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Contents (continued)

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Introduction

Diageo is the world’s leading premium drinks business. Its geographic breadth and range of industry leading brands across categories and price points is unparalleled.

Diageo plc is incorporated as a public limited company in England and Wales. Diageo was incorporated as Arthur Guinness Son and Company Limited on 21 October 1886. The group was formed by the merger of Grand Metropolitan Public Limited Company (GrandMet) and Guinness PLCplc (the Guinness Group) in December 1997. Diageo plc’s principal executive office is located at Lakeside Drive, Park Royal, London NW10 7HQ and its telephone number is +44 (0) 20 8978 6000.

Diageo plc’s agent for service of process in the United States is General Counsel, Diageo North America, Inc., 801 Main Avenue (6078-06), Norwalk, CT 06851.

This is the Annual Report on Form 20-F of Diageo plc for the year ended 30 June 2014.2016. The information set out in thisForm 20-F does not constitute Diageo plc’s statutory accounts under the UK Companies Acts for the years ended 30 June 2014, 20132016, 2015 or 2012.2014. PricewaterhouseCoopers LLP has reported on the accounts for the year ended 30 June 2016 and the group’s former auditors, KPMG LLP has reported on the accounts for the year ended 2014 and KPMG Audit Plc has reported on those accounts for the the years ended 30 June 20132015 and 2012;2014; their respective audit reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for the years ended 30 June 2014, 20132016, 2015 or 2012.2014. The accounts for 20132015 and 20122014 have been delivered to the registrar of companies for England and Wales and those for 20142016 will be delivered in due course.

This document contains forward-looking statements that involve risk and uncertainty. 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 beyond Diageo’s control. For more details, please refer to the cautionary statement concerning forward-looking statements on pages 36-37.

46-47.

The content of the company’s website (www.diageo.com) or any other documents referred to herein should not be considered to form a part of or be incorporated into this report. This report 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. In this report, the term ‘company’ refers to Diageo plc and terms ‘group’ and ‘Diageo’ refer to the company and its consolidated subsidiaries, except as the context otherwise requires. A glossary of terms used in this report is included at the end of the report.

Diageo’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed and adopted for use in the European Union (EU) and IFRS as issued by the International Accounting Standards Board (IASB). References to IFRS hereafter should be construed as references to both IFRS as adopted by the EU and IFRS as issued by the IASB. Unless otherwise indicated, all financial information contained in this document has been prepared in accordance with IFRS.

Information presented

As at 1 July 2013 the group adopted a number of new standards and amendments and the application of IFRS11 - Joint arrangements and the amendment to IAS19 - Employee benefits resulted in a restatement of comparative figures. The impact on the group’s consolidated statement of comprehensive income and net cash flow for the years ended 30 June 2013 and 30 June 2012, and net assets as at 30 June 2013 and 30 June 2012 is provided in note 18 to the consolidated financial statements on pages 202 and 203.

Unless otherwise stated in this document, percentage movements are organic movements. TheseOrganic movements and organic operating margins are before exceptional items. Commentary, unless otherwise stated, refers to organic movements. Share, unless otherwise stated, refers to value share. See the ‘DefinitionsFor a definition of organic movement and reconciliations of non-GAAP measures to GAAP measures’ for an explanation of organic movement calculationsmeasures see on page 102.

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The brand ranking information presented in this report, when comparing volume information with competitors, has been sourced fromreflects data published by sources such as IWSR, Impact Databank, IWSR, IRI,Nielsen, Beverage Information Group orand Plato Logic. Market data information and competitive set classifications are taken from independent industry sources in the markets in which Diageo operates.

Disclosures not incorporated by reference

The following pages and sections of the Annual Report of Diageo plc for the year ended 30 June 2014,2016, are not incorporated by reference into this report on Form 20-F and are furnished to the SECUnited States Securities and Exchange Commission (SEC) for information only:

·disclosures

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Introduction (continued)

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Historical information

The following tables present selected consolidated financial data for Diageo for the five years ended 30 June 20142016 and as at the respective year ends. The data presented below for the five years ended 30 June 2016 and the respective year ends has been derived from Diageo’s consolidated financial statements, audited by Diageo’s independent auditorauditor. The group’s former auditors, KPMG LLP and has been restated to reflectits affiliates (KPMG) reported on the adjustments resulting fromfinancial statements for the adoption of new accounting standards and an amendment to accounting standard.four years ended 30 June 2015.

Income statement data8

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Historical information (continued)

Balance sheet data

Notes to the historical information

1. Accounting policiesThe consolidated financial statements for the five years ended 30 June 20142016 have been prepared in accordance with IFRS. The IFRS accounting policies applied by the group to prepare the financial information in this document are disclosed in the notes to the consolidated financial statements.

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Historical information (continued)

2. Impact of new accounting standards and amendments to accounting standards As reported in note 1 to the consolidated financial statements, the group has adopted IFRS 11 and the amendment to IAS 19.

IFRS 11 has changed the accounting for certain joint arrangements which were formerly consolidated on a line by line basis. As a result the group’s share of net income from certain joint arrangements is now included in the line ‘Share of after tax results of associates and joint ventures’. The amendment to IAS 19 changed the calculation of the amounts for post employment arrangements included in operating profit, finance charges and the statement of comprehensive income. All comparative information has been restated.

The adoption of the changes reduced sales for the year ended 30 June 2013 by £211 million (2012 – £202 million; 2011 – £189 million; 2010 – £165 million), reduced net profit for the year ended 30 June 2013 by £44 million (2012 – £51 million; 2011 – £57 million; 2010 – £35 million) and reduced basic earnings per share for the year ended 30 June 2013 by 1.3 pence (2012 – 1.6 pence; 2011 – 1.9 pence; 2010 – 1.1 pence). The impact on the balance sheet data is not material. See note 18 to the consolidated financial statements for more information.

See note 18 to the consolidated financial statements for an analysis of the impact on the income statement for the years ended 30 June 2013 and 30 June 2012.

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Historical information (continued)

3. Exceptional itemsExceptional items are charges or credits which,those that in management’s judgement need to be disclosed by virtue of their size or incidence in order for thea user to obtain a properfull understanding of the financial information.nature. Such items are included within the income statement caption to which they relate.relate, and are separately disclosed in the notes to the consolidated financial statements. An analysis of exceptional items is as follows:

4.3. Discontinued operationsInin the year ended 30 June 2014 discontinued operations representscomprised a charge after taxation of £83 million (2013 – £nil; 2012 – £11 million; 2011 – £nil; 2010 – £19(£91 million less tax of £8 million) (2012 - £16 million less deferred tax of £5 million) in respect of the settlement of thalidomide litigation in Australia and New Zealand and anticipated future payments to thalidomide organisations.

5.4. DividendsThe boardBoard expects that Diageo will pay an interim dividend in April and a final dividend in October of each year. Approximately 40% of the total dividend in respect of any financial year is expected to be paid as an interim dividend and approximately 60% as a final dividend. The payment of any future dividends, subject to shareholder approval, will depend upon Diageo’s earnings, financial condition and such other factors as the boardBoard deems relevant. Proposed dividends are not considered to be a liability until they are approved by the boardBoard for the interim dividend and by the shareholders at the annual general meeting for the final dividend.

The table below sets out the amounts of interim, final and total cash dividends paid by the company on each ordinary share. The dividends are translated into US dollars per ADS (each ADS representing four ordinary shares) at the actual rate on each of the respective dividend payment dates.

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Historical information (continued)

Note: Subject to shareholders’ approval the final dividend for the year ended 30 June 20142016 will be paid on 26 October 2014,2016, and payment to US ADR holders will be made on 712 October 2014.2016. In the table above, an exchange rate of £1 = $1.68$1.33 has been assumed for this dividend, but the exact amount of the payment to US ADR holders will be determined by the rate of exchange on 26 October 2014.

2016.

6.5. Net borrowingsNet borrowings are defined as gross borrowings (short term borrowings and long term borrowings plus finance lease liabilities plus interest rate hedging instruments, cross currency interest rate swaps and funding foreign currency forwards and swaps used to manage borrowings) less cash and cash equivalents.

7.6. Share capital There were 2,754 million ordinary share of 28¹⁰¹/⁄₁₀₈ pence each in issue with a nominal value of £797 million throughout the five year period ended 30 June 2014.

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2016.

Historical information (continued)

8.7. Exchange ratesA substantial portion of the group’s assets, liabilities, revenues and expenses are denominated in currencies other than pounds sterling. For a discussion of the impact of exchange rate fluctuations on the group’s financial position and results of operations, see note 15 to the consolidated financial statements.

The following table shows periodyear end and average US dollar/pound sterling noon buying exchange rates, for the periods indicated, expressed in US dollars per £1.

*  The average of the noon buying rates on the last business day of each month during the year ended 30 June.

The following table shows period end, high, low and average US dollar/pound sterling noon buying exchange rates by month, for the six month period to 31 July 2014,2016, expressed in US dollars per £1. The information in respect of the month of July is for the period up to and including 31 July 2014.

**  The average of the noon buying rates on each business day of the month.

The noon buying exchange rate as at 1 August 2014 was £1 = $1.68.

These rates have been provided for information only. They are not necessarily the rates that have been used in this document for currency translations or in the preparation of the consolidated financial statements. See note 1 to the consolidated financial statements for the actual rates used in the preparation of the consolidated financial statements.

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Strategic report

Business description

OUR BUSINESS

Diageo is a global leader in beverage alcohol with iconic brands across spirits and beer. We truly understand the consumer and have world-class marketing and innovation skills to build powerful brands that play a positive role in spirits, beersociety.

Diageo has built a strong platform for growth. We have grown through investment in our brands, and wine. by acquisition to broaden our geographical footprint and category depth and range.

Our 21 market model⁽ⁱ⁾ has established strong local business units, well positioned to win in increasingly competitive and fast paced operating environments.

We invest behindwant to make a positive contribution – to society, to communities, to individuals, and to the environment – while continuing to prosper as a business. We actively create the shared value that is part of our heritage, and essential to our future.

Strength through global reach and iconic brands

We build global brands alongside local stars. These brands have broad consumer appeal across geographies to meet demand now and in the future.

Doing business the right way

For us, standards are everything, from how we produce and market our brands, to drive growth, providing consumers with choicehow we innovate and quality across categories and price points.

Our business is built on foundations laid by the giants of our industry. Arthur Guinness, Alexander Walker and all those that followed in their footsteps, cared deeply about the people and businesses they fostered. They were driven to create products that would last for generations, the best conditions for their people, and the best financial performance. Today, we act like those entrepreneurs, passionate about our brands, our customers and consumers, our communities, and society as a whole. Our purpose is to help our consumers celebrate life, every day, everywhere, and to do so responsibly.

We give our people the freedom to do the best work of their careers. We take great pride in what we do,sell, and in how we do it. Above all we value each other’s commitment to delivering the best.governance and ethics as codified in our Code of Business Conduct.

Our role in society

10Everywhere we operate, we set out to have a positive impact on the world around us. Doing so is good for our business, for our communities and for our consumers.

At the core of our approach is a commitment to create a positive role for alcohol in society. This is fundamental to our purpose – celebrating life, every day, everywhere. We are also committed to tackling alcohol misuse through effective programmes that prevent and reduce alcohol misuse, and work with others to raise awareness and change people’s attitudes and behaviour. We market our products responsibly and provide the information consumers need to make informed decisions.

Our distilleries and breweries are at the very heart of the communities in which we work, which gives us an opportunity to create shared value. To do this, we work hard to increase access to opportunity through: enabling entrepreneurship, employability and skills; improving access to clean water, sanitation and hygiene; and helping to empower women.

By reducing carbon packaging, water and waste now, we are reducing our environmental impact to support future opportunities.

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Business description (continued)

Production

Diageo owns manufacturing production facilities across the globe, including maltings, distilleries, breweries, packaging plants, maturation warehouses, cooperages vineyards, wineries and distribution warehouses. Diageo’s brands are also produced at plants owned and operated by third parties and joint ventures at a number of locations internationally.

Diageo has been investing over the last few years in a number of restructuring programmes thatto increase the efficiency of its supply operations. The most significant programmes are referred toThis has resulted in note 4 toimprovements and changes in the consolidated financial statements.

group’s supply operations principally in North America, Scotland and Ireland.

The locations, principal activities, products, packaging production capacity and packaging production volume of Diageo’s principal production centres in the year ended 30 June 2014 are2016 were as follows: