Financial Instruments. The carrying values of cash and cash equivalents, receivables, accounts payable, other current liabilities, and notes payable approximate fair value. Marketable securities are carried at fair value. As of November 23, 2014, and May 25, 2014, a comparison of cost and market values of our marketable debt and equity securities is as follows:

	Cost				Market Value				Gross Gains				Gross Losses
In Millions		Nov. 23, 2014		May 25, 2014		Nov. 23, 2014		May 25, 2014		Nov. 23, 2014		May 25, 2014		Nov. 23, 2014		May 25, 2014
Available-for-sale:
Debt securities	$	247.6	$	318.6	$	247.8	$	318.8	$	0.2	$	0.2	$	-	$	-
Equity securities		1.8		1.8		7.6		7.2		5.8		5.4		-		-
Total	$	249.4	$	320.4	$	255.4	$	326.0	$	6.0	$	5.6	$	-	$	-

For the second quarter of fiscal 2015, there were no gains or losses from sales of available-for-sale marketable securities. Gains and losses are determined by specific identification. Classification of marketable securities as current or noncurrent is dependent upon our intended holding period, the security's maturity date, or both. The aggregate unrealized gains and losses on available-for-sale securities, net of tax effects, are classified in accumulated other comprehensive loss (AOCI) within stockholders' equity. Scheduled maturities of our marketable securities are as follows:

Marketable securities with a market value of $2.3 million as of November 23, 2014, were pledged as collateral for certain derivative contracts. As of November 23, 2014, $21.5 million of certain accounts receivable were pledged as collateral against a foreign uncommitted line of credit.

The fair values and carrying amounts of long-term debt, including the current portion, were $8,914.8 million and $8,463.8 million, respectively, as of November 23, 2014. The fair value of long-term debt was estimated using market quotations and discounted cash flows based on our current incremental borrowing rates for similar types of instruments. Long-term debt is a Level 2 liability in the fair value hierarchy.

Risk Management Activities. As a part of our ongoing operations, we are exposed to market risks such as changes in interest and foreign currency exchange rates and commodity and equity prices. To manage these risks, we may enter into various derivative transactions (e.g., futures, options, and swaps) pursuant to our established policies.

Commodity Price Risk. Many commodities we use in the production and distribution of our products are exposed to market price risks. We utilize derivatives to manage price risk for our principal ingredients and energy costs, including grains (oats, wheat, and corn), oils (principally soybean), non-fat dry milk, natural gas, and diesel fuel. Our primary objective when entering into these derivative contracts is to achieve certainty with regard to the future price of commodities purchased for use in our supply chain. We manage our exposures through a combination of purchase orders, long-term contracts with suppliers, exchange-traded futures and options, and over-the-counter options and swaps. We offset our exposures based on current and projected market conditions and generally seek to acquire the inputs at as close to our planned cost as possible.

We use derivatives to manage our exposure to changes in commodity prices. We do not perform the assessments required to achieve hedge accounting for commodity derivative positions. Accordingly, the changes in the values of these derivatives are recorded currently in cost of sales in our Consolidated Statements of Earnings.

Although we do not meet the criteria for cash flow hedge accounting, we nonetheless believe that these instruments are effective in achieving our objective of providing certainty in the future price of commodities purchased for use in our supply chain. Accordingly, for purposes of measuring segment operating performance certain gains and losses are reported in unallocated corporate items outside of segment operating results until such time that the exposure we are managing affects earnings. At that time we reclassify the gain or loss from unallocated corporate items to segment operating profit, allowing our operating segments to realize the economic effects of the derivative without experiencing the resulting mark-to-market volatility, which remains in unallocated corporate items.

Unallocated corporate items for the quarter ended November 23, 2014, and November 24, 2013, included:

	Quarter Ended				Six-Month Period Ended
In Millions		Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013
Net loss on certain mark-to-market valuation of commodity positions	$	(40.2)	$	(3.7)	$	(81.6)	$	(16.0)
Net loss on commodity positions reclassified from unallocated corporate items to segment operating profit		32.8		18.7		28.0		34.5
Net mark-to-market revaluation of certain grain inventories		2.3		6.0		(0.7)		1.7
Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items	$	(5.1)	$	21.0	$	(54.3)	$	20.2

As of November 23, 2014, the net notional value of commodity derivatives was $634.9 million, of which $264.8 million related to energy inputs and $370.1 million related to agricultural inputs. These contracts relate to inputs that generally will be utilized within the next 12 months.

