DIAGEO PLC

Additional

Unaudited financial information

1. Definitions and reconciliation of non-GAAP

measures to GAAP measures

Diageo’s strategic planning process is based on certain non-GAAP measures,

including organic movements. These non-GAAP measures are chosen for

planning and reporting, and some of them are used for incentive purposes. The

group’s management believes that these measures provide valuable additional

information for users of the financial statements in understanding the group’s

performance. These non-GAAP measures should be viewed as complementary

to, and not replacements for, the comparable GAAP measures and reported

movements therein.

It is not possible to reconcile the forecast tax rate before exceptional items,

forecast free cash flow, forecast effective interest rate, forecast organic net sales

growth and forecast organic operating profit growth to the most comparable

GAAP measure as it is not possible to predict, without unreasonable effort, with

reasonable certainty, the future impact of changes in exchange rates,

acquisitions and disposals, and potential exceptional items.

Volume

Volume is a performance indicator that is measured on an equivalent units basis to

nine-litre cases of spirits. An equivalent unit represents one nine-litre case of

spirits, which is approximately 272 servings. A serving comprises 33ml of spirits,

165ml of wine, or 330ml of ready-to-drink or beer. Therefore, to convert volume of

products other than spirits to equivalent units, the following guide has been used:

beer in hectolitres, divide by 0.9; wine in nine-litre cases, divide by five; ready-to-

drink and certain pre-mixed products that are classified as ready-to-drink in nine-

litre cases, divide by ten. As part of the move to an asset-light beer operating

model, calculation of volume for Guinness flavour extract and other concentrate

sales has been amended to represent the equivalent finished goods volume.

Comparatives for prior periods have been restated.

Organic movements

Organic information is presented using US dollar amounts on a constant

currency basis excluding the impact of exceptional items, certain fair value

remeasurements, hyperinflation, and acquisitions and disposals. Organic

measures enable users to focus on the performance of the business which is

common to both years and which represents those measures that local managers

are most directly able to influence.

Calculation of organic movements

The organic movement percentage is the amount in the row titled ‘Organic

movement’ in the tables below, expressed as a percentage of the relevant

absolute amount in the row titled ‘Year ended 30 June 2025 adjusted’. Organic

operating margin is calculated by dividing operating profit before exceptional

items by net sales after excluding the impact of exchange rate movements,

certain fair value remeasurements, hyperinflation and acquisitions and

(a) Exchange rates

Exchange in the organic movement calculation reflects the adjustment to

recalculate the reported results as if they had been generated at the prior period

weighted average exchange rates.

Exchange impacts in respect of the external hedging of intergroup sales by the

markets in a currency other than their functional currency and the intergroup

recharging of services are also translated at prior period weighted average

exchange rates and are allocated to the geographical segment to which they

relate. Residual exchange impacts are reported as part of the Corporate segment.

Results from hyperinflationary economies are translated at forward-looking

rates.

(b) Acquisitions and disposals

For acquisitions in the current period, the post-acquisition results are excluded from

the organic movement calculations. For acquisitions in the prior period, post-

acquisition results are included in full in the prior period but are included in the

organic movement calculation from the anniversary of the acquisition date in the

current period. The acquisition row also eliminates the impact of transaction costs

that have been charged to operating profit in the current or prior period in respect of

acquisitions that, in management’s judgement, are expected to be completed.

Where a business, brand, brand distribution right or agency agreement was

disposed of or terminated in the reporting period, the group, in the organic

movement calculations, excludes the results for that business from the current

and prior period. In the calculation of operating profit, the overheads included in

disposals are only those directly attributable to the businesses disposed of, and

do not result from subjective judgements of management.

(c) Exceptional items

Exceptional items are those that in management’s judgement need to be disclosed

separately. Such items are included in the income statement caption to which they

relate, and form part of the segmental reporting, and are excluded from the organic

movement calculations. Management believes that separate disclosure of

exceptional items and the classification between operating and non-operating

further helps investors to understand the performance of the group. Changes in

estimates and reversals in relation to items previously recognised as exceptional are

presented consistently as exceptional in the current year.

Exceptional operating items are those that are unusual or non-recurring in

nature, considered to be of a size that could distort performance and are part of

the operating activities of the group, such as one-off global restructuring

programmes which can be multi-year, impairment of intangible assets and fixed

assets, indirect tax settlements, property disposals and changes in post-

employment plans.

Gains and losses on the sale or directly attributable to a prospective sale of

businesses, brands or distribution rights, step up gains and losses that arise when

an investment becomes an associate or an associate becomes a subsidiary and

other unusual non-recurring items, that are considered to be of a size that could

distort performance and not in respect of the production, marketing and

distribution of premium drinks, are disclosed as exceptional non-operating items

below operating profit in the income statement.

Exceptional finance incomes/charges are those that are unusual or non-recurring

in nature, considered to be of a size that could distort the performance and are

part of the financing activity of the group.

Exceptional current and deferred tax items comprise unusual or non-recurring

items, that are considered to be of a size that could distort performance.

Examples include direct tax provisions and settlements in respect of prior years

and the remeasurement of deferred tax assets and liabilities following tax rate

changes.

(d) Fair value remeasurements

Fair value remeasurements in the organic movement calculation reflect an

adjustment to eliminate the impact of fair value changes in biological assets,

earn-out arrangements that are accounted for as remuneration and fair value

changes relating to contingent consideration liabilities and equity options that

arose on acquisitions recognised in the income statement.

Adjustment in respect of hyperinflation

The group's experience is that hyperinflationary conditions result in price increases

that include both normal pricing actions reflecting changes in demand, commodity

and other input costs or considerations to drive commercial competitiveness, as

well as hyperinflationary elements and that for the calculation of organic

movements, the distortion from hyperinflationary elements should be excluded.

Cumulative inflation over 100% (2% per month compounded) over three years

is one of the key indicators within IAS 29 to assess whether an economy is

deemed to be hyperinflationary. As a result, the definition of 'Organic

movements' includes price growth in markets deemed to be hyperinflationary

economies, up to a maximum of 2% per month while also being on a constant

currency basis. Corresponding adjustments have been made to all income

statement related lines in the organic movement calculations.

In the tables presenting the calculation of organic movements, 'hyperinflation' is

included as a reconciling item between reported and organic movements and that also

includes the relevant IAS 29 adjustments.

Organic movement calculations for theyear ended 30 June 2026 were as follows:

(1)Comparative volume for prior periods have been restated as part of the move to an asset-light beer operating model.

(2)Reclassifications relate to accounting treatment change in Latin America and the transfer of the Réunion business from Africa to Europe.

(3)Acquisitions and disposals that had an effect on organic volume, sales, net sales, marketing and operating profit growth in the year ended 30 June 2026, are detailed onpage 208.

(4)The impact of movements in exchange rates on reported figures for operating profit was principally due to the favourable exchange impact of the Venezuelan bolivar and the euro against

the US dollar.

(5)Organic operating margin calculatedby dividing Operating profit before exceptional items by net sales.

For the reconciliation of sales to net sales, see page 30.

Percentages and margin movements are calculated on rounded figures.

In the year ended 30 June 2026, the acquisitions and disposals that affected volume, sales, net sales, marketing and operating profit were as follows, as per footnote (3)

on the previous page:

Earnings per share before exceptional items

Earnings per share before exceptional items is calculated by dividing profit attributable to equity shareholders of the parent company before exceptional items by the

weighted average number of shares in issue.

Earnings per share before exceptional items for the years ended 30 June 2026 and 30 June 2025 are set out in the table below:

Free cash flow and adjusted operating cash flow

Free cash flow comprises the net cash flow from operating activities aggregated with the net cash expenditure paid for property, plant and equipment and computer

software that is included in net cash flow from investing activities.

The remaining components of net cash flow from investing activities that do not form part of free cash flow, as defined by the group’s management, are in respect of

the acquisition and sale of businesses and loans to associates and other investments that do not meet the definition of cash and cash equivalents.

The group’s management regards a portion of the purchase and disposal of property, plant and equipment and computer software as ultimately non-discretionary since

ongoing investment in plant, machinery and technology is required to support the day-to-day operations, whereas acquisition and sale of businesses are discretionary.

Where appropriate, separate explanations are given for the impacts of acquisition and sale of businesses, dividends paid and the purchase of own shares, each of which

arises from decisions that are independent from the running of the ongoing underlying business.

In the year ended 30 June 2026, adjusted operating cash flow replaced operating cash conversion within the annual incentive plans of employees, to elevate the focus

on absolute free cash flow delivery across the business. Adjusted operating cash flow is calculated by adjusting free cash flow to exclude borrowing costs capitalised

included in net cash expenditure paid for property, plant and equipment and computer software, taxation and net interest payments, dividends received, restructuring

and other non-operating spend, the variance between actual and planned movement of maturing inventories, hyperinflation adjustment and the effects of exchange rate

fluctuations.

Free cash flow and adjusted operating cash flow reconciliations for theyears ended 30 June 2026 and 30 June 2025 are set out in the table below:

Return on average invested capital

Return on average invested capital is used by management to assess the return obtained from the group’s asset base and is calculated to aid evaluation of the

performance of the business.

The profit used in assessing the return on average invested capital reflects operating profit before exceptional items attributable to equity shareholders of the parent

company after applying the tax rate before exceptional items, plus share of tax results of associates and joint ventures for the fiscal year. Average invested capital is

calculated using the average derived from the consolidated balance sheets at the beginning, middle and end of the year. Average capital employed comprises average

net assets attributable to equity shareholders of the parent company for the year, excluding net post-employment benefit assets/liabilities (net of deferred tax) and

average net borrowings.

Calculations for the return on average invested capital for theyears ended 30 June 2026 and 30 June 2025 are set out in the table below:

Adjusted net borrowings to adjusted EBITDA

Diageo manages its capital structure with the aim of achieving capital efficiency, providing flexibility to invest through the economic cycle and giving efficient access

to debt markets at attractive cost levels. The group regularly assesses its debt and equity capital levels to enhance its capital structure by reviewing the ratio of adjusted

net borrowings (net borrowings plus post-employment benefit liabilities before tax) to adjusted EBITDA (earnings before exceptional operating items, non-operating

items, interest, tax, depreciation, amortisation and impairment).

Calculations for the ratio of adjusted net borrowings to adjusted EBITDA as at 30 June 2026 and 30 June 2025 are set out in the table below:

Tax rate before exceptional items

Tax rate before exceptional items is calculated by dividing the total tax charge before tax charges and credits in respect of exceptional items, by profit before taxation

adjusted to exclude share of after-tax results of associates and joint ventures and the impact of exceptional operating and non-operating items, expressed as a

percentage. The measure is used by management to assess the rate of tax applied to the group’s operations before tax on exceptional items.

The tax rates from operations before exceptional and after exceptional items for theyears ended 30 June 2026 and 30 June 2025 are set out in the table below:

Other definitions

Volume share is a brand’s retail volume expressed as a percentage of the retail

volume of all brands in its segment. Value share is a brand’s retail sales value

expressed as a percentage of the retail sales value of all brands in its segment.

Unless otherwise stated, share refers to value share.

Net sales are sales less excise duties. Diageo incurs excise duties throughout the

world. In the majority of countries, excise duties are effectively a production tax

which becomes payable when the product is removed from bonded premises

and is not directly related to the value of sales. It is generally not included as a

separate item on external invoices; increases in excise duties are not always

passed on to the customer and where a customer fails to pay for a product

received, the group cannot reclaim the excise duty. The group therefore

recognises excise duty as a cost to the group.

Price/mix is the number of percentage points difference between the organic

movement in net sales and the organic movement in volume. The difference

arises because of changes in the composition of sales between higher and lower

priced variants/markets or as price changes are implemented.

Shipments comprise the volume of products sold to Diageo’s immediate (first

tier) customers. Depletions are the estimated volume of the onward sales made

by Diageo's immediate customers. Both shipments and depletions are measured

on an equivalent units basis.

References to emerging markets include Central and Eastern Europe (excluding

Benelux, Greece and Nordics), Türkiye, Middle East and North Africa

(MENA), Latin America and Caribbean, Africa and Asia Pacific (excluding

Australia, Korea and Japan).

References to ready-to-drink also include ready-to-serve products, such as pre-

mixed cans in some markets.

References to beer include cider, flavoured malt beverages and some non-

alcoholic products such as Guinness 0.0 and Malta Guinness.

The results of Hop House 13 Lager are included in the Guinness figures.

There is no industry-agreed definition for price tiers and for data providers such

as IWSR, definitions can vary by market. Diageo bases price tier definitions on

a methodology that uses external metrics (including market pricing data from

Nielsen, IRI etc., as well as the IWSR segmentation) for benchmarking and

internal pricing metrics for a consistent segmentation.

References to the group include Diageo plc and its consolidated subsidiaries.

Cautionary statement concerning forward-looking statements

This document contains 'forward-looking' statements. These

statements can be identified by the fact that they do not relate only to historical

or current facts and may generally, but not always, be identified by the use of

words such as 'will', 'anticipates', 'should', 'could', 'would', 'targets', 'aims', 'may',

'expects', 'intends' or similar expressions statements. In this document, such

statements include those that express forecasts, expectations, plans, outlook,

objectives and projections with respect to future matters, including information

related to Diageo’s fiscal 27 outlook, Diageo’s medium-term guidance,

Diageo’s Accelerate programme, the impact of tariffs and any other statements

relating to Diageo’s performance for the year ending 30 June 2027 or thereafter.

Forward-looking statements involve risk and uncertainty because they relate to

events and depend on circumstances that will occur in the future. There are a

number of factors that could cause actual results and developments to differ

materially from those expressed or implied by these forward-looking

statements, including factors that are outside Diageo's control, which include

(but are not limited to): (i) economic, political, social or other developments in

countries and markets in which Diageo operates, including geopolitical

instability as a result of Russia's invasion of Ukraine and the conflicts in the

Middle East and macroeconomic events that may affect Diageo’s customers,

suppliers and/or financial counterparties; (ii) the effects of climate change, or

legal, regulatory or market measures intended to address climate change; (iii)

changes in consumer preferences and tastes, including as a result of disruptive

market forces, changes in demographics and evolving social trends (including

any shifts in consumer tastes towards at-home occasions, premiumisation,

small-batch craft alcohol, lower or non-alcoholic products or THC and hemp-

based THC beverages, increased use of GLP-1 medications, and/or

developments in e-commerce); (iv) changes in the domestic and international

tax environment that could lead to uncertainty around the application of existing

and new tax laws and unexpected tax exposures; (v) changes in the cost of

production, including as a result of increases in the cost of commodities, labour

and/or energy due to inflation and/or supply chain disruptions; (vi) any litigation

or other similar proceedings (including with tax, customs, competition,

environmental, anti-corruption or other regulatory authorities); (vii) legal and

regulatory developments, including changes in regulations relating to

environmental issues and/or e-commerce; (viii) the consequences of any failure

of internal controls; (ix) the consequences of any failure by Diageo or its

associates to comply with anti-corruption, sanctions, trade restrictions or similar

laws and regulations, or any failure of Diageo’s related internal policies and

procedures to comply with applicable law or regulation; (x) Diageo’s ability to

make sufficient progress against or achieve its ESG ambitions; (xi) cyber-

attacks and IT threats or any other disruptions to core business operations; (xii)

contamination, counterfeiting or other circumstances which could harm the

level of customer support for Diageo’s brands and adversely impact its sales;

(xiii) Diageo’s ability to maintain its brand image and corporate reputation or to

adapt to a changing media environment; (xiv) fluctuations in exchange rates

and/or interest rates; (xv) Diageo’s ability to successfully execute its strategic

business transformation projects; (xvi) Diageo’s ability to derive the expected

benefits from its business strategies, including the implementation of

competitive category strategies, investments in joint ventures, productivity

initiatives or inventory forecasting; (xvii) Diageo's ability to consistently deliver

value, service performance, commercial execution and suitable portfolio choices

to its customers; (xviii) increased competitive product and pricing pressures,

including as a result of introductions of new products or categories that compete

with Diageo’s products and consolidations by competitors and retailers; (xix)

increased costs for, or shortages of, talent, as well as labour strikes or disputes;

(xx) movements in the value of the assets and liabilities related to Diageo’s

pension plans; (xxi) Diageo’s ability to renew supply, distribution,

manufacturing or licence agreements (or related rights) and licences on

favourable terms, or at all, when they expire; or (xxii) any failure by Diageo to

protect its intellectual property rights.

In preparing the ESG-related information contained in this document, Diageo

has made a number of key judgements, estimations and assumptions and the

processes and issues involved are complex. The ESG-related forward-looking

statements should be treated with special caution, as ESG and climate data,

models and methodologies are often relatively new, are rapidly evolving and are

not of the same standard as those available in the context of other financial

information, nor are they subject to the same or equivalent disclosure standards,

historical reference points, benchmarks, market consensus or globally accepted

accounting principles. In particular, it is not possible to rely on historical data as

a strong indicator of future trajectories in the case of climate change and its

evolution. Outputs of models, processed data and methodologies are also likely

to be affected by underlying data quality, which can be hard to assess and we

expect industry guidance, market practice, and regulations in this field to

continue to change. There are also challenges faced in relation to the ability to

access data on a timely basis and the lack of consistency and comparability

between data that is available. This means the ESG-related forward-looking

statements and ESG metrics discussed in this document carry an additional

degree of inherent risk and uncertainty, and therefore, our actual results and

developments could differ materially from those expressed or implied by the

ESG-related forward-looking statements in this document.

In light of the uncertainty as to the nature of future policy and market responses

to climate change, including between regions, and the effectiveness of any such

responses, Diageo may have to re-evaluate its progress and adapt its approach

towards its ESG ambitions, commitments and targets in the future, update the

methodologies it uses or alter its approach to ESG and climate analysis and may

be required to amend, update and recalculate its ESG disclosures and

assessments in the future, as market practice and data quality and availability

develop rapidly.

All oral and written forward-looking statements made on or after the date of this

document and attributable to Diageo are expressly qualified in their entirety by

the cautionary statements contained or referred to in this section. Further details

of potential risks and uncertainties affecting Diageo are described in our filings

with the London Stock Exchange and the US Securities and Exchange

Commission (SEC), including in our Annual Report on Form 20-F for the year

ended 30 June 2026.

