Microsoft 2005 Annual Report Download - page 56

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PAGE 55
Shared Performance Stock Awards will only be awarded in fiscal year 2005 and 2006 to newly hired and promoted employees
eligible to receive Shared Performance Stock Awards.
Stock Awards and Shared Performance Stock Awards are amortized over the vesting period (generally 5 years) using the
straight line method.
The following activity has occurred under our existing plans:
(share amounts in millions)
Y
ear Ended June 30
2004
2005
Stock awards
Beginning balance 3.9
34.4
Granted 32.6
41.0
Special dividend adjustment –
6.7
Vested (0.8)
(7.3)
Cancelled (1.3)
(3.5)
Ending balance 34.4
71.3
Weighted-average fair value per share for shares granted during the year*
$24.09 $24.03
Shared performance stock awards
Beginning balance –
30.5
Granted 31.7
3.7
Special dividend adjustment –
3.5
Vested –
–
Cancelled (1.2)
(2.4)
Ending balance 30.5
35.3
Weighted-average fair value per share for shares granted during the year*
$23.62 $24.35
* Adjusted for additional awards granted for the $3.00 special dividend.
Stock Options. Nonqualified stock options have been granted to our directors under our non-employee director stock plans.
Nonqualified and incentive stock options have been granted to our officers and employees under our employee stock plans.
Options granted before 1995 generally vest over four and one-half years and expire ten years from the date of grant. Options
granted between 1995 and 2001 generally vest over four and one-half years and expire seven years from the date of grant,
while certain options vest either over four and one-half years or over seven and one-half years and expire ten years from the
date of grant. Options granted after 2001 vest over four and one-half years and expire ten years from the date of grant. At June
30, 2005, stock options for 662 million shares were vested.
The weighted average Black-Scholes value of options granted under the stock plans during fiscal year 2003 and 2004 was
$12.08 and $10.13, respectively. No stock options were granted in fiscal 2005. The fair value of each option grant is estimated
on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for
grants:
Y
ear Ended June 30
2003
2004
Weighted average expected life in years 7
7
Dividend per share $0.08
$0.16
Volatility 42.0%
29.5%
Risk-free interest rate 3.9%
4.1%