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Modern Times Group MTG AB - 2006 Incentive Program (Page 2)

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Modern Times Group MTG AB - 2006 Incentive Program
approximately three years and the stock options run during approximately five years. The stock
options are not transferable and the right to exercise the stock options normally requires that the
holder is still employed within the MTG group at the time of exercise. The term, the strike price
and the number of outstanding warrants/stock options are set forth in the summary below. No
warrants/stock option has been exercised for acquisition of shares
Warrants
Stock
options
Year of grant
2005
2005
Number of granted options
133,333
266,666
Price per share (SEK)
261.70
261.70
Outstanding shares that can
be acquired
133,333 266,666
3
Preparation of the Incentive Program
The proposed incentive program has been prepared by the Remuneration Committee, in
consultation with the owners, independent experts and the Board of Directors. The proposal has
been adopted by the Board of Directors.
4
Dilution Effects and Costs for the Program
Exercise of the proposed warrants and stock options will increase the number of Class B
shares. Upon full exercise, these new shares represent approximately 0.6 percent of the total
number of outstanding shares in the company and approximately 0.2 percent of the total
number of votes in the company. Considering the previously issued and outstanding warrants,
the dilution effect at full exercise will be approximately 4.0 percent of the total number of shares
and approximately 1.3 percent of the total number of votes.
Given that transfers of warrants from the subsidiary to employees shall take place at a
calculated market price, the warrants are not expected to incur the company any significant
expenses. However, the dilution effect of the warrants may affect the earnings per share in
accordance with the accounting standard IAS 33.
The stock options may nevertheless lead to such costs for the MTG group as social security
fees and accounting costs during the term of the stock options.
Costs in the form of social security fees can arise at exercise of the stock options. Based on an
assumed share price of SEK 485 at exercise and an assumed acquisition price of the stock
option of SEK 420,90 per share, the social security fees can be calculated to amount to
approximately SEK 4.3 million.
Social security will be expensed during the vesting period of the stock options based on the
change in value of the stock options.
IFRS 2 stipulates that stock options should be expensed as personnel costs (excluding social
security fees) over the vesting period and will be reported directly against equity. Based on an
assumption that approximately 10 percent of the stock options that are offered lapse before
vesting as a result of personnel turnover, the estimated cost for the stock options amounts to

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