General Mills (GIS)

Stock-based Compensation Expense for Stock Options

We use the intrinsic value method for measuring the cost of compensation paid in shares of our 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. The following table illustrates the pro forma effect on net earnings and earnings per share if we had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation using the Black-Scholes option-pricing model.

These amounts reflect the expensing of share awards made to retirement-eligible employees over the expected vesting period of the award. SFAS 123(R), “Share-Based Payment,” when adopted, will require the expensing of future awards over the period to retirement eligibility, if less than the vesting period. Future share-based compensation amounts may differ from the pro forma amounts presented based on that change as well as any changes in the number of options granted or their fair values.

The weighted average fair values at grant date of the options granted were estimated as $9.00 in the third quarter and $8.04 for the first thirty-nine weeks of fiscal 2006, and $8.33 in the third quarter and $8.53 for the first thirty-nine weeks of fiscal 2005, using the Black-Scholes option-pricing model.

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Stock-based Compensation Expense for Stock Options

We use the intrinsic value method for measuring the cost of compensation paid in shares of our 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. The following table illustrates the pro forma effect on net earnings and earnings per share if we had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation using the Black-Scholes option-pricing model.

These amounts reflect the expensing of share awards made to retirement-eligible employees over the expected vesting period of the award. SFAS 123(R), “Share-Based Payment,” when adopted, will require the expensing of future awards over the period to retirement eligibility, if less than the vesting period. Future share-based compensation amounts may differ from the pro forma amounts presented based on that change as well as any changes in the number of options granted or their fair values.

The weighted average fair values at grant date of the options granted were estimated as $7.82 in the second quarter and first half of fiscal 2006, and $7.62 in the second quarter and first half of fiscal 2005, using the Black-Scholes option-pricing model.

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Stock-based Compensation Expense for Stock Options

We use the intrinsic value method for measuring the cost of compensation paid in shares of our 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. The following table illustrates the pro forma effect on net earnings and earnings per share if we had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation using the Black-Scholes option-pricing model.

These amounts reflect the expensing of share awards made to retirement-eligible employees over the expected vesting period of the award. SFAS 123(R), when adopted, will require the expensing of future awards over the period to retirement eligibility, if less than the vesting period. Future share-based compensation amounts may differ from the pro forma amounts presented based on that change as well as any changes in the number of options granted or their fair values.

No options were granted in the first quarters of fiscal 2006 or fiscal 2005.

Page 5

Stock-based Compensation Expense for Stock Options

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. The following table illustrates the pro forma effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

The weighted average fair values at grant date of the options granted were estimated as $7.62 and $8.93, in the second quarter and first half fiscal 2005, and the second quarter and first half fiscal 2004, respectively, using the Black-Scholes option-pricing model.