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Modern Times Group MTG AB - 2006 Incentive Program (Page 3)

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Modern Times Group MTG AB - 2006 Incentive Program
approximately SEK 16.3 million allocated over the years 2006 - 2009. The accounted amount
will be reconsidered, taking into account changes in expected vesting during the vesting period
as well as at the end of the vesting period in view of the actual vesting.
The cost for the company of paying a cash bonus to cover a part of the cost of the option
premium (see section 7 below) amounts to approximately SEK 16.8 million including social fees.
The calculation is based on the following assumptions:
that all warrants are acquired;
that all option holders, holding warrants and stock options and/or Class B shares
acquired by warrants/stock options, remain in employment three years after the
acquisition; and
that the option premium amounts to SEK 72.30 (see below).
With adjustments made for the investment that the employees make at acquisition of the
warrants, the cost amounts to approximately SEK 7.1 million.
The Theoretical Value of a Stock Option
The stock options have no market value as they are not transferable. A theoretical value of the
stock option has nevertheless been calculated based on the Black & Scholes valuation model
and, as far as possible, in accordance with the principles stipulated in IFRS 2. The calculation is
based on an assumed share price of SEK 366 and an expected volatility of 30 percent.
Considering the risk of the stock options becoming invalid before expiration due to of the
requirement of continued employment, the value calculated in accordance with the Black &
Scholes valuation model has been reduced by 20 percent. The theoretical value of one stock
option has been calculated to amount to SEK 54.40, yielding a value for all stock options of
approximately SEK 14.5 million.
The Value of a Warrant
Based on a share price of the company's Class B share of SEK 366, a subscription price of the
warrants of SEK 420,90 (115 per cent) and an estimated volatility of 30 percent, the value per
warrant has been estimated to SEK 72.30, yielding a value for all warrants of approximately
SEK 9.6 million.
7 Miscellaneous
For the information of shareholders, the Board of Directors is considering encouraging
participation in the incentive programme by committing to a cash bonus that may be paid three
years following each participant's acquisition of the warrants. The cash bonus will only be paid
provided that the warrants, stock options and/or Class B shares acquired by way of warrants
and stock options are still held by the participant and provided that the participant is still
employed within the MTG group. The cash bonus may amount to a maximum of the difference
between the total price paid by the participant and 2 percent of the total value of the underlying
Class B shares at the time of the acquisition of the options.

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