PERNOD-RICARD_REGISTRATION_DOCUMENT_2017-2018

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CORPORATE GOVERNANCE AND INTERNAL CONTROL REPORT OF THE BOARD OF DIRECTORS ON CORPORATE GOVERNANCE

Allocation of stock options with external performance conditions

All of the performance-based shares under the plan are subject to internal and external performance conditions and will vest from November 2021 depending on the internal performance condition over three consecutive FY (18, 19 and 20 - see below) and the positioning of the overall performance of Pernod Ricard shares compared to the overall performance of a Panel of 12 comparable companies (see above). This external benchmark condition will be evaluated over a three-year period following the plan allocation, i.e. from 9 November 2017 to 9 November 2020 inclusive. The volumes subject to the external performance condition will be those determined at the close of the 2019/20 accounts after applying the internal condition. Final volumes will be determined at the end of the external benchmark condition evaluation period in accordance with subsection "Allocation of stock options" in section 2.1.8.4. Allocation of performance-based shares with internal condition A total of 363,691 performance-based shares (excluding shares related to the supplementary pension scheme) were awarded by the Board of Directors at its meeting of 9 November 2017, all subject to the internal performance condition described below. The number of performance-based shares that will ultimately be granted will be determined based on the ratios of achievement of the Group’s Profit from Recurring Operations, adjusted for currency effects and changes in the scope of consolidation as compared with the Group’s budgeted Profit from Recurring Operations over three consecutive FY (18, 19 and 20). The number of performance-based shares is determined according to the following conditions: if the average level of achievement is 0.95 or below: no ● performance-based shares will be acquired; if the average level of achievement is between 0.95 and 1: the ● number of performance-based shares acquired is determined by applying the percentage of linear progression between 0 and 100%; and if the average level of achievement is 1 or more: 100% of ● performance-based shares will be vested. Performance-based shares allocated to all beneficiaries have a four-year vesting period, without a lock-in period. In addition, beneficiaries must still be part of the Group on the vesting date, except in the case of retirement, death or invalidity.

The volume of performance-based stock options allocated by the Board of Directors’ meeting of 9 November 2017 stood at 124,050 stock options. All of the stock options under the plan are subject to an external performance condition and will become exercisable from November 2021 depending on the positioning of the overall performance of Pernod Ricard shares compared to the overall performance of a panel of 12 comparable companies. This condition will be evaluated over a three-year period following the plan allocation, i.e. from 9 November 2017 to 9 November 2020 inclusive. The number of shares that will ultimately be granted will be determined by comparing the overall performance of the Pernod Ricard share and the overall performance of a Panel from 9 November 2017 to 9 November 2020 inclusive (three years). Accordingly, if the overall performance of the Pernod Ricard shares (TSR) is: below the median (8 th to 13 th position), no options will be exercisable; ● at the median (7 th position), 66% of the options will be exercisable; ● in 6 th , 5 th or 4 th position, 83% of the options will be exercisable; and ● in 3 rd , 2 nd or 1 st position, 100% of the options will be exercisable. ● At the grant date, the Board of Directors decided that the Panel shall comprise, in addition to Pernod Ricard, the following 12 companies: AB InBev, Brown Forman, Campari, Carlsberg, Coca-Cola, Constellation Brands, Danone, Diageo, Heineken, LVMH, PepsiCo and Rémy Cointreau. The Panel’s composition is subject to change, based on the above-mentioned companies’ development. The Board of Directors shall, with a duly reasoned decision and following the recommendation of the Compensation Committee, exclude a company from or add a new company to the Panel, especially in the case of an acquisition, absorption, dissolution, spin-off, merger or change of business of one or more of the Panel’s members, subject to maintaining the overall consistency of the Panel and enabling the application of the external performance condition in line with the performance objective set upon allocation. The vesting period for the options is four years followed by an exercise period of four years. Allocation of performance-based shares with internal and external performance conditions At its meeting of 9 November 2017, the Board of Directors granted 6,600 performance-based shares with internal and external performance conditions (excluding shares related to the supplementary pension scheme).

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PERNOD RICARD REGISTRATION DOCUMENT 2017/2018