeds from these dispositions of $939 million were used to reduce
our debt level.

Dividends in 2002 totaled $1.10 per share, a payout of 65 percent of diluted
earnings per share before unusual items. We intend to maintain the prevailing
$1.10 annual dividend rate per share in fiscal 2003. We currently estimate that
average diluted shares outstanding in fiscal 2003 will increase to 382 million.

Cash used for share repurchases in 2002 totaled $2.44 billion. Of that, $2.32
billion was used to repurchase 55 million shares from Diageo at a price of
$42.14 per share. The company repurchased an additional 3.2 million shares on
the open market at an average price of approximately $28, net of put and call
option premiums. We do not expect to repurchase any significant number of shares
in fiscal 2003.

FINANCIAL CONDITION Our balance sheet changed significantly with the acquisition
of Pillsbury. As shown in the table below, our adjusted debt plus minority
interest grew to over $9 billion, and our stockholders' equity grew to $3.6
billion due to the net 79 million shares issued to Diageo. The market value of
General Mills stockholders' equity increased as well, due to price appreciation
and the increase in shares outstanding. As of May 26, 2002, our equity market
capitalization was $16.6 billion, based on a price of $45.10 per share with 367
million basic shares outstanding. Our total market capitalization, including
debt, minority interest and equity capital, is shown in the chart at right.

TOTAL CAPITALIZATION
(at fiscal year-end, dollars in billions)

[BAR CHART]

                                     ADJUSTED DEBT
       MARKET VALUE OF EQUITY    PLUS MINORITY INTEREST

00             11.7                       3.5
01             12.0                       3.6
02             16.6                       9.1


CAPITAL STRUCTURE

<TABLE>
<CAPTION>
In Millions                                           MAY 26, 2002      May 27, 2001
------------------------------------------------------------------------------------
<S>                                                       <C>               <C>
Notes payable                                             $  3,600          $    858
Current portion of long-term debt                              248               349
Long-term debt                                               5,591             2,221
Deferred income taxes - tax leases                              71                74
------------------------------------------------------------------------------------
Total debt                                                   9,510             3,502
Debt adjustments:
   Leases - debt equivalent                                    423               266
   Certain cash and cash equivalents                          (894)               --
   Marketable investments, at cost                            (135)             (143)
------------------------------------------------------------------------------------
Adjusted debt                                                8,904             3,625
Minority interest                                              153                --
------------------------------------------------------------------------------------
Adjusted debt plus minority interest                         9,057             3,625
Stockholders' equity                                         3,576                52
------------------------------------------------------------------------------------
Total Capital                                             $ 12,633          $  3,677
====================================================================================
</TABLE>

On Oct. 31, 2001, when we acquired Pillsbury, the associated debt we took on was
primarily short term. In February 2002, we issued $3.5 billion in five- and
10-year bonds, replacing a portion of that short-term debt. As discussed
earlier, we have entered into interest rate swap contracts to lock in our
interest rate on our floating-rate debt. Combined, nearly 90 percent of our debt
is now fixed rate. We consider our leases and deferred income taxes related to
tax leases as part of our debt structure, and both are 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.


                                                                              15
<PAGE>


DEBT STRUCTURE

<TABLE>
<CAPTION>
In Millions                                     MAY 26, 2002         May 27, 2001
------------------------------------------------------------------------------------
<S>                                           <C>          <C>     <C>          <C>
Floating-rate                                 $  602         7%    $1,974        55%
Fixed-rate                                     7,961        88%     1,311        36%
Leases - debt equivalent                         423         4%       266         7%
Deferred income taxes - tax leases                71         1%        74         2%
------------------------------------------------------------------------------------
Adjusted Debt plus Minority Interest          $9,057       100%    $3,625       100%
====================================================================================
</TABLE>

At the end of fiscal 2002, approximately half of our debt was long term, 41
percent was short term (excluding the impact of reclassification from our
long-term credit facility), and the balance was leases and tax-benefit leases.
We plan to refinance the majority of our short-term debt with long-term debt in
fiscal 2003.

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. The table below details the fee-paid credit
lines we had available as of May 26, 2002. We have $4 billion in committed
credit lines available to us, $2.1 billion as part of our core facilities and
$1.9 billion as part of a bridge facility we set up at the time of the
acquisition. Additionally, we have $45 million in uncommitted credit lines
available.

COMMITTED CREDIT FACILITIES

<TABLE>
<CAPTION>
                                                              Amount        Expiration
--------------------------------------------------------------------------------------
<S>                                                    <C>                <C>
Core Facilities                                        $1.05 billion      January 2003
                                                       $1.05 billion      January 2006
Bridge Facility                                        $1.90 billion      October 2002
--------------------------------------------------------------------------------------
Total Credit Lines                                     $4.00 billion
======================================================================================
</TABLE>

We believe that two important measures of financial strength are the ratios of
fixed charge coverage and cash flow to debt. With the increased debt associated
with our acquisition, our fixed charge coverage in fiscal 2002 was 2.9 times
before unusual items, and cash flow to debt was 10 percent. We do not expect to
pay down any significant amount of debt in 2003. However, given the cash
generating nature of our business, we expect that stronger cash flow over the
following years will allow us to reduce our debt and significantly strengthen
our ratios. 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 "Baa1" 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."

In fiscal 2002, we established a minority interest structure, which provides
some attractive opportunities for us to refinance some of our short-term debt.
In May, we sold a minority interest in a subsidiary to a third-party investor
for $150 million. This subsidiary holds some of our manufacturing assets and
trademarks. All assets, liabilities and results of operations of the subsidiary
are reflected in our financial statements, and the third party's investment is
reflected as minority interest on our balance sheet. We did not have any
preferred distribution obligations to the third-party investor in fiscal 2002.
We may sell additional minority interests, as this structure may provide
favorable financing terms, be viewed more positively by the rating agencies and
generate tax efficiencies. Subsequent to fiscal year end, we sold a minority
interest in another subsidiary for $150 million. For more information on these
minority interests, refer to Note Nine on page 32 of this report.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

LONG-TERM FINANCIAL OBLIGATIONS

<TABLE>
<CAPTION>
                                                 Less Than
In Millions, Payments Due by Period       Total     1 Year    1-3 Years   4-5 Years   After 5 Years
---------------------------------------------------------------------------------------------------
<S>                                      <C>        <C>          <C>         <C>             <C>
Long-term debt, including
   current maturities                    $5,839     $  248       $  329      $1,590          $3,672
Operating leases                            287         59           79          53              96
---------------------------------------------------------------------------------------------------
Total                                    $6,126     $  307       $  408      $1,643          $3,768
===================================================================================================
</TABLE>

Our other commercial commitments as of May 26, 2002, include:

*  Guarantees of approximately $212 million of debt and other obligations of
   unconsolidated affiliates, primarily CPW and SVE.

*  Commitments for the purchase of goods, services and equipment to be used in
   the production of our products for approximately $500 million with terms up
   to three years. These commitments do not exceed projected requirements over
   the related terms and are in the normal course of business.

We are contingently liable for the payment of up to $395 million to Diageo,
depending on the General Mills stock price during the 20-day period preceding
April 30, 2003.

EURO CONVERSION Twelve of the 15 member countries of the European Economic and
Monetary Union adopted the euro as a common legal currency in January 2002.
General Mills' operating subsidiaries affected have addressed the systems and
business issues raised by the euro currency conversion. These issues included,
among others (1) the need to adapt computer and other business systems and
equipment to accommodate euro-denominated transactions; and (2) the competitive
impact of cross-border price transparency. The euro conversion has not had
material impact on General Mills' operations or financial results.


16
<PAGE>


MARKET RISK MANAGEMENT Our Company is exposed to market risk stemming from
changes in interest rates, foreign exchange rates and commodity 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 company policies
that place clear controls on these activities. The counterparties in these
transactions are highly rated financial institutions. Our hedging transactions
include (but are not limited to) the use of a variety of derivative financial
instruments. We use derivatives only where there is an underlying exposure; we
do not use them for trading or speculative purposes. Additional information
regarding our use of financial instruments is included in Note Seven to the
consolidated financial statements.

INTEREST RATES - We manage our debt structure and our interest rate risk through
the use of fixed- and floating-rate debt, and through the use of derivatives. We
use interest rate swaps to hedge our exposure to interest rate changes, and also
to lower our financing costs. 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. Our primary
exposure is to U.S. interest rates.

FOREIGN CURRENCY RATES - Foreign currency fluctuations can affect our net
investments and earnings denominated in foreign currencies. We primarily use
foreign currency forward contracts and option contracts to selectively hedge our
cash flow exposure to changes in exchange rates. These contracts function as
hedges, since they change in value inversely to the change created in the
underlying exposure as foreign exchange rates fluctuate. Our primary exchange
rate exposure is with the Canadian dollar, the euro, the Japanese yen and the
British pound against the U.S. dollar.

COMMODITIES - Certain ingredients used in our products are exposed to commodity
price changes. We manage this risk through an integrated set of financial
instruments, including purchase orders, noncancelable contracts, futures
contracts, futures options and swaps. Our primary commodity price exposures are
to cereal grains, sugar, vegetables, fruits, other agricultural products,
vegetable oils, packaging materials and energy costs.

VALUE AT RISK - These estimates are intended to measure the maximum potential
fair value General Mills could lose in one day from adverse changes in market
interest rates, foreign exchange rates or commodity prices, under normal market
conditions. A Monte Carlo (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 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
RiskMetrics(TM) 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 and options; and
commodity swaps, futures and options. 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 one-day loss in fair
value for our interest rate, foreign currency and commodity
market-risk-sensitive instruments outstanding on May 26, 2002. The amounts were
calculated using the VAR methodology described earlier.

<TABLE>
<CAPTION>
                                                               Fair Value Impact
------------------------------------------------------------------------------------------
In Millions                        AT MAY 26, 2002   Average during 2002   At May 27, 2001
------------------------------------------------------------------------------------------
<S>                                            <C>                   <C>               <C>
Interest rate instruments                      $39                   $36               $28
Foreign currency instruments                     1                     1                 1
Commodity instruments                            1                     1                 1
==========================================================================================
</TABLE>

FORWARD-LOOKING STATEMENTS Throughout this report to shareholders, we discuss
some of our expectations regarding the Company's future performance. All of
these forward-looking statements are based on our current expectations and
assumptions. Such statements are subject to certain risk and uncertainties that
could cause actual results to differ.

In particular, our predictions about future volume and earnings could be
affected by difficulties resulting from the Pillsbury acquisition, such as
integration problems; failure to achieve synergies; unanticipated liabilities;
inexperience in new business lines; and changes in the competitive environment.
Our future results also could be affected by a variety of additional factors
such as: competitive dynamics in the U.S. ready-to-eat cereal market, including
pricing and promotional spending levels by competitors; the impact of
competitive products and pricing; product development; actions of competitors
other than as described above; acquisitions or disposals of business assets;
changes in capital structure; changes in laws and regulations, including changes
in accounting standards; customer demand; effectiveness of advertising and
marketing spending or programs; consumer perception of health-related issues;
and economic conditions including currency rate fluctuations. The Company
undertakes no obligation to publicly revise any forward-looking statements to
reflect future events or circumstances.


                                                                              17
<PAGE>


SIX-YEAR FINANCIAL SUMMARY                              General Mills, Inc. 2002

<TABLE>
<CAPTION>
In Millions, Except per Share Data           MAY 26, 2002   May 27, 2001   May 28, 2000   May 30, 1999   May 31, 1998
---------------------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>            <C>            <C>
FINANCIAL RESULTS
Earnings per share - basic                        $  1.38        $  2.34        $  2.05        $  1.74        $  1.33
Earnings per share - diluted                         1.34           2.28           2.00           1.70           1.30
Dividends per share                                  1.10           1.10           1.10           1.08           1.06
Return on average total capital                       9.1%          23.6%          24.4%          23.7%          20.0%
Net sales                                           7,949          5,450          5,173          4,834          4,736
Costs and expenses:
   Cost of sales                                    4,767          2,841          2,698          2,593          2,538
   Selling, general and administrative              1,909          1,440          1,376          1,223          1,248
   Interest, net                                      416            206            152            119            117
   Unusual expenses (income)                          190            (35)            --             41            156
Earnings before taxes and earnings (losses) of
   joint ventures                                     667            998            947            858            677
Income taxes                                          239            350            336            308            246
Earnings (losses) of joint ventures                    33             17              3            (15)            (9)
Earnings before accounting changes                    461            665            614            535            422
Accounting changes                                     (3)            --             --             --             --
Earnings including accounting changes                 458            665            614            535            422
Earnings before interest, taxes and unusual items   1,273          1,169          1,099          1,018            950
Earnings before interest, taxes and unusual
   items as a % of sales                             16.0%          21.4%          21.2%          21.1%          20.1%
Earnings before interest, taxes, depreciation,
   amortization and unusual items                   1,569          1,392          1,308          1,212          1,145
Earnings as a % of sales                              5.8%          12.2%          11.9%          11.1%           8.9%
Average common shares:
   Basic                                              331            284            299            306            316
   Diluted                                            342            292            307            315            325
---------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total assets                                       16,540          5,091          4,574          4,141          3,861
Land, buildings and equipment, net                  2,764          1,501          1,405          1,295          1,186
Working capital at year-end                        (2,310)          (801)        (1,339)          (598)          (408)
Long-term debt, excluding current portion           5,591          2,221          1,760          1,702          1,640
Stockholders' equity                                3,576             52           (289)           164            190
---------------------------------------------------------------------------------------------------------------------
OTHER STATISTICS
Total dividends                                       358            312            329            331            336
Purchases of land, buildings and equipment            506            307            268            281            184
Research and development                              131             83             77             70             66
Advertising media expenditures                        489            358            361            348            366
Wages, salaries and employee benefits               1,105            666            644            636            608
Number of employees (actual)                       29,859         11,001         11,077         10,664         10,228
---------------------------------------------------------------------------------------------------------------------
Common stock price:
   High for year                                    52.86          46.35          43.94          42.34          39.13
   Low for year                                     41.61          31.38          29.38          29.59          30.00
   Year-end                                         45.10          42.20          41.00          40.19          34.13
=====================================================================================================================
</TABLE>

ALL SHARE AND PER SHARE DATA HAVE BEEN ADJUSTED FOR THE TWO-FOR-ONE STOCK SPLIT
IN NOVEMBER 1999.

