Twenty-First Century Fox 2006 Annual Report Download - page 96

News Corporation
Notes totheConsolidated Financial Statements (CONTINUED)
Under the 2004 Plan, equity grants generally vest over a four-year period and expire ten years from the date of
grant. The equity awards were granted with exercise prices that are equal to or exceed the marketprice at the date of grant
and were valued, in Australian dollars. No future grants will be issuedunder the 2004 Plan and the 2004 Plan automatically
terminates in 2014.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with
the following assumptions used for grants in fiscal years ending June 30:
2006 2005 2004
Weighted average risk free interest rate 4.94% 4.08% 5.60%
Dividend yield 0.7% 0.9% 0.9%
Expected volatility 29.52% 35.38% 41.83%
Maximum expected life of options 7years 7years 7years
The fair value of each outstanding stock option award under the 2004 Plan was estimated on the date of grant using
the Black-Scholesoption valuation model that uses the following assumptions; expected volatility was based on historical
volatility of the Class ACommon Stock; expected term of stock options granted was derived from the historical activity of
the Company’s stock options and represented the period of time that stock options granted were expected to be out-
standing; weighted average risk-free interest rate was an average of the interest rates of Australian government bonds with
similar lives on the dates of the stock option grants; and dividend yield was calculated as an average of aten year history of
the Company’s yearly dividend divided by the fiscal year’s closing stock price.
Other
The Company operates an employee share ownership scheme in the United Kingdom. This plan enables employees to enter
into fixed-term savings contracts with independent financial institutions linked to an option for Class ACommon Stock.
The savings contracts can range from three to seven years with an average expected life of four years. During the years
ended June 30, 2006, 2005 and 2004, the Company granted approximately 341,000, approximately 1.4 million andapprox-
imately 556,000 stock options under this scheme, respectively.
The following table summarizesinformation about the Company’s stock option transactions for all the Company’s
stock option plans (options in thousands):
2006 2005 2004
Options
Weighted average
exercise price Options
Weighted average
exercise price Options
Weighted average
exercise price
(in US$) (in A$) (in US$) (in A$) (in US$) (in A$)
Outstanding at the beginning of the
year 131,367 $13.97 $23.35 143,849 $13.69 $23.13 136,299 $13.44 $23.13
Granted 935 16.36 *1,519 14.04 18.70 26,767 12.97 19.73
Exercised (16,102) 10.32 16.74 (6,273) 10.09 15.96 (9,738) 8.77 14.00
Cancelled (5,319) 13.98 24.27 (7,728) 11.95 20.97 (9,479) 13.05 22.99
Outstanding at the end of the year 110,881 $14.52 $24.50 131,367 $13.97 $23.35 143,849 $13.69 $23.13
Vested and unvested expected to vest
at June 30, 2006 110,881
Exercisable at the end of the year 102,055 95,638 82,549
Weighted average fair value of options
granted $ 4.20 *$6.74 $8.66 $7.13 $10.01
*Granted in U.S. dollars.
The exercise prices for the stock options issued prior to the Reorganization in November 2004 are in Australian dollars. The
U.S. dollar equivalents presented above have been converted at historical exchange rates; therefore, the proceeds from the
exercise of these options may differ due to fluctuations in exchange rates in periods subsequent tothedate of the grants.
The Company issued 1,325,000 SARs in both fiscal 2005 and fiscal 2004 at exercise prices of $15.20 and $12.99,
respectively. As of June 30, 2006, none of the SARs have been exercised and 331,250 of the SARs issued in fiscal 2005 and
662,500 of the SARs issued in fiscal 2004 were vested and exercisable. No SARs were issued in fiscal 2006.
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