Letter Agreement between the Company and Lachlan K. Murdoch


 Exhibit 10.3 
  
 News Corporation 
  
 July 28, 2005 
  
 Lachlan Murdoch 
 Deputy Chief Operating Officer 
 News Corporation 
 1211 Avenue of the Americas 
 New York, NY 10036 
  

			
	Re:	    	Notification of Annual Bonus Guidelines

  
 Dear Lachlan: 
  
 The purpose of this letter is to advise you that, pursuant to Article V of
the News Corporation 2005 Long-Term Incentive Plan, the Compensation Committee (the “Committee”) of the Board of Directors of News Corporation (the “Company”) determined on July 28, 2005, that the
Annual Bonus Guidelines set forth as Exhibit A to this letter (the “Guidelines”) will be used to calculate your annual bonus for the fiscal year ended June 30, 2005. The award of your bonus will be made upon
certification by the Committee that the performance goals upon which your bonus is based have been attained. 
  

	
	Sincerely,
	
	 /s/ Andrew S. B. Knight


	Andrew S. B. Knight
	Chairman of the Compensation Committee
	News Corporation








 Exhibit A 
  

Annual Bonus Guidelines of Lachlan Murdoch 
  
 (i) Lachlan Murdoch (the “Executive”) shall be eligible for an annual bonus (“Bonus”), as determined in
accordance with these Annual Bonus Guidelines (the “Guidelines”) for the fiscal year of News Corporation (“News Corp”) ended June 30, 2005 (the “Fiscal Year”). Any Bonus earned
by the Executive pursuant to the Guidelines shall be paid in the manner hereinafter provided no later than two and one-half months after the end of the period to which such Bonus relates or ten days after the earnings for the Fiscal Year are
announced, whichever occurs first. Payment of the Bonus shall be contingent upon certification by the Compensation Committee of the Board of Directors (the “Compensation Committee”) of News Corp of the EPS Percentage
Comparison (as defined below) for the Fiscal Year, and any deferral of a Bonus shall be made in a manner that complies with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). 
  
 (ii) The Bonus payable for the Fiscal Year shall be the amount calculated
pursuant to subsection (iii) below by (A) determining the EPS Percentage Comparison for the Fiscal Year then ended and (B) determining the Required Amount for such EPS Percentage Comparison. 
  
 (iii) “EPS Percentage Comparison” shall mean the
amount of percentage change (calculated to 1/100th of a percent) in Earnings Per Share (as calculated below) of News
Corp, determined as follows: 
  
 (A) Net Income for the Fiscal
Year shall be determined in accordance with United States generally accepted accounting principles and will be such amount reported as Net Income in News Corp’s audited consolidated financial statements (the “Financial
Statements”); 
  
 (B) Adjusted Net Income (which is
to be used as the basis for the EPS Percentage Comparison computation) shall be determined by adjusting Net Income by eliminating the effect on Net Income of the following items, which will apply equally to income and losses from “Associated
Entities” (as that term is used in the Financial Statements) included in Net Income (the “Adjustments”) - (i) non-cash intangible asset impairment charges and writedowns on investments to realizable values; (ii) gains or
losses on the sale or other disposition of businesses or investments; (iii) items classified as Extraordinary Items (or a similar classification); (iv) the impact of changes in accounting in the Fiscal Year of such change (with the intent being to
measure Adjusted Net Income in each Fiscal Year on the same bases of accounting); (v) costs of material business restructurings, reorganizations and relocations (includes severances, shut down, asset writeoffs – whether immediately recognized
or the incremental impact of accelerated charges over the restructuring period); and (vi) gains and losses from capital and debt issuances and retirements; 
  
 (C) Earnings Per Share shall be calculated by dividing Adjusted Net Income by the number of shares of stock (or stock equivalents) of the combined classes
of News Corp utilized in the Financial Statements for the respective Fiscal Year in determining diluted earnings per share (e.g., such number of shares for the 2004 Fiscal Year is set forth in Note 23 to the financial statements included in News
Corp’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 12, 2004), after adjusting for new share issuances and the effect of corporate reorganizations such as stock splits; and 
  
 (D) In such determination, Earnings Per Share for the Fiscal Year then ended
(“Current Year”) shall be divided by Earnings Per Share for the prior Fiscal Year (“Prior Year”) to determine the EPS Percentage Comparison. If Prior Year Earnings Per Share is a negative number, the
difference 






 between Earnings Per Share for the Current Year and Prior Year shall be divided by Prior Year Earnings Per Share
(expressed as a positive number) to determine the EPS Percentage Comparison. For example: (A) if Prior Year Earnings Per Share is ($2.00) and Current Year Earnings Per Share is ($2.50), the EPS Percentage Comparison shall be negative 25% (negative
change of $.50 divided by absolute value of $2.00 = negative 25%); (B) if Prior Year Earnings Per Share is ($2.00) and Current Year Earnings Per Share is $1.00, the EPS Percentage Comparison shall be 150% (positive change of $3.00 divided by
absolute value of $2.00 = 150%); and (C) if Prior Year Earnings Per Share is $2.00 and Current Year Earnings Per Share is $1.80, the EPS Percentage Comparison is negative 10% (negative change of $.20 divided by absolute value of $2.00 = negative
10%). 
  
 (iv) The “Required Amount” shall
equal the following amounts, using straight-line interpolation between low and high Required Amounts for any EPS Percentage Comparison that falls within any applicable EPS Percentage Comparison range: 
  

							
	EPS Percentage Comparison Ranges:	  	The Required Amount is
	 If the EPS Percentage Comparison is

	  	Low

	  	High


	 Negative 25% or less
	  	 	0	  	 	0
	 Between negative 25% and negative 12 1/2%
	  	 	0	  	$	2 million
	 Between negative 12 1/2% and 0
	  	$	2 million	  	$	2 million
	 Between 0 and 10%
	  	$	2 million	  	$	4 million
	 Between 10% and 20%
	  	$	4 million	  	$	5 million
	 Between 20% and 30%
	  	$	5 million	  	$	6 million
	 Between 30% and 40%
	  	$	6 million	  	$	7 million
	 More than 40%
	  	$	7 million	  	$	7 million

  
 For example: (A) if the EPS Percentage
Comparison is a negative 26%, no Bonus will be payable; (B) if the EPS Percentage Comparison is a negative 14%, the Bonus payable will be $1,760,000; (C) if the EPS Percentage Comparison is a negative 6.2455%, the Bonus payable will be $2,000,000
(i.e., negative 6.2455% rounded to the nearest 1/100th of a percent is negative 6.25%); (D) if the EPS Percentage
Comparison is 1.5313%, the Bonus payable will be $2,306,000 (i.e., 1.5313% rounded to the nearest 1/100th of a
percent is 1.53%); (E) if the EPS Percentage Comparison is 14.9555%, the Bonus payable will be $4,496,000 (i.e., 14.9555% rounded to the nearest 1/100th of a percent is 14.96%); (F) if the EPS Percentage Comparison is 22.0036%, the Bonus payable will be $5,200,000 (i.e., 22.0036% rounded to the nearest 1/100th of a percent is 22.00%); and (G) if the EPS Percentage Comparison is 50.6587%, the Bonus payable will be $7,000,000. 
  
 (v) The Bonus payable to the Executive for the Fiscal Year shall be payable
entirely in cash.