Any forward-looking statements made by or on behalf of Diageo speak only as

of the date they are made. Diageo expressly disclaims any obligation or

undertaking to publicly update or revise these forward-looking statements other

than as required by applicable law. The reader should, however, consult any

additional disclosures that Diageo may make in any documents which it

publishes and/or files with the SEC.

All readers, wherever located, should take note of these disclosures. This

document includes names of Diageo’s products, which constitute trademarks or

trade names which Diageo owns, or which others own and license to Diageo for

use. All rights reserved. © Diageo plc 2026.

The information in this document does not constitute an offer to sell or an

invitation to buy shares in Diageo plc or an invitation or inducement to engage

in any other investment activities.

This document may include information about Diageo’s target debt rating. A

security rating is not a recommendation to buy, sell or hold securities and may

be subject to revision or withdrawal at any time by the assigning rating

organisation. Each rating should be evaluated independently of any other rating.

Past performance cannot be relied upon as a guide to future performance.

References in this document to information on websites are included as an aid to

their location and such information is not incorporated in, and does not form

part of, this document unless otherwise noted.

Other additional information

Other additional

Spirits and investments

Spirits are produced in distilleries located worldwide. The group owns 31

Scotch whisky distilleries in Scotland, two whisky distilleries in Canada, five in

the United States and one in China. Diageo produces Smirnoff internationally.

Ketel One vodka is a joint venture product, distributed by Diageo from the

manufacturing base of the Nolet Group in the Netherlands. Cîroc grape-based

vodka liquids are purchased from Maison Villevert in France and packed by

both NewPrinces S.p.A. and Maison Villevert. Gin distilleries are in Scotland

(Cameronbridge) and in Canada (Valleyfield). Baileys is produced in the

Republic of Ireland and Northern Ireland. Irish whiskey is distilled at the Roe &

Co distillery in Dublin. Rum is distilled in the US Virgin Islands, in Australia

and Guatemala and is blended and bottled in the United States, Canada, United

Kingdom and Guatemala. Raki is produced in Türkiye, Chinese white spirits are

produced in Chengdu, in the Sichuan province of China, cachaça is produced in

Ceará State in Brazil and tequila in Mexico.

The breakdown of the group's maturing inventory is as follows:

Diageo’s maturing Scotch whisky is stored in warehouses in Scotland

(Clackmannanshire area between Blackgrange, Cambus West and Menstrie,

where we are holding approximately 43% of the group’s maturing Scotch

whisky), its maturing Canadian whisky in Valleyfield and Gimli in Canada, its

maturing American whiskey in Kentucky and Tennessee in the United States

and maturing Chinese white spirits in Chengdu, China.

Expansion of our warehousing facilities at Midtown in Clackmannanshire was

recently completed. Additional land has also been secured at the nearby Garvel

Farm site, which will allow warehouse capacity expansion in future. Alongside

the new warehouses being built, there is also investment in state-of-the-art

automation of warehousing.

In North America, Diageo officially opened its new 360,000-square-foot

manufacturing and warehousing facility in Montgomery, Alabama, bringing the

company’s iconic beverage alcohol brands closer to customers across the

Southern United States. Strategically located at the heart of the company’s

Southern U.S. region, and with a multi-million case annual production capacity,

‘Diageo Montgomery’ will build greater resilience and agility into the

company’s supply chain footprint in North America, while making its

operations more sustainable.

In China, the Eryuan malt whisky distillery fully opened in mid-2024. It aims to

develop the highest quality China single origin whisky, placing China firmly on

the global whisky producer’s map.

Diageo’s end-to-end tequila production is based in Mexico. We have invested

more than $500 million to expand our manufacturing footprint through new

facilities in the state of Jalisco, supporting the continued growth of the category.

As part of this expansion, we are implementing a range of digital transformation

initiatives across our tequila operations. During fiscal 26, we began

commissioning operations at our new distillery in La Barca. As our most

advanced production site, it will double our current production capacity while

enabling end-to-end, real-time process traceability and improved operational

efficiency.

Diageo owns a controlling equity stake in United Spirits Limited (USL) which

is one of the leading alcoholic beverage companies in India, selling close to 64

million equivalent units in fiscal 26 of Indian-Made Foreign Liquor (IMFL) and

imported liquors. USL has a significant market presence across India and

operates nine owned sites, as well as a network of leased and third-party

manufacturing facilities. USL owns several Indian brands, such as McDowell’s

(Indian whisky, rum, and brandy), Black Dog (scotch), Signature (Indian

whisky), Royal Challenge (Indian whisky), Godawan (Indian single malt) and

Antiquity (Indian whisky).

Beer and investments

Diageo’s principal brewing facility is at the St James’s Gate brewery in Dublin,

Ireland. Additionally, at the end of fiscal 26 Diageo owned breweries in several

African countries: Kenya, Tanzania, and Uganda. On 17 December 2025,

Diageo announced the sale of its shareholding in East African Breweries PLC

and its shareholding in the Kenyan spirits business to Asahi Group Holdings,

Ltd; for more information see note 8 to the consolidated financial statements.

Guinness flavour extract is shipped from Ireland to all overseas Guinness

brewing operations, which use the flavour extract to brew beer locally. Guinness

is transported from Ireland in bulk to the Belfast facility in Northern Ireland for

canning and to Great Britain in bulk to the Runcorn facility, where the kegging,

bottling and canning of Guinness Draught takes place.

To support beer growth, the new €300 million brewery expansion in

Littleconnell is fully on stream since May 2026. In addition, a new Guinness 0.0

plant is being constructed in Littleconnell to double the total capacity of

Guinness 0.0, with this plant expected to come on stream in early 2028. In May

2026, Diageo announced plans to more than double the capacity in Littleconnell

as part of a wider €400 million investment to include brewing expansion, and a

new roasting facility. This new capacity should come on stream at the end of

2028. This brings the total investment in capacity expansion in Littleconnell to

approximately €700 million.

The Diageo Beer Category Third-Party Operations Team provide technical

services to facilitate the delivery of over 7 million hectolitres of beer and ready-

to-drink products supplied through over 50 partner breweries and beverage

packaging facilities worldwide. A shift towards an asset-light strategy in Africa

and the associated divestments, including the sales of Guinness Nigeria and

Guinness Cameroun, have driven a significant pivot to third-party production

and distribution.

The Beer Category TPO team's focus is on maintaining secure supply solutions

through partners while assuring the consistent quality of Diageo brands

produced at third-party facilities and enhancing Diageo value through

supporting the start-up of new partnerships and delivery of innovation projects.

In addition to supporting Guinness and beer, the team has an expanding role in

supporting the third-party manufacturing of ready to drink and spirits in Asia-

Pacific and Africa.

Flavoured malt beverages (FMB) are made from an original base containing

malt, but then stripped of malt character, and flavoured. This product segment is

implemented mainly in the United States, Canada and the Caribbean.

Ready-to-drink (RTD)

Diageo produces a range of ready-to-drink products mainly in the United

Kingdom, across Africa, Australia, Brazil, the United States and Canada.

Raw materials and supply agreements

The group has several long-term contracts for purchasing raw materials,

including glass, other packaging, spirits, cream, rum and grapes. Forward

contracts are in place for the purchase of cereals and packaging materials to

minimise the effects of short-term price fluctuations. Our long-term hedging

means there is a lag in cost of sales benefit generated from a commodity price

decrease. The continued geopolitical tensions, weather patterns with volatile

consumer demand, are the key drivers of constraints we are managing.

Cereals, including barley, wheat, corn and sorghum, are used in our scotch and

beer production and in our spirits brands through purchased neutral spirit.

Agave, a key raw material for our tequila brands, is sourced from Mexico.

Cream, the principal raw material for Irish cream liqueur, is sourced from

Ireland. Grapes and aniseed are used in the production of raki and are sourced

from suppliers in Türkiye. Other raw materials purchased in significant

quantities to produce spirits and beer are molasses, sugar, and several flavours

(such as juniper berries, agave, chocolate and herbs). These are sourced from

suppliers across the globe.

Many products are supplied to customers in glass bottles. Glass is purchased

from a variety of multinational and local suppliers. The largest suppliers are

Ardagh Packaging in the United Kingdom and Owens-Illinois in the United

States.

Like other consumer goods companies, we maintain stocks in markets to

compensate for extended lead times and demand volatility. Diageo is managing

well through the current levels of uncertainty and constraints in our supply

chain by expanding our supplier base and maintaining agility in our logistics

networks.

Competition

Diageo’s brands compete primarily on the basis of quality and price. Our

business is built on getting the right product to the right consumer for the right

occasion, and at the right price, including through taking into account ever

evolving shopper landscapes, technologies and consumer preferences. Diageo

also seeks to recruit and re-recruit consumers to its portfolio of brands,

including through meaningful consumer engagement, sustainable innovation

and investment in brands.

In spirits, Diageo’s major global competitors are Pernod Ricard, Suntory Global

Spirits, Bacardi, Campari and Brown-Forman, each of which has several brands

that compete directly with Diageo’s brands. In addition, Diageo faces

competition from regional and local companies in the countries in which it

operates.

