Notes to Financial Statements

December 31, 2003

1. Description of Plan

The following brief description of the Dollar General Corporation 401(k) Savings and Retirement Plan (the "Plan") provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions.

General

The Plan is a defined contribution plan for all employees of Dollar General Corporation (the "Employer" or the "Company"). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").

Contributions

The Plan allows the participants to make contributions of the participants' earnings in the form of deferred compensation to a retirement plan before income taxes are deducted. The contributions are invested, and income earned is not taxed to the participant until withdrawn from the Plan.

Participants may elect to contribute from 1% to 25% of pre-tax annual eligible compensation as defined in the Plan, subject to certain limitations under applicable federal law. Participants may also make rollover contributions to the Plan. The Employer has the option of matching up to 100% of the first 5% of eligible compensation contributed by the participants ("Employer Matching Contribution"). The participant contribution and Employer Matching Contribution are invested as directed by the participant.

In addition to the Employer Matching Contribution described above, the Employer may contribute discretionary amounts from time to time ("Profit Sharing Contribution") as Profit Sharing Contributions. The Profit Sharing Contribution is invested as directed by the participant. Participants must be employed on the last day of the Plan year to receive a Profit Sharing Contribution. There was no Profit Sharing Contribution for the 2003 Plan year. Prior to January 1, 2003, the Employer also had the option to make contributions to the Plan on behalf of all participants which shall be treated as Qualified Nonelective Employer Contributions ("QNEC"). Effective January 1, 2003, the Company elected to discontinue QNEC contributions to the Plan.

Dollar General Corporation
401(k) Savings and Retirement Plan

Notes to Financial Statements (continued)

1. Description of Plan (continued)

Participant Accounts

Each participant's account is credited with the participant's contributions and withdrawals, as applicable, and allocations of the Employer contributions and Plan earnings, and is charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account.

Vesting

Participants who have one hour of service on or after January 1, 2003 are immediately vested in their contributions and the Employer Matching and Profit Sharing Contributions plus actual earnings thereon. Participants who do not have one hour of service on or after January 1, 2003 are subject to the prior vesting schedule under the Plan. Participants are 100% vested without regard to credited service in the event of death, disability, or attainment of retirement age.

Participant Loans

Participants in the Plan may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Only one loan may be outstanding at a time. Loans are secured by the balance in the participant's account and bear interest at a rate commensurate with local prevailing rates as determined by the Plan Administrator. Loans must be repaid within 5 years from the date of the loan unless proceeds are used to acquire the principal residence of the participant borrower. Principal and interest are paid ratably through weekly or semi-monthly payroll deductions.

Payment of Benefits

On termination of service, a participant may elect to receive a lump-sum amount equal to the value of the participant's vested interest in his or her account or, under certain circumstances, may purchase an annuity.

Dollar General Corporation
401(k) Savings and Retirement Plan

Notes to Financial Statements (continued)

1. Description of Plan (continued)

Forfeited Accounts

Forfeited balances of terminated participants' nonvested accounts are used to reduce future contributions of the Company or to pay reasonable Plan expenses. In 2003, employer contributions were reduced by $1,382,471 and Plan expenses of $186,483 were paid from forfeited nonvested accounts. The balance of forfeited nonvested accounts was $364,902 and $571,039 at December 31, 2003 and 2002, respectively.

Administrative Expenses

Participants pay for the costs charged for originating loans. Fees and expenses associated with the administrative and recordkeeping services provided by an external provider are paid by the Plan. The Employer pays all other expenses.

Change in Trustees and Plan Recordkeepers

On November 1, 2003, State Street Bank and Trust Company ("State Street") replaced Matrix Capital Bank as Trustee of the Plan and CitiStreet LLP replaced BISYS Retirement Services, L.P. as Plan recordkeeper. As of November 17, 2003, all assets and records were transferred to State Street and CitiStreet.

Plan Termination

Although it has not expressed any intent to do so, the Employer has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, all participant accounts will become fully vested and the assets will be distributed to participants or their beneficiaries.