ALL SALES-RELATED AND SELLING, GENERAL AND ADMINISTRATIVE INFORMATION PRIOR TO
FISCAL 2002 HAS BEEN RESTATED FOR THE ADOPTION OF EITF ISSUE 01-09.


18
<PAGE>


INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of General Mills,
Inc. and subsidiaries as of May 26, 2002 and May 27, 2001, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the fiscal years in the three-year period ended May 26, 2002. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

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 26, 2002 and May 27, 2001, and the results of their
operations and their cash flows for each of the fiscal years in the three-year
period ended May 26, 2002 in conformity with accounting principles generally
accepted in the United States of America.


/s/ KPMG LLP

Minneapolis, Minnesota
June 24, 2002


                                                                              19
<PAGE>


CONSOLIDATED STATEMENTS OF EARNINGS                     General Mills, Inc. 2002

<TABLE>
<CAPTION>
In Millions, Except per Share Data, Fiscal Year Ended                    MAY 26, 2002    May 27, 2001    May 28, 2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>             <C>             <C>
Net Sales                                                                     $ 7,949         $ 5,450         $ 5,173
Costs and Expenses:
   Cost of sales                                                                4,767           2,841           2,698
   Selling, general and administrative                                          1,909           1,440           1,376
   Interest, net                                                                  416             206             152
   Unusual items - expense (income)                                               190             (35)             --
---------------------------------------------------------------------------------------------------------------------
      Total Costs and Expenses                                                  7,282           4,452           4,226
---------------------------------------------------------------------------------------------------------------------
Earnings before Taxes and Earnings from Joint Ventures                            667             998             947
Income Taxes                                                                      239             350             336
Earnings from Joint Ventures                                                       33              17               3
---------------------------------------------------------------------------------------------------------------------
Earnings before Cumulative Effect of Change in Accounting Principle               461             665             614
Cumulative Effect of Change in Accounting Principle                                (3)             --              --
---------------------------------------------------------------------------------------------------------------------
Net Earnings                                                                  $   458         $   665         $   614
=====================================================================================================================

Earnings per Share - Basic:
   Earnings before cumulative effect of change in accounting principle        $  1.39         $  2.34         $  2.05
   Cumulative effect of change in accounting principle                           (.01)             --              --
---------------------------------------------------------------------------------------------------------------------
      Net Earnings per Share - Basic                                          $  1.38         $  2.34         $  2.05
=====================================================================================================================
Average Number of Common Shares                                                   331             284             299
=====================================================================================================================

Earnings per Share - Diluted:
   Earnings before cumulative effect of change in accounting principle        $  1.35         $  2.28         $  2.00
   Cumulative effect of change in accounting principle                           (.01)             --              --
---------------------------------------------------------------------------------------------------------------------
      Net Earnings per Share - Diluted                                        $  1.34         $  2.28         $  2.00
=====================================================================================================================
Average Number of Common Shares - Assuming Dilution                               342             292             307
=====================================================================================================================
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


20
<PAGE>


CONSOLIDATED BALANCE SHEETS                             General Mills, Inc. 2002

<TABLE>
<CAPTION>
In Millions                                                                             MAY 26, 2002     May 27, 2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>              <C>
ASSETS
Current Assets:
   Cash and cash equivalents                                                                $    975         $     64
   Receivables, less allowance for doubtful accounts of $21 in 2002 and $6 in 2001             1,010              664
   Inventories                                                                                 1,055              519
   Prepaid expenses and other current assets                                                     156               99
   Deferred income taxes                                                                         241               62
---------------------------------------------------------------------------------------------------------------------
      Total Current Assets                                                                     3,437            1,408
Land, Buildings and Equipment at cost, net                                                     2,764            1,501
Goodwill                                                                                       8,473              804
Other Intangible Assets                                                                           90               66
Other Assets                                                                                   1,776            1,312
---------------------------------------------------------------------------------------------------------------------
Total Assets                                                                                $ 16,540         $  5,091
=====================================================================================================================

LIABILITIES AND EQUITY
Current Liabilities:
   Accounts payable                                                                         $  1,217         $    619
   Current portion of long-term debt                                                             248              349
   Notes payable                                                                               3,600              858
   Other current liabilities                                                                     682              383
---------------------------------------------------------------------------------------------------------------------
      Total Current Liabilities                                                                5,747            2,209
Long-term Debt                                                                                 5,591            2,221
Deferred Income Taxes                                                                            336              349
Deferred Income Taxes - Tax Leases                                                                71               74
Other Liabilities                                                                              1,066              186
---------------------------------------------------------------------------------------------------------------------
      Total Liabilities                                                                       12,811            5,039
---------------------------------------------------------------------------------------------------------------------
Minority Interest                                                                                153               --
Stockholders' Equity:
   Cumulative preference stock, none issued                                                       --               --
   Common stock, 502 shares issued in 2002 and 408 shares issued in 2001                       5,733              745
   Retained earnings                                                                           2,568            2,468
   Less common stock in treasury, at cost, 135 shares in 2002 and 123 shares in 2001          (4,292)          (3,014)
   Unearned compensation                                                                         (57)             (54)
   Accumulated other comprehensive income                                                       (376)             (93)
---------------------------------------------------------------------------------------------------------------------
      Total Stockholders' Equity                                                               3,576               52
---------------------------------------------------------------------------------------------------------------------
Total Liabilities and Equity                                                                $ 16,540         $  5,091
=====================================================================================================================
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                                              21
<PAGE>


CONSOLIDATED STATEMENTS OF CASH FLOWS                   General Mills, Inc. 2002

<TABLE>
<CAPTION>
In Millions, Fiscal Year Ended                                                        MAY 26, 2002    May 27, 2001    May 28, 2000
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>             <C>             <C>
Cash Flows - Operating Activities:
   Net earnings                                                                            $   458         $   665         $   614
   Adjustments to reconcile net earnings to cash flow:
      Depreciation and amortization                                                            296             223             209
      Deferred income taxes                                                                     93              49              44
      Changes in current assets and liabilities, excluding effects from businesses
        acquired                                                                                37             (73)           (126)
      Tax benefit on exercised options                                                          46              33              34
      Cumulative effect of change in accounting principle                                        3              --              --
      Unusual items expense (income)                                                           190             (35)             --
      Other, net                                                                              (207)           (122)            (50)
----------------------------------------------------------------------------------------------------------------------------------
   Cash provided by continuing operations                                                      916             740             725
   Cash used by discontinued operations                                                         (3)             (3)             (3)
----------------------------------------------------------------------------------------------------------------------------------
         Net Cash Provided by Operating Activities                                             913             737             722
----------------------------------------------------------------------------------------------------------------------------------
Cash Flows - Investment Activities:
   Purchases of land, buildings and equipment                                                 (506)           (307)           (268)
   Investments in businesses, intangibles and affiliates, net of investment returns
     and dividends                                                                          (3,688)            (96)           (295)
   Purchases of marketable securities                                                          (46)            (98)            (18)
   Proceeds from sale of marketable securities                                                  70              70              12
   Proceeds from disposal of land, buildings and equipment                                      21               1               6
   Proceeds from disposition of businesses                                                     939              --              --
   Other, net                                                                                  (61)            (30)             (1)
----------------------------------------------------------------------------------------------------------------------------------
         Net Cash Used by Investment Activities                                             (3,271)           (460)           (564)
----------------------------------------------------------------------------------------------------------------------------------
Cash Flows - Financing Activities:
   Change in notes payable                                                                   2,688             295             566
   Issuance of long-term debt                                                                3,485             296             501
   Payment of long-term debt                                                                  (427)           (408)           (111)
   Proceeds from minority investors                                                            150              --              --
   Common stock issued                                                                         139             107              76
   Purchases of common stock for treasury                                                   (2,436)           (226)           (820)
   Dividends paid                                                                             (358)           (312)           (329)
   Other, net                                                                                   28              10             (20)
----------------------------------------------------------------------------------------------------------------------------------
         Net Cash Provided (Used) by Financing Activities                                    3,269            (238)           (137)
----------------------------------------------------------------------------------------------------------------------------------
Increase in Cash and Cash Equivalents                                                          911              39              21
Cash and Cash Equivalents - Beginning of Year                                                   64              25               4
----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents - End of Year                                                    $   975         $    64         $    25
==================================================================================================================================

Cash Flows from Changes in Current Assets and Liabilities, Excluding Effects from
  Businesses Acquired:
   Receivables                                                                             $   265         $   (94)        $    11
   Inventories                                                                                 (12)             (9)            (51)
   Prepaid expenses and other current assets                                                    12             (17)             (5)
   Accounts payable                                                                            (90)              7             (50)
   Other current liabilities                                                                  (138)             40             (31)
----------------------------------------------------------------------------------------------------------------------------------
Changes in Current Assets and Liabilities                                                  $    37         $   (73)        $  (126)
==================================================================================================================================
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


22
<PAGE>


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY         General Mills, Inc. 2002

<TABLE>
<CAPTION>
                                                $.10 Par Value Common Stock
                                              (One Billion Shares Authorized)
                                             -----------------------------------                             Accumulated
                                                  Issued           Treasury                                        Other
                                             -----------------------------------   Retained      Unearned  Comprehensive
In Millions, Except per Share Data           Shares   Amount   Shares     Amount   Earnings  Compensation         Income      Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>   <C>        <C>     <C>        <C>           <C>            <C>        <C>
BALANCE AT MAY 30, 1999                         408   $  658     (104)   $(2,195)   $ 1,828       $   (69)       $   (57)   $   165
===================================================================================================================================
Comprehensive Income:
   Net earnings                                                                         614                                     614
   Other comprehensive income, net of tax:
      Unrealized losses on securities                                                                                 (8)        (8)
      Foreign currency translation                                                                                   (22)       (22)
      Minimum pension liability adjustment                                                                             1          1
-----------------------------------------------------------------------------------------------------------------------------------
   Other comprehensive income                                                                                        (29)       (29)
                                                                                                                 ------------------
Total comprehensive income                                                                                                      585
-----------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared ($1.10 per share),
   net of income taxes of $1                                                           (328)                                   (328)
Stock compensation plans (includes income tax
  benefits of $39)                               --       25        4        101                                                126
Shares purchased                                                  (23)      (848)                                              (848)
Put and call option premiums/settlements, net    --       (2)      --          7                                                  5
Unearned compensation related to restricted
  stock awards                                                                                        (13)                      (13)
Earned compensation and other                                                                          19                        19
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MAY 28, 2000                         408   $  681     (123)   $(2,935)   $ 2,114       $   (63)       $   (86)   $  (289)
===================================================================================================================================
Comprehensive Income:
   Net earnings                                                                         665                                     665
   Other comprehensive income, net of tax:
      Unrealized losses on securities                                                                                  5          5
      Foreign currency translation                                                                                    (7)        (7)
      Minimum pension liability adjustment                                                                            (5)        (5)
-----------------------------------------------------------------------------------------------------------------------------------
   Other comprehensive income                                                                                         (7)        (7)
                                                                                                                 ------------------
Total comprehensive income                                                                                                      658
-----------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared ($1.10 per share),
   net of income taxes of $1                                                           (311)                                   (311)
Stock compensation plans (includes income tax
  benefits of $38)                               --       34        5        124                                                158
Shares purchased                                                   (5)      (198)                                              (198)
Put and call option premiums/settlements, net    --       30       --         (5)                                                25
Unearned compensation related to restricted
  stock awards                                                                                        (13)                      (13)
Earned compensation and other                                                                          22                        22
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MAY 27, 2001                         408   $  745     (123)   $(3,014)   $ 2,468       $   (54)       $   (93)   $    52
===================================================================================================================================
Comprehensive Income:
   Net earnings                                                                         458                                     458
   Other comprehensive income, net of tax:
      Cumulative effect of adopting SFAS
        No. 133                                                                                                     (158)      (158)
      Unrealized losses on hedge derivatives                                                                        (114)      (114)
      Unrealized losses on securities                                                                                (11)       (11)
      Foreign currency translation                                                                                    (4)        (4)
      Minimum pension liability adjustment                                                                             4          4
-----------------------------------------------------------------------------------------------------------------------------------
   Other comprehensive income                                                                                       (283)      (283)
                                                                                                                 ------------------
Total comprehensive income                                                                                                      175
-----------------------------------------------------------------------------------------------------------------------------------
Cash dividends declared ($1.10 per share),
  net of income taxes of $1                                                            (358)                                   (358)
Shares issued for acquisition                    94    4,902       40        992                                              5,894
Shares repurchased from Diageo                                    (55)    (2,318)                                            (2,318)
Stock compensation plans (includes income tax
  benefits of $53)                               --       46        6        176                                                222
Shares purchased                                                   (3)      (119)                                              (119)
Put and call option premiums/settlements, net    --       40       --         (9)                                                31
Unearned compensation related to restricted
  stock awards                                                                                        (29)                      (29)
Earned compensation and other                                                                          26                        26
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MAY 26, 2002                         502   $5,733     (135)   $(4,292)   $ 2,568       $   (57)       $  (376)   $ 3,576
===================================================================================================================================
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                                              23
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Preparing our consolidated financial statements in conformity with generally
accepted U.S. accounting principles requires us to make estimates and
assumptions that affect reported amounts of assets, 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. Certain prior years' amounts
have been reclassified to conform with the current year presentation.