In beer, Diageo also competes globally, as well as on a regional and local basis

(with the profile varying between regions) with several competitors, including

AB InBev, Asahi, Molson Coors, Heineken, Constellation Brands and

Carlsberg.

Research and development

Innovation forms an important part of Diageo’s growth strategy, playing a key

role in positioning its brands for continued growth in both developed and

emerging markets. The strength and depth of Diageo’s brand range also

provides a solid platform from which to drive sustainable innovation that leads

to new products and experiences for consumers, whether or not they choose to

drink alcohol. Diageo focuses its innovation on its strategic priorities and the

most significant consumer opportunities, including the development of global

brand extensions and new-to-world products, and continuously invests to

deepen its understanding of evolving trends and consumer socialising occasions

to inform product and packaging development, ranging from global brand

redesigns to cutting edge innovations. Supporting this, the group has ongoing

programmes to develop new beverage products which are managed internally

by the innovation and research and development functions.

Trademarks and other intellectual property

Diageo produces, sells and distributes branded goods, and is therefore

substantially dependent on the maintenance and protection of its trademarks. All

brand names mentioned in this document are protected by trademarks. The

group also holds trade secrets, as well as has substantial trade knowledge related

to its products. The group believes that its significant trademarks are registered

and/or otherwise protected (insofar as legal protection is available) in all

material respects in its most important markets. Diageo also owns valuable

patents and trade secrets for technology and takes all reasonable steps to protect

these rights.

Seasonality

The beverage alcohol industry is subject to seasonality in each major category.

Our spirits sales are typically highest during the second quarter of our fiscal

year, primarily due to seasonal holiday buying in our largest markets.

Employees

Many of our employees are represented by unions, with a variety of collective

bargaining agreements in place. We believe our relationships with the unions

that represent our employees are satisfactory in all material respects.

Compliance with US corporate governance rules

Under applicable SEC rules and the NYSE’s corporate governance rules for

listed companies, Diageo must disclose any significant ways in which its

corporate governance practices differ from those followed by US companies

under NYSE listing standards. Diageo believes the following to be the

significant areas in which there are differences between its corporate

governance practices and NYSE corporate governance rules applicable to US

companies. This information is also provided on the company’s website at

https://www.diageo.com/en/our-business/corporate-governance.

•Basis of regulation: UK listed companies are required to include in their annual

report a narrative statement of (i) how they have applied the principles of the

Code and (ii) whether or not they have complied with the best practice

provisions of the Code. NYSE listed companies must adopt and disclose their

corporate governance guidelines. UK listed companies are required to include in

their annual report statements as to (i) how directors have complied with Section

172 of the Act, which requires directors to promote the success of the company

for the benefitof its members as a whole, having regard to the interests of

stakeholdersand (ii) how directors have engaged with and taken account of the

views of the company’s workforce and other stakeholder groups. Diageo

complied throughout the year with the best practice provisions of the Code and

the disclosure requirements noted above.

•Director independence: The Code requires at least half the Board (excluding

the Chair) to be independent non-executive directors, asdetermined by

affirmatively concluding that a director is independent in character and

judgement and determining whether there are relationships and circumstances

which are likely to affect, or could appear to affect, the director’s judgement.

The Code requires the Board to state its reasons if it determines that a director

is independent notwithstanding the existence of relationships or circumstances

which may appear relevant to its determination. NYSE rules require a majority

of independent directors, according to the NYSE’s own 'brightline' tests and

an affirmative determination by the Board that the director has no material

relationship with the listed company. Diageo’s Board has determined that, in

its judgement and without taking into account the NYSE brightline tests, all

of the Non-Executive Directors are independent. As such, currently seven of

Diageo’s directors are independent. Further details of this determination are

set out below.

•Chair and Chief Executive: The Code requires these roles to be separate.

There is no corresponding requirement for US companies. Diageo has a

separate Chair and Chief Executive.

•Non-Executive Director meetings: NYSE rules require non-management

directors to meet regularly without management present and independent

directors to meet separately at least once a year. The Code requires non-

executive directors to meet without the Chair present at least annually to

appraise the Chair’s performance. During the year, Diageo has complied with

these requirements with independent Non-Executive Directors, including the

Chair, meeting without the Executive Directors present seven times and

independent Non-Executive Directors meeting without the Chair or

Executive Directors present once.

•Board committees: Diageo has a number of Board committees that are similar

in purpose and constitution to those required by NYSE rules. Diageo’s Audit,

Remuneration and Nomination Committees consist entirely of independent

non-executive directors. Under NYSE standards, companies are required to

have a nominating/corporate governance committee, which develops and

recommends a set of corporate governance principles and is composed

entirely ofindependent directors. The terms of reference for Diageo’s

Nomination Committee, which comply with the Code, do not contain such a

requirement. In accordance with the requirements of the Code, Diageo has

disclosed on page 85 the results and means of its annual evaluation of the

Board, its Committees and the directors, and it provides extensive

information regarding the Directors’compensation in the Directors’

remuneration report on pages 100-129.

•Code of ethics: NYSE rules require a code of business conduct and code of

ethics to be adopted for directors, executive officers and employees and

disclosure of any waivers for executive directors or officers. Diageo has

adopted a Code of Business Conduct for all directors, officers and employees,

as well as a Code of Ethics for Senior Financial Officers in accordance with

the requirements of SOx. See page 94 for further details.

•Compliance certification: NYSE rules require chief executives to certify

to the NYSE their awareness of any NYSE corporate governance

violations. Diageo is exempt from this as a foreign private issuer but is

required to notify the NYSE if any executive officer becomes aware of

any non-compliance with NYSE corporate governance standards. No

such notification was necessary during the period covered by this report.

Regulations and taxes

Diageo’s worldwide operations are subject to extensive regulatory requirements

relating to production, product liability, distribution, importation, marketing,

promotion, sales, pricing, labelling, packaging, advertising, antitrust, labour,

pensions, compliance and control systems and environmental issues.

In the United States, the beverage alcohol industry is subject to strict federal and

state government regulations. At the federal level, the Alcohol and Tobacco Tax

and Trade Bureau, or TTB, of the US Treasury Department oversees the US

beverage alcohol industry, including through regulating and collecting taxes on

the production of alcohol within the United States and regulating trade

practices. In addition, individual US states, as well as some local authorities in

US jurisdictions in which Diageo sells or produces its products, administer and

enforce industry-specific regulations and may apply additional excise taxes and,

in many states, sales taxes. Federal, state and local regulations cover virtually

every aspect of Diageo's US operations, including production, importation,

distribution, marketing, promotion, sales, pricing, labelling, packaging and

advertising.

Spirits and beer are subject to national import and excise duties in many markets

around the world. Most countries impose excise duties on beverage alcohol

products, although the form of such taxation varies significantly from a simple

application to units of alcohol by volume, to advanced systems based on the

imported or wholesale value of the product. Several countries impose additional

import duty on distilled spirits, often discriminating between categories (such as

Scotch whisky or bourbon) in the rate of such tariffs. Within the European

Union, such products are subject to different rates of excise duty in each

country, but within the overall European Union framework there are minimum

rates of excise duties that must first be applied to each relevant category of

beverage alcohol. The UK's current alcohol duty system charges duty based on

alcohol by volume (rather than by product type). Rates of UK alcohol duty were

increased in line with inflation, effective from 1 February 2026. This regime

remains relatively new in its application and subject to ongoing developments;

for example, on 13 July 2026, draft legislation was published proposing that

penalties for late filing and late payment of UK alcohol duty be brought within

the existing points-based penalty regime. As such, the impact of this regime on

Diageo's business continues to be assessed.

Import and excise duties can have a significant impact on the final pricing of

Diageo’s products to consumers. These duties can affect a product’s revenue or

margin, both by reducing consumption and/or by encouraging consumers to

switch to lower-taxed categories of beverages. The group devotes resources to

encouraging the equitable taxation treatment of all beverage alcohol categories

and to reducing government imposed barriers to fair trading.

The advertising, marketing and sale of alcohol are subject to various restrictions

in markets around the world. These range from a complete prohibition of

alcohol in certain cultures and jurisdictions, such as in certain states in India, to

the prohibition of the import into a certain jurisdiction of spirits and beer, and to

restrictions on the advertising style, media and content. In a number of

countries, television is a prohibited medium for the marketing of spirits brands,

while in other countries, television advertising, while permitted, is carefully

regulated. Many countries also strictly regulate the use of internet-based

advertising and social media in connection with alcohol sales. Any further

prohibitions imposed on advertising or marketing, particularly within Diageo’s

most significant markets, could have an adverse impact on beverage alcohol

sales.

Labelling of beverage alcohol products is also regulated in many markets,

varying from the required inclusion of health warning labels to manufacturer or

importer identification, alcohol strength and other consumer information. As

well as producer, importer or bottler identification, specific warning statements

related to the risks of drinking beverage alcohol products are required to be

included on all beverage alcohol products sold in the US, in certain countries

withinthe EU, and in a number of other jurisdictions in which Diageo operates.