Dollar General Corporation
401(k) Savings and Retirement Plan

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies

Basis of Accounting

The financial statements of the Plan are prepared under the accrual method of accounting.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

Investment Valuation and Income Recognition

The Plan's investments are stated at fair value, which generally equals the quoted market price on the last business day of the Plan year. The shares of registered investment companies are valued at quoted market prices that represent the net asset value of shares held by the Plan at year-end. The Dollar General Corporation common stock is valued at the last reported sales price on the last business day of the Plan year. Real Estate limited partnership investments are valued at the appraised values as of the last business day of the Plan year. The participant loans receivable are valued at their outstanding balances, which approximate fair value.

Purchases and sales of securities are recorded on a trade date basis. Dividend income is recorded on the dividend payable date. Interest income is recorded on the accrual basis.

Payment of Benefits

Benefits are recorded when paid.

Dollar General Corporation
401(k) Savings and Retirement Plan

Notes to Financial Statements (continued)

3. Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service dated March 5, 2002, stating that the Plan is qualified under Section 401(a) of the Code and therefore, the related trust is exempt from taxation. Subsequent to this issuance of the determination letter, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Company has indicated that it will take the necessary steps, if any, to maintain the Plan's qualified status.

4. Investments

During 2003, the Plan's investments (including gains and losses on investments purchased and sold, as well as held during the year) appreciated (declined) in fair value as follows:

                                                  Year ended
                                              December 31, 2003
                                           -----------------------

Registered investment companies                  $ 8,310,072
Dollar General Corporation common stock           16,931,835
Real estate limited partnerships                    (11,191)
                                           -----------------------
                                                 $25,230,716
                                           =======================

Dollar General Corporation
401(k) Savings and Retirement Plan

                                                                                         December 31,
-------------------------------------------------------------------------------------------------------------------

    Identity of Party Involved               Description of Assets                  2003               2002
-------------------------------------------------------------------------------------------------------------------

Dollar General Corporation          Dollar General Corporation common stock      $35,793,491         $22,456,612
The American Funds Group            Washington Mutual Investors Fund              10,144,177           7,037,951
INVESCO Institutional               Invesco Stable Value Trust                    12,484,808                   -
PIMCO Funds                         PIMCO Total Return Fund                        4,754,651                   -
Dodge & Cox Funds                   Dodge & Cox Balanced Fund                     18,056,186                   -
The American Funds Group            The Income Fund of America                             -          14,275,848
The American Funds Group            The Cash Management Trust of America                   -           4,351,489

5. Transactions with Parties-in-Interest

Transactions with parties-in-interest include purchases and sales of assets through Matrix Capital Bank from January 1 through October 31, 2003 and through State Street Bank and Trust from November 1 through December 31, 2003. For the periods indicated, Matrix Capital Bank and State Street Bank and Trust also served as the depositor for the Plan's assets.

Additional parties-in-interest transactions include contributions by the Employer and the Plan's investment in Company stock including reinvestment of dividends paid from the Company stock.

6. Commitments and Contingencies

As previously disclosed in the Plan's Form 11-K for the year ended December 31, 2001 filed with the Securities and Exchange Commission on July 3, 2002 (the "2001 Form 11-K"), the Company restated its audited financial statements for fiscal years 1999 and 1998, and certain unaudited financial information for fiscal year 2000 (the "Restatement") by

Dollar General Corporation
401(k) Savings and Retirement Plan

Notes to Financial Statements (continued)

6. Commitments and Contingencies (continued)

means of its Form 10-K for the fiscal year ended February 2, 2001, which was filed on January 14, 2002. Also as described more fully in the 2001 Form 11-K, the Company settled the consolidated Restatement-related class action lawsuit filed in the United States District Court for the Middle District of Tennessee on behalf of a class of persons who purchased or otherwise made an investment decision regarding the Company's securities and related derivative securities between March 5, 1997 and January 14, 2002. The $162 million settlement was approved by the court on May 24, 2002 and was paid by the Company in the first half of its fiscal year ended January 31, 2003.

As a member of the plaintiff class, the Plan expects that this agreement will result in a net payment to the Plan after attorneys' fees of approximately $1.4 million, which has not been reflected in the Plan's financial statements.

7. Risks and Uncertainties

The Plan invests in various investment securities including Dollar General Corporation common stock, which comprises 40% and 37% of total investments at December 31, 2003 and 2002, respectively. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statements of net assets available for benefits.

Supplemental Schedule

Dollar General Corporation

401(k) Savings and Retirement Plan

EIN: 61-0502302 Plan: 002