(A) PRINCIPLES OF CONSOLIDATION - Our consolidated financial statements include
parent company operations and majority-owned subsidiaries as well as General
Mills' investment in and share of net earnings or losses of 20- to
50-percent-owned companies, which are recorded on an equity basis.

Our fiscal year ends on the last Sunday in May. Years 2002, 2001 and 2000 each
consisted of 52 weeks. Our wholly owned international operations, with the
exception of Canada and our export operations, are reported for the 12 calendar
months ending April 30. The results of the acquired Pillsbury operations are
reflected in our financial results from Nov. 1, 2001.

(B) LAND, BUILDINGS, EQUIPMENT AND DEPRECIATION - Buildings and equipment are
depreciated over estimated useful lives, primarily using the straight-line
method. Buildings are usually depreciated over 40 to 50 years, and equipment is
depreciated over three to 15 years. Depreciation charges for 2002, 2001 and 2000
were $283 million, $194 million and $183 million, respectively. Accelerated
depreciation methods generally are used for income tax purposes. 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.

(C) INVENTORIES - Inventories are valued at the lower of cost or market. We
generally use the LIFO method of valuing inventory because we believe that it is
a better match with current revenues. However, FIFO is used for most foreign
operations, where LIFO is not recognized for income tax purposes and the
operations often lack the staff to handle LIFO complexities accurately.

(D) INTANGIBLE ASSETS - Goodwill represents the difference between the purchase
prices of acquired companies and the related fair values of net assets acquired
and accounted for by the purchase method of accounting. On May 28, 2001, we
adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill
and Intangible Assets." This Statement eliminates the amortization of goodwill
and instead requires that goodwill be tested annually for impairment. See Note
One (N) for the effects of this adoption. The costs of patents, copyrights and
other amortizable intangible assets are amortized evenly over their estimated
useful lives.

(E) RECOVERABILITY OF LONG-LIVED ASSETS - We review long-lived assets, including
identifiable intangibles and goodwill, for impairment when events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An asset is deemed impaired and written down to its fair value if
estimated related future cash flows are less than its carrying amount.

(F) FOREIGN CURRENCY TRANSLATION - For most of our foreign operations, local
currencies are considered the functional currency. Assets and liabilities are
translated using exchange rates in effect at the balance sheet date. Results of
operations are translated using the average exchange rates prevailing throughout
the period. Translation effects are classified within Accumulated Other
Comprehensive Income in Stockholders' Equity.

(G) FINANCIAL INSTRUMENTS - See Note One (N) for a description of our adoption
of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
See Note Seven for a description of our accounting policies related to financial
instruments.

(H) REVENUE RECOGNITION - We recognize sales upon shipment to our customers.

(I) RESEARCH AND DEVELOPMENT - All expenditures for research and development are
charged against earnings in the year incurred. The charges for 2002, 2001 and
2000 were $131 million, $83 million and $77 million, respectively.

(J) ADVERTISING COSTS - Advertising expenses (including production and
communication costs) for 2002, 2001 and 2000 were $489 million, $358 million and
$361 million, respectively. Prepaid advertising costs (including syndication
properties) of $36 million and $34 million were reported as assets at May 26,
2002, and May 27, 2001, respectively. We expense the production costs of
advertising the first time that the advertising takes place.

(K) STOCK-BASED COMPENSATION - We use the intrinsic value method for measuring
the cost of compensation paid in Company common stock. This method defines our
cost as the excess of the stock's market value at the time of the grant over the
amount that the employee is required to pay. Our stock option plans require that
the employee's payment (i.e., exercise price) be the market value as of the
grant date.

(L) EARNINGS PER SHARE - Basic Earnings per Share (EPS) is computed by dividing
net earnings by the weighted average number of common shares outstanding.
Diluted EPS includes the effect of all dilutive potential common shares
(primarily related to outstanding in-the-money stock options).

(M) CASH AND CASH EQUIVALENTS - We consider all investments purchased with an
original maturity of three months or less to be cash equivalents. Cash and cash
equivalents totaling $77 million are designated as collateral for certain
derivative liabilities.


24
<PAGE>


(N) ACCOUNTING RULES ADOPTED - On the first day of fiscal 2002, we adopted three
new accounting rules. SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," requires all derivatives to be recorded at fair value on
the balance sheet and establishes new accounting rules for hedging. We recorded
the cumulative effect of adopting this accounting change, as follows:

<TABLE>
<CAPTION>
                                                                               Included in
                                                                               Accumulated
                                                                  Included           Other
                                                                        in   Comprehensive
In Millions, Except per Share Data                                Earnings          Income
------------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>
Pretax                                                               $  (5)          $(251)
Income tax effects                                                       2              93
------------------------------------------------------------------------------------------
   Total                                                             $  (3)           (158)
==========================================================================================
Per Diluted Share Net Earnings Effect                                $(.01)
==========================================================================================
</TABLE>

This cumulative effect was primarily associated with the impact of lower
interest rates on the fair-value calculation for delayed-starting interest rate
swaps we entered into in anticipation of our Pillsbury acquisition and other
financing requirements. Refer to Note Seven and Note Ten for more information.

We also adopted SFAS No. 141, "Business Combinations," which requires use of the
purchase method of accounting for all business combinations initiated after June
30, 2001.

The third Statement we adopted at the start of the year was SFAS No. 142,
"Goodwill and Intangible Assets." This Statement eliminates the amortization of
goodwill and instead requires that goodwill be tested annually for impairment.
Goodwill amortization expense in fiscal 2001 totaled $23 million pretax, $22
million after tax. Transitional impairment tests of our goodwill did not require
adjustment to any of our goodwill carrying values.

The following table adjusts earnings and earnings per share for the adoption of
SFAS No. 142.

<TABLE>
<CAPTION>
In Millions, Except per Share Data, Fiscal Year Ended     MAY 26, 2002   May 27, 2001   May 28, 2000
----------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>            <C>
Reported Net Earnings:                                         $   458        $   665        $   614
   Addback goodwill amortization                                    --             22             21
----------------------------------------------------------------------------------------------------
   Adjusted Net Earnings                                       $   458        $   687        $   635
====================================================================================================
Basic Earnings per Share:
   Reported EPS - basic                                        $  1.38        $  2.34        $  2.05
   Addback goodwill amortization                                    --            .08            .07
----------------------------------------------------------------------------------------------------
   Adjusted Basic EPS                                          $  1.38        $  2.42        $  2.12
====================================================================================================
Diluted Earnings per Share:
   Reported EPS - diluted                                      $  1.34        $  2.28        $  2.00
   Addback goodwill amortization                                    --            .07            .07
----------------------------------------------------------------------------------------------------
   Adjusted Diluted EPS                                        $  1.34        $  2.35        $  2.07
====================================================================================================
</TABLE>

The Financial Accounting Standard Board's (FASB's) Emerging Issues Task Force
(EITF) Issue 01-09, "Accounting for Consideration Given by a Vendor to a
Customer or a Reseller of the Vendor's Products," requires recording certain
coupon and trade promotion expenses as reductions of revenues and was effective
for us in our fourth quarter 2002. Since adopting this requirement resulted only
in the reclassification of certain expenses from selling, general and
administrative expense to a reduction of net sales, it did not affect our
financial position or net earnings. The impact was a reduction of net sales, and
a corresponding reduction in selling, general and administrative expense, of
$2,246 million, $1,628 million and $1,527 million in 2002, 2001 and 2000,
respectively.

(O) NEW ACCOUNTING RULES - In August 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144
requires that a single accounting model be used for long-lived assets to be
disposed of by sale, and broadens the presentation of discontinued operations to
include more disposal transactions. SFAS No. 144 is effective for us with the
beginning of fiscal 2003. We do not expect the adoption of SFAS No. 144 to have
a material impact on the Company's financial statements.

2. ACQUISITIONS

On Oct. 31, 2001, we acquired the worldwide Pillsbury operations from Diageo plc
(Diageo). Pillsbury, based in Minneapolis, Minn., has built a portfolio of
leading food brands, such as PILLSBURY refrigerated dough, GREEN GIANT, OLD EL
PASO, PROGRESSO and TOTINO'S. Pillsbury had sales of $6.1 billion (before EITF
Issue 01-09 reclassification) in its fiscal year ended June 30, 2001, including
businesses subsequently divested. We believe the addition of Pillsbury's
businesses will enhance our future growth and generate significant cost
synergies.

The transaction was accounted for as a purchase. Under terms of the agreement
between General Mills and Diageo, we acquired Pillsbury in a stock and cash
transaction. Consideration to Diageo included 134 million General Mills common
shares. Under a stockholders' agreement, Diageo had a put option to sell
directly to us 55 million shares of General Mills common stock at a price of
$42.14 per share, which Diageo exercised on Nov. 1, 2001. Therefore, those 55
million shares were valued at a total of $2,318 million. The 79 million shares
of General Mills common stock retained by Diageo were valued at $3,576 million
based on the three-day average trading price prior to the closing of $45.27 per
share. Therefore, the total stock consideration was $5,894 million. The cash
paid to Diageo and assumed debt of Pillsbury totaled $3,830 million. As a
result, the total acquisition consideration (exclusive of direct acquisition
costs) was approximately $9,724 million.

                                                                              25
<PAGE>


Under terms of the agreement, Diageo holds contingent value rights that may
require payment to Diageo on April 30, 2003, of up to $395 million, depending on
the General Mills stock price and the number of General Mills shares that Diageo
continues to hold on that date. If the General Mills stock price averages less
than $49 per share for the 20 trading days prior to that date, Diageo will
receive an amount per share equal to the difference between $49 and the General
Mills stock trading price, up to a maximum of $5 per share.

The stockholders' agreement between General Mills and Diageo includes a
standstill provision, under which Diageo is precluded from buying additional
shares in General Mills for a 20-year period following the close of the
transaction, or for three years following the date on which Diageo owns less
than 5 percent of General Mills' outstanding shares, whichever is earlier. The
agreement also generally requires pass-through voting by Diageo, so its shares
will be voted in the same proportion as the other General Mills shares are
voted. So long as Diageo owns at least 50 percent of the 134 million shares it
originally received in this transaction, Diageo may designate two individuals to
the General Mills Board of Directors.

The excess of the purchase price over the estimated fair value of the net assets
purchased was approximately $8 billion. The allocation of the purchase price is
based on preliminary estimates, subject to revisions when appraisals and
integration plans have been finalized. Revisions to the allocation, which may be
significant, will be reported as changes to various assets and liabilities,
including goodwill, other intangible assets, and deferred income taxes. As of
May 26, 2002, the goodwill balance includes all of the excess purchase price of
the Pillsbury acquisition, as the valuation of specific intangible assets has
not yet been completed. We expect the valuation to result in a significant value
for nonamortizable brands. We do not anticipate significant amounts to be
allocated to amortizable intangible assets and, therefore, the amount of
intangibles amortization is not expected to be material to the results of
operations in future periods.

In order to obtain regulatory clearance for the acquisition of Pillsbury, we
arranged to divest certain businesses. On Nov. 13, 2001, International
Multifoods Corporation (IMC) purchased the Pillsbury dessert and specialty
products businesses as well as certain General Mills brands and the General
Mills Toledo production facilities for $316 million. After-tax cash proceeds
from this transaction were used to reduce General Mills debt. Under the
agreement with IMC, General Mills expects to spend approximately $70 million for
the purchase and installation of certain production assets at the Toledo plant,
of which $47 million has been expended through May 26, 2002.

As part of the transaction, 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. Since the sale of the assets to IMC was integral to the
Pillsbury acquisition, and because the assets sold were adjusted to fair market
value as part of the purchase of Pillsbury, there was no gain or loss recorded
on the sale in the Company's consolidated statement of earnings.