Spirits and beer are also regulated in distribution. In many countries, alcohol

may only be sold through licenced outlets, both on- and off-trade, varying from

government- or state-operated monopoly outlets (for example, in the off-trade

channel in Norway, certain Canadian provinces, and certain US states) to the

system of licenced on-trade outlets (for example, licenced bars and restaurants)

which prevails in much of the Western world, including in the majority of US

states, in the UK and in much of the EU. In a number of states in the US,

wholesalers of alcoholic beverages must publish price lists periodically and/or

must file price changes in some instances up to three months before they

become effective. In a response to public health concerns, some governments

have imposed or are considering imposing minimum pricing on beverage

alcohol products and may consider raising the legal drinking age, further

limiting the number, type or opening hours of retail outlets and/or expanding

retail licencing requirements.

Regulatory decisions and changes in the legal and regulatory environment could

also increase Diageo’s costs and liabilities and/or impact on its business

activities.

Taxation

This section provides a descriptive summary of certain US federal income tax and

UK tax consequences that are likely to be material to the holders of the ordinary

shares or ADSs, but only those who hold their ordinary shares or ADSs as capital

assets for tax purposes. It does not purport to bea complete technical analysis or a

listing of all potential tax effects relevant to the ownership of the ordinary shares or

ADSs, and does not address the potential application of the provisions of the

Internal Revenue Code of 1986, as amended, known as the Medicare contribution

tax. This section does not apply to any holder who is subject to special rules,

•certain financial institutions;

•a dealer in securities or foreign currency;

•a trader in securities that elects to use a mark-to-market method of tax

accounting for securities holdings;

•a tax-exempt organisation;

•an insurance company;

•a person liable for alternative minimum tax;

•a person that actually or constructively owns 10% or more of the combined

voting power of voting stock of Diageo or of the total value of stock of

Diageo;

•a person that holds ordinary shares or ADSs as part of a straddle or a hedging

or conversion transaction;

•a person that holds ordinary shares or ADSs as part of a wash sale for tax

purposes; or

•a US holder (as defined below) whose functional currency is not US

dollar.

If an entity or arrangement treated as a partnership for US federal income tax

purposes holds ordinary shares or ADSs, the US federal income tax treatment of

a partner will generally depend on the status of the partner and the tax treatment

of the partnership. A partner in a partnership holding ordinary shares or ADSs

should consult its tax advisor with regard to the US federal income tax treatment

of an investment in ordinary shares or ADSs.

For UK tax purposes, this section applies only to persons who are the absolute

beneficial owners of ordinary shares or ADSs and who hold their ordinary

shares or ADSs as investments. It assumes that holders of ADSs will be treated

as holders of the underlying ordinary shares. In addition to those persons

mentioned above, this section does not applyto holders that are banks, regulated

investment companies, other financial institutions, or to persons who have or are

deemed to have acquired their ordinary shares or ADSs in the course of an

employment or trade. This summary applies to persons who are treated as

resident in the United Kingdom for the purposes of UK tax law but not those to

whom special rules relating to residence apply (including qualifying new

residents, temporary non-residents or those to whom 'split year' treatment

applies).

This section is based on the Internal Revenue Code of 1986, as amended, its

legislative history, existing and proposed regulations, published rulings and

court decisions, the laws of the United Kingdom and the practice of His

Majesty’s Revenue and Customs (HMRC), all as currently in effect, as well as

on the Convention Between the Government of the United Kingdom of Great

Britain and Northern Ireland and the Government of the United States of

America for the Avoidance of Double Taxation and the Prevention of Fiscal

Evasion with Respect to Taxes on Income and Capital Gains (the Treaty). These

laws are subject to change, possibly on a retroactive basis.

In addition, this section is based in part upon the representations of the

Depositary and the assumption that each obligation in the Deposit Agreement

and any related agreement will be performed in accordance with its terms. In

general, and taking into account this assumption, for US federal income tax

purposes and for the purposes of the Treaty, holders of ADRs evidencing ADSs

should be treated as the owner of the shares represented by those ADSs.

Exchanges of shares for ADRs, and ADRs for shares, generally will not be

subject to US federal income tax or to UK tax on profits or gains.

A US holder is a beneficial owner of ordinary shares or ADSs that is for US

federal income tax purposes:

•a citizen or resident for tax purposes of the United States and who is not and

has at no point been resident in the United Kingdom;

•a US domestic corporation, or other US entity taxable as a corporation;

•an estate whose income is subject to US federal income tax regardless of its

source; or

•a trust if a US court can exercise primary supervision over the trust’s

administration and one or more US persons are authorised to control all

substantial decisions of the trust.

This section is not intended to provide specific advice and no action should be taken

or omitted in reliance upon it. This section addresses only certain aspects of US

federal income tax and UK income tax, corporation tax, capital gains tax,

inheritance tax and stamp taxes. Holders of the ordinary shares or ADSs are urged to

consult their own tax advisors regarding the US federal, state and local, and UK and

other tax consequences of owning and disposing of the shares or ADSs in their

respective circumstances. In particular, holders are encouraged to confirm with their

advisor whether they are US holders eligible for the benefits of the Treaty.

Dividends

UK taxation

The company will not be required to withhold tax at source when paying a

dividend.

All dividends received by an individual shareholder or ADS holder who is

resident in the UK for tax purposes will, except to the extent that they are

earned through an ISA or other regime which exempts the dividends from tax,

form part of that individual’s total income for income tax purposes and will

represent the highest part of that income.

A nil rate of income tax will apply to the first £500 of taxable dividend income

received by an individual shareholder in the 2026/2027 tax year (the Nil Rate

Amount), regardless of what tax rate would otherwise apply to that dividend

income.

Any taxable dividend income in excess of the Nil Rate Amount will be subject

to income tax at the following special rates (for the 2026/2027 tax year):

•at the rate of 10.75%, to the extent that the relevant dividend income falls

below the threshold for the higher rate of income tax;

•at the rate of 35.75%, to the extent that the relevant dividend income falls

above the threshold for the higher rate of income tax but below the threshold

for the additional rate of income tax; and

•at the rate of 39.35%, to the extent that the relevant dividend income

falls above the threshold for the additional rate of income tax.

In determining whether and, if so, to what extent the relevant dividend income

falls above or below the threshold for the higher rate of income tax or, as the

case may be, the additional rate of income tax, the individual’s total taxable

dividend income for the tax year in question (including the part within the Nil

Rate Amount) will, as noted above, be treated as the highest part of that

individual’s total income for income tax purposes.

Shareholders within the charge to UK corporation tax which are small companies

(for the purposes of the UK taxation of dividends) will not generally be subject to

tax on dividends from the company. Other shareholders within the charge to UK

corporation tax will not be subject to tax on dividends from the company so long

as the dividends fall within an exempt class and certain conditions are met. In

general, dividends paid on shares that are ordinary share capital for UK tax

purposes and are not redeemable and dividends paid to a person holding less than

10% of the issued share capital of the payer (or any class of that share capital) are

examples of dividends that fall within an exempt class.

US taxation

Under the US federal income tax laws, and subject to the passive foreign

investment company (PFIC) rules discussed below, the gross amount of any

distribution (other than certain pro-rata distribution of ordinary shares) paid to a

US holder by Diageo in respect of its ordinary shares or ADSs out of its current

or accumulated earnings and profits (as determined for US federal income tax

purposes) will be treated as a dividend that is subject to US federal income

taxation.

Dividends paid to certain non-corporate US holders that constitute qualified dividend

income will be taxed at the preferential rates applicable to long-term capital

gains, provided that the ordinary shares or ADSs areheld for more than 60 days

during the 121-day period beginning 60 days before the ex-dividend date and the

holder meets other holding period requirements. Dividends paid by Diageo with

respect to its ordinary shares or ADSs generally will be qualified dividend

income to US holders that meet the holding period requirement, provided that, in

the year that they receive the dividend, we are eligible for the benefits of the Treaty.

We believe that we are currently eligible for the benefits of the Treaty and we

therefore expect that dividends on the ordinary shares or ADSs will be qualified

dividend income, but there can be no assurance that we will continue to be

eligible for the benefits of the Treaty. Under UK law, dividends paid by the

company are not subject to UK withholding tax. Therefore, the US holder will

include in income for US federal income tax purposes the amount of the

dividend received, and thereceipt of a dividend will not entitle the US holder to

a foreign tax credit.

The dividend must be included in income when the US holder, in the case of

ordinary shares, or the Depositary, in the case of ADSs, receives the dividend,

actually or constructively. The dividend will not be eligiblefor the dividends-

received deduction generally allowed to US corporations in respect of dividends

received from other US corporations. Dividends will generally be income from

sources outside the United States and will generally be ‘passive’ income for

purposes of computing the foreign tax credit allowable to a US holder.

Distributions in excess of current and accumulated earnings and profits, as

determined for US federal income tax purposes, will be treated as a non-taxable

return of capital to the extent of the holder’s basis in the ordinary shares or

ADSs andthereafter as capital gain. However, Diageo does not expect to

calculate earnings and profits in accordance with US federal income tax

principles. Accordingly, a US holder should expect to generally treat

distributions Diageo makes as dividends.

Taxation of capital gains

UK taxation

A citizen or resident (for tax purposes) of the United States who has at no time

been resident in the United Kingdom will not be liable for UK tax on capital

gains realised or accrued on the sale or other disposal of ordinary shares or

ADSs, unless the ordinary shares or ADSs are held in connection with a trade or

business carried on by the holder in the United Kingdom through a UK branch,

agency or a permanent establishment. A disposal (or deemed disposal) of shares

or ADSs by a holder who is resident in the United Kingdom may, depending on

the holder’s particular circumstances, and subject to any available exemption or

relief, give rise to a chargeable gain or an allowable loss for the purposes of UK

tax on capital gains.

US taxation

Subject to the PFIC rules discussed below, a US holder who sells or otherwise

disposes of ordinary shares or ADSs will recognise capital gain or loss for US

federal income tax purposes equal to the difference between the US dollar value

of the amount that is realised and the tax basis, determined in US dollars, in the

ordinary shares or ADSs. Capital gain of a non-corporate US holder is generally

taxed at preferential rates where the property is held for more than one year. The

gain or loss will generally be income or loss from sources within the United

States for foreign tax credit limitation purposes. The deductibility of capital

losses is subject to limitations.

PFIC rules

Diageo believes that ordinary shares and ADSs should not currently be treated

as stock of a PFIC for US federal income tax purposes, and we do not expect to

become a PFIC in the foreseeable future. However this conclusion is a factual

determination that is made annually and thus may be subject to change. It is

therefore possible that we could become a PFIC in a future taxable year.

If treated as a PFIC, gain realised on the sale or other disposition of ordinary

shares or ADSs would in general not be treated as capital gain. Instead, unless a

US holder elects to be taxed annually on a mark-to-market basis with respect to

the ordinary shares or ADSs, US holders would be treated as if the holder had

realised such gain and certain ‘excess distributions’ pro-rated over the holder’s

holding period for the ordinary shares or ADSs. To the extent gain is allocated

to the taxable year of the sale or other disposition of ordinary shares or ADSs

and to any year before Diageo became a PFIC, it would be taxed asordinary

income. The amount allocated to each other taxable year would be taxed at the

highest tax rate in effect (for individuals or corporations, as applicable) for each

such year to which the gain was allocated, together with an interest charge in

respect of the tax attributable to each such year. With certain exceptions, a

holder’s ordinary shares or ADSs will be treated as stock in a PFIC if Diageo

were a PFIC at any time during the holding period in a holder’s ordinary shares

or ADSs. In addition, dividends received from Diageo will not be eligible for

the special tax rates applicable to qualified dividend income if Diageo is a PFIC

(or is treated as a PFIC with respect to the holder) either in the taxable year of

the distribution or the preceding taxable year, but instead will be taxable at rates

applicable to ordinary income. If any investor owns our shares or ADSs during

any year that we are a PFIC with respect to them, they may be required to file

IRS Form 8621.

UK inheritance tax

Subject to certain provisions relating to trusts or settlements, an ordinary share or

ADS held by an individual shareholder who is domiciled in the United States for

the purposes of the Convention between the United States and the United

Kingdom relating to estate and gift taxes (the Convention) and who is neither

domiciled in the United Kingdom nor (where certain conditions are met) a UK

national (as defined in the Convention), will generally not be subject to UK

inheritance tax on the individual’s death (whether held on the date of death or

gifted during the individual’s lifetime) except where the ordinary share or ADS is

part of the business property of a UK permanent establishment of the individual or

pertains to a UK fixed base of an individual who performs independent personal

services. In a case where an ordinary share or ADS is subject both to UK

inheritance tax and to US federal gift or estate tax, the Convention generally

provides for inheritance tax paid in the United Kingdom to be credited against

federal gift or estate tax payable in the United States, or for federal gift or estate

tax paid in the United States to be credited against any inheritance tax payable in

the United Kingdom, based on priority rules set forth in the Convention.

Effective from 6 April 2025, UK inheritance tax is charged based on long-term

residence (and not domicile). Particularly in view of this reform, UK inheritance

tax and its interaction with the Convention is complex. Any person who is in

doubt about the application of UK inheritance tax in relation to their ordinary

shares or ADSs, or the effect of the Convention, should consult appropriately

qualified tax advisers.

UK stamp duty and stamp duty reserve tax

No stamp duty or stamp duty reserve tax (SDRT) will arise upon the deposit of

an underlying ordinary share with the Depositary if that deposit is effected by

(a) the issue of that share or (b) a transfer of that share in the course of (i)

capital-raising arrangements or (ii) qualifying listing arrangements. Otherwise,

stamp duty or SDRT applies at the higher rate of 1.5% of the amount or value of

the consideration payable or, in certain circumstances, the value of the ordinary

shares (rounded up to the nearest multiple of £5 in the case of stamp duty). The

Depositary will pay the stamp duty or SDRT but will recover an amount in

respect of such tax from the initial holders of ADSs.

No UK stamp duty will be payable on the acquisition or transfer of ADRs.

Furthermore, an agreement to transfer ADSs in the form of ADRs will not give

rise to a liability to SDRT.

Purchases of ordinary shares (as opposed to ADRs) will be subject to UK stamp

duty, and/or SDRT as the case may be, at the rate of 0.5% of the price payable

for the ordinary shares at the time of the transfer (or, in certain circumstances,

the value of the ordinary shares). Stamp duty applies where a physical

instrument of transfer is used to effect the transfer. SDRT applies to any

agreement to transfer ordinary shares (regardless of whether or not the transfer

is effected electronically or by way of an instrument of transfer). However,

where the ordinary shares being acquired are transferred direct to the

Depositary’s nominee, the only charge will generally be the higher charge of

1.5%, subject to the applicability of any exemptions to the 1.5% charge

discussed above.

Any stamp duty payable (as opposed to SDRT) is rounded up to the nearest £5.

No stamp duty (as opposed to SDRT) will be payable if the amount or value of

the consideration is (and is certified to be) £1,000 or less. Stamp duty and SDRT

are usually paid or borne by the purchaser.

Whilst stamp duty and SDRT may in certain circumstances both apply to the

same transaction, in practice usually only one or the other will need to be paid.

UK stamp duty and SDRT are expected to be replaced by a new single tax in

2027, the Securities Transfer Tax (STT). Draft legislation for the STT was

published on 13 July 2026. The STT is intended to modernise the existing stamp

taxes regime, by simplifying and digitising the administration and payment of

tax on transactions in securities. Based on the draft legislation as currently

published, no material changes to the current rates or method of computation are

anticipated, although there may be further changes prior to the legislation being

implemented. As such, the impact of the STT on transactions involving the

acquisition or transfer of the ordinary shares or ADSs remains uncertain.

US backup withholding and information reporting

Payments of dividends and sales proceeds with respect to ordinary shares and

ADSs may be reported to the IRS and to the US holder. Backup withholding

may apply to these reportable payments if the US holder fails to provide an

accurate taxpayer identification number or certification of exempt status or fails

to report all interest and dividends required to be shown on its US federal

income tax returns. Certain US holders (including, among others, corporations)

are not subject to information reporting and backup withholding. The amount of

any backup withholding from a payment to a US holder will be allowed as a

credit against the holder’s US federal income tax liability and may entitle the

holder to a refund, provided that the required information is timely furnished to

the IRS. US holders should consult their tax advisors as to their qualification for

exemption from backup withholding and the procedure for obtaining an

exemption. Certain US holders who are individuals (and certain specified

entities), may be required to report information relating to their ownership of

non-US securities unless the securities are held in accounts at financial

institutions (in which case theaccounts may be reportable if maintained by non-

US financial institutions). US holders should consult their tax advisors regarding

any reporting obligations they may have with respect to the ordinary shares or

ADSs.

Data preparation methodology for SECR tables

Data preparation methodology for Scope 1 and 2 greenhouse

gas emissions

We calculate CO 2 e emissions data based on direct measurement of energy use

(meter readings/invoices) for the majority of sites. We externally report Scope 1

and 2 greenhouse gas emissions using metric tonnes of CO 2 e to compare the

emissions from the seven main greenhouse gases based on their global warming

potential. We base our CO 2 e reduction targets and reporting protocols (since

2007. on market-based emissions.

Direct (Scope 1) emissions

We report fuel consumption by fuel type at site level using the environmental

management system. Using calorific values, the fuel is then converted to energy

consumption, in kilowatt hours (kWh), by fuel type and is multiplied by the

relevant CO 2 e emission factor to derive total CO 2 e emissions. Scope 1 emission

factors for fuels are typically average fuel CO 2 e emissions factors and calorific

values (the latest available at the end of the period) from the UK Government

Department for Energy Security and Net Zero (DESNZ) for fossil fuels and

from UK Government National Air Emissions Inventory (NAEI) for bioenergy

sources.

For market-based emissions calculations, we apply product-specific factors

where available. Energy attribute certificates (EACs), derived from our

distillery by-product feedstock and processed by a third party to generate

biomethane, form a component of our decarbonisation, together with purchased

renewable gas EACs (i.e. from certificate-backed biomethane supplied

indirectly through the natural gas grid).

Fugitive and owned agricultural (Scope 1) emissions

We calculate fugitive emissions based on the amount of emitted ozone-

depleting substances and fluorinated gases, multiplied by the relevant emission

factor to represent the global warming potential in tonnes of CO 2 e. Annually,

each site reports the quantity (mass) of each material and/or gas emitted based

on any added and/or topped-up amount, reported via the environmental

management system. The mass of each emitted ozone-depleting substance and

fluorinated gas is multiplied by the relevant emission factor from the

Intergovernmental Panel on Climate Change Sixth Assessment Report (IPCC

AR6) and then added together to report the equivalent GHG emissions in tonnes

of CO 2 e.

We calculate Scope 1 FLAG emissions from our owned agricultural direct

impacts (i.e. fertiliser use). The relevant quantities of fertiliser are multiplied by

the percentage of nitrogen content and by the relevant GHG emission and

conversion factors (e.g. nitrogen to nitrous oxide, nitrous oxide GHG emission

factor) to determine the equivalent tonnes CO 2 e emissions.

Indirect (Scope 2) emissions

We report greenhouse gas emissions from electricity (Scope 2) as market-based

emissions and as location-based emissions in line with the World Resources

Institute (WRI)/World Business Council for Sustainable Development

(WBCSD) GHG Protocol Scope 2 guidance 2015. For market-based emissions,

electricity consumption recorded on our environmental management system is

multiplied by emissions factors specified in EACs, contracts, power purchase

agreements and supplier utility emissions, as detailed in the GHG Protocol’s

Scope 2 guidance. We use GHG Protocol Scope 2 to ensure EACs and

associated financial instruments meet the required standards. GHG emission

factors, relating to indirect (Scope 2) emissions, are updated to the latest

available by end of the period.

Total direct and indirect greenhouse gas emission (Scope 1 and

Scope 2 data aggregation)

For market-based: total direct and indirect greenhouse gas emissions by weight

(market/net based) (1,000 tonnes CO 2 e) is the aggregation of Scope 1 and 2

GHG emissions with fugitive and owned agriculture emissions to calculate total

direct operations market-based emissions. The percentage reduction in absolute

greenhouse gas emissions (direct and indirect greenhouse gas emissions by

weight (market/net based)) from the prior year is a percentage change

calculation with reference to the corresponding prior year figure. Our direct

operations emissions target for 2030 remains consistent with earlier reporting

protocols and is based on market-based emissions.

GHG emission intensity ratios

Total, aggregated direct operations market-based emissions are divided by the

volume of direct operations packaged product reported in the same period. The

market-based emissions are converted to grammes of CO 2 e and the volume of

packaged product is reported in litres to generate relevant GHG emission

intensity ratios in g CO 2 e/litre packaged.

Data preparation methodology for energy consumption

We report total energy and renewable energy in MWh and/or TJ. We calculate

direct and indirect energy data based on the direct measurement of energy use

(meter readings/invoices for volumes of fuel supplied).

We determine direct energy (renewable/non-renewable) from the quantity of

different fuel types (in metric tonnes, litres) of renewable and non-renewable

fuels and by applying the relevant calorific value (either from DESNZ or the

supplier).

We report fuel consumption by fuel type at site level using the environmental

management system. Using calorific values, the fuel is then converted to energy

consumption, in kWh, by fuel type and classified as either renewable or non-

renewable based on fuel type or source. EACs, derived from our distillery by-

product feedstock and processed by a third-party to generate biogas, together

with purchased renewable gas EACs, are applied to relevant natural gas

supplied to sites via a common carrier pipeline/network.

We measure indirect energy (renewable/non-renewable) in MWh and/or TJ

from energy utilities or suppliers and/or by applying the relevant EACs.

All indirect energy generated and used on site, along with purchased indirect

energy supplied through the grid is classified as renewable by the allocation of

EACs, contracts, power purchase agreements and supplier-specific utility

factors, where relevant.

We include directly connected renewable energy generated on or near our sites,

where all energy is used on site and no EACs are created (e.g. roof-mounted

solar panels with all generated renewable electricity used on site).

Additional information for shareholders

Annual General Meeting (AGM)

The AGM will be held at Convene 133 Houndsditch, London, EC3A 7DB on 5

November 2026 at 2.30 pm.

Documents on display

The Annual Report on Form 20-F and any other documents filed by the

company with the US Securities Exchange Commission (SEC) may be

inspected at the SEC’s office of Investor Education and Advocacy located at

100 F Street, NE, Washington, DC 20549-0213, USA. Please call the SEC at

1-800-SEC-0330 for further information on the public reference rooms and their

copy charges. Filings with the SEC are also available to the public from

commercial document retrieval services, and from the website maintained by

the US Securities and Exchange Commission athttps://www.sec.gov.

Warning to shareholders – share fraud

Please beware of the share fraud of ‘boiler room’ scams, where shareholders are

called ‘out of the blue’ by fraudsters (sometimes claiming to represent Diageo)

attempting to obtain money or property dishonestly. Further information on boiler

room scams can be found on the Financial Conduct Authority’s website (https://

www.fca.org.uk/consumers/share-bond-and-boiler-room-scams) but in short, if in

doubt, take proper professional advice before making any investment decision.

Electronic communications

Shareholders can register for an account to manage their shareholding online,

including being able to check the number of shares they own and the value of

their shareholding; register for electronic communications; update their personal

details; provide a dividend mandate instruction; apply for the Dividend

Reinvestment Plan; access dividend confirmations; and use the online share

dealing service. To register for an account, shareholders should visit https://

www.diageoregistrars.com/welcome.

Dividend payments

Direct payment into bank account

UK shareholders: The Company normally pays dividends twice each year and

have taken the decision that these will only be made directly to shareholder's

bank or building society. This is a more secure method of payment and avoids

delays or cheques being lost. Shareholders can register their bank account

details for this purpose online athttps://www.diageoregistrars.com/welcome or

call the Registrar on +44 (0)371 277 1010* to supply the details over the phone.

For shareholders outside the UK, MUFG Corporate Markets (a trading name of

MUFG Pension & Market Services and a member of MUFG, a global financial

group) may be able to provide you with a range of services relating to your

shareholding. To learn more about the services available to you please visit the

Share Portal athttps://www.diageoregistrars.com/welcome or call +44 (0)371

277 1010.*

Dividend Reinvestment Plan

A Dividend Reinvestment Plan is offered by the Registrar, MUFG Corporate

Markets, to give shareholders the opportunity to build up their shareholding in

Diageo by using their cash dividends to purchase additional Diageo shares.

Shareholders can join the Dividend Reinvestment Plan online athttps://

www.diageoregistrars.com/welcome or call the Registrar, MUFG Corporate

Markets, on +44 (0)371 277 1010* to request the relevant application form.

Dividend currency election

Holders of ordinary shares will receive their dividends in sterling unless they

wish to elect to receive their dividends in US dollars. To elect to receive their

dividends in US dollars, shareholders can download the relevant election form

on the shareholder portal athttps://www.diageoregistrars.com or call +44 (0)371

277 1010.*

Exchange controls

Other than certain economic sanctions which may be in effect from time to

time, there are currently no UK foreign exchange control restrictions on the

payment of dividends, interest or other payments to holders of Diageo’s

securities who are non-residents of the UK or on the conduct of Diageo’s

operations.

There are no restrictions under the company’s articles of association or under

English law that limit the right of non-resident or foreign owners to hold or vote

the company’s ordinary shares.

Please refer to the ‘Taxation’ section on pages 220-222 for details relating to the

taxation of dividend payments.

Useful contacts

The Registrar/Shareholder queries

MUFG Corporate Markets acts as the company’s registrar and can be

contacted as follows:

By email: Diageo@cm.mpms.mufg.com

By telephone: +44 (0) 371 277 1010*

In writing: Registrars – MUFG Corporate Markets, Central Square, 29

Wellington Street, Leeds, LS1 1DL.

*Calls are charged at the standard geographic rate and will vary by provider. Calls

outside the United Kingdom will be charged at the applicable international rate.

Lines are open 08:00 to 17:30 UK time, Monday to Friday, excluding public

holidays in England and Wales.

ADR administration

Citibank Shareholder Services acts as the company’s ADR administrator

and can be contacted as follows:

By email: citibank@shareholders-online.com

By telephone: +1 866 253 0933/

(International) +1 781 575 4555

In writing: Citibank Shareholder Services. PO Box 43077,

Providence, RI 02940-3077

** Lines are open Monday to Friday 8:30 to 18:00 EST

General Counsel and Company Secretary

Randall Ingber

The.cosec@diageo.com

Investor Relations

investor.relations@diageo.com

Liquidity and capital resources

1. Sources and uses of liquidity

The primary source of the group’s liquidity over the last three financial years has been cash generated from operations. These funds

have generally been used to pay interest, taxes and dividends, and to fund capital expenditure and acquisitions, and, together with the

group’s current strong cash position, are expected to continue to fund future operating and capital needs. The group also issues short-

term commercial paper regularly in order to finance its day-to-day operations, and accesses the term debt capital markets regularly to

refinance maturing bonds each year and to manage liquidity.

The table below sets forth the group’s available undrawn committed bank facilities as at 30 June 2026 and 30 June 2025.

The facilities can be used for general corporate purposes and, together with cash and cash equivalents, support the group’s

commercial paper programmes.

