PERNOD-RICARD_REGISTRATION_DOCUMENT_2017-2018

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CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Outstanding shares on 30.06.2018

Presence of performance condition

Outstanding shares on 30.06.2017

Allocated during the period

Cancelled during the period

Transferred during the period

Expired during the period

Type of shares

Plan dated 06.11.2013 Plan dated 06.11.2014 Plan dated 06.11.2015 Plan dated 17.11.2016 Plan dated 17.11.2016 Plan dated 09.11.2017

Free Conditional Free Conditional Free Conditional Free Conditional Free Unconditional Free Conditional

233,299 399,243 388,103 456,066 74,553

0 0 0 0 0

223,567 39,095 28,610 26,490

9,732

0 0 0 0 0 0

0

0 0 0

360,148 359,493 429,576 49,704 366,449

0

24,849

N/A

371,511

5,062

0

The average strike price of options exercised during FY18 was €65.68. 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:

Presence of performance condition

Initial share price € (1)

Strike price €

Type of options/shares

Expected volatility

Expected dividend yield

Risk-free interest rate

IFRS 2 fair value

Plan dated 09.11.2017 Plan dated 09.11.2017 Plan dated 09.11.2017

Purchase Conditional

128.35 126.53 128.35 N/A 128.35 N/A

19% 18% N/A

1.86% 1.86% 1.86%

0.65% 0.00%

18.89 71.99

Free Conditional Free Conditional

N/A

119.15

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

The fair values are fixed upon implementation of each plan, and they do not vary year on year. In addition, here we only present the values relating to the plans allocated during FY18 (information on previous plans is available in the previous 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 exercise of options before maturity has been taken into account in the stock option plan evaluation model (with or without performance conditions linked to the market), by making assumptions about the beneficiaries’ behaviour as regards early exercise (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 9 November 2017 are all conditional on the positioning of the overall performance of the Pernod Ricard share (TSR (1) ) compared to the overall performance of a panel of 12 peers: the stock options will be pre-vested on 9 November 2020, provided that the Pernod Ricard share (TSR (1) ) is positioned 7 th out of 13 or better for overall performance (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 9 November 2021. Two performance-based share plans were granted on 9 November 2017. In both cases, their 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 2018, 30 June 2019 and 30 June 2020 compared with the budgeted Profit from Recurring Operations for each of these 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 one of the two plans also takes account of the same market performance condition as applied to the stock options allocated on 9 November 2017, in addition to the internal condition described above: positioning of the overall performance of the Pernod Ricard share (TSR (1) ) compared to the overall performance of a panel of 12 peers over the period from 9 November 2017 to 9 November 2020 inclusive (three years). The performance-based shares, the number of which will be determined by applying the internal condition, will be vested, provided that the Pernod Ricard share (TSR (1) ) is positioned 7 th out of 13 or better for overall performance (the number will be determined by increments based on the level of performance achieved). Vesting will be final as of 10 November 2021 if the continuous service condition is met on 9 November 2021.

Total shareholder return. (1)

192

PERNOD RICARD REGISTRATION DOCUMENT 2017/2018