Interest Rate Risk. We are exposed to interest rate volatility with regard to future issuances of fixed-rate debt, and existing and future issuances of floating-rate debt. Primary exposures include U.S. Treasury rates, LIBOR, Euribor, and commercial paper rates in the United States and Europe. We use interest rate swaps, forward-starting interest rate swaps, and treasury locks to hedge our exposure to interest rate changes, to reduce the volatility of our financing costs, and to achieve a desired proportion of fixed versus floating-rate debt, based on current and projected market conditions. 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 upon notional principal amount.

Floating Interest Rate Exposures — Floating-to-fixed interest rate swaps and hedges of forecasted issuances of debt are accounted for as cash flow hedges. Effectiveness is assessed based on either the perfectly effective hypothetical derivative method or changes in the present value of interest payments on the underlying debt. Effective gains and losses deferred to AOCI are reclassified into earnings over the life of the associated debt. Ineffective gains and losses are recorded as net interest. The amount of hedge ineffectiveness was less than $1 million for the quarter and six-month periods ended November 23, 2014.

Fixed Interest Rate Exposures — Fixed-to-floating interest rate swaps are accounted for as fair value hedges with effectiveness assessed based on changes in the fair value of the underlying debt and derivatives, using incremental borrowing rates currently available on loans with similar terms and maturities. Ineffective gains and losses on these derivatives and the underlying hedged items are recorded as net interest. The amount of hedge ineffectiveness was a gain of $1.2 million for the quarter ended November 23, 2014 and less than $1 million for the six-month period ended November 23, 2014.

During the second quarter of fiscal 2015, we entered into swaps to convert $500.0 million of 1.4 percent fixed-rate notes due October 20, 2017, and $500.0 million of 2.2 percent fixed-rate notes due October 21, 2019, to floating rates.

In advance of a planned debt financing, we entered into $250.0 million of treasury locks with an average fixed rate of 1.99 percent. All of these treasury locks were cash settled for $17.9 million during the third quarter of fiscal 2014, coincident with the issuance of our $500.0 million 10-year fixed-rate notes.

During the third quarter of fiscal 2013, we entered into swaps to convert $250.0 million of 0.875 percent fixed-rate notes due January 29, 2016, to floating rates.

As of November 23, 2014, the pre-tax amount of cash-settled interest rate hedge gain or loss remaining in AOCI that will be reclassified to earnings over the remaining term of the related underlying debt is as follows:

In Millions		Gain/(Loss)
5.2% notes due March 17, 2015	$	(0.1)
5.7% notes due February 15, 2017		(4.9)
5.65% notes due February 15, 2019		2.1
3.15% notes due December 15, 2021		(69.9)
3.65% notes due February 15, 2024		16.4
5.4% notes due June 15, 2040		(14.3)
4.15% notes due February 15, 2043		11.1
Net pre-tax hedge loss in AOCI	$	(59.6)

The following table summarizes the notional amounts and weighted-average interest rates of our interest rate derivatives. Average floating rates are based on rates as of the end of the reporting period.

The following tables reconcile the net fair values of assets and liabilities subject to offsetting arrangements that are recorded in the Consolidated Balance Sheets to the net fair values that could be reported in the Consolidated Balance Sheets:

	Nov. 23, 2014
			Assets						Liabilities
				Gross Amounts Not Offset in the Balance Sheet (e)						Gross Amounts Not Offset in the Balance Sheet (e)
In Millions	Gross Amounts of Recognized Assets	Gross Liabilities Offset in the Balance Sheet (a)	Net Amounts of Assets (b)	Financial Instruments	Cash Collateral Received	Net Amount (c)	Gross Amounts of Recognized Liabilities	Gross Assets Offset in the Balance Sheet (a)	Net Amounts of Liabilities (b)	Financial Instruments	Cash Collateral Received	Net Amount (d)
Commodity contracts	$ 0.7	$ -	$ 0.7	$ (0.3)	$ -	$ 0.4	$ (21.1)	$ -	$ (21.1)	$ 0.3	$ -	$ (20.8)
Interest rate contracts	0.5	-	0.5	-	-	0.5	(2.5)	-	(2.5)	-	-	(2.5)
Foreign exchange contracts	14.1	-	14.1	(8.6)	-	5.5	(13.3)	-	(13.3)	8.6	-	(4.7)
Total	$ 15.3	$ -	$ 15.3	$ (8.9)	$ -	$ 6.4	$ (36.9)	$ -	$ (36.9)	$ 8.9	$ -	$ (28.0)

(d) Fair value of liabilities that could be reported net in the Consolidated Balance Sheets.

(e) Fair value of assets and liabilities reported on a gross basis in the Consolidated Balance Sheets.

	May 25, 2014
			Assets						Liabilities
				Gross Amounts Not Offset in the Balance Sheet (e)						Gross Amounts Not Offset in the Balance Sheet (e)
In Millions	Gross Amounts of Recognized Assets	Gross Liabilities Offset in the Balance Sheet (a)	Net Amounts of Assets (b)	Financial Instruments	Cash Collateral Received	Net Amount (c)	Gross Amounts of Recognized Liabilities	Gross Assets Offset in the Balance Sheet (a)	Net Amounts of Liabilities (b)	Financial Instruments	Cash Collateral Received	Net Amount (d)
Commodity contracts	$ 19.1	$ -	$ 19.1	$ (3.4)	$ -	$ 15.7	$ (4.0)	$ -	$ (4.0)	$ 3.4	$ -	$ (0.6)
Interest rate contracts	0.7	-	0.7	-	-	0.7	-	-	-	-	-	-
Foreign exchange contracts	10.5	-	10.5	(8.0)	-	2.5	(19.1)	-	(19.1)	8.0	-	(11.1)
Total	$ 30.3	$ -	$ 30.3	$ (11.4)	$ -	$ 18.9	$ (23.1)	$ -	$ (23.1)	$ 11.4	$ -	$ (11.7)

(d) Fair value of liabilities that could be reported net in the Consolidated Balance Sheets.

(e) Fair value of assets and liabilities reported on a gross basis in the Consolidated Balance Sheets.

Foreign Exchange Risk. Foreign currency fluctuations affect our net investments in foreign subsidiaries and foreign currency cash flows related to third party purchases, intercompany loans, product shipments, and foreign-denominated commercial paper. We are also exposed to the translation of foreign currency earnings to the U.S. dollar. Our principal exposures are to the Australian dollar, Brazilian real, British pound sterling, Canadian dollar, Chinese renminbi, euro, Japanese yen, Mexican peso, and Swiss franc. We mainly use foreign currency forward contracts to selectively hedge our foreign currency cash flow exposures. We also generally swap our foreign-denominated commercial paper borrowings and nonfunctional currency intercompany loans back to U.S. dollars or the functional currency of the entity with foreign exchange exposure; the gains or losses on these derivatives offset the foreign currency revaluation gains or losses recorded in earnings on the associated borrowings. We generally do not hedge more than 18 months forward.

As of November 23, 2014, the net notional value of foreign exchange derivatives was $1.1 billion. The amount of hedge ineffectiveness was less than $1 million for the quarter and six-month periods ended November 23, 2014.

We also have many net investments in foreign subsidiaries that are denominated in euros. We previously hedged a portion of these net investments by issuing euro-denominated commercial paper and foreign exchange forward contracts. During the second quarter of fiscal 2014, we entered into a net investment hedge for a portion of our net investment in foreign operations denominated in euros by issuing €500.0 million of euro-denominated bonds. As of November 23, 2014, we had deferred net foreign currency losses of $42.4 million in AOCI associated with net investment hedging activity.

Venezuela is a highly inflationary economy and as such, we remeasure the value of the assets and liabilities of our Venezuelan subsidiary based on the exchange rate at which we expect to remit dividends in U.S. dollars. In February 2014, the Venezuelan government established a new foreign exchange market mechanism (“SICAD 2”) and has indicated that this will be the market through which U.S. dollars will be obtained for the remittance of dividends. This market has significantly higher foreign exchange rates than those available through the other foreign exchange mechanisms. In the six-month period ended November 23, 2014, we recorded an immaterial impact in unallocated corporate items resulting from the remeasurement of assets and liabilities of our Venezuelan subsidiary at the SICAD 2 rate. We have been able to access U.S. dollars through the SICAD 2 market. Our Venezuela operations represent less than 1 percent of our consolidated assets, liabilities, net sales, and segment operating profit. As of November 23, 2014, we had $1.0 million of non-U.S. dollar cash balances in Venezuela.

Equity Instruments. Equity price movements affect our compensation expense as certain investments made by our employees in our deferred compensation plan are revalued. We use equity swaps to manage this risk. As of November 23, 2014, the net notional value of our equity swaps was $119.4 million. These swap contracts mature in fiscal 2015.

The fair values of our assets, liabilities, and derivative positions recorded at fair value and their respective levels in the fair value hierarchy as of November 23, 2014 and May 25, 2014, were as follows:

	Nov. 23, 2014
	Fair Values of Assets								Fair Values of Liabilities
In Millions		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Derivatives designated as hedging instruments:
Interest rate contracts (a) (b)	$	-	$	0.5	$	-	$	0.5	$	-	$	(2.5)	$	-	$	(2.5)
Foreign exchange contracts (c) (d)		-		12.6		-		12.6		-		(8.4)		-		(8.4)
Total		-		13.1		-		13.1		-		(10.9)		-		(10.9)

Derivatives not designated as hedging instruments:
Foreign exchange contracts (c) (d)		-		1.5		-		1.5		-		(4.9)		-		(4.9)
Equity contracts (a) (e)		-		-		-		-		-		(0.5)		-		(0.5)
Commodity contracts (c) (e)		0.3		0.4		-		0.7		-		(21.1)		-		(21.1)
Grain contracts (c) (e)		-		5.5		-		5.5		-		(6.8)		-		(6.8)
Long-lived assets (f)		-		11.5		-		11.5		-		-		-		-
Total		0.3		18.9		-		19.2		-		(33.3)		-		(33.3)

Other assets and liabilities reported at fair value:
Marketable investments (a) (g)		7.6		247.8		-		255.4		-		-		-		-
Total		7.6		247.8		-		255.4		-		-		-		-
Total assets, liabilities, and derivative positions recorded at fair value	$	7.9	$	279.8	$	-	$	287.7	$	-	$	(44.2)	$	-	$	(44.2)

(a) These contracts and investments are recorded as prepaid expenses and other current assets, other assets, other current liabilities or other liabilities, as appropriate, based on whether in a gain or loss position. Certain marketable investments are recorded as cash and cash equivalents.

(c) These contracts are recorded as prepaid expenses and other current assets or as other current liabilities, as appropriate, based on whether in a gain or loss position.

(d) Based on observable market transactions of spot currency rates and forward currency prices.

(e) Based on prices of futures exchanges and recently reported transactions in the marketplace.

(f) We recorded a $15.2 million non-cash impairment charge in the second quarter to write down certain long-lived assets to their fair value of $11.5 million. Fair value was based on recently reported transactions for similar assets in the marketplace. These assets had a book value of $26.7 million and were associated with the restructuring actions described in Note 3.

	May 25, 2014
	Fair Values of Assets								Fair Values of Liabilities
In Millions		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Derivatives designated as hedging instruments:
Interest rate contracts (a) (b)	$	-	$	0.7	$	-	$	0.7	$	-	$	-	$	-	$	-
Foreign exchange contracts (c) (d)		-		9.9		-		9.9		-		(12.6)		-		(12.6)
Total		-		10.6		-		10.6		-		(12.6)		-		(12.6)

Derivatives not designated as hedging instruments:
Foreign exchange contracts (c) (d)		-		0.6		-		0.6		-		(6.5)		-		(6.5)
Commodity contracts (c) (e)		11.1		8.0		-		19.1		-		(4.0)		-		(4.0)
Grain contracts (c) (e)		-		7.5		-		7.5		-		(4.9)		-		(4.9)
Total		11.1		16.1		-		27.2		-		(15.4)		-		(15.4)

Other assets and liabilities reported at fair value:
Marketable investments (a) (f)		7.2		318.8		-		326.0		-		-		-		-
Total		7.2		318.8		-		326.0		-		-		-		-
Total assets, liabilities, and derivative positions recorded at fair value	$	18.3	$	345.5	$	-	$	363.8	$	-	$	(28.0)	$	-	$	(28.0)

(c) These contracts are recorded as prepaid expenses and other current assets or as other current liabilities, as appropriate, based on whether in a gain or loss position.

(d) Based on observable market transactions of spot currency rates and forward currency prices.

(e) Based on prices of futures exchanges and recently reported transactions in the marketplace.

Information related to our cash flow hedges, fair value hedges, and other derivatives not designated as hedging instruments for the quarter and six-month periods ended November 23, 2014 and November 24, 2013, were as follows:

		Interest Rate Contracts				Foreign Exchange Contracts				Equity Contracts				Commodity Contracts				Total
		Quarter Ended				Quarter Ended				Quarter Ended				Quarter Ended				Quarter Ended
In Millions	Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013
Derivatives in Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in other comprehensive income (OCI) (a)	$	-	$	(3.7)	$	7.3	$	(6.5)	$	-	$	-	$	-	$	-	$	7.3	$	(10.2)
Amount of gain (loss) reclassified from AOCI into earnings (a) (b)		(2.6)		(3.1)		0.2		4.4		-		-		-		-		(2.4)		1.3
Amount of gain recognized in earnings (c)		-		-		0.1		-		-		-		-		-		0.1		-
Derivatives in Fair Value Hedging Relationships:
Amount of net gain recognized in earnings (d)		1.2		1.5		-		-		-		-		-		-		1.2		1.5
Derivatives Not Designated as Hedging Instruments:
Amount of gain (loss) recognized in earnings (d)		-		-		2.3		(6.0)		1.1		5.1		(40.2)		(3.7)		(36.8)		(4.6)

(b) Gain (loss) reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and selling, general, and administrative (SG&A) expenses for foreign exchange contracts.

(c) Loss recognized in earnings is related to the ineffective portion of the hedging relationship, including SG&A expenses for foreign exchange contracts and interest, net for interest rate contracts. No amounts were reported as a result of being excluded from the assessment of hedge effectiveness.

(d) Gain (loss) recognized in earnings is reported in interest, net for interest rate contracts, in cost of sales for commodity contracts, and in SG&A expenses for equity contracts and foreign exchange contracts.

		Interest Rate Contracts				Foreign Exchange Contracts				Equity Contracts				Commodity Contracts				Total
		Six-Month Period Ended				Six-Month Period Ended				Six-Month Period Ended				Six-Month Period Ended				Six-Month Period Ended
In Millions		Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013		Nov. 23, 2014		Nov. 24, 2013
Derivatives in Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in other comprehensive income (OCI) (a)	$	-	$	10.7	$	5.8	$	(2.8)	$	-	$	-	$	-	$	-	$	5.8	$	7.9
Amount of gain (loss) reclassified from AOCI into earnings (a) (b)		(5.2)		(6.1)		(1.5)		9.5		-		-		-		-		(6.7)		3.4
Amount of gain (loss) recognized in earnings (c)		-		-		0.1		(0.2)		-		-		-		-		0.1		(0.2)

Derivatives in Fair Value Hedging Relationships:
Amount of net gain recognized in earnings (d)		0.9		0.3		-		-		-		-		-		-		0.9		0.3

Derivatives Not Designated as Hedging Instruments:
Amount of gain (loss) recognized in earnings (d)		-		-		0.9		(11.1)		5.2		5.6		(81.6)		(16.0)		(75.5)		(21.5)

(b) Gain (loss) reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign exchange contracts.

(c) Loss recognized in earnings is related to the ineffective portion of the hedging relationship, including SG&A expenses for foreign exchange contracts. No amounts were reported as a result of being excluded from the assessment of hedge effectiveness.

Amounts Recorded in Accumulated Other Comprehensive Loss. As of November 23, 2014, the after-tax amounts of unrealized gains and losses in AOCI related to hedge derivatives follows:

In Millions		After-Tax Gain/(Loss)+
Unrealized losses from interest rate cash flow hedges	$	(36.1)+
Unrealized gains from foreign currency cash flow hedges		6.8+
After-tax loss in AOCI related to hedge derivatives	$	(29.3)+

The net amount of pre-tax gains and losses in AOCI as of November 23, 2014, that we expect to be reclassified into net earnings within the next 12 months is $2.0 million of loss.

Credit-Risk-Related Contingent Features. Certain of our derivative instruments contain provisions that require us to maintain an investment grade credit rating on our debt from each of the major credit rating agencies. If our debt were to fall below investment grade, the counterparties to the derivative instruments could request full collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on November 23, 2014, was $37.8 million. We would be required to post this amount of collateral to the counterparties if the contingent features were triggered.

Credit Risk. We enter into interest rate, foreign exchange, commodity, and equity derivatives primarily with a diversified group of highly rated counterparties. We continually monitor our positions and the credit ratings of the counterparties involved and, by policy, limit the amount of credit exposure to any one party. These transactions may expose us to potential losses due to the risk of nonperformance by these counterparties; however, we have not incurred a material loss. We also enter into commodity futures transactions through various regulated exchanges.

The amount of loss due to the credit risk of the counterparties, should the counterparties fail to perform according to the terms of the contracts, is $5.6 million against which we do not hold any collateral. Under the terms of master swap agreements, some of our transactions require collateral or other security to support financial instruments subject to threshold levels of exposure and counterparty credit risk. Collateral assets are either cash or U.S. Treasury instruments and are held in a trust account that we may access if the counterparty defaults.

We offer certain suppliers access to a third party service that allows them to view our scheduled payments online. The third party service also allows suppliers to finance advances on our scheduled payments at the sole discretion of the supplier and the third party. We have no economic interest in these financing arrangements and no direct relationship with the suppliers, the third party, or any financial institutions concerning this service. All of our accounts payable remain as obligations to our suppliers as stated in our supplier agreements. As of November 23, 2014, $436.8 million of our total accounts payable is payable to suppliers who utilize this third party service.