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(iii) The Cadbury Schweppes (New Issue) Share Option Plan 2004 was established by the Directors,
under the authority given by stockholders in May 2004. Eligible executives are granted options to subscribe for
new shares only. Subject to the satisfaction of certain performance criteria, options are normally exercisable up
to the 10th anniversary of grant.
There were performance requirements for the exercising of options. The plans were accounted for as liabilities
until vested, then as equity until exercised or lapsed.
Other Share Plans
Cadbury had an International Share Award Plan (“ISAP”) which was used to reward exceptional performance
of employees. Following the decision to cease granting discretionary options other than in exceptional circum-
stances, the ISAP was used to grant conditional awards to employees, who previously received discretionary
options. Awards under this plan are classified as liabilities until vested.
Share Award Fair Values
The fair value was measured using the valuation technique that was considered to be the most appropriate to
value each class of award; these included Binomial models, Black-Scholes calculations, and Monte Carlo
simulations. These valuations took into account factors such as nontransferability, exercise restrictions and
behavioral considerations. Key assumptions are detailed below:
BSRP LTIP ISAP
2007
Expected volatility ........................... N/A 15% N/A
Expected life ............................... 3years 3 years 1 to 3 years
Risk-free rate ............................... 5.5% N/A 4.9% to 5.8%
Expected dividend yield ....................... 2.5% 2.5% 2.5% to 3.0%
Fair value per award (% of share price at date of
grant) ................................... 185.5% 92.8% UEPS 91.8% to 99.3%
45.1% TSR
Expectations of meeting performance criteria ........ 40% 70% 100%
BSRP LTIP ISAP
2006
Expected volatility......................... N/A 18% N/A
Expected life ............................. 3years 3 years 1 to 3 years
Risk-free rate ............................ 4.5% N/A 4.2% to 4.9%
Expected dividend yield..................... 2.5% 2.5% 2.3% to 2.5%
Fair value per award (% of share price at date of
grant) ................................ 185.2%(1) 92.8% UEPS 93.0% to 99.3%
46% TSR
Expectations of meeting performance criteria ..... 40% 70% N/A
(1) Fair value of BSRP includes 100% of the matching shares available.
Expected volatility was determined by calculating the historical volatility of Cadbury’s share price over the
previous three years. The expected life used in the model has been adjusted, based on Cadbury’s best estimate, for
the effects of nontransferability, exercise restrictions and behavioral considerations. The risk-free rates used reflect
96
DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)