PERNOD RICARD - Universal Registration Document 2019-2020

6. CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

The average strike price of options exercised during FY20 was €102.80. The assumptions used in calculating the fair values of the options and shares allocated over the financial year, using the binomial or Monte Carlo models and the terms under which the options/shares were granted, are as follows:

Type of options/ shares

Presence of performance condition

Initial share price (€) (1)

Expected dividend yield

IFRS 2 fair value (€)

Strike price (€)

Expected volatility

Risk-free interest rate

Plan dated 08.11.2019

Purchase Conditional

167.40

162.79

19.70%

2.14%

0.10%

24.4

Plan dated 08.11.2019

Free Conditional

167.40

N/A

19.10%

2.14%

0.00%

95.14

Plan dated 08.11.2019

Free Conditional

167.40

N/A

N/A

2.14%

N/A

153.67

N/A: not applicable. Closing share price at grant date. (1)

The fair values are fixed upon implementation of each plan and do not vary year on year. In addition, only the values relating to the plans allocated during FY20 are presented above (information on previous plans is available in the previous Universal Registration Documents). From 2012 onwards, the volatility assumption used for the plans is based on a multi-criteria approach taking into consideration: historic volatility over a period equal to the duration of the options; — implied volatility calculated on the basis of options available — in financial markets. The possibility of exercising options prior to maturity has been taken into account in the valuation model of the stock option plans by reflecting, via an assumption, the behaviour of beneficiaries as regards the anticipated periods (before maturity). In 2017, a new option exercise profile was defined and replaced that established in 2010. It was assumed that 30%, 40% and 30% of the options would be exercised once the share price reached 120%, 150% and 180% of the exercise price respectively. This assumption is based on a recent analysis of behaviour observed on plans awarded before 2017. Options allocated on 8 November 2019 are all conditional on the positioning of the overall performance of the Pernod Ricard share (TSR  (1) ) compared with the overall performance of a panel of 12 peers: the stock options will be pre-vested on 8 November 2022, provided that

the overall performance of the Pernod Ricard share (TSR  (1) ) is positioned 7 th out of 13 or better (the number will be determined in increments depending on the level of performance achieved). Vesting will be final if the continuous service condition is met on 8 November 2023. Two performance-based share plans were granted on 8 November 2019. In one case, the fair value corresponds, amongst other things, to the market price of the shares at the grant date, less the loss of expected dividends during the vesting period ( i.e. four years for all beneficiaries). Lastly, the number of performance-based shares granted will depend on the average level of Group Profit from Recurring Operations for the years ended 30 June 2020, 30 June 2021 and 30 June 2022 compared with budgeted Profit from recurring operations for each of those years, at constant exchange rates and scope of consolidation. The accounting expense for the plan under IFRS 2 will be adjusted for this condition no later than the end of the vesting period. The fair value of the other plan takes account of the same market performance condition as applied to the stock options allocated on 8 November 2019: positioning of the overall performance of the Pernod Ricard share (TSR (1) ) compared with the overall performance of a panel of 12 peers over the period from 8 November 2019 to 8 November 2022 inclusive (three years). Vesting will be final as of 9 November 2023 if the continuous service condition is met on 8 November 2023.

Off-balance sheet commitments Note 6.3

> 1 year and < 5 years

Total

< 1 year

> 5 years

€ million

Commitments given at 30.06.2019

2,587

863

1,356

368

Commitments given in relation to companies within the Group Commitments given in relation to the financing of the Company

7

2 6 6

5

-

23 23

12 12

6 6

Financial guarantees given

Other items

-

-

-

-

Commitments relating to the operating activities of the issuer Firm and irrevocable commitments to purchase raw materials

2,556

855 582

1,339 1,087

362

1,744

74 68

Tax commitments (customs guarantees and others)

243 555

163

11

Operating lease agreements

97

239

219

Other items

15

13

2

1

(1) Total Shareholder Return.

Pernod Ricard Universal Registration Document 2019-2020 209