Pillsbury had a 50 percent equity interest in Ice Cream Partners USA LLC (ICP),
a joint venture Pillsbury formed with Nestle USA during fiscal 2000 for the
manufacture, marketing and distribution of HAAGEN-DAZS and Nestle ice cream
products in the United States. On Dec. 26, 2001, Nestle USA exercised its right,
triggered by the change of ownership of Pillsbury, to buy the 50 percent stake
of ICP that it did not already own. Nestle paid us $641 million for our 50
percent of the joint venture and a long-term, paid-in-full license for the
HAAGEN-DAZS brand in the United States. Net proceeds from this transaction also
were used to reduce our debt level.

We are reconfiguring our cereal production as a result of selling our Toledo,
Ohio, plant to IMC. We also incurred a number of one-time costs associated with
the acquisition of Pillsbury, and the associated divestiture of certain
businesses and assets to IMC. (See Note Three.)

In February 2002, we decided to close two Pillsbury facilities in order to
utilize the operating capacity of the newly combined companies more fully. We
closed the Geneva, Ill., plant, which produced frozen breakfast products; and
the Anthony, Texas, production facility, which produced various Mexican food
products. Our exit liabilities connected to these plant closures amount to $22
million and have been included in the purchase price allocation of Pillsbury.
Approximately 370 employees were affected by these two plant closures.

We continue to evaluate plans to consolidate manufacturing, warehouse and
distribution activities into fewer locations. The closure of additional
Pillsbury facilities could result in additional severance and other exit
liabilities, which would increase the excess purchase price. These amounts will
be recorded on our consolidated balance sheet as adjustments to the excess
purchase price when plans have been finalized and announced. The integration of
Pillsbury into General Mills' operations also may result in the restructuring of
certain General Mills activities. These actions could result in additional
unusual charges, which will be recorded as expense in our consolidated
statements of earnings in the period during which plans are finalized.

Actual results of acquired business operations are included in the consolidated
statement of earnings for the period from Nov. 1, 2001 through May 26, 2002. The
following unaudited pro forma information presents a summary of our consolidated


26
<PAGE>


results of operations and the acquired Pillsbury operations as if the
acquisition had occurred on May 29, 2000.

<TABLE>
<CAPTION>
In Millions, Except per Share Data, Fiscal Year Ended                 MAY 26, 2002   May 27, 2001
-------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>
Net sales                                                                  $ 9,936        $10,089
Earnings before cumulative effect of change in accounting principle            495            849
Net earnings                                                                   492            849
Earnings per Share - Basic
   EPS before cumulative effect of change in accounting principle             1.36           2.34
   Net EPS - Basic                                                            1.35           2.34
Earnings per Share - Diluted
   EPS before cumulative effect of change in accounting principle             1.32           2.29
   Net EPS - Diluted                                                          1.31           2.29
=================================================================================================
</TABLE>

These unaudited pro forma results have been prepared for comparative purposes
only and include certain adjustments, such as increased interest expense on
acquisition debt. They do not reflect the effect of synergies that would have
been expected to result from the integration of the Pillsbury businesses. The
pro forma information does not purport to be indicative of the results of
operations that actually would have resulted had the combination occurred on May
29, 2000, or of future results of the consolidated entities.

On Jan. 13, 2000, we acquired Small Planet Foods of Sedro-Woolley, Wash. Small
Planet Foods is a leading producer of branded organic food products marketed
under the CASCADIAN FARM and MUIR GLEN trademarks. On Aug. 12, 1999, we acquired
Gardetto's Bakery, Inc. of Milwaukee, Wis. GARDETTO'S is a leading national
brand of baked snack mixes and flavored pretzels. On June 30, 1999, we acquired
certain grain elevators and related assets from Koch Agriculture Company. The
aggregate purchase price of these acquisitions, which were accounted for using
the purchase method, was approximately $227 million, and associated goodwill was
$153 million. The results of the acquired businesses have been included in the
consolidated financial statements since their respective acquisition dates. Our
fiscal 2000 financial results would not have been materially different if we had
made these acquisitions at the beginning of the fiscal year.

Through fiscal 2001, the goodwill associated with the acquisitions made in
fiscal 2000 was amortized over 40 years on a straight-line basis. As described
in Note One (N), we adopted SFAS No. 142, which eliminated goodwill amortization
at the beginning of fiscal 2002.

3. UNUSUAL ITEMS

In fiscal 2002, we recorded unusual items totaling $190 million pretax expense,
$120 million after tax ($.35 per diluted share), consisting of $91 million
pretax of Pillsbury transaction and integration costs; $87 million pretax of
cereal reconfiguration charges; a $30 million pretax charge for a special
contribution to the General Mills Foundation to increase its post-acquisition
net assets to a level consistent with the guidelines of the Foundation; $9
million pretax of two flour mill and SQUEEZIT beverage restructuring/closing
charges; and $3 million, net of insurance recovery, associated with a flash
flood at our Cincinnati, Ohio, cereal plant. These expenses were partially
offset by insurance settlement proceeds of $30 million pretax stemming from a
1994 oats handling incident.

In 2001, we reached a partial settlement with a group of global insurance
companies that participated in the reinsurance of a property policy covering the
oats handling incident. We recorded this partial settlement, totaling $55
million pretax income net of associated costs, in the fourth quarter of 2001. We
also expensed certain transaction costs associated with our pending acquisition
of Pillsbury totaling $8 million pretax. Finally, in the fourth quarter of 2001,
we made the decision to exit the Squeezit beverage business. The charge
associated with this action, primarily noncash write-downs associated with asset
disposals, totaled $12 million pretax. At May 26, 2002, there was no remaining
reserve balance related to the exit of the Squeezit beverage business. The net
of these unusual items totaled income of $35 million pretax, $22 million after
tax ($.08 per diluted share).

Analysis of our restructuring and integration reserve activity is as follows:

<TABLE>
<CAPTION>
                                                     Supply Chain
                                  ----------------------------------------------
                                                     Asset                        Transaction/
In Millions                        Severance     Write-off      Other      Total   Integration      Other      Total
--------------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>        <C>        <C>           <C>        <C>        <C>
Reserve balance at May 30, 1999        $   3         $  14      $  14      $  31         $  --      $  13      $  44
--------------------------------------------------------------------------------------------------------------------
   1998 Amounts utilized                  --            --         (9)        (9)           --         (2)       (11)
   1999 Amounts utilized                  (2)          (14)        --        (16)           --         (7)       (23)
--------------------------------------------------------------------------------------------------------------------
Reserve balance at May 28, 2000            1            --          5          6            --          4         10
   2001 Charges                           --            --         --         --            --         12         12
   1998 Amounts utilized                  --            --         --         --            --         (2)        (2)
   1999 Amounts utilized                  --            --         (2)        (2)           --         (1)        (3)
   2001 Amounts utilized                  --            --         --         --            --         (8)        (8)
--------------------------------------------------------------------------------------------------------------------
Reserve balance at May 27, 2001            1            --          3          4            --          5          9
   2002 Charges                           26            58         12         96            90          4        190
   1998 Amounts utilized                  --            (2)        (1)        (3)           --         --         (3)
   1999 Amounts utilized                  --            --         (1)        (1)           --         --         (1)
   2001 Amounts utilized                  --            --         --         --            --         (4)        (4)
   2002 Amounts utilized                  (3)           (5)       (12)       (20)          (51)        (4)       (75)
--------------------------------------------------------------------------------------------------------------------
RESERVE BALANCE AT MAY 26, 2002        $  24         $  51      $   1      $  76         $  39      $   1      $ 116
====================================================================================================================
</TABLE>

4. INVESTMENTS IN JOINT VENTURES

We have a 50 percent equity interest in Cereal Partners Worldwide (CPW), a joint
venture with Nestle that manufactures and markets ready-to-eat cereals outside
the United States and Canada. We have a 40.5 percent equity interest in Snack
Ventures Europe (SVE), our joint venture with PepsiCo that manufactures and
markets snack foods in continental Europe. We have a 50 percent equity interest
in 8th Continent, LLC, a domestic joint venture formed in 2001 with DuPont to
develop and market soy


                                                                              27
<PAGE>


foods and beverages. As a result of the Pillsbury acquisition, we have 50
percent interests in the following joint ventures for the manufacture,
distribution and marketing of HAAGEN-DAZS frozen ice cream products and
novelties: Haagen-Dazs Japan K.K., Haagen-Dazs Korea Company Limited,
Haagen-Dazs Taiwan Limited, Haagen-Dazs Distributors (Thailand) Company Limited,
and Haagen-Dazs Marketing & Distribution (Philippines) Inc. We also have a 50
percent interest in Seretram, a joint venture with Co-op de Pau for the
production of GREEN GIANT canned corn in France.

The joint ventures are reflected in our financial statements on an equity
accounting basis. We record our share of the earnings or losses of these joint
ventures. (The table that follows reflects the joint ventures on a 100 percent
basis.) We also receive royalty income from certain of these joint ventures,
incur various expenses (primarily research and development) and record the tax
impact of certain of the joint venture operations that are structured as
partnerships.

Our cumulative investment in these joint ventures (including our share of
earnings and losses) was $326 million, $218 million and $198 million at the end
of 2002, 2001 and 2000, respectively. We made aggregate investments in the joint
ventures of $38 million, $25 million and $29 million (net of a $6 million loan
repayment) in 2002, 2001 and 2000, respectively. We received aggregate dividends
from the joint ventures of $17 million, $3 million and $5 million in 2002, 2001
and 2000, respectively.

Summary combined financial information for the joint ventures on a 100 percent
basis follows. Since we record our share of CPW results on a two-month lag, CPW
information is included as of and for the 12 months ended March 31. The
Haagen-Dazs and Seretram joint ventures are reported as of and for the six
months ended April 30, 2002. The SVE and 8th Continent information is consistent
with our May year-end.

COMBINED FINANCIAL INFORMATION - JOINT VENTURES - 100% BASIS

<TABLE>
<CAPTION>
In Millions, Fiscal Year                             2002           2001           2000
---------------------------------------------------------------------------------------
<S>                                                <C>            <C>            <C>
Net Sales                                          $1,693         $1,468         $1,429
Gross Profit                                          755            664            619
Earnings (losses) before Taxes                         94             61            (4)
Earnings (losses) after Taxes                          78             48            (22)
=======================================================================================
In Millions                                                 MAY 26, 2002   May 27, 2001
---------------------------------------------------------------------------------------
Current Assets                                                      $587           $476
Noncurrent Assets                                                    712            614
Current Liabilities                                                  630            585
Noncurrent Liabilities                                                 9              2
=======================================================================================
</TABLE>

Our proportionate share of joint venture sales was $777 million, $666 million
and $652 million for 2002, 2001 and 2000, respectively.

5. BALANCE SHEET INFORMATION

The components of certain balance sheet accounts are as follows:

<TABLE>
<CAPTION>
In Millions                                                               MAY 26, 2002    May 27, 2001
------------------------------------------------------------------------------------------------------
<S>                                                                            <C>             <C>
Land, Buildings and Equipment:
   Land                                                                        $    54         $    25
   Buildings                                                                     1,151             636
   Equipment                                                                     2,916           2,226
   Construction in progress                                                        497             292
------------------------------------------------------------------------------------------------------
      Total land, buildings and equipment                                        4,618           3,179
   Less accumulated depreciation                                                (1,854)         (1,678)
------------------------------------------------------------------------------------------------------
      Net land, buildings and equipment                                        $ 2,764         $ 1,501
======================================================================================================
Goodwill:
   Total goodwill                                                              $ 8,559         $   892
   Less accumulated amortization                                                   (86)            (88)
------------------------------------------------------------------------------------------------------
      Goodwill                                                                 $ 8,473         $   804
======================================================================================================
Intangible Assets:
   Intangible assets, primarily capitalized software                           $   129         $    93
   Less accumulated amortization                                                   (39)            (27)
------------------------------------------------------------------------------------------------------
      Intangible assets                                                        $    90         $    66
======================================================================================================
Other Assets:
   Prepaid pension                                                             $ 1,001         $   677
   Marketable securities, at market                                                160             187
   Investments in and advances to affiliates                                       320             214
   Miscellaneous                                                                   295             234
------------------------------------------------------------------------------------------------------
      Total other assets                                                       $ 1,776         $ 1,312
======================================================================================================
</TABLE>

The changes in the carrying amount of goodwill for the fiscal year ended May 26,
2002, are as follows:

<TABLE>
<CAPTION>
                                                                                  Pillsbury
                                                                                Unallocated
                                                                                     Excess
                                       Bakeries and                                Purchase
In Millions               U.S. Retail   Foodservice  International   Corporate        Price      Total
------------------------------------------------------------------------------------------------------
<S>                            <C>           <C>            <C>         <C>          <C>        <C>
Balance at May 27, 2001        $  745        $   59         $   --      $   --       $   --     $  804
Pillsbury transaction              --            --             --          --        7,669      7,669
------------------------------------------------------------------------------------------------------
BALANCE AT MAY 26, 2002        $  745        $   59         $   --      $   --       $7,669     $8,473
======================================================================================================
</TABLE>

The Pillsbury acquisition valuation and purchase price allocation has not yet
been completed. (See Note Two.) Therefore, all the excess purchase price is
currently accounted for in goodwill. When the purchase price allocation is
completed, the amount allocated to goodwill will change and the remaining
goodwill will be allocated to our operating segments.

Intangible asset amortization expense was $13 million, $6 million and $5 million
for fiscal 2002, 2001 and 2000, respectively. Excluding amortization for
intangible assets acquired as part of the Pillsbury acquisition, estimated
amortization expense for the next


28
<PAGE>


five fiscal years (in millions) is as follows: $15 in 2003, $12 in 2004, $11 in
2005, $9 in 2006 and $8 in 2007.

As of May 26, 2002, a comparison of cost and market values of our marketable
securities (which are debt and equity securities) was as follows:

<TABLE>
<CAPTION>
                                                                   Market       Gross     Gross
In Millions                                                Cost     Value        Gain      Loss
-----------------------------------------------------------------------------------------------
<S>                                                        <C>       <C>         <C>       <C>
Held to maturity:
   Debt securities                                         $  3      $  3        $ --      $ --
   Equity securities                                          2         2          --        --
-----------------------------------------------------------------------------------------------
     Total                                                 $  5      $  5        $ --      $ --
===============================================================================================
Available for sale:
   Debt securities                                         $130      $155        $ 25      $ --
   Equity securities                                         --        --          --        --
-----------------------------------------------------------------------------------------------
     Total                                                 $130      $155        $ 25      $ --
===============================================================================================
</TABLE>

Realized gains from sales of marketable securities were $15 million, $4 million
and $3 million in 2002, 2001 and 2000, respectively. The aggregate unrealized
gains and losses on available-for-sale securities, net of tax effects, are
classified in Accumulated Other Comprehensive Income within Stockholders'
Equity.

Scheduled maturities of our marketable securities are as follows:

<TABLE>
<CAPTION>
                                                         Held to maturity    Available for sale
-----------------------------------------------------------------------------------------------
                                                                   Market                Market
In Millions                                                Cost     Value        Cost     Value
-----------------------------------------------------------------------------------------------
<S>                                                        <C>       <C>         <C>       <C>
Under one year (current)                                   $ --      $ --        $ --      $ --
From 1 to 3 years                                            --        --          45        52
From 4 to 7 years                                            --        --           5         5
Over 7 years                                                  3         3          80        98
Equity securities                                             2         2          --        --
-----------------------------------------------------------------------------------------------
   Totals                                                  $  5      $  5        $130      $155
===============================================================================================
</TABLE>

6. INVENTORIES

The components of inventories are as follows:

<TABLE>
<CAPTION>
In Millions                                                       MAY 26, 2002     May 27, 2001
-----------------------------------------------------------------------------------------------
<S>                                                                     <C>                <C>
Raw materials, work in process and supplies                             $  234             $129
Finished goods                                                             753              326
Grain                                                                       99               94
Reserve for LIFO valuation method                                          (31)             (30)
-----------------------------------------------------------------------------------------------
   Total inventories                                                    $1,055             $519
===============================================================================================
</TABLE>

At May 26, 2002, and May 27, 2001, respectively, inventories of $720 million and
$282 million were valued at LIFO. LIFO accounting had negligible impact on 2002,
2001 and 2000 earnings. Results of operations were not materially affected by a
liquidation of LIFO inventory. The difference between replacement cost and the
stated LIFO inventory value is not materially different from the reserve for
LIFO valuation method.

7. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The carrying amounts and fair values of our financial instruments (based on
market quotes and interest rates at the balance sheet dates) were as follows:

<TABLE>
<CAPTION>
                                                     MAY 26, 2002               May 27, 2001
-----------------------------------------------------------------------------------------------
                                                CARRYING        FAIR       Carrying        Fair
In Millions                                       AMOUNT       VALUE         Amount       Value
-----------------------------------------------------------------------------------------------
<S>                                               <C>         <C>            <C>         <C>
Assets:
   Cash and cash equivalents                      $  975      $  975         $   64      $   64
   Receivables                                     1,010       1,010            664         664
   Marketable securities                             160         160            187         187
Liabilities:
   Accounts payable                                1,217       1,217            619         619
   Debt                                            9,439       9,507          3,428       3,500
Derivatives relating to:
   Debt                                             (435)       (435)            --        (250)
   Commodities                                         9           9             --          (3)
   Foreign currencies                                 (6)         (6)            --           4
===============================================================================================
</TABLE>

The Company is exposed to certain market risks as a part of its ongoing business
operations and uses derivative financial and commodity instruments, where
appropriate, to manage these risks. Derivatives are financial instruments whose
value is derived from one or more underlying financial instruments. Examples of
underlying instruments are currencies, equities, commodities and interest rates.
In general, instruments used as hedges must be effective at reducing the risk
associated with the exposure being hedged, and must be designated as a hedge at
the inception of the contract.

With the adoption of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as of May 28, 2001, we record the fair value of all
outstanding derivatives in receivables or other liabilities. Gains and losses
related to the ineffective portion of any hedge are recorded in various costs
and expenses, depending on the nature of the derivative.

Each derivative transaction we enter into is designated at inception as a hedge
of risks associated with specific assets, liabilities or future commitments, and
is monitored to determine if it remains an effective hedge. Effectiveness is
based on changes in the derivative's market value or cash flows being highly
correlated with changes in market value or cash flows of the underlying hedged
item. We do not enter into or hold derivatives for trading or speculative
purposes.

We use derivative instruments to reduce financial risk in three areas: interest
rates, foreign currency and commodities. The notional amounts of derivatives do
not represent actual amounts exchanged by the parties and, thus, are not a
measure of the Company's exposure through its use of derivatives. We enter into
interest rate swap, foreign exchange, and commodity swap agreements with a
diversified group of highly rated counterparties. We enter into commodity
futures transactions through various regulated


                                                                              29
<PAGE>


exchanges. These transactions may expose the Company to credit risk to the
extent that the instruments have a positive fair value, but we have not
experienced any material losses nor do we anticipate any losses. The Company
does not have a significant concentration of risk with any single party or group
of parties in any of its financial instruments.

Qualifying derivatives are reported as part of hedge arrangements as follows:

CASH FLOW HEDGES - Gains and losses on these instruments are recorded in Other
Comprehensive Income until the underlying transaction is recorded in earnings.
When the hedged item is realized, gains or losses are reclassified from
Accumulated Other Comprehensive Income to the Consolidated Statements of
Earnings on the same line item as the underlying transaction risk.

FOREIGN EXCHANGE TRANSACTION RISK - The Company is exposed to fluctuations in
foreign currency cash flows related primarily to third-party purchases,
intercompany product shipments, and intercompany loans. Forward contracts of
generally less than 12 months duration are used to hedge some of these risks.
Effective ness is assessed based on changes in forward rates.

INTEREST RATE RISK - The Company is exposed to interest rate volatility with
regard to existing variable-rate debt and planned future issuances of fixed-rate
debt. The Company uses interest rate swaps, including forward-starting swaps, to
reduce interest rate volatility, and to achieve a desired proportion of variable
vs. fixed-rate debt, based on current and projected market conditions.

Variable-to-fixed interest rate swaps are accounted for as cash flow hedges,
with effectiveness assessed based on either the hypothetical derivative method
or changes in the present value of interest payments on the underlying debt.

PRICE RISK - The Company is exposed to price fluctuations primarily as a result
of anticipated purchases of ingredient and packaging materials. The Company uses
a combination of long cash positions with suppliers, exchange-traded futures and
option contracts and over-the-counter hedging mechanisms to reduce price
fluctuations in a desired percentage of forecasted purchases over a period of
generally less than one year. Commodity contracts are accounted for as cash flow
hedges, with effectiveness assessed based on changes in futures prices.

We use a grain merchandising operation to provide us efficient access to and
more informed knowledge of various commodities markets. This operation uses
futures and options to hedge its net inventory position to minimize market
exposure. As of May 26, 2002, our grain merchandising operation had futures and
options contracts that essentially hedged its net inventory position. None of
the contracts extended beyond May 2003. All futures contracts and futures
options are exchange-based instruments with ready liquidity and determinable
market values. Neither results of operations nor the year-end positions from our
grain merchandising operation were material to the Company's overall results.

Unrealized losses from cash flow hedges recorded in Accumulated Other
Comprehensive Income as of May 26, 2002, totaled $432 million pretax, primarily
related to interest rate swaps we entered into in contemplation of future
borrowings and other financing requirements (primarily related to the Pillsbury
acquisition), which are being reclassified into interest expense over the life
of the interest rate hedge. (See Note Eight regarding swaps settled or
neutralized.) Other insignificant amounts related to foreign currency and
commodity price cash flow hedges will be reclassified, as appropriate, into
earnings during the next 12 months.

FAIR VALUE HEDGES - Fair value hedges involve recognized assets, liabilities or
firm commitments as the hedged risks.

FOREIGN EXCHANGE TRANSLATION RISK - The Company is exposed to fluctuations in
the value of foreign currency investments in subsidiaries and cash flows related
primarily to repatriation of these investments. Forward contracts, generally
less than 12 months duration, are used to hedge some of these risks.
Effectiveness is assessed based on changes in forward rates. Effective gains and
losses on these instruments are recorded as a foreign currency translation
adjustment in Other Comprehensive Income.

The Company enters into foreign currency forward contracts to reduce volatility
in the translation of foreign currency earnings to U.S. dollars. Gains and
losses on these instruments are recorded in selling, general and administrative
expense, generally reducing the exposure to translation volatility during a
full-year period.

Our net balance sheet exposure consists of the net investment in foreign
operations, translated using the exchange rates in effect at the balance sheet
date. The components of our net balance sheet exposure by geographic region are
as follows:

<TABLE>
<CAPTION>
In Millions                                                    MAY 26, 2002    May 27, 2001
------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>
Europe                                                                 $363           $181
North/South America                                                     248             37
Asia/Other                                                              101             16
------------------------------------------------------------------------------------------
   Net Balance Sheet Exposure                                          $712           $234
==========================================================================================
</TABLE>

INTEREST RATE RISK - The Company currently uses interest rate swaps to reduce
funding costs associated with certain debt issues and to achieve a desired
proportion of variable vs. fixed-rate debt, based on current and projected
market conditions.

Fixed-to-variable 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


30
<PAGE>


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 recorded as interest expense.

The following table indicates the types of swaps used to hedge various assets
and liabilities, and their weighted average interest rates. Average variable
rates are based on rates as of the end of the reporting period. The swap
contracts mature during time periods ranging from 2003 to 2014.

<TABLE>
<CAPTION>
                                                    MAY 26, 2002            May 27, 2001
---------------------------------------------------------------------------------------------
In Millions                                      ASSET   LIABILITY         Asset    Liability
---------------------------------------------------------------------------------------------
<S>                                                <C>     <C>                <C>     <C>
Pay floating swaps - notional amount               --      $ 2,692            --      $   340
   Average receive rate                            --          5.4%           --          7.1%
   Average pay rate                                --          1.8%           --          4.0%
Pay fixed swaps - notional amount                  --      $ 6,814            --      $ 5,766
   Average receive rate                            --          1.8%           --          4.1%
   Average pay rate                                --          6.4%           --          6.6%
=============================================================================================
</TABLE>

The interest rate differential on interest rate swaps used to hedge existing
assets and liabilities is recognized as an adjustment of interest expense or
income over the term of the agreement.

8. DEBT

NOTES PAYABLE - The components of notes payable and their respective weighted
average interest rates at the end of the periods are as follows:

<TABLE>
<CAPTION>
                                                 MAY 26, 2002              May 27, 2001
---------------------------------------------------------------------------------------------
                                                         WEIGHTED                    Weighted
                                                          AVERAGE                     Average
                                              NOTES      INTEREST         Notes      Interest
In Millions                                 PAYABLE          RATE       Payable          Rate
---------------------------------------------------------------------------------------------
<S>                                         <C>               <C>       <C>               <C>
U.S. commercial paper                       $ 3,288           2.1%      $   733           4.4%
Canadian commercial paper                        34           2.3            27           4.6
Euro commercial paper                           809           2.2           768           4.9
Financial institutions                          519           2.1           330           4.4
Amounts reclassified to long-term debt       (1,050)           --        (1,000)           --
---------------------------------------------------------------------------------------------
   Total Notes Payable                      $ 3,600                     $   858
=============================================================================================
</TABLE>

SEE NOTE SEVEN FOR A DESCRIPTION OF RELATED INTEREST-RATE DERIVATIVE
INSTRUMENTS.

To ensure availability of funds, we maintain bank credit lines sufficient to
cover our outstanding short-term borrowings. As of May 26, 2002, we had $4.0
billion in committed lines and $45 million in uncommitted lines.

We have revolving credit agreements expiring in January 2006 covering the
fee-paid credit lines that provide us with the ability to refinance short-term
borrowings on a long-term basis; accordingly, a portion of our notes payable has
been reclassified to long-term debt. The revolving credit agreements provide for
borrowings of up to $1.05 billion.

LONG-TERM DEBT - During fiscal 2002, General Mills filed a Registration
Statement with the Securities and Exchange Commission covering the sale of up to
$8.0 billion in debt securities. In February 2002, we issued $3.5 billion of
notes: $2.0 billion of 6 percent notes due 2012 with an effective interest rate
of 7.75 percent; and $1.5 billion of 5 1/8 percent notes due 2007 with an
effective interest rate of 5.90 percent. Interest is payable semiannually on
Feb. 15 and Aug. 15, beginning Aug. 15, 2002. Proceeds from the notes were used
to repay short-term debt incurred in connection with the Pillsbury acquisition.
Following the February offering, $4.5 billion remains available under the
Registration Statement for future use.

In anticipation of the Pillsbury acquisition and other financing needs, we
entered into interest rate swap contracts during fiscal 2001 and fiscal 2002
totaling $7.1 billion to attempt to lock in our interest rate on associated
debt. In connection with the February notes offering, we closed out $3.5 billion
of these swaps. A portion was settled for cash, and the remainder was
neutralized with offsetting swaps. These swaps had been designated as cash flow
hedges. Therefore, the mark-to-market value for these swaps has been recorded in
Other Comprehensive Income. The amount currently recorded in Accumulated Other
Comprehensive Income ($242 million pretax) will be reclassified to interest
expense over the lives of the swap contracts (primarily five to 10 years).

<TABLE>
<CAPTION>
In Millions                                                      MAY 26, 2002    May 27, 2001
---------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>
6% notes due 2012                                                     $ 2,000         $    --
5 1/8% notes due 2007                                                   1,500              --
Medium-term notes, 4.8% to 9.1%, due 2003 to 2078                         922           1,274
7.0% notes due Sept. 15, 2004                                             150             157
Zero coupon notes, yield 11.1%, $261 due Aug. 15, 2013                     78              70
Zero coupon notes, yield 11.7%, $54 due Aug. 15, 2004                      42              38
8.2% ESOP loan guaranty, due through June 30, 2007                         21              30
Notes payable, reclassified                                             1,050           1,000
Other                                                                      76               1
---------------------------------------------------------------------------------------------
                                                                        5,839           2,570
Less amounts due within one year                                         (248)           (349)
---------------------------------------------------------------------------------------------
   Total Long-term Debt                                               $ 5,591         $ 2,221
=============================================================================================
</TABLE>

SEE NOTE SEVEN FOR A DESCRIPTION OF RELATED INTEREST-RATE DERIVATIVE
INSTRUMENTS.


                                                                              31
<PAGE>


In 2001, we issued $284 million of debt under our medium-term note program with
maturities up to two years and interest rates varying from 7.0 to 7.4 percent.

The Company has guaranteed the debt of the Employee Stock Ownership Plan;
therefore, the loan is reflected on our consolidated balance sheets as long-term
debt with a related offset in Unearned Compensation in Stockholders' Equity.

The sinking fund and principal payments due on long-term debt are (in millions)
$248, $104, $225, $54 and $1,536 in 2003, 2004, 2005, 2006 and 2007,
respectively. The 2005 and 2006 amounts are exclusive of $12 million and $5
million, respectively, of interest yet to be accreted on zero coupon notes. The
notes payable that are reclassified under our revolving credit agreement are not
included in these principal payments.

Our marketable securities (see Note Five) include zero coupon U.S. Treasury and
other top-rated securities. These investments are intended to provide funds for
the payment of principal and interest for the zero coupon notes due Aug. 15,
2004, and Aug. 15, 2013.

9. MINORITY INTEREST

In April 2002, the Company and certain of its wholly owned subsidiaries
contributed assets with an aggregate fair market value of approximately $4
billion to another subsidiary (GMC), a limited liability company. GMC is a
separate and distinct legal entity from the Company and its subsidiaries, and
has separate assets, liabilities, businesses and operations. The contributed
assets consist primarily of manufacturing assets and intellectual property
associated with the production and retail sale of Big G ready-to-eat cereals,
PROGRESSO soups and OLD EL PASO products. In exchange for the contribution of
these assets, GMC issued the managing membership interest and Class A and Class
B preferred membership interests to wholly owned subsidiaries of the Company.
The managing member directs the business activities and operations of GMC and
has fiduciary responsibilities to GMC and its members. Other than rights to vote
on certain matters, holders of the Class A and Class B interests have no right
to direct the management of GMC.

In May 2002, GMC sold approximately 30 percent of the Class A interests to an
unrelated third-party investor in exchange for $150 million. The Class A
interests receive quarterly preferred distributions at a floating rate equal to
the three-month LIBOR plus 90 basis points. The GMC limited liability company
agreement requires that the rate of the preferred distributions for the Class A
interests be reset by agreement between the third-party investors and GMC every
five years, beginning in May 2007. If GMC and the investors fail to mutually
agree on a new rate of preferred distributions, GMC must remarket the
securities. Upon a failed remarketing, the rate over LIBOR will be increased by
75 basis points (up to a maximum total of 300 basis points following a scheduled
reset date). In the event of four consecutive failed remarketings, the
third-party investors can force a liquidation and winding up of GMC.

GMC has a scheduled duration of 20 years. However, GMC, through the managing
member, may elect to redeem all of the Class A interests held by third-party
investors at any time for an amount equal to the investors' capital accounts,
plus an optional retirement premium if such retirement occurs prior to June
2007. Under certain circumstances, GMC also may be dissolved and liquidated
earlier. Events requiring liquidation include, without limitation, the
bankruptcy of GMC or its subsidiaries, failure to deliver the preferred
quarterly return, failure to comply with portfolio requirements, breaches of
certain covenants, and four consecutive failed attempts to remarket the Class A
interests. In the event of a liquidation of GMC, the third-party investors that
hold the Class A interests would be entitled to repayment from the proceeds of
liquidation prior to the subsidiaries of the Company that are members of GMC.
The managing member may avoid liquidation in most circumstances by exercising an
option to purchase the preferred interests. An election to redeem the preferred
membership interests could impact the Company's liquidity by requiring the
Company to refinance the redemption price or liquidate a portion of GMC assets.

Currently, all of the Class B interests are held by a subsidiary of the Company.
The Company may offer the Class B interests and the remaining, unsold Class A
interests to third-party investors on terms and conditions to be determined.

For financial reporting purposes, the assets, liabilities, results of
operations, and cash flows of GMC are included in the Company's consolidated
financial statements. The third-party investor's Class A interest in GMC is
reflected as a minority interest on the consolidated balance sheet of the
Company.

Subsequent to fiscal year end, General Mills Capital, Inc. (GM Capital), a
wholly owned subsidiary, sold $150 million of its Series A preferred stock to an
unrelated third-party investor. GM Capital regularly enters into transactions
with the Company to purchase receivables of the Company. These receivables are
included in the consolidated balance sheet and the $150 million purchase price
for the Series A preferred stock will be reflected as additional minority
interest on the balance sheet. The proceeds from the issuance of the preferred
stock were used to pay down commercial paper.


32
<PAGE>


10. STOCKHOLDERS' EQUITY

Cumulative preference stock of 5 million shares, without par value, is
authorized but unissued.

We have a shareholder rights plan that entitles each outstanding share of common
stock to one right. Each right entitles the holder to purchase one
two-hundredths of a share of cumulative preference stock (or, in certain
circumstances, common stock or other securities), exercisable upon the
occurrence of certain events. The rights are not transferable apart from the
common stock until a person or group has acquired 20 percent or more, or makes a
tender offer for 20 percent or more, of the common stock. Then each right will
entitle the holder (other than the acquirer) to receive, upon exercise, common
stock of either the Company or the acquiring company having a market value equal
to two times the exercise price of the right. The initial exercise price is $120
per right. The rights are redeemable by the Board of Directors at any time prior
to the acquisition of 20 percent or more of the outstanding common stock. The
shareholder rights plan has been specifically amended so that the Pillsbury
transaction described in Note Two does not trigger the exercisability of the
rights. The rights expire on Feb. 1, 2006. At May 26, 2002, there were 367
million rights issued and outstanding.

The Board of Directors has authorized the repurchase, from time to time, of
common stock for our treasury, provided that the number of treasury shares shall
not exceed 170 million.

Through private transactions in fiscal 2002 and 2001 that were a part of our
stock repurchase program, we issued put options and purchased call options
related to our common stock. In 2002 and 2001, we issued put options for 7
million and 17 million shares for $17 million and $36 million in premiums paid
to the Company, respectively. As of May 26, 2002, put options for 10 million
shares remained outstanding at exercise prices ranging from $37.00 to $47.00 per
share with exercise dates from June 14, 2002, to May 20, 2003. In 2002 and 2001,
we purchased call options for 4 million and 8 million shares for $16 million and
$34 million in premiums paid by the Company, respectively. As of May 26, 2002,
call options for 9 million shares remained outstanding at exercise prices
ranging from $34.00 to $54.84 per share with exercise dates from June 17, 2002,
to Nov. 20, 2003.

The following table provides details of Other Comprehensive Income:

<TABLE>
<CAPTION>
                                                                                 Other
                                                                     Tax       Compre-
                                                    Pretax      (Expense)      hensive
In Millions                                         Change       Benefit        Income
--------------------------------------------------------------------------------------
<S>                                                  <C>           <C>           <C>
Fiscal year ended May 28, 2000
   Foreign currency translation                      $ (25)        $   3         $ (22)
   Minimum pension liability                             1            --             1
   Other fair value changes:
     Securities                                        (13)            5            (8)
--------------------------------------------------------------------------------------
Other Comprehensive Income                           $ (37)        $   8         $ (29)
======================================================================================
Fiscal year ended May 27, 2001
   Foreign currency translation                      $  (8)        $   1         $  (7)
   Minimum pension liability                            (8)            3            (5)
   Other fair value changes:
     Securities                                          8            (3)            5
--------------------------------------------------------------------------------------
Other Comprehensive Income                           $  (8)        $   1         $  (7)
======================================================================================
Fiscal year ended May 26, 2002
   Foreign currency translation                      $  (4)        $  --         $  (4)
   Minimum pension liability                             7            (3)            4
   Other fair value changes:
     Securities                                         (3)            1            (2)
     Hedge derivatives                                (343)          127          (216)
   Reclassification to earnings:
     Securities                                        (15)            6            (9)
     Hedge derivatives                                 163           (61)          102
   Cumulative effect of adopting SFAS No. 133         (251)           93          (158)
--------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME                           $(446)        $ 163         $(283)
======================================================================================
</TABLE>

Except for reclassification to earnings, changes in Other Comprehensive Income
are primarily noncash items.

Accumulated Other Comprehensive Income balances were as follows:

<TABLE>
<CAPTION>
In Millions                                                MAY 26, 2002   May 27, 2001
--------------------------------------------------------------------------------------
<S>                                                               <C>            <C>
Foreign currency translation adjustments                          $(113)         $(109)
Unrealized gain (loss) from:
   Securities                                                        16             27
   Hedge derivatives                                               (272)            --
Pension plan minimum liability                                       (7)           (11)
--------------------------------------------------------------------------------------
Accumulated Other Comprehensive Income                            $(376)         $ (93)
======================================================================================
</TABLE>


                                                                              33
<PAGE>


11. STOCK PLANS

The Company uses broad-based stock plans to help ensure alignment with
stockholders' interests. A total of 8,984,631 shares are available for grant
under the 1998 senior management plan through Oct. 1, 2005, the 1998 employee
plan (which has no specified duration) and the 2001 director plan through Sept.
30, 2006. Shares available for grant are reduced by shares issued, net of shares
surrendered to the Company in stock-for-stock exercises. Options may be priced
only at 100 percent of the fair market value at the date of grant. No options
now outstanding have been re-priced since the original date of grant. Options
now outstanding include some granted under the 1988, 1990, 1993 and 1995 option
plans, under which no further rights may be granted. All options expire within
10 years and one month after the date of grant. The stock plans provide for full
vesting of options upon completion of specified service periods, or in the event
there is a change of control.

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 1998 employee plan. Restricted stock, up to 50 percent of
the value of an individual's cash incentive award, may be granted through the
Executive Incentive Plan. Certain restricted stock awards require the employee
to deposit personally owned shares (on a one-for-one basis) with the Company
during the restricted period. The 2001 director plan allows each nonemployee
director to annually receive 1,000 restricted stock units convertible to common
stock at a date of the director's choosing following his or her one-year term.
In 2002, 2001 and 2000, grants of 691,115, 353,500 and 330,229 shares of
restricted stock or units were made to employees and directors with weighted
average values at grant of $46.93, $37.61 and $38.49 per share, respectively. On
May 26, 2002, a total of 1,634,158 restricted shares and units were outstanding
under all plans.

The 1988 plan permitted the granting of performance units corresponding to stock
options granted. The value of performance units was determined by return on
equity and growth in earnings per share measured against preset goals over
three-year performance periods. For seven years after a performance period,
holders may elect to receive the value of performance units (with interest) as
an alternative to exercising corresponding stock options. On May 26, 2002, there
were 48,614 options outstanding with corresponding performance unit accounts.
The value of these options exceeded the value of the performance unit accounts.

The following table contains information on stock option activity. Approximately
33 percent of the options outstanding at May 26, 2002, were granted under the
Salary Replacement Option and Deposit Stock OptionPlans, both of which have been
discontinued.

<TABLE>
<CAPTION>
                                                        Weighted                   Weighted
                                                         Average                    Average
                                            Options     Exercise       Options     Exercise
                                        Exercisable    Price per   Outstanding    Price per
                                         (Thousands)       Share    (Thousands)       Share
-------------------------------------------------------------------------------------------
<S>                                          <C>          <C>           <C>          <C>
Balance at May 30, 1999                      24,232       $25.05        53,076       $28.17
   Granted                                                              11,445        37.49
   Exercised                                                            (5,679)       21.82
   Expired                                                                (552)       33.42
-------------------------------------------------------------------------------------------
Balance at May 28, 2000                      25,412        26.40        58,290        30.57
   Granted                                                              11,600        38.07
   Exercised                                                            (5,651)       24.60
   Expired                                                                (741)       35.98
-------------------------------------------------------------------------------------------
Balance at May 27, 2001                      27,724        27.79        63,498        32.40
   Granted                                                              14,567        48.17
   Exercised                                                            (6,569)       27.64
   Expired                                                                (421)       39.44
-------------------------------------------------------------------------------------------
BALANCE AT MAY 26, 2002                      30,149       $29.18        71,075       $36.03
===========================================================================================
</TABLE>

The following table provides information regarding options exercisable and
outstanding as of May 26, 2002:

<TABLE>
<CAPTION>
                                         Weighted                    Weighted      Weighted
Range of                                  Average                     Average       Average
Exercise                    Options      Exercise       Options      Exercise     Remaining
Price                   Exercisable     Price per   Outstanding     Price per   Contractual
per Share                (Thousands)        Share    (Thousands)        Share   Life (Years)
-------------------------------------------------------------------------------------------
<S>                           <C>          <C>            <C>          <C>             <C>
Under $25                     4,976        $22.61         4,982        $22.61          2.26
$25-$30                      12,392         26.46        12,401         26.47          2.53
$30-$35                       9,822         32.24        19,836         33.28          6.65
$35-$40                         173         36.96         8,464         37.43          6.25
Over $40                      2,786         41.77        25,392         45.02          8.91
-------------------------------------------------------------------------------------------
                             30,149        $29.18        71,075        $36.03          6.38
===========================================================================================
</TABLE>

Stock-based compensation expense related to restricted stock for 2002, 2001 and
2000 was $16 million, $11 million and $9 million, respectively, using the
intrinsic value-based method of accounting for stock-based compensation plans.
Effective with 1997, we adopted the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 allows either a fair
value-based method or an intrinsic value-based method of accounting for such
compensation plans. Had compensation expense for our stock option plan grants
been determined using the fair value-based method, net earnings, basic earnings
per share and diluted earnings per share would have been approximately $384
million, $1.16 and $1.13, respectively, for 2002; $621 million, $2.19 and $2.15,
respectively, for 2001; and, $575 million, $1.92 and $1.89, respectively, for
2000. The weighted average fair values at grant date of the options granted in
2002, 2001 and 2000 were estimated as $11.77, $8.78 and


34
<PAGE>


$8.89, respectively, using the Black-Scholes option-pricing model with the
following weighted average assumptions:

<TABLE>
<CAPTION>
                                                          2002         2001          2000
-----------------------------------------------------------------------------------------
<S>                                                    <C>          <C>           <C>
Risk-free interest rate                                   5.1%         5.6%          6.3%
Expected life                                          7 YEARS      7 years       7 years
Expected volatility                                        20%          20%           18%
Expected dividend growth rate                               8%           8%            8%
=========================================================================================
</TABLE>

The Black-Scholes model requires the input of highly subjective assumptions and
may not provide a reliable measure of fair value.

12. EARNINGS PER SHARE

Basic and diluted earnings per share (EPS) were calculated using the following:

<TABLE>
<CAPTION>
In Millions, Fiscal Year                                  2002         2001          2000
-----------------------------------------------------------------------------------------
<S>                                                       <C>          <C>           <C>
Net earnings                                              $458         $665          $614
-----------------------------------------------------------------------------------------
Average number of common shares - basic EPS                331          284           299
-----------------------------------------------------------------------------------------
Incremental share effect from:
   Stock options                                            11            8             8
   Restricted stock, stock rights and puts                  --           --            --
-----------------------------------------------------------------------------------------
Average number of common shares - diluted EPS              342          292           307
=========================================================================================
</TABLE>

The diluted EPS calculation does not include 4 million, 8 million and 9 million
average anti-dilutive stock options, nor does it include 13 million, 15 million
and 8 million average anti-dilutive put options in 2002, 2001 and 2000,
respectively.

13. INTEREST EXPENSE

The components of net interest expense are as follows:

<TABLE>
<CAPTION>
In Millions, Fiscal Year                                  2002         2001          2000
-----------------------------------------------------------------------------------------
<S>                                                       <C>          <C>           <C>
Interest expense                                          $445         $223          $168
Capitalized interest                                        (3)          (2)           (2)
Interest income                                            (26)         (15)          (14)
-----------------------------------------------------------------------------------------
   Interest, net                                          $416         $206          $152
=========================================================================================
</TABLE>

During 2002, 2001 and 2000, we paid interest (net of amount capitalized) of $346
million, $215 million and $167 million, respectively.

14. RETIREMENT AND OTHER POSTRETIREMENT BENEFIT PLANS

We have defined-benefit retirement plans covering most employees. Benefits for
salaried employees are based on length of service and final average
compensation. The hourly plans include various monthly amounts for each year of
credited service. Our funding policy is consistent with the requirements of
federal law. Our principal 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.

We sponsor plans that provide health-care benefits to the majority of our
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.

Trust assets related to the above plans consist principally of listed equity
securities, corporate obligations and U.S. government securities.

Reconciliation of the funded status of the plans and the amounts included in the
balance sheet are as follows:

<TABLE>
<CAPTION>
                                                                                Postretirement
                                                     Pension Plans              Benefit Plans
------------------------------------------------------------------------------------------------
In Millions                                          2002         2001         2002         2001
------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>          <C>          <C>
Fair Value of Plan Assets
   Beginning fair value                           $ 1,606      $ 1,578      $   237      $   230
   Actual return on assets                             (2)          83          (10)          (2)
   Acquisition                                      1,167           --           --           --
   Company contributions                                7           11           29           28
   Plan participant contributions                      --           --            5            2
   Benefits paid from plan assets                    (107)         (66)         (28)         (21)
------------------------------------------------------------------------------------------------
Ending Fair Value                                 $ 2,671      $ 1,606      $   233      $   237
================================================================================================
Projected Benefit Obligation
   Beginning obligations                          $ 1,077      $   958      $   286      $   231
   Service cost                                        34           18           11            6
   Interest cost                                      122           79           33           21
   Plan amendment                                      21            1          (13)          --
   Curtailment                                          5           --            2           --
   Plan participant contributions                      --           --            5            2
   Actuarial loss (gain)                              (15)          87           72           42
   Acquisition                                        963           --          248           --
   Actual benefits paid                              (107)         (66)         (33)         (16)
------------------------------------------------------------------------------------------------
Ending Obligations                                $ 2,100      $ 1,077      $   611      $   286
================================================================================================
Funded Status of Plans                            $   571      $   529      $  (378)     $   (49)
------------------------------------------------------------------------------------------------
   Unrecognized actuarial loss                        334          106          154           59
   Unrecognized prior service costs (credits)          49           36          (17)          (5)
   Unrecognized transition asset                       (3)         (18)          --           --
------------------------------------------------------------------------------------------------
Net Amount Recognized                             $   951      $   653      $  (241)     $     5
================================================================================================
Amounts Recognized on Balance Sheets
------------------------------------------------------------------------------------------------
   Prepaid asset                                  $ 1,001      $   677      $    82      $    75
   Accrued liability                                  (62)         (44)        (323)         (70)
   Intangible asset                                    --            1           --           --
   Minimum liability adjustment in equity              12           19
------------------------------------------------------------------------------------------------
Net Amount Recognized                             $   951      $   653      $  (241)     $     5
================================================================================================
</TABLE>


                                                                              35
<PAGE>


Plans with obligations in excess of plan assets:

<TABLE>
<CAPTION>
                                                                                               Postretirement
                                                                          Pension Plans        Benefit Plans
--------------------------------------------------------------------------------------------------------------
In Millions                                                              2002       2001       2002       2001
--------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>        <C>        <C>        <C>
Accumulated benefit obligation                                           $ 71       $ 44       $466       $166
Plan assets at fair value                                                   9         --         45         41
==============================================================================================================
</TABLE>

Assumptions as of year-end are:

<TABLE>
<CAPTION>
                                                                                                Postretirement
                                                                          Pension Plans         Benefit Plans
--------------------------------------------------------------------------------------------------------------
                                                                         2002       2001       2002       2001
--------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>        <C>        <C>        <C>
Discount rate                                                            7.50%      7.75%      7.50%      7.75%
Rate of return on plan assets                                            10.4       10.4       10.0       10.0
Salary increases                                                          4.4        4.4         --         --
Annual increase in cost of benefits                                        --         --        8.3        6.6
==============================================================================================================
</TABLE>

The annual increase in cost of postretirement benefits is assumed to decrease
gradually in future years, reaching an ultimate rate of 5.2 percent in the year
2007.

Components of net benefit (income) or expense each year are as follows:

<TABLE>
<CAPTION>
                                                                                         Postretirement
                                                          Pension Plans                  Benefit Plans
--------------------------------------------------------------------------------------------------------------
In Millions                                        2002       2001       2000       2002       2001       2000
--------------------------------------------------------------------------------------------------------------
<S>                                               <C>        <C>        <C>        <C>        <C>        <C>
Service cost                                      $  34      $  18      $  20      $  11      $   6      $   6
Interest cost                                       122         79         69         33         21         17
Expected return on plan assets                     (241)      (159)      (142)       (23)       (23)       (22)
Amortization of transition asset                    (15)       (15)       (14)        --         --         --
Amortization of (gains) losses                        2          2          1          3          1          1
Amortization of prior service costs (credits)         8          6          6         (1)        (2)        (2)
Settlement or curtailment losses                      5         --         --          2         --         --
--------------------------------------------------------------------------------------------------------------
   Net (income) expense                           $ (85)     $ (69)     $ (60)     $  25      $   3      $  --
==============================================================================================================
</TABLE>

Assumed trend rates for health-care costs have an important effect on the
amounts reported for the postretirement benefit plans. If the health-care cost
trend rate increased by 1 percentage point in each future year, the aggregate of
the service and interest cost components of postretirement expense would
increase for 2002 by $5 million, and the postretirement accumulated benefit
obligation as of May 26, 2002, would increase by $51 million. If the health-care
cost trend rate decreased by 1 percentage point in each future year, the
aggregate of the service and interest cost components of postretirement expense
would decrease for 2002 by $4 million, and the postretirement accumulated
benefit obligation as of May 26, 2002, would decrease by $44 million.

The General Mills Savings Plan is a defined contribution plan that covers our
salaried and nonunion employees. It had net assets of $1,666 million at May 26,
2002, and $1,071 million at May 27, 2001. This plan is a 401(k) savings plan
that includes a number of investment funds and an Employee Stock Ownership Plan
(ESOP). The ESOP's only assets are Company common stock and temporary cash
balances. Company expense recognized in 2002, 2001 and 2000 was $9 million, $8
million and $8 million, respectively. The ESOP's share of this expense was $3
million, $7 million and $7 million, respectively. The ESOP's expense is
calculated by the "shares allocated" method.

The ESOP uses Company common stock to convey benefits to employees and, through
increased stock ownership, to further align employee interests with those of
shareholders. The Company matches a percentage of employee contributions to the
ESOP with a base match plus a variable year-end match that depends on annual
results. Employees receive the Company match in the form of common stock.

The ESOP originally purchased Company common stock principally with funds
borrowed from third parties (and guaranteed by the Company). The ESOP shares are
included in net shares outstanding for the purposes of calculating earnings per
share. The ESOP's third-party debt is described in Note Eight.

The Company treats cash dividends paid to the ESOP the same as other dividends.
Dividends received on leveraged shares (i.e., all shares originally purchased
with the debt proceeds) are used for debt service, while dividends received on
unleveraged shares are passed through to participants.

The Company's cash contribution to the ESOP is calculated so as to pay off
enough debt to release sufficient shares to make the Company match. The ESOP
uses the Company's cash contributions to the plan, plus the dividends received
on the ESOP's leveraged shares, to make principal and interest payments on the
ESOP's debt. As loan payments are made, shares become unencumbered by debt and
are committed to be allocated. The ESOP allocates shares to individual employee
accounts on the basis of the match of employee payroll savings (contributions),
plus reinvested dividends received on previously allocated shares. In 2002, 2001
and 2000, the ESOP incurred interest expense of $2 million, $3 million and $4
million, respectively. The ESOP used dividends of $8 million, $7 million and $9
million, along with Company contributions of $3 million, $6 million and $6
million to make interest and principal payments in the respective years.

The number of shares of Company common stock in the ESOP is summarized as
follows:

<TABLE>
<CAPTION>
Number of Shares, in Thousands                                   MAY 26, 2002   May 27, 2001
--------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>
Unreleased shares                                                       1,170          1,652
Committed to be allocated                                                  15             24
Allocated to participants                                               5,500          5,680
--------------------------------------------------------------------------------------------
   Total shares                                                         6,685          7,356
============================================================================================
</TABLE>


36
<PAGE>


15. PROFIT-SHARING PLAN

The Executive Incentive Plan provides incentives to key employees who have the
greatest potential to contribute to current earnings and successful future
operations. These awards are approved by the Compensation Committee of the Board
of Directors, which consists solely of independent, outside directors. Awards
are based on performance against pre-established goals approved by the
Committee. Profit-sharing expense was $11 million, $12 million and $10 million
in 2002, 2001 and 2000, respectively.

16. INCOME TAXES

The components of earnings before income taxes and earnings of joint ventures
and the corresponding income taxes thereon are as follows:

<TABLE>
<CAPTION>
In Millions, Fiscal Year                                       2002          2001          2000
-----------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>           <C>
Earnings before income taxes:
   U.S                                                        $ 653         $ 991         $ 919
   Foreign                                                       14             7            28
-----------------------------------------------------------------------------------------------
       Total earnings before income taxes                     $ 667         $ 998         $ 947
-----------------------------------------------------------------------------------------------
Income taxes:
   Current:
     Federal                                                  $ 127         $ 283         $ 280
     State and local                                              8            20            14
     Foreign                                                     11            (2)           (2)
-----------------------------------------------------------------------------------------------
       Total current                                            146           301           292
-----------------------------------------------------------------------------------------------
   Deferred:
     Federal                                                     84            42            44
     State and local                                             15             5            (5)
     Foreign                                                     (6)            2             5
-----------------------------------------------------------------------------------------------
       Total deferred                                            93            49            44
-----------------------------------------------------------------------------------------------
         Total Income Taxes                                   $ 239         $ 350         $ 336
===============================================================================================
</TABLE>

During 2002, 2001 and 2000, we paid income taxes of $196 million, $231 million
and $284 million, respectively.

In fiscal 1982 and 1983 we purchased certain income tax items from other
companies through tax lease transactions. Total current income taxes charged to
earnings reflect the amounts attributable to operations and have not been
materially affected by these tax leases. Actual current taxes payable relating
to 2002, 2001 and 2000 operations were increased by approximately $3 million,
$16 million and $22 million, respectively, due to the current effect of tax
leases. These tax payments do not affect taxes for statement of earnings
purposes since they repay tax benefits realized in prior years. The repayment
liability is classified as Deferred Income Taxes - Tax Leases.

The following table reconciles the U.S. statutory income tax rate with the
effective income tax rate:

<TABLE>
<CAPTION>
Fiscal Year                                                    2002          2001          2000
-----------------------------------------------------------------------------------------------
<S>                                                            <C>           <C>           <C>
U.S. statutory rate                                            35.0%         35.0%         35.0%
-----------------------------------------------------------------------------------------------
State and local income taxes,
   net of federal tax benefits                                  2.3           1.6           1.3
Other, net                                                     (1.5)         (1.6)          (.8)
-----------------------------------------------------------------------------------------------
   Effective Income Tax Rate                                   35.8%         35.0%         35.5%
===============================================================================================
</TABLE>

The tax effects of temporary differences that give rise to deferred tax assets
and liabilities are as follows:

<TABLE>
<CAPTION>
In Millions                                                         MAY 26, 2002   May 27, 2001
-----------------------------------------------------------------------------------------------
<S>                                                                      <C>               <C>
Accrued liabilities                                                      $106              $ 65
Unusual charges                                                           104                 9
Compensation and employee benefits                                        111                73
Unrealized hedge losses                                                   163                --
Tax credit carryforwards                                                   51                 8
Other                                                                      23                14
-----------------------------------------------------------------------------------------------
   Gross deferred tax assets                                              558               169
-----------------------------------------------------------------------------------------------
Depreciation                                                              281               134
Prepaid pension asset                                                     289               255
Intangible assets                                                          22                10
Other                                                                      51                54
-----------------------------------------------------------------------------------------------
   Gross deferred tax liabilities                                         643               453
-----------------------------------------------------------------------------------------------
Valuation allowance                                                        10                 3
-----------------------------------------------------------------------------------------------
   Net Deferred Tax Liability                                            $ 95              $287
===============================================================================================
</TABLE>

We have not recognized a deferred tax liability for unremitted earnings of $87
million from our foreign operations because we do not expect those earnings to
become taxable to us in the foreseeable future and because a determination of
the potential liability is not practicable. If a portion were to be remitted, we
believe income tax credits would substantially offset any resulting tax
liability.

17. LEASES AND OTHER COMMITMENTS

An analysis of rent expense by property leased follows:

<TABLE>
<CAPTION>
In Millions, Fiscal Year                                             2002       2001       2000
-----------------------------------------------------------------------------------------------
<S>                                                                   <C>        <C>        <C>
Warehouse space                                                       $26        $25        $24
Equipment                                                              23         11          8
Other                                                                  19          7          7
-----------------------------------------------------------------------------------------------
   Total Rent Expense                                                 $68        $43        $39
===============================================================================================
</TABLE>

Some leases require payment of property taxes, insurance and maintenance costs
in addition to the rent payments. Contingent and escalation rent in excess of
minimum rent payments and sublease income netted in rent expense were
insignificant.


                                                                              37
<PAGE>


Noncancelable future lease commitments (in millions) are: $59 in 2003, $44 in
2004, $35 in 2005, $31 in 2006, $22 in 2007 and $96 after 2007, with a
cumulative total of $287. These future lease commitments will be partially
offset by future sublease receipts of $46 million.

We are contingently liable under guaranties and comfort letters for $212
million. The guaranties and comfort letters are principally issued to support
borrowing arrangements, primarily for our joint ventures. We remain the
guarantor on certain leases and other obligations of Darden Restaurants, Inc.
(Darden), an entity we spun off as of May 28, 1995. However, Darden has
indemnified us against any related loss.

The Company is involved in various claims, including environmental matters,
arising in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters, either individually or in aggregate, will
not have a material adverse effect on the Company's financial position or
results of operations.

18. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

We operate exclusively in the consumer foods industry, with multiple operating
segments organized generally by product categories.

Following the acquisition of Pillsbury, we restructured our management
organization. Consistent with our new organization and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," we have
aggregated our operating segments into three reportable segments: 1) U.S.
Retail; 2) Bakeries and Foodservice; and 3) International. U.S. Retail consists
of cereals, meals, refrigerated and frozen dough products, baking products,
snacks, yogurt and other. Our Bakeries and Foodservice segment consists of
products marketed to bakeries and offered to the commercial and noncommercial
foodservice sectors throughout the United States and Canada. The International
segment includes our retail business outside the United States and our
foodservice business outside of the United States and Canada.

During 2002, there was one individual customer that generated 12 percent of our
net sales. There were no individual customers that generated more than 10
percent of our net sales during 2001 and 2000.

Management reviews operating results to evaluate segment performance. Operating
profit for the reportable segments excludes general corporate expenses. Interest
expense and income taxes are centrally managed at the corporate level and,
therefore, are not allocated to segments since they are excluded from the
measure of segment profitability reviewed by the Company's management. Under our
supply chain organization, our manufacturing, warehouse, distribution and sales
activities are substantially integrated across our operations in order to
maximize efficiency and productivity. As a result, fixed assets, capital
expenditures for long-lived assets, and depreciation and amortization expenses
are not maintained nor available by operating segment.

The measurement of operating segment results is generally consistent with the
presentation of the consolidated statements of earnings. Intercompany
transactions between reportable operating segments were not material in the
periods presented.

<TABLE>
<CAPTION>
In Millions, Fiscal Year                                    2002          2001          2000
--------------------------------------------------------------------------------------------
<S>                                                      <C>           <C>           <C>
Net Sales:
   U.S. Retail                                           $ 6,143       $ 4,790       $ 4,560
   Bakeries and Foodservice                                1,028           397           355
   International                                             778           263           258
--------------------------------------------------------------------------------------------
     Total                                                 7,949         5,450         5,173
--------------------------------------------------------------------------------------------
Operating Profit Before Unusual Items:
   U.S. Retail                                           $ 1,066       $ 1,057       $ 1,013
   Bakeries and Foodservice                                  146            91            81
   International                                              45            17            18
   Unallocated Corporate Items                                16             4           (13)
--------------------------------------------------------------------------------------------
     Total                                                 1,273         1,169         1,099
--------------------------------------------------------------------------------------------
Operating Profit Including Unusual Items:
   U.S. Retail                                           $   999       $ 1,100       $ 1,013
   Bakeries and Foodservice                                  144            91            81
   International                                              45            17            18
   Unallocated Corporate Items                              (105)           (4)          (13)
--------------------------------------------------------------------------------------------
     Total                                                 1,083         1,204         1,099
Interest, net                                                416           206           152
Income Taxes                                                 239           350           336
Earnings from Joint Ventures                                  33            17             3
--------------------------------------------------------------------------------------------
Earnings before cumulative effect of change in
   accounting principle                                      461           665           614
Cumulative effect of change in accounting principle           (3)           --            --
--------------------------------------------------------------------------------------------
Net Earnings                                             $   458       $   665       $   614
============================================================================================
</TABLE>

The following table provides net sales information for our primary product
categories:

<TABLE>
<CAPTION>
In Millions, Fiscal Year                                    2002          2001          2000
--------------------------------------------------------------------------------------------
<S>                                                      <C>           <C>           <C>
Product Categories:
   U.S. Retail:
     Big G Cereals                                       $ 1,866       $ 1,963       $ 1,986
     Meals                                                 1,161           580           555
     Pillsbury USA                                           793            --            --
     Baking Products                                         786           824           804
     Snacks                                                  722           711           630
     Yogurt/Health Ventures/Other                            815           712           585
--------------------------------------------------------------------------------------------
       Total U.S. Retail                                   6,143         4,790         4,560
--------------------------------------------------------------------------------------------
   Bakeries and Foodservice                                1,028           397           355
--------------------------------------------------------------------------------------------
   International:
     Canada                                                  283           177           178
     Rest of World                                           495            86            80
--------------------------------------------------------------------------------------------
       Total International                                   778           263           258
--------------------------------------------------------------------------------------------
         Consolidated Total                              $ 7,949       $ 5,450       $ 5,173
============================================================================================
</TABLE>


38
<PAGE>


The following table provides earnings information for our joint venture
activities by operating segment:

<TABLE>
<CAPTION>
In Millions, Fiscal Year                                     2002          2001         2000
--------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>          <C>
Earnings (Loss) After Tax:
   U.S. Retail                                            $    (6)      $    --      $    --
   International                                               39            17            3
--------------------------------------------------------------------------------------------
     Total                                                $    33       $    17      $     3
============================================================================================
</TABLE>

The following table provides financial information by geographic area:

<TABLE>
<CAPTION>
In Millions, Fiscal Year                                     2002          2001         2000
--------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>          <C>
Net sales:
   U.S                                                    $ 7,139       $ 5,187      $ 4,915
   Non-U.S                                                    810           263          258
--------------------------------------------------------------------------------------------
     Consolidated Total                                   $ 7,949       $ 5,450      $ 5,173
============================================================================================
Long-lived assets:
   U.S                                                    $ 2,549       $ 1,488      $ 1,395
   Non-U.S                                                    215            13           10
--------------------------------------------------------------------------------------------
     Consolidated Total                                   $ 2,764       $ 1,501      $ 1,405
============================================================================================
</TABLE>


19. QUARTERLY DATA (UNAUDITED)

Summarized quarterly data for 2002 and 2001 follows:

<TABLE>
<CAPTION>
                                                           First Quarter     Second Quarter      Third Quarter      Fourth Quarter
----------------------------------------------------------------------------------------------------------------------------------
In Millions, Except per Share and Market Price Amounts      2002     2001      2002     2001      2002     2001      2002     2001
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>
Net sales                                                 $1,404   $1,306    $1,842   $1,500    $2,379   $1,323    $2,324   $1,321
Gross profit                                                 683      653       802      747       881      615       816      594
Earnings before cumulative effect of change in
 accounting principle                                        191      159       130      203        83      157        57      146
Net earnings                                                 188      159       130      203        83      157        57      146
Earnings per share before cumulative effect of change
 in accounting principle:
   Basic                                                     .67      .56       .43      .72       .23      .55       .16      .51
   Diluted                                                   .65      .55       .41      .70       .22      .54       .15      .50
Net earnings per share:
   Basic                                                     .66      .56       .43      .72       .23      .55       .16      .51
   Diluted                                                   .64      .55       .41      .70       .22      .54       .15      .50
Dividends per share                                         .275     .275      .275     .275      .275     .275      .275     .275
Market price of common stock:
   High                                                    45.36    41.75     51.16    43.44     52.86    45.40     50.39    46.35
   Low                                                     42.05    32.13     42.50    31.38     43.22    38.75     41.61    37.26
==================================================================================================================================
</TABLE>

See Note Three for a description of unusual items. In fiscal 2002, the net
earnings impact was $9 million income, $68 million expense, $24 million expense,
and $37 million expense in quarters one, two, three, and four, respectively. The
net impact per diluted share in fiscal 2002 was $.03 income, $.22 expense, $.06
expense and $.10 expense in quarters one, two, three, and four, respectively. In
fiscal 2001, the net earnings impact was under $1 million expense, $1 million
expense, and $1 million expense in quarters one, two and three, respectively.
There was no impact to diluted EPS in these quarters. The net earnings impact in
the fourth quarter of 2001 was $24 million income ($.08 per diluted share).


                                                                              39

</TEXT>
</DOCUMENT>