2. Analysis of cash flows

The table below sets forth the group’s cash flows for the year ended 30 June 2026 and 30 June 2025.

Net cash inflow from operating activities infiscal 26 was $4,392 million (2025 –$4,297 million), an increase of$95 million

compared to fiscal 25, primarily driven by lower year on year tax and interest payments partly offset by lower operating profit and

adverse creditor movement.

Net cash outflow from investing activities in fiscal 26 was $982 million (2025 –$1,720 million), a net decrease in outflow of$738

million compared to fiscal 25, primarily driven by a decrease of$368 million in net cash expenditure for property, plant and

equipment and computer software and a favourable movement of$225 million in acquisitions, investmentin associates, loans, other

investments and other financial assets and an increase of$145 million in net consideration received in respect of sale of businesses.

Net cash outflow from financing activities in fiscal 26 was$3,784 million (2025 –$1,494 million), a net increase in outflow of$2,290

million compared to fiscal 25. This change was driven by an increase in net outflow in relation to bond issuances and repayments

from$1,527 million inflow to$1,648 million outflow and a net decrease in outflow in respect of other borrowings from$629 million

outflow to$127 million outflow. Additionally, dividend payment decreased from $2,436 million to $2,010 million.

The operating, investing and financing activities described above resulted in a decrease in net cash and cash equivalents of$684

million, from $2,178 million at 30 June 2025 to $1,494 million at 30 June 2026 (2025 – increase of $1,069 million).

3. Analysis of borrowings

The group policy with regard to the expected maturity profile of borrowings of group finance companies is to limit the proportion of

such borrowings maturing within 12 months to 50% of gross borrowings less money market demand deposits, and the level of

commercial paper to 30% of gross borrowings less money market demand deposits. In addition, it is group policy to maintain

backstop facility terms from relationship banks to support commercial paper obligations.

The group’s gross borrowings and net borrowings are measured at amortised cost with the exception of borrowings designated in fair

value hedge relationships, interest rate hedging instruments and foreign currency swaps and forwards. For borrowings designated in

fair value hedge relationships, Diageo recognises a fair value adjustment for the risk being hedged in the balance sheet, whereas

interest rate hedging instruments and foreign currency swaps and forwards are measured at fair value.

The table below sets forth the group’s gross borrowings and net borrowings as at 30 June 2026 and 30 June 2025.

The table below sets forth the percentage of the group’s gross borrowings and cash and cash equivalents by currency as at 30 June

Based on average monthly net borrowings and net interest charge, the effective interest rate for the year ended 30 June 2026 was

3.9%. For this calculation, net interest charge excludes fair value adjustments to derivative financial instruments and borrowings and

average monthly net borrowings include the impact of interest rate swaps that are no longer in a hedge relationship but exclude the

market value adjustment for cross currency interest rate swaps.

In theyear ended 30 June 2026, the group issued bonds of €1,000 million ($1,171 million – net of discount and fee) consisting of

€500 million ($585 million – net of discount and fee)3.75% fixed rate notes due 2037,€500 million ($586 million – net of discount

and fee)3.25% fixed rate notes due 2032 and repaid bonds of$1,250 million and€1,350 million ($1,569 million). In theyear ended

30 June 2025, the group issued bonds of €2,200 million ($2,452 million – net of discount and fee) consisting of €700 million

($780 million – net of discount and fee) 3.125% fixed rate notes due 2031, €300 million ($346 million – including issuance premium)

3.125% fixed rate notes due 2031, €700 million ($776 million – net of discount and fee) 3.375% fixed rate notes due 2035,

€500 million ($550 million – net of discount and fee) 3.75% fixed rate notes due 2044, $750 million ($748 million – net of discount

and fee) 5.125% fixed rate notes due 2030, $750 million ($743 million – net of discount and fee) 5.625% fixed rate notes due 2035

and repaid bonds of $600 million and €1,600 million ($1,816 million).

The principal components of the$1,372 million decrease in net borrowings from 30 June 2025 to 30 June 2026 were mainly the

$3,211 million of free cash flow, partially offset by$1,846 million equity dividends.

For information on the maturity profile of net borrowings and a further description of net borrowings, please see 'Note 17 – Net

borrowings' in the consolidated financial statements.

For information on the use of financial instruments including for hedging purposes, please see 'Note 16 – Financial instruments and

risk management' in the consolidated financial statements.

The group’s management is committed to enhancing shareholder value in the long-term, both by investing in the business and brands

so as to deliver continued improvement in the return from those investments and by managing the capital structure. Diageo manages

its capital structure to achieve capital efficiency, provide flexibility to invest through the economic cycle and give efficient access to

debt markets at attractive cost levels. This is achieved by targeting an adjusted net borrowings (net borrowings aggregated with post-

employment benefit liabilities) to adjusted EBITDA leverage of 2.5–3.0 times, this range for Diageo being currently broadly

consistent with an A-band credit rating. Diageo would consider operating outside of this range in order to effect strategic initiatives

within its stated goals, which could have an impact on its rating. If Diageo’s leverage was to be negatively impacted by the financing

of an acquisition, it would seek over time to return to the range of 2.5–3.0 times. The group regularly assesses its debt and equity

capital levels against its stated policy for capital structure. As at 30 June 2026, the adjusted net borrowings of$20,869 million (2025

–$22,263 million) to adjusted EBITDA ratio was 3.1 (2025 –3.4) times. For this calculation, net borrowings are adjusted by post-

employment benefit liabilities before tax of$387 million (2025 –$409 million) whilst adjusted EBITDA of$6,650 million (2025 –

$6,645 million)comprises operating profit excluding exceptional operating items and depreciation, amortisation and impairment and

includes share of after-tax results of associates and joint ventures. See page 210 for the reconciliation and calculation of the adjusted

net borrowing to adjusted EBITDA ratio.

The group’s funding, liquidity and exposure to foreign currency, interest rate risks, financial credit risk and commodity price risk are

conducted within a framework of board approved policies and guidelines. The group purchases insurance for commercial or, where

required, for legal or contractual reasons. In addition, the group retains some insurable risk where external insurance is not considered

to be an economic means of mitigating this risk. Loan, trade and other receivables exposures are managed locally in the operating

units where they arise and credit limits are established as deemed appropriate for the customer.

b) The following bonds were issued or repaid:

4. Contractual obligations and other commitments

Long-term debt obligations comprise the principal amount of borrowings (excluding foreign currency swaps) with an original

maturity of greater than one year. Interest obligations comprise interest payable on these borrowings and are calculated based on the

fixed amounts payable and where the interest rate is variable, on an estimate of what the variable rates will be in the future. Purchase

obligations include various long-term purchase contracts entered into for the supply of raw materials, principally bulk whisk(e)y,

cereals, cans and glass bottles. Contracts are used to guarantee the supply of raw materials over the long term and to enable a more

accurate prediction of costs of raw materials in the future. Purchase obligations contain minimum purchase commitments Diageo had

on 30 June 2026; a change compared to the previous period when total contract values were disclosed. For certain provisions,

discounted numbers are disclosed.

Corporate tax payable of$207 million and deferred tax liabilities of $2,455 million are not included in the table above, as the ultimate

timing of settlement cannot be reasonably estimated.

Management believes that it has sufficient funding for its working capital requirements.

Neither Diageo plc nor any member of the Diageo group has any off-balance sheet financing arrangements that currently have or are

reasonably likely to have a material future effect on the group’s financial condition, changes in financial condition, results of

operations, liquidity, capital expenditure or capital resources.

For more information on commitments and contingencies, please see 'Note 19 – Contingent liabilities and legal proceedings' in the

5. Capital repayments

Authorisation was given by shareholders on 6 November 2025 to purchase a maximum of 222,565,850 ordinary shares at a minimum

price of 28101/108 pence and a maximum price of the higher of (a)105% of the average market value of the company's ordinary shares

for the five business days prior to the day the purchase is made and (b) the higher of the price of the last independent trade and the

highest current independent bid on the trading venue where the purchase is carried out. The programme expires at the conclusion of

the next Annual General Meeting or 15 months from the passing of this resolution, if earlier.

During the year ended 30 June 2024, the group purchased 28 million ordinary shares, representing approximately 1.1% of the issued

ordinary share capital at an average price of 2918 pence (3644 cents) per share, and an aggregate cost of$987 million, including

transaction costs under the share buyback programme. The shares purchased under the share buyback programmes were cancelled.

For further details about the shares purchased and the average price paid per share please refer to note 18 in the consolidated financial

Exhibits

(i) Pursuant to an Agreement of Resignation, Appointment and Acceptance dated 16 October 2007 by and among Diageo plc, Diageo Capital plc, Diageo Finance BV,

Diageo Investment Corporation, The Bank of New York and Citibank NA, The Bank of New York Mellon has become the successor trustee to Citibank NA under

Diageo’s indentures dated 3 August 1998, 8 December 2003 and 1 June 1999.

Signature

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the

requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto

duly authorised.

DIAGEO plc

(REGISTRANT)

/s/ Nik Jhangiani

Name: Nik Jhangiani

Title: Chief Financial Officer

18 August 2026

Glossary of terms and US equivalents

In this document the following words and expressions shall, unless the context otherwise requires, have the following meanings: