20-F

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

or

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal period ended December 31, 2003

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from October 1, 2002 to December 31, 2003

Commission file number: 1-10409

InterContinental Hotels Group PLC
(Exact name of Registrant as specified in its charter)

England and Wales
(Jurisdiction of incorporation or organization)

67 Alma Road,
Windsor, Berkshire SL4 3HD
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
American Depositary Shares	New York Stock Exchange
Ordinary Shares of £1 each	New York Stock Exchange*

* Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary Shares of £1 each                     739,364,254

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:

Yes No

Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 Item 18

This page has been intentionally left blank.

2

TABLE OF CONTENTS

		Page
Introduction		5
Cautionary Note Regarding Forward-Looking Statements		6
PART I
Item 1.	Identity of Directors, Senior Management and Advisers	8
Item 2.	Offer Statistics and Expected Timetable	8
Item 3.	Key Information	8
	Selected Consolidated Financial Information	8
	Risk Factors	13
Item 4.	Information on the Company	17
	Summary	17
	Segmental Information	19
	Hotels	22
	Soft Drinks	36
	Trademarks	37
	Organizational Structure	38
	Property, Plants and Equipment	38
	Environment	39
Item 5.	Operating and Financial Review and Prospects	39
	Introduction	39
	Critical Accounting Policies Under UK GAAP and US GAAP	40
	Operating Results	42
	Liquidity and Capital Resources	55
Item 6.	Directors, Senior Management and Employees	58
	Directors and Senior Management	58
	Compensation	60
	Board Practices	61
	Employees	63
	Share Ownership	64
Item 7.	Major Shareholders and Related Party Transactions	64
	Major Shareholders	64
	Related Party Transactions	65
Item 8.	Financial Information	66
	Consolidated Statements and Other Financial Information	66
	Significant Changes	66
Item 9.	The Offer and Listing	66
	Plan of Distribution	68
	Selling Shareholders	68
	Dilution	68
	Expenses of the Issue	68
Item 10.	Additional Information	68
	Memorandum and Articles of Association	68
	Material Contracts	70
	Exchange Controls	72
	Taxation	72
	Documents on Display	75
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	75
Item 12.	Description of Securities Other Than Equity Securities	77

3

		Page
PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	78
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	78
Item 15.	Controls and Procedures	78
Item 16.	[Reserved]	78
Item 16A.	Audit Committee Financial Expert	78
Item 16B.	Code of Ethics	78
Item 16C.	Principal Accountant Fees and Services	78
Item 16D.	Exemptions from the Listing Standards for Audit Committees	79
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	79
PART III
Item 17.	Financial Statements	79
Item 18.	Financial Statements	79
Item 19.	Exhibits	79

4

INTRODUCTION

As used in this document, except as the context otherwise requires, the terms:

• “board” refers to the board of directors of InterContinental Hotels Group PLC or, where appropriate, the board of Six Continents PLC;

• “Britvic” refers to Britannia Soft Drinks Limited;

• “Company” refers to InterContinental Hotels Group PLC or Six Continents PLC or their respective board of directors as the context requires;

• “Group” refers to InterContinental Hotels Group PLC and its subsidiaries or Six Continents PLC and its subsidiaries as the context requires;

• “Hotels” or “IHG Hotels” refers to the hotels business of Six Continents or InterContinental Hotels Group PLC as the context requires;

• “IHG” refers to InterContinental Hotels Group PLC or, where appropriate, its board of directors;

• “MAB” or “Mitchells and Butlers” refers to Mitchells & Butlers plc;

• “ordinary share” or “share” refer to the ordinary shares of 28p each of Six Continents PLC or the ordinary shares of £1 each of the Company;

• “Separation transaction” or “Separation” refers to the transaction that separated Six Continents PLC’s hotels and soft drinks businesses from its retail business, completed on April 15, 2003. The Separation resulted in two separately listed holding companies: (i) Mitchells & Butlers plc, which is the holding company of the retail business and Standard Commercial Property Developments Limited; and (ii) InterContinental Hotels Group PLC, which is the holding company for the hotels and soft drinks businesses;

• “Six Continents” refers to Six Continents PLC;

• “Soft Drinks” and “Britvic Group” refer to the soft drinks business of InterContinental Hotels Group PLC, which the Company has through its controlling interest in Britvic; and

• “VAT” refers to UK value added tax levied by HM Customs & Excise on certain goods and services.

References in this document to the “Companies Act” mean the Companies Act 1985, as amended, of Great Britain; references to the “EU” mean the European Union. References in this document to “UK” refer to the United Kingdom of Great Britain and Northern Ireland.

The Company publishes its Consolidated Financial Statements expressed in UK pounds sterling. In this document, references to “US dollars”, “US$”, “$” or “¢” are to United States (“US”) currency, references to “euro” or “€” are to the euro, the currency of the European Economic and Monetary Union and references to “pounds sterling”, “sterling”, “£”, “pence” or “p” are to UK currency. Solely for convenience, this Annual Report on Form 20-F contains translations of certain pound sterling amounts into US dollars at specified rates. These translations should not be construed as representations that the pound sterling amounts actually represent such US dollar amounts or could be converted into US dollars at the rates indicated. Unless otherwise indicated, the translations of pounds sterling into US dollars have been made at the rate of £1.00 = $1.78, the noon buying rate in The City of New York for cable transfers in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on December 31, 2003. On March 26, 2004 the Noon Buying Rate was £1.00 = $1.81. For information regarding rates of exchange between pounds sterling and US dollars from fiscal 1999 to the present, see “Item 3. Key Information – Exchange Rates”.

The Company’s fiscal year ends on December 31. This reflects a change from September 30, implemented following Separation. The December 31 fiscal year end is in line with the calendar accounting year ends of the majority of comparable US and European hotel companies. IHG will continue to report on a December 31 fiscal year end basis, as the Group believes this will facilitate more meaningful comparisons with other key participants in the industry. References in this document to a particular year are to the fiscal year unless otherwise indicated. For example, references to the fiscal period ended December 31, 2003 are shown as 2003 and represent the

5

15 months from October 1, 2002 to December 31, 2003, unless otherwise specified, references to the fiscal year ended September 30, 2002 are shown as 2002 and references to other fiscal years are shown in a similar manner.

The Company’s Consolidated Financial Statements are prepared on the basis of accounting principles generally accepted in the United Kingdom (“UK GAAP”) which differ from those generally accepted in the United States (“US GAAP”). The significant differences applicable to the Group are explained in Note 33 of Notes to the Financial Statements.

During 2003, the Company changed its fiscal year end to December 31 and thus its financial statements for its last fiscal period are presented for the 15 months ended December 31, 2003 as permitted by the Companies Act 1985. In accordance with the transition period reporting requirements of the US Securities and Exchange Commission, an unaudited analysis of the financial statements and notes thereto for this 15 month period showing the three month period ended December 31, 2002 and the 12 month period ended December 31, 2003 is presented in Note 32 of Notes to the Financial Statements.

IHG believes that the reporting of profit and earnings measures before exceptional items provides additional meaningful information on underlying returns and trends to shareholders. The Group’s key performance indicators used in budgets, monthly reporting, forecasts, long- term planning and incentive plans for internal financial reporting focus primarily on profit and earnings measures before exceptional items. For this purpose, exceptional items comprises operating exceptional items, in addition to those non-operating exceptional items disclosed below operating profit as required by UK GAAP. Throughout this document earnings per share is also calculated excluding the effect of all exceptional items and the related tax effect and is referred to as adjusted earnings per share.

The Company furnishes The Bank of New York, as Depositary, with annual reports containing Consolidated Financial Statements and an independent auditor’s opinion thereon. These Financial Statements are prepared on the basis of UK GAAP. The annual reports contain reconciliations to US GAAP of net income and shareholders’ equity. The Company also furnishes the Depositary with semi-annual reports prepared in conformity with UK GAAP, which contain unaudited interim consolidated financial information. Upon receipt thereof, the Depositary mails all such reports to recorded holders of American Depositary Receipts (“ADRs”) evidencing American Depositary Shares (“ADSs”). The Company also furnishes to the Depositary all notices of shareholders’ meetings and other reports and communications that are made generally available to shareholders of the Company. The Depositary makes such notices, reports and communications available for inspection by recorded holders of ADRs and mails to all recorded holders of ADRs notices of shareholders’ meetings received by the Depositary. The Company is not required to report quarterly financial information. However, during 2003, the Company reported interim financial information at March 31, 2003 and September 30, 2003 in accordance with the Listing Rules of the UK Listing Authority. In addition, it provided a trading update at June 30, 2003 and intends to continue to provide quarterly financial information during fiscal 2004, although it has not made any decision with respect to reporting quarterly financial information after 2004.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 20-F contains certain forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934 with respect to the financial condition, results of operations and business of the Group and certain of the plans and objectives of the board of directors of InterContinental Hotels Group PLC with respect thereto. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use such words as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe” or other words of similar meanings. Such statements in the Form 20-F include, but are not limited to, statements under the following headings: (i) “Item 4. Information on the Company”; (ii) “Item 5. Operating and Financial Review and Prospects”; (iii) “Item 8. Financial Information”; and (iv) “Item 11. Quantitative and Qualitative Disclosures About Market Risk”. Specific risks faced by the Company are described under “Item 3. Key Information – Risk Factors” commencing on page 13. By their nature, forward-looking statements involve risk and uncertainty, and the factors described in the context of such forward-looking statements in this Form 20-F could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. These factors include, among others, the effect of economic recession, events that adversely impact domestic or international travel, including terrorist incidents and epidemics such as Severe Acute Respiratory Syndrome (“SARS”), increased use of intermediary reservation channels, the risks involved with the Group’s reliance on brands and protection of intellectual property rights and the reliance on consumer perception of its brands, the future balance between supply and demand for the Group’s hotels, political and economic developments and currency exchange rate fluctuations (including the effect of fluctuations in the US dollar/UK pound sterling exchange rate on the Group’s revenue and

6

on the price of Company ADSs and the US dollar value of dividends), the ability to recruit and retain key personnel, possible regulatory and legislative changes or action, the risks involved with developing and employing new technologies, the inability to sustain its organizational structure or meet cost saving strategies, the effects of being unable to make disposals of hotel assets, the risks of litigation, the Group’s ability to purchase adequate insurance, risks associated with funding the defined benefits under its pension schemes, the significant levels of indebtedness for the Group, the ability to access the capital markets for future capital needs, the availability of properties to be acquired or operated by franchisees or by the Group under management contracts, the risks of reliance on suppliers in the soft drinks business, possible contamination and the effect of adverse weather conditions on the demand in the soft drinks business.

7

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

SELECTED CONSOLIDATED FINANCIAL INFORMATION

Summary

The selected consolidated financial data set forth below for the 15 months ended December 31, 2003 and the years ended September 30, 2002, 2001, 2000 and 1999 are derived from Consolidated Financial Statements of the Group, which have been audited by its independent auditors, Ernst & Young LLP, restated where appropriate to accord with the Group’s current accounting policies and presentation. The selected consolidated financial data set forth below should be read in conjunction with, and are qualified in their entirety by reference to, the Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report.

The selected consolidated financial data for the 12 months ended December 31, 2003 and for the three months ended December 31, 2002 are derived from the unaudited analysis of the 15 month period ended December 31, 2003 in the Consolidated Financial Statements included elsewhere in this Annual Report. See Note 32 of Notes to the Financial Statements. Segmental information has been restated for the year ended September 30, 2002 to reflect the new organizational structure of the Group following the fundamental reorganization of the Hotels business (see “Organization Review” on page 29). It has not been practicable to restate segmental information for the year ended September 30, 2001.

The Group prepares its Consolidated Financial Statements in accordance with UK GAAP which differ in certain respects from US GAAP. The US GAAP selected financial data as of and for the years ended September 30, 2002, 2001, 2000 and 1999 have been restated for the effects of an under provision for deferred taxation with a consequential change to goodwill arising on acquisitions of £145 million, identified in fiscal 2003, following a review of historical tax basis and unrealized gains in respect of the Group’s properties. The overall effect on deferred tax was an underprovision of £53 million for the year ended September 30, 2002 (2001: £3 million, 2000: £30 million, 1999: £30 million). A description of the significant differences and reconciliations of net income and shareholders’ equity are set forth in Note 33 of Notes to the Financial Statements.

8

Consolidated Profit and Loss Account Data

	15 months ended December 31 (1)						12 months ended December 31			Three months ended December 31			Year ended September 30 (1)
	2003 (2)			2003			2003			2002			2002			2001			2000			1999
	$			£			£			£			£			£			£			£
	(In millions, except per share and ADS amounts)
Amounts in accordance with UK GAAP (3)
Turnover:
Continuing operations		4,788			2,690			2,161			529			2,134			2,473			2,092			1,675
Discontinued operations		1,412			793			451			342			1,481			1,560			3,066			3,011
		6,200			3,483			2,612			871			3,615			4,033			5,158			4,686
Total operating profit before operating exceptional items:
Continuing operations		616			346			286			60			329			486			428			365
Discontinued operations		244			137			85			52			289			306			477			459
		860			483			371			112			618			792			905			824
Operating exceptional items:
Continuing operations		(91	)		(51	)		(51	)		—			(77	)		(43	)		—			—
		(91	)		(51	)		(51	)		—			(77	)		(43	)		—			—
Total operating profit:
Continuing operations		525			295			235			60			252			443			428			365
Discontinued operations		244			137			85			52			289			306			477			459
		769			432			320			112			541			749			905			824
Non-operating exceptional items:
Continuing operations		(303	)		(170	)		(167	)		(3	)		(2	)		(2	)		2			(112	)
Discontinued operations		(76	)		(43	)		(43	)		—			55			2			1,294			—
		(379	)		(213	)		(210	)		(3	)		53			—			1,296			(112	)
Profit on ordinary activities before interest		390			219			110			109			594			749			2,201			712
Interest receivable		185			104			77			27			116			165			57			48
Interest payable and similar charges		(269	)		(151	)		(112	)		(39	)		(176	)		(224	)		(209	)		(188	)
Premium on early settlement of debt		(242	)		(136	)		(136	)		—			—			—			—			—
Profit before taxation		64			36			(61	)		97			534			690			2,049			572
Taxation		30			17			46			(29	)		(52	)		(223	)		(342	)		(190	)
Minority equity interests		(60	)		(34	)		(30	)		(4	)		(25	)		(24	)		(16	)		(8)
Earnings		34			19			(45	)		64			457			443			1,691			374
Per ordinary share:
Basic		4.6¢			2.6p			(6.1)p			8.7p			62.5p			60.6p			228.5p			55.3p
Diluted		4.6¢			2.6p			(6.1)p			8.7p			62.3p			60.2p			227.0p			54.9p
Adjusted: pre-FRS 15 (4)		n/a			n/a			n/a			n/a			n/a			n/a			n/a			71.7p
post-FRS 15 (4)		86.2¢			48.4p			39.3p			9.1p			51.4p			66.6p			68.8p			66.6p
Dividends (5)		37.7¢			21.2p			21.2p			—			41.7p			40.5p			39.3p			38.1p

See page 11 for footnotes.

9

Consolidated Profit and Loss Account Data

	15 months ended December 31 (1)						12 months ended December 31			Three months ended December 31			Year ended September 30 (1)
	2003 (2)			2003			2003			2002			2002			2001			2000			1999
	$			£			£			£			£			£			£			£
	(In millions, except per share and ADS amounts)
Amounts in accordance with US GAAP (6)
Income/(loss) before cumulative effect on prior years of change in accounting principle:
Continuing operations before effect of restatement		51			29			(1	)		30			110			191			142			(28	)
Effect of restatement for the period		—			—			—			—			56			—			—			—
Continuing operations as restated		51			29			(1	)		30			166			191			142			(28	)
Income from discontinued operations before effect of restatement		107			60			30			30			172			491			313			303
Effect of restatement for the period		—			—			—			—			(10	)		(31	)		142			—
Income from discontinued operations as restated		107			60			30			30			162			460			455			303
Surplus on disposal		—			—			—			—			171			25			1,242			—
Total discontinued operations as restated		107			60			30			30			333			485			1,697			303
Cumulative effect on prior years      of adoption of FAS 142		(1,267	)		(712	)		—			(712	)		—			—			—			—
Net (loss)/income		(1,109	)		(623	)		29			(652	)		499			676			1,839			275
Per ordinary share and American Depositary Share (7) Basic
Income/(loss) before cumulative effect on prior years of change in accounting principle:
Continuing operations before effect of restatement		7.0	¢		4.0	p		(0.1	)p		4.1	p		15.0	p		26.1	p		19.2	p		(4.3	)p
Effect of restatement for the period		—			—			—			—			7.7	p		—			—			—
Continuing operations as restated		7.0	¢		4.0	p		(0.1	)p		4.1	p		22.7	p		26.1	p		19.2	p		(4.3	)p
Discontinued operations before effect of restatement		14.6	¢		8.2	p		4.1	p		4.1	p		46.9	p		70.6	p		210.1	p		45.0	p
Effect of restatement for the period		—			—			—			—			(1.3	)p		(4.3	)p		19.2	p		—
Total discontinued operations as restated		14.6	¢		8.2	p		4.1	p		4.1	p		45.6	p		66.3	p		229.3	p		45.0	p
Cumulative effect on prior years      of adoption of FAS 142		(172.9)	¢		(97.1	)p		—			(97.1	)p		—			—			—			—
Net (loss)/income		(151.3)	¢		(84.9	)p		4.0	p		(88.9	)p		68.3	p		92.4	p		248.5	p		40.7	p
Diluted
Income/(loss) before cumulative effect on prior years of change in accounting principle:
Continuing operations before effect of restatement		7.0¢			4.0	p		(0.1	)p		4.1	p		14.9	p		26.0	p		19.1	p		(4.3	)p
Effect of restatement for the period		—			—			—			—			7.7	p		—			—			—
Continuing operations as restated		7.0¢			4.0	p		(0.1	)p		4.1	p		22.6	p		26.0	p		19.1	p		(4.3	)p
Discontinued operations before effect of restatement		14.6¢			8.2	p		4.1	p		4.1	p		46.7	p		70.2	p		208.7	p		44.6	p
Effect of restatement for the period		—			—			—			—			(1.3	)p		(4.3	)p		19.1	p		—
Total discontinued operations as restated		14.6¢			8.2	p		4.1	p		4.1	p		45.4	p		65.9	p		227.8	p		44.6	p
Cumulative effect on prior years      of adoption of FAS 142		(172.9)¢			(97.1	)p		—			(97.1	)p		—			—			—			—
Net (loss)/income		(151.3)¢			(84.9	)p		4.0	p		(88.9	)p		68.0	p		91.9	p		246.9	p		40.3	p

Footnotes on the following page.

10

Consolidated Balance Sheet Data

	December 31		September 30
	2003 (2)	2003	2002	2001	2000	1999
	$	£	£	£	£	£
	(In millions)
Amounts in accordance with UK GAAP (restated) (3)
Intangible assets	281	158	173	174	189	13
Tangible assets	7,033	3,951	7,641	7,558	6,683	5,794
Investments	306	172	218	234	217	505
Current assets	1,778	999	1,022	1,107	1,684	1,405
Total assets	9,398	5,280	9,054	9,073	8,773	7,717
Current liabilities (8)	1,931	1,085	2,273	2,009	1,604	1,803
Long-term debt (8)	1,759	988	631	1,019	1,213	2,101
Share capital	1,315	739	734	734	745	694
Shareholders’ funds	4,546	2,554	5,335	5,153	5,099	3,053
Amounts in accordance with US GAAP (restated) (6)
Intangible assets	2,825	1,587	2,702	2,902	2,960	2,594
Tangible assets	6,970	3,916	6,552	6,343	5,130	4,211
Investments	310	174	189	205	254	505
Current assets	1,741	978	983	1,209	1,796	1,438
Total assets	11,846	6,655	10,426	10,659	10,140	8,748
Current liabilities (8)	2,663	1,496	2,109	2,033	1,461	2,595
Long-term debt (8)	931	523	622	779	1,152	1,111
Redeemable preference share capital	—	—	—	—	—	18
Share capital	1,315	739	243	242	246	223
Shareholders’ equity	6,016	3,380	6,221	6,381	6,147	3,755

(1) Other than the results for fiscal 1999 which include 53 weeks’ trading (Hotels 12 months), all other fiscal years include 52 weeks’ trading (Hotels 12 months). Fiscal 2003 reflects 15 months’ trading (Soft Drinks 64 weeks).

(2) US dollar amounts have been translated at the Noon Buying Rate on December 31, 2003 of £1.00 = $1.78 solely for convenience.

(3) Fiscal 2002, 2001, 2000, and 1999 amounts have been restated on the adoption of UITF 38 and the reclassification of pension balances within provisions in fiscal 2002 and 2001 (see Note 1 of Notes to the Financial Statements).

(4) Adjusted earnings per share are disclosed in order to show performance undistorted by exceptional items or, in respect of Financial Reporting Standard 15, the impact of adopting this Standard.

(5) Dividend per share amounts have been restated to reflect the Separation.

(6) US GAAP amounts for fiscal 2002, 2001, 2000 and 1999 have been restated to reflect adjustments to goodwill and deferred taxation following a review of historical tax basis and unrealized gains in respect of the Group’s properties (see Note 33 of Notes to the Financial Statements).

(7) Each American Depositary Share represents one ordinary share.

(8) Long-term debt under UK GAAP includes amounts supported by long-term facilities, which are classified as current liabilities under US GAAP.

11

Dividends

Six Continents PLC paid an interim dividend of 6.6p per ordinary share on April 9, 2003 for the period prior to the Separation.

Following Separation, InterContinental Hotels Group PLC paid an interim dividend of 4.05p per share on October 14, 2003. The IHG board has proposed a final dividend of 9.45p per share, payable on June 7, 2004, if approved by shareholders at the Annual General Meeting to be held on June 1, 2004, bringing the total IHG dividend for the 12 months ended December 31, 2003 to 13.50p per share.

IHG has adopted a progressive dividend policy that it believes is appropriate to the strategies of the Group and that seeks to build dividends in real terms from the base of 13.50p and to build cover over time. However, the payment of any further dividends will depend upon the earnings and financial condition of InterContinental Hotels Group PLC.

The table below sets forth the amounts of interim, final and total dividends on each ordinary share in respect of each fiscal year indicated. Comparative dividends per share have been restated using the aggregate of the weighted average number of shares of InterContinental Hotels Group PLC and Six Continents PLC, adjusted to equivalent shares of InterContinental Hotels Group PLC. For the purposes of showing the dollar amounts per ADS, such amounts are before deduction of UK withholding tax (as described under “Item 10. Additional Information — Taxation”) and are translated into US dollars per ADS at the Noon Buying Rate on each of the respective UK payment dates. However, dividends paid in US dollars by the Depositary may be based on a market exchange rate other than the Noon Buying Rate.

	Pence per ordinary share			$ per ADS
	Interim	Final	Total	Interim	Final		Total
Year ended September 30
1999 (1)	11.56	26.55	38.11	0.188	0.427		0.615
2000 (1)	11.92	27.37	39.29	0.178	0.402		0.580
2001 (1)	12.27	28.20	40.47	0.177	0.406		0.583
2002 (1)	12.58	29.14	41.72	0.205	0.474		0.679
Period ended December 31, 2003
Six Continents (1)	7.65	—	7.65	0.119	—		0.119
IHG	4.05	9.45	13.50	0.068	0.171	(2)	0.239

(1) Restated to reflect an equivalent number of shares in InterContinental Hotels Group PLC.

(2) The 2003 final dividend has been translated at the Noon Buying Rate on March 26, 2004 of £1.00=$1.81.

Dividends will be paid in pounds sterling and exchange rate fluctuations will affect the US dollar amount received by holders of ADRs on conversion of such dividends. Moreover, fluctuations in the exchange rates between pounds sterling and the US dollar will affect the dollar equivalent of the pounds sterling price of the ordinary shares on the London Stock Exchange and, as a result, are likely to affect the market price of ADSs which are evidenced by ADRs in the United States.

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Exchange Rates

The following tables show, for the periods and dates indicated, certain information regarding the exchange rate for pounds sterling, based on the Noon Buying Rate for pounds sterling expressed in US dollars per £1.00. The exchange rate on March 26, 2004 was £1.00 = $1.81.

Month	Month’s Highest Exchange Rate	Month’s Lowest Exchange Rate
September 2003	1.66	1.57
October 2003	1.70	1.66
November 2003	1.72	1.67
December 2003	1.78	1.72
January 2004	1.85	1.79
February 2004	1.90	1.82
March 2004 (through March 26, 2004)	1.87	1.79

Year ended September 30	Period End	Average Rate (1)	High	Low
1999	1.65	1.63	1.72	1.55
2000	1.48	1.55	1.68	1.40
2001	1.47	1.44	1.50	1.37
2002	1.57	1.48	1.58	1.41
Period ended December 31
2003	1.78	1.63	1.78	1.54

(1) The average of the Noon Buying Rate on the last day of each full month during the period.

A significant portion of the Group’s assets, liabilities and revenues are denominated in currencies other than pounds sterling, principally the US dollar and euro. For a discussion of the impact of exchange rate movements, see “Item 11. Quantitative and Qualitative Disclosures About Market Risk”.

RISK FACTORS

This section describes some of the risks that could materially affect the Group’s businesses. The factors below should be considered in connection with any forward looking statements in this Form 20-F and the cautionary statements contained on page 6.

The risks below are not the only ones that the Group faces. Some risks are not yet known to IHG and some that IHG does not currently believe to be material could later turn out to be material. All of these risks could materially affect the Group’s businesses, turnover, operating profit, earnings, net assets and liquidity and capital resources.

The Group is exposed to the risks of economic recession

The Group is exposed to the risks of either a global economic recession or a recession in one or more of its key markets that could lower revenues and reduce income. A recession would adversely affect room rates and/or occupancy levels and other income generating activities resulting in deterioration of results of operations and potentially affecting the value of properties in affected economies.

The Group is exposed to the risk of events that adversely impact domestic or international travel

The Group’s room rates and occupancy levels could be adversely impacted by events that reduce domestic or international travel, such as actual or threatened acts of terrorism or war, epidemics, travel-related accidents, travel-related industrial action, increased transportation and fuel costs and natural disasters resulting in reduced worldwide travel or other local factors impacting individual hotels.

In fiscal 2003, the outbreak of SARS dramatically reduced travel to Toronto, Hong Kong, Singapore, China and to other destinations in Asia. If the apparently successful efforts to control the disease are not maintained and the disease reappears or spreads beyond previously affected areas to other markets, particularly in the United States or Europe, the resulting decline in travel could have an adverse impact on the Group’s business,

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financial condition and results of operations. Additionally, future epidemics such as the SARS epidemic could materially harm the Group’s future financial results.

Terrorist incidents such as the events of September 11, 2001, and the bombings in Bali in October 2002 and the war in Iraq in 2003 have significantly affected international travel and consequently global demand for hotel rooms. Further incidents or uncertainties in this area may have an adverse impact on the Group’s operations and financial results.

The Group is exposed to the risk of increased use of intermediaries’ reservation channels

The value of the Group’s brands is partly derived from the ability to drive reservations through its proprietary HolidexPlus reservation system. In recent years there have been very rapid changes in the ability to choose and book hotel rooms, partly driven by the internet, with the emergence of intermediaries which market hotel rooms in such a way that there is the risk of commoditization of hotel rooms. Some of the emerging business models and intermediaries could have a significant impact on the ability of the Group to continue to drive reservations, and hence have an impact on the value of the Group’s brands. Additionally, these channels, including off-line intermediaries and travel agents, are becoming more consolidated which may lead to higher costs of distribution for the Group, for example by intermediaries being able to demand higher commissions. Although the Group is actively taking steps to adapt to the changing environment (by developing competitive internet reservation systems for its own benefit), because of the very high pace of change in this area there is a risk that the Group will not adapt quickly enough.

The Group is reliant on the reputation of its brands and the protection of its intellectual property rights

An event that were to materially damage the reputation of one or more of the Group’s brands and/or failure to sustain the appeal of the Group’s brands to its customers could have an adverse impact on the value of that brand and subsequent revenues from that brand or business. Given the importance of brand recognition to the Group’s businesses, the Group has invested considerable effort in protecting its intellectual property, including by registration of trademarks and domain names. If the Group is unable to protect its intellectual property, any infringement or misappropriation could materially harm its future financial results and ability to develop its businesses.

The Group is exposed to the risks of the hotel industry supply and demand cycle

The Group’s future operating results could be adversely affected by industry over-capacity (by number of rooms) and weak demand. Reductions in room rates and occupancy levels would adversely impact the Group’s results of operations.

The Group may not be able to increase or maintain the number of its properties operated by its franchisees or pursuant to its management contracts

Competition may generally reduce the number of suitable management, franchise and investment opportunities offered to the Group, and increase the bargaining power of property owners seeking to engage a manager or become a franchisee. There can be no assurance that the Group will be able to identify, retain or add franchisees to the Group system or to secure management contracts. There are also risks that significant franchisees or groups of franchisees may have interests that conflict, or are not aligned, with those of the Group. Changes in legislation or regulatory changes may be implemented that have the effect of favoring franchisees relative to brand owners.

The Group is exposed to political and economic developments and currency exchange rate fluctuations

Global political and economic developments and currency exchange rate fluctuations may impact results of operations. In addition, local economic factors such as local interest rates, risks of hyper-inflation or deflation and political developments in some countries could adversely impact the Group’s results of operations. Political or economic factors could effectively prevent the Group from receiving profits from, or from selling its investments in, certain countries. In addition, fluctuations in currency exchange rates between the UK pound sterling, the currency in which the Group reports its financial statements, and the US dollar and other currencies in which the Group’s international operations or investments do business, could adversely affect the Group’s reported earnings and the value of its businesses. Fluctuations of this type have been experienced recently with the significant strengthening of the pound against the dollar.

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The Group is dependent upon recruiting and retaining key personnel and developing their skills

In order to develop, support and market its products, the Group must hire and retain highly skilled employees with particular expertise. The implementation of the Group’s strategic business plans could be undermined by failure to recruit or retain key personnel, the unexpected loss of key senior employees, failures in the Group’s succession planning and incentivization plans, or a failure to invest in the development of key skills. Additionally, unless skills are supported by a sufficient infrastructure to enable knowledge and skills to be passed on, the Group risks losing accumulated knowledge if key employees leave the Group.

The Group is exposed to changes in consumer perception and preference adversely affecting its brands

The Group’s range of brands and relevance to the sectors of the markets in which it operates may be adversely affected by changes in taste, commoditization (whereby the price and quality of hotel rooms become relatively more important than brand identifications) or other factors affecting consumers’ willingness to purchase goods or services, including any factor which adversely affects the reputation of those brands.

The Group is exposed to regulatory action

Both in the United Kingdom and internationally, the Group’s operations are subject to regulation, and further changes in regulation could adversely affect results of operations. Examples of such regulatory changes could include:

• Further employment legislation which could impact labor costs such as minimum wage and maximum working hours, overtime, working conditions, recruiting and terminating employees and work permits.

• Changes in tax legislation and practice.

• Future legislation or regulation or different enforcement of current legislation or regulations, particularly in the areas of competition law, consumer protection, nondiscrimination, franchise and environmental law could adversely affect the Group’s operations. The Group’s operations are exposed to governmental actions in almost 100 countries and territories. The hospitality industry is heavily regulated, including with respect to food and beverage sales, employee relations, diversity and access for the disabled, construction and environmental concerns. Compliance with these laws could reduce revenues and profits of properties owned or managed by the Group. The Group and its various properties are subject worldwide to numerous laws, including those relating to the preparation and sale of food and beverages, such as health and liquor license laws. Additionally, the success of the Group’s strategy in relation to the expansion of its existing properties may be dependent upon obtaining necessary building permits or zoning variances from local authorities. The Group is also subject to foreign and US federal, state and local laws and regulations relating to the environment and the handling of hazardous substances which may impose or create significant potential environmental liabilities, even in situations where the environmental problem or violation occurred on a property before the Group acquired it.

• Adverse regulatory developments could limit or prevent the Group receiving profits from, or limit its ability to sell, the properties affected by the regulatory change.

The Group is exposed to certain risks in relation to technology

A failure by the Group to take advantage of new technology and developments could put the Group at a competitive disadvantage in the field of e-commerce and business-to-business hospitality or supplier procurement or any other aspect of the Group businesses dependent upon its technology infrastructure. The Group may have to make substantial additional investments in new technologies to remain competitive. The technologies that the Group chooses may not prove to be commercially successful or the information technology strategy employed may not be sufficiently aligned or responsive to changes in business strategy. As a result, the Group could lose customers, fail to attract new customers or incur substantial costs in order to maintain its customer base or face other losses. Additionally, failure to develop an appropriate e- commerce strategy and select the right partners could erode the Group’s market share.

The Group is reliant upon its HolidexPlus reservation system which is an electronic booking and delivery channel directly linked to travel agents, hotels and internet networks. Inadequate disaster recovery arrangements leading to loss of key communications linkages, particularly in relation to HolidexPlus and other key parts of the IT infrastructure for a prolonged period, or permanently, may result in significant business interruption and subsequent impact on revenues.

15

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The Group may be unable to sustain the new organizational structure or meet cost-saving strategies on an ongoing basis

The Group has implemented a new organizational structure and certain cost-saving strategies relating to its non-hotel cost base. There is no assurance that the organizational structure will remain appropriate or that annualized cost-savings will be realized, which could adversely affect the financial performance of the Group.

The Group may be unable to make disposals of hotel assets

The Group has stated its intention to dispose of assets that do not have strategic value, either with or without brand representation. If a disposal is appropriate, there can be no assurance that the Group will be able to complete any such selected disposals on commercially reasonable terms, or at all.

The Group is exposed to the risk of litigation

The Group could be at risk of litigation from its guests, customers, joint venture partners, suppliers, employees, regulatory authorities, franchisees and/or the owners of hotels managed by it for breach of its contractual or other duties. Claims filed in the United States may include requests for punitive damages as well as compensatory damages.

Exposure to litigation may affect the Group’s reputation even though the monetary consequences are not significant.

The Group may face difficulties insuring its businesses

Historically, the Group has maintained insurance at levels determined by it to be appropriate in light of the cost of cover and the risk profiles of the businesses in which it operates. Following the effects of the September 11, 2001 terrorist attacks and subsequent events, many companies faced increased premiums for reduced cover as the insurance market hardened. A repeat of incidents of this nature may result in the Group experiencing significant increases in the cost of insuring its business at an acceptable level, or in the Group being unable to obtain cover for certain risks at a realistic price.

The Group is exposed to funding risks in relation to the defined benefits under its pension plans

The Group is required by law to maintain a minimum funding level in relation to its ongoing obligation to provide current and future pensions for the members of its pension plans who are entitled to defined benefits. In addition, if any plan of the Group is wound up, the Group could become statutorily liable to make an immediate payment to the trustees to bring the funding of these defined benefits to a level which is higher than this minimum. The contributions payable by the Group must be set with a view to making prudent provision for the benefits accruing under the plans of the Group.

Some of the issues which could adversely affect the funding of these defined benefits (and materially affect the Group’s funding obligations) are: (i) poor investment performance of pension fund investments; (ii) long life expectancy (which will make pensions payable for longer and therefore more expensive to provide); (iii) adverse annuity rates (which tend in particular to depend on prevailing interest rates and life expectancy) as these will make it more expensive to secure pensions with an insurance company; and (iv) other events occurring which make past service benefits more expensive than predicted in the actuarial assumptions by reference to which the Group’s past contributions were assessed.

The Group’s indebtedness could adversely affect its financial position

The Group has put in place borrowing facilities to meet its expected capital resource requirements. The Group’s ability to borrow under these and any other additional facilities which it might seek to establish will require that the Group be able to comply with certain financial and other covenants contained in the relevant facility documentation. If the Group’s revenues, cash flow or credit ratings do not meet expectations, the Group may lose its ability to borrow money or to do so on terms it considers to be favorable. Conditions in the capital markets will also affect the Group’s ability to borrow funds or to raise equity financing, as well as the terms it may obtain. All of these factors could also make it difficult or impossible for the Group otherwise to raise capital needed to pursue its strategy.

The Group cannot assure investors that it will be able to arrange any additional financing or refinancing needed to fund its capital resource requirements on acceptable terms, or at all.

If the Group’s levels of debt increase substantially, its business may not be able to generate sufficient cash flow to service its debt and/or continue its investment program.

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The Group may experience a lack of selected acquisition opportunities

While the Group’s strategy is to extend the hotel network through activities that do not involve significant capital, in some cases the Group may consider it appropriate to acquire new land or locations for the development of new hotels. If the availability of suitable sites becomes limited, this could adversely affect its results of operations.

Additional Risks Relating to Soft Drinks

The Britvic Group is reliant upon certain suppliers

The Britvic Group is reliant upon fruit juice concentrates, sugar and other fruit juice raw materials as necessary ingredients for many of its products, as well as packaging and containers such as cans and Polyethylene Trephthalate (PET) bottles. In the event the Britvic Group is unable to obtain an adequate supply of these raw materials or packaging or fails to negotiate the purchase of these materials on a reasonable commercial basis, this could have a significant adverse impact on the Britvic Group’s financial operations.

The Britvic Group is exposed to risks related to possible product contamination

The Britvic Group, like all beverage producers, has been and will continue to be vulnerable to accidental or malicious contamination of its products or base raw materials. Any such contamination could result in recall of the Britvic Group’s products, the Britvic Group being unable to sell its products, damage to brand image and/or civil or criminal liability, which could have a material adverse effect on the Britvic Group’s operations and financial performance.

The Britvic Group is exposed to significant competition

The Britvic Group operates in a highly competitive market sector in which large competitors are active.

A change in the level of marketing undertaken by competitors or in their pricing policies, the growth or strengthening of existing retailers of beverage products, the introduction of new competing brands or products or increased purchasing power pressure from customers could have a material adverse effect on the Britvic Group’s operations and financial performance. Conversely, competition law may regulate the Company’s ability to participate in industry consolidation at a strategic level.

Adverse weather conditions could reduce demand for the Britvic Group’s products

Demand for the Britvic Group’s products may be affected by weather conditions, especially in the summer months, when unseasonably cool or wet weather can affect sales volumes and therefore the results of the Britvic Group’s operations for the year.

ITEM 4.     INFORMATION ON THE COMPANY

SUMMARY

Group Overview

Group companies operate in two core business areas: hotels and resorts, with worldwide interests through ownership, leasing, management and franchising, and soft drink manufacture in the United Kingdom.

On March 22, 2004, InterContinental Hotels Group PLC had a market capitalization of £3.6 billion, and was included in the list of FTSE 100 companies. Following the Separation in April 2003, InterContinental Hotels Group PLC became the holding company for the Group of which Six Continents PLC is the principal subsidiary company. Six Continents PLC was formed in 1967.

The Company’s corporate headquarters are in the United Kingdom, and the registered address is:

InterContinental Hotels Group PLC
67 Alma Road
Windsor
Berkshire SL4 3HD
Tel: +44 (0) 1753 410 100
Internet address: www.ihgplc.com

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InterContinental Hotels Group PLC was incorporated in Great Britain on October 2, 2002 and registered in, and operates under, the laws of England and Wales. Operations undertaken in countries other than England and Wales are under the laws of those countries in which they reside.

Group History and Recent Developments

The Group, formerly known as Bass, and more recently, Six Continents, was historically a conglomerate operating, among other things, as a brewer, soft drinks manufacturer, hotelier, leisure operator, and restaurant, pub and bar owner. In the last several years, the Group underwent a major transformation in its operations and organization, as a result of the Separation and a number of significant disposals during this period, narrowing the scope of its business.

On August 22, 2000, Six Continents completed the sale of its brewing business to Interbrew S.A. (“Interbrew”) of Belgium for £2.3 billion.

In February 2001, the Group sold an estate of 988 smaller unbranded pub sites with limited growth potential to Nomura International PLC (“Nomura”) for £625 million.

On March 3, 2003 Capital Management and Investment PLC (“CMI”) announced an unsolicited unilateral securities exchange offer for Six Continents PLC, which was firmly rejected by the board. At an Extraordinary General Meeting held on March 12, 2003 shareholders voted in favor of proceeding with the proposed Separation of Six Continents, immediately following which CMI’s bid lapsed.

On April 15, 2003, following shareholder and regulatory approval, Six Continents PLC separated into two new listed groups, InterContinental Hotels Group PLC comprising the Hotels and Soft Drinks businesses and Mitchells & Butlers plc comprising the Retail and Standard Commercial Property Developments businesses (see page F-8 for the mechanics of the Separation).

Acquisitions, Dispositions and Capital Expenditure

Since the Separation, the Group has entered into the following significant acquisition and disposal transactions:

On July 1, 2003, the Group completed the sale of a 16 property Staybridge Suites portfolio to Hospitality Properties Trust (“HPT”) for $185 million. The Group entered into a contract with HPT for the ongoing management of these hotels. In September 2003, HPT converted 14 other suite hotels to the Staybridge Suites brand under IHG management.

On September 9, 2003, the Group completed the sale of the London May Fair Hotel Limited (the holding company for the InterContinental London May Fair) to Radisson Edwardian for £115 million.

In October 2003, the Group announced the acquisition of the Candlewood Suites brand in the United States from Candlewood Hotel Corporation for a consideration of $15 million and an agreement to enter into a management contract with HPT to manage 76 Candlewood Suites properties. The transaction concluded on December 31, 2003.

On February 24, 2004, the Group sold its share of Midland Hotel and Conference Centre Limited (the holding company for the Crowne Plaza The Midland in Manchester) to Quintessential Hotels Limited for £20 million.

On March 15, 2004, the Group announced that it had entered into an agreement to sell the InterContinental Central Park South in New York City to Anbau Enterprises Inc. for $63.5 million, with an expected completion date in April 2004.

The Group’s continuing operations have invested cash capital expenditure, including for major refurbishments, of £288 million, £396 million and £621 million in fiscal 2003, 2002 and 2001, respectively. Capital expenditure was significantly higher in 2001 due to acquisitions completed in that year.

Material acquisitions and dispositions relating to IHG Hotels are described below under — “Hotels — History”.

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Hotels

Hotels owns, manages, leases or franchises a number of hotel brands including InterContinental, Crowne Plaza, Holiday Inn, Staybridge Suites, Candlewood Suites and Holiday Inn Express (or Express by Holiday Inn outside of the Americas) (“Express”), which at December 31, 2003 comprised 3,520 hotels with 536,318 guest rooms in nearly 100 countries and territories.

Soft Drinks

IHG has a controlling interest in and manages Britvic, the second largest soft drinks manufacturer (measured by volume) in the United Kingdom. Britvic owns an extensive portfolio of soft drinks brands that include Tango and Robinsons. It also produces Pepsi Beverages International (“PBI”) products under license. The Group, and other shareholders in the Britvic business (Allied Domecq, Whitbread and PepsiCo) have agreed, subject, inter alia, to market conditions, to consider an initial public offering of Britvic between January 1, 2005 and December 31, 2008.

SEGMENTAL INFORMATION

Geographic Segmentation

The following table shows turnover and operating profit in pounds sterling by geographical area and the percentage of each geographical area, for the following periods: 15 months ended December 31, 2003 including unaudited information for the three months ended December 31, 2002 and 12 months ended December 31, 2003, the years ended September 30, 2002 and 2001.

Amounts in accordance with UK GAAP

15 months ended December 31,	12 months ended December 31,	Three months ended December 31,	Year ended September 30					15 months ended December 31,	12 months ended December 31,	Three months ended December 31,	Year ended September 30
2003	2003	2002		2002	2001			2003	2003	2002		2002	2001
%							(£ million)
						Turnover by Geographical Area (1) (3)
61.2	58.7	68.7		68.9	60.7	United Kingdom		2,131	1,533	598		2,491	2,446
14.6	15.7	10.9		11.4	10.9	Rest of Europe, the Middle East and Africa		506	411	95		411	441
16.4	17.4	13.4		13.2	22.5	United States		571	454	117		476	908
3.6	3.8	3.1		3.0	3.4	Rest of Americas		127	100	27		108	137
4.2	4.4	3.9		3.5	2.5	Asia Pacific		148	114	34		129	101
100.0	100.0	100.0		100.0	100.0			3,483	2,612	871		3,615	4,033
						Operating Profit before Exceptional Items by Geographical Area (1) (2)
55.3	53.1	62.5		64.2	54.4	United Kingdom		267	197	70		397	431
7.9	8.1	7.1		9.7	14.6	Rest of Europe, the Middle East and Africa		38	30	8		60	116
25.7	28.8	15.2		18.5	24.0	United States		124	107	17		114	190
6.8	7.0	6.3		4.2	5.1	Rest of Americas		33	26	7		26	40
4.3	3.0	8.9		3.4	1.9	Asia Pacific		21	11	10		21	15
100.0	100.0	100.0		100.0	100.0			483	371	112		618	792

(1) The results of overseas operations have been translated into sterling at weighted average rates of exchange for the period. In the case of the US dollar, the translation rates are fiscal 2003: £1=$1.62 (2002: £1=$1.48; 2001: £1=$1.44).

(2) Operating profit before exceptional items does not include operating and non-operating exceptional items for all periods presented. Operating exceptional items by region are United Kingdom (2003: 15 months £17 million, 12 months £17 million, 3 months £nil million; 2002: £24 million; 2001: £19 million), Rest of Europe, the Middle East and Africa (2003: 15 months £24 million, 12 months £24 million, 3 months £nil million; 2002: £nil million; 2001: £nil million) the United States (2003: 15 months £9 million, 12 months £9 million, 3 months £nil million; 2002: £39 million; 2001: £24 million) and Asia Pacific (2003: 15 months £1 million, 12 months £1 million, 3 months £nil million; 2002: £14 million; 2001: £nil million).

(3) Amounts are reported by origin. See Note 2 of Notes to the Financial Statements for details by destination, for which the amounts are not significantly different.

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Activity Segmentation

The following table shows turnover and operating profit in pounds sterling by activity and the percentage contribution of each activity for the following periods: 15 months ended December 31, 2003 (including unaudited information for the three months ended December 31, 2002 and 12 months ended December 31, 2003) and the year ended September 30, 2002. Segmental information has been restated for the year ended September 30, 2002 to reflect the new structure of the organization following the fundamental reorganization of the Hotels business (see “Organization Review” on page 29).

Amounts in accordance with UK GAAP

15 months ended December 31,		12 months ended December 31,		Three months ended December 31,		Year ended September 30,				15 months ended December 31,	12 months ended December 31,		Three months ended December 31,		Year ended September 30,
2003		2003		2002		2002				2003	2003		2002		2002
%								Turnover by Activity (1)	(£ million)
24.6		24.3		25.7		26.7		Americas		661	525		136		570
37.5		37.3		38.4		37.2		EMEA		1,010	807		203		794
5.5		5.3		6.4		6.0		Asia Pacific		148	114		34		128
1.9		1.9		1.9		1.9		Central (3)		51	41		10		40
69.5		68.8		72.4		71.8		Hotels		1,870	1,487		383		1,532
30.5		31.2		27.6		28.2		Soft Drinks		820	674		146		602
100.0		100.0		100.0		100.0		Continuing operations		2,690	2,161		529		2,134
								Discontinued operations		793	451		342		1,481
										3,483	2,612		871		3,615
								Operating Profit before Exceptional Items by Activity (1) (2)
56.3		56.3		56.6		52.6		Americas		195	161		34		173
32.9		32.2		36.7		38.0		EMEA		114	92		22		125
6.4		4.2		16.7		7.0		Asia Pacific		22	12		10		23
(23.1	)	(21.7	)	(30.0	)	(16.7	)	Central (3)		(80)	(62	)	(18	)	(55	)
72.5		71.0		80.0		80.9		Hotels		251	203		48		266
27.5		29.0		20.0		19.1		Soft Drinks		95	83		12		63
100.0		100.0		100.0		100.0		Continuing operations		346	286		60		329
								Discontinued operations		137	85		52		289
										483	371		112		618

(1) The results of overseas operations have been translated into sterling at weighted average rates of exchange for the period. In the case of the US dollar, the translation rates are fiscal 2003: £1=$1.62 (2002: £1=$1.48).

(2) Operating profit before exceptional items does not include operating and non-operating exceptional items for all periods presented. Operating exceptional items by business segment are the Americas (2003: 15 months £9 million, 12 months £9 million, 3 months £nil million; 2002: £39 million), EMEA (2003: 15 months £41 million, 12 months £41 million, 3 months £nil million; 2002: £24 million) and Asia Pacific (2003: 15 months £1 million, 12 months £1 million, 3 months £nil million; 2002: £14 million).

(3) Central includes global functions that were centralized following the reorganization review. Costs are reduced by Holidex fee income.

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The following table shows turnover and operating profit in pounds sterling by activity and the percentage contribution of each activity for the year ended September 30, 2002 and the year ended September 30, 2001. As it has not been practicable to restate segmental information for the year ended September 30, 2001 to conform with the new presentation resulting from the new structure following the fundamental reorganization of the Hotels business, the 2002 financial information is presented on the same basis.

Amounts in accordance with UK GAAP

Year ended September 30			Year ended September 30
2002	2001			2002	2001
%		Turnover by Activity (1)		(£ million)
71.8	76.7	Hotels		1,532	1,896
28.2	23.1	Soft Drinks		602	571
—	0.2	Other (3)		—	6
100.0	100.0	Continuing operations		2,134	2,473
		Discontinued operations		1,483	1,567
		Less: Inter-divisional sales		2	7
				3,615	4,033
		Operating Profit before Exceptional Items by Activity (1) (2)
79.6	87.9	Hotels		262	427
19.2	11.7	Soft Drinks		63	57
1.2	0.4	Other (3)		4	2
100.0	100.0	Continuing operations		329	486
		Discontinued operations		289	306
				618	792

(1) The results of overseas operations have been translated into sterling at weighted average rates of exchange for the year. In the case of the US dollar, the translation rates are fiscal 2002: £1=$1.48 (2001: £1=$1.44).

(2) Operating profit before exceptional items does not include operating and non-operating exceptional items for all periods presented. Operating exceptional items by business segment are the Americas (2002: £39 million, 2001: £11 million), EMEA (2002: £24 million, 2001: £18 million), Asia Pacific (2002: £14 million, 2001: £nil million) and Other (2002: £nil million, 2001: £14 million).

(3) Other includes central service costs, dividends received from FelCor Lodging Trust Inc., goodwill amortization, significant contract termination receipts, rebates and other non-trading items.

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HOTELS

Overview

InterContinental Hotels Group owns a portfolio of well-recognized and respected brands, including InterContinental, Crowne Plaza, Staybridge Suites, Holiday Inn and Express, with more than 3,500 owned, leased, managed and franchised hotels and approximately 535,000 guest rooms across nearly 100 countries and territories as at December 31, 2003. IHG believes its strong hotel brands, international scope and portfolio of high quality assets, built through organic growth and acquisition, place it in a strong competitive position.

History

The Group made its first significant international hotel acquisition when it acquired Holiday Inn International in 1988 and the remaining North American Business of Holiday Inn in 1990. This gave the Group the Holiday Inn and the Crowne Plaza by Holiday Inn brands. Subsequently, in 1990, the Group launched the limited service brand, Express.

In line with its strategy to optimize capital deployment, the Group disposed of its owned US midscale hotel property assets in 1997, but retained branding distribution on the majority of these properties through franchise agreements.

During 1997, the Group entered the US upscale extended stay segment with the introduction and development of Staybridge Suites by Holiday Inn. To expand further its international reach and its strong brand portfolio, the Group acquired the InterContinental hotels business in March 1998. This acquisition added 117 InterContinental and 20 Forum hotels to the portfolio. Following this acquisition, the Group had a portfolio of brands spanning the industry from upper upscale to midscale limited service across all regions.

In January 2000, the Group announced that it had purchased the business of the Australia-based hotel company, Southern Pacific Hotels Corporation (“SPHC”), which operated 59 hotels under the “Parkroyal” and “Centra” brands across Australia, New Zealand and the South Pacific as well as hotels in select South East Asian countries, for Australian $313 million. These hotels strengthened considerably the Group’s existing organically-built presence in the Asia Pacific region. A large proportion of these hotels were subsequently converted to the InterContinental, Crowne Plaza and Holiday Inn brands. Shortly afterwards, in April 2000, the Group acquired the outstanding 90.1% of the issued share capital which it did not already own of Bristol Hotels & Resorts Inc., a US based hotel management company comprising 112 hotels operating mainly under leases, for a total consideration of $157 million. These leases were then sold or converted to management contracts by July 2001.

In April 2001, the Group acquired the entire business of Posthouse for a consideration of £810 million. Posthouse consisted of 79 midscale hotels, 78 of which were in the United Kingdom and one in the Republic of Ireland, with 12,333 rooms, of which 77 hotels were owned or on long leases and two were management contracts. The Group then converted the majority of these hotels to the Holiday Inn brand, thereby enhancing the position of Holiday Inn in the United Kingdom, making it the number one midscale brand by number of rooms. This acquisition, combined with strong midscale segment positions in Germany and Italy, gave the Group a strong European base of operations.

In August 2001, the Group completed the acquisition, for a total consideration of £241 million, of the Regent Hotel in Hong Kong, which it subsequently rebranded “InterContinental Hong Kong”, strengthening its upper upscale hotel market position in the Asia Pacific region and adding a key location for its international guests.

In April 2003, the Group completed its Separation from the Retail business of Six Continents, creating a focused hotel company. The Separation also resulted in the creation of Mitchells & Butlers plc, a stand-alone operator of managed pubs, bars and restaurants. On Separation, the Group retained a controlling interest in Britannia Soft Drinks Limited, the holding company for the Britvic Group.

Developments

InterContinental Hotels. During 2003, 10 new InterContinental Hotels were added to the portfolio including Bangkok, Perth, and Warsaw. After dispositions there was no net change in the total number of InterContinental Hotels.

The Group expects to open an InterContinental in Buckhead (Atlanta) in late 2004 and Boston in 2006, along with other properties in Beijing, Cyprus and Seattle.

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The major refurbishment program at some of the leading InterContinental properties is now largely complete, with the reopening of the InterContinental Le Grand, Paris in April 2003. Since reopening, the hotel has encountered difficult market conditions due to the Iraq war, reduced US travel and a poorly attended airshow, all contributing to a slower than expected performance. As the global economy recovers, IHG expects the refurbished hotels to demonstrate the benefit of the capital invested.

Staybridge Suites. As of December 31, 2003, 71 hotels were open, including 23 opened in 2003, in addition to a further 22 franchise agreements and 15 management contracts which had been signed during the year. In July 2003, IHG entered into an arrangement with Hospitality Properties Trust (“HPT”), whereby 16 owned Staybridge suites were sold to HPT in conjunction with a management contract between HPT and IHG to keep the hotels in the IHG system. In September 2003, IHG announced the conversion by HPT of 14 Summerfield suites to Staybridge Suites under IHG management.

Holiday Inn. By December 31, 2003, 70 of the 79 original Posthouse hotels acquired in 2001 had been re-branded as IHG hotels, and 9 had been disposed of.

Candlewood Suites. On December 31, 2003, IHG acquired the Candlewood Suites brand and entered into a management contract with HPT to manage 76 Candlewood Suites properties. This adds 109 hotels and 12,569 rooms to the IHG portfolio in the United States in the midscale extended stay segment where IHG was previously unrepresented.

Crowne Plaza. On February 24, 2004, IHG sold its share of Midland Hotel and Conference Centre Limited (the holding company for the Crowne Plaza The Midland in Manchester) to Quintessential Hotels Limited.

Strategy

IHG Hotels’ strategy is to use the strength of its brands, the breadth of its hotel distribution, the diversity of its business models and the benefits of its scale to drive growth and returns for shareholders. Key to the implementation of this strategy are the following priorities:

• the continued development of high quality, strongly differentiated and preferred brands;

• extending the network of hotels around the world that are attractive to international guests in the upscale and upper upscale brands and in the domestic markets for the midscale brands;

• using the Group’s scale to drive revenues and operating margins;

• enhancing returns from the asset base by redeploying capital over time; and

• investing and training staff to ensure that brands and service levels are maintained and enhanced.

Segmental Results

The following table shows turnover and operating profit in US dollars of the IHG Hotels business by activity and the percentage contribution of each activity for the following periods: 15 months ended December 31, 2003 (including unaudited information for the three months ended December 31, 2002 and 12 months ended December 31, 2003) and the year ended September 30, 2002. Segmental information has been restated for the year ended September 30, 2002 to reflect the new structure of the organization following the fundamental reorganization of the Hotels business.

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Amounts in accordance with UK GAAP

15 months ended December 31, 2003		12 months ended December 31, 2003		Three months ended December 31, 2002		Year ended September 30, 2002			15 months ended December 31, 2003		12 months ended December 31, 2003		Three months ended December 31, 2002		Year ended September 30, 2002
%									($ million)
								Turnover by Activity (1)
								Americas
20.2		19.9		21.2		20.5		Owned and leased	608		481		127		463
1.9		1.9		2.0		2.5		Managed	58		46		12		57
13.3		13.5		12.5		14.2		Franchised	402		327		75		322
35.4		35.3		35.7		37.2			1,068		854		214		842
								EMEA
49.9		50.2		48.6		48.1		Owned and leased	1,503		1,213		290		1,088
2.6		2.6		2.5		2.3		Managed	77		62		15		53
1.5		1.5		1.5		1.6		Franchised	46		37		9		36
54.0		54.3		52.6		52.0			1,626		1,312		314		1,177
								Asia Pacific
6.6		6.4		7.4		6.7		Owned and leased	198		154		44		152
1.1		1.1		1.3		1.3		Managed	34		26		8		29
0.2		0.2		0.3		0.2		Franchised	7		5		2		5
7.9		7.7		9.0		8.2			239		185		54		186
2.7		2.7		2.7		2.6		Central (3)	82		66		16		57
100.0		100.0		100.0		100.0			3,015		2,417		598		2,262
								Operating Profit before           Exceptional Items           by Activity (2)
								Americas
9.4		9.7		8.0		9.1		Owned and leased	38		32		6		36
2.2		2.1		2.7		3.8		Managed	9		7		2		15
84.4		84.5		84.0		66.5		Franchised	342		279		63		262
(18.3	)	(17.0	)	(24.0	)	(14.2	)	Regional overheads	(74	)	(56	)	(18	)	(56	)
77.7		79.3		70.7		65.2			315		262		53		257
								EMEA
38.5		37.9		41.3		46.7		Owned and leased	156		125		31		184
9.6		9.4		10.7		7.4		Managed	39		31		8		29
8.9		8.8		9.3		4.3		Franchised	36		29		7		17
(11.9	)	(10.9	)	(16.0	)	(10.9	)	Regional overheads	(48	)	(36	)	(12	)	(43	)
45.1		45.2		45.3		47.5			183		149		34		187
								Asia Pacific
6.7		5.5		12.0		6.1		Owned and leased	27		18		9		24
6.2		4.6		13.3		4.8		Managed	25		15		10		19
1.2		1.2		1.3		1.3		Franchised	5		4		1		5
(5.4	)	(5.5	)	(5.3	)	(4.1	)	Regional overheads	(22	)	(18	)	(4	)	(16	)
8.7		5.8		21.3		8.1			35		19		16		32
(31.5	)	(30.3	)	(37.3	)	(20.8	)	Central (3)	(128	)	(100	)	(28	)	(82	)
100.0		100.0		100.0		100.0			405		330		75		394

(1) Amounts are reported by origin.

(2) Operating profit before exceptional items excludes profits/(losses) on sale of fixed assets and operations and other exceptional items.

(3) Central includes global functions that were centralized following the reorganization review. Costs are reduced by Holidex fee income.

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The following table shows turnover and operating profit in US dollars of the IHG Hotels business by activity and the percentage contribution of each activity for the year ended September 30, 2002 and the year ended September 30, 2001. As it has not been practicable to restate segmental information for the year ended September 30, 2001 to conform with the new presentation resulting from the new structure following the fundamental reorganization of the Hotels business, the 2002 financial information is presented on the same basis.

Amounts in accordance with UK GAAP

Year ended September 30					Year ended September 30
2002		2001				2002		2001
%					($ million)
				Turnover by Activity (1)
				Americas
20.6		19.6		Owned and leased		466		535
12.7		11.0		Managed and upscale franchised		288		301
4.8		24.5		Midscale franchised		108		666
38.1		55.1				862		1,502
				EMEA
48.1		35.9		Owned and leased		1,088		979
5.3		3.7		Managed and franchised		121		100
53.4		39.6				1,209		1,079
8.5		5.3		Asia Pacific		191		145
100.0		100.0				2,262		2,726
				Operating Profit before Exceptional Items by Activity (2)
				Americas
5.9		12.7		Owned and leased		23		78
51.7		7.0		Managed and upscale franchised		200		43
10.6		36.6		Midscale franchised		41		224
68.2		56.3				264		345
				EMEA
37.5		40.1		Owned and leased		145		246
10.1		7.2		Managed and franchised		39		44
47.6		47.3				184		290
9.3		4.2		Asia Pacific		36		26
(25.1	)	(7.8	)	Other (3)		(97	)	(48	)
100.0		100.0				387		613

(1) Amounts are reported by origin.

(2) Operating profit before exceptional items excludes profits/(losses) on sale of fixed assets and operations and other exceptional items.

(3) Other includes central service costs, dividends received from FelCor Lodging Trust Inc., goodwill amortization, significant contract termination receipts, rebates and other non-trading items.

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Segmental Results

The following table shows turnover and operating profit in pounds sterling of the IHG Hotels business by activity and the percentage contribution of each activity for the following periods: 15 months ended December 31, 2003 (including unaudited information for the three months ended December 31, 2002 and 12 months ended December 31, 2003), and the year ended September 30, 2002. Segmental information has been restated for the year ended September 30, 2002 to reflect the new structure of the organization following the fundamental reorganization of the Hotels business (see “Organization Review” on page 29).

Amounts in accordance with UK GAAP

15 months ended December 31, 2003		12 months ended December 31, 2003		Three months ended December 31, 2002		Year ended September 30, 2002			15 months ended December 31, 2003		12 months ended December 31, 2003		Three months ended December 31, 2002		Year ended September 30, 2002
	%									(£ million)
								Turnover by Activity (1) (2)
								Americas
20.1		19.9		20.9		20.5		Owned and leased	376		296		80		314
1.9		1.9		2.1		2.5		Managed	36		28		8		38
13.3		13.5		12.5		14.2		Franchised	249		201		48		218
35.3		35.3		35.5		37.2			661		525		136		570
								EMEA
49.8		50.1		48.8		48.2		Owned and leased	933		746		187		736
2.6		2.6		2.6		2.3		Managed	48		38		10		36
1.6		1.5		1.6		1.4		Franchised	29		23		6		22
54.0		54.2		53.0		51.9			1,010		807		203		794
								Asia Pacific
6.6		6.4		7.3		6.7		Owned and leased	123		95		28		103
1.1		1.0		1.3		1.3		Managed	20		15		5		20
0.3		0.3		0.3		0.3		Franchised	5		4		1		5
8.0		7.7		8.9		8.3			148		114		34		128
2.7		2.8		2.6		2.6		Central (4)	51		41		10		40
100.0		100.0		100.0		100.0			1,870		1,487		383		1,532
								Operating Profit before Exceptional Items by Activity(1) (3)
								Americas
9.2		9.9		6.3		9.0		Owned and leased	23		20		3		24
2.0		2.0		2.1		3.8		Managed	5		4		1		10
84.8		84.5		85.4		66.6		Franchised	213		172		41		177
(18.3)		(17.2	)	(22.9	)	(14.3	)	Regional overheads	(46	)	(35	)	(11	)	(38	)
77.7		79.2		70.9		65.1			195		161		34		173
								EMEA
38.6		37.9		41.7		46.6		Owned and leased	97		77		20		124
9.6		9.4		10.4		7.5		Managed	24		19		5		20
9.2		8.9		10.4		4.1		Franchised	23		18		5		11
(12.0)		(10.8	)	(16.7	)	(11.3	)	Regional overheads	(30	)	(22	)	(8	)	(30	)
45.4		45.4		45.8		46.9			114		92		22		125
								Asia Pacific
7.2		5.4		14.6		5.6		Owned and leased	18		11		7		15
5.6		3.9		12.5		5.3		Managed	14		8		6		14
1.6		2.0		—		1.9		Franchised	4		4		—		5
(5.6)		(5.4	)	(6.3	)	(4.1	)	Regional overheads	(14	)	(11	)	(3	)	(11	)
8.8		5.9		20.8		8.7			22		12		10		23
(31.9)		(30.5	)	(37.5	)	(20.7	)	Central (4)	(80	)	(62	)	(18	)	(55	)
100.0		100.0		100.0		100.0			251		203		48		266

Footnotes on the following page.

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(1) The results of overseas operations have been translated into sterling at weighted average rates of exchange for the year. In the case of the US dollar, the translation rates are fiscal 2003: £1=$1.62 (2002: £1=$1.48).

(2) Amounts are reported by origin.

(3) Operating profit before exceptional items excludes profits/(losses) on sale of fixed assets and operations and other exceptional items.

(4) Central includes global functions that were centralized following the reorganization review. Costs are reduced by Holidex fee income.

The following table shows turnover and operating profit for the IHG Hotels business in pounds sterling by activity and the percentage contribution of each activity for the year ended September 30, 2002 and the year ended September 30, 2001. As it has not been practicable to restate segmental information for the year ended September 30, 2001 to conform with the new presentation resulting from the new structure following the fundamental reorganization of the Hotels business, the 2002 financial information is presented on the same basis.

Amounts in accordance with UK GAAP

Year ended September 30					Year ended September 30
2002		2001				2002		2001
	%				(£ million)
				Turnover by Activity (1) (2)
				Americas
20.6		19.6		Owned and leased		316		372
12.7		24.5		Managed and upscale franchised		195		464
4.8		11.0		Midscale franchised		73		209
38.1		55.1				584		1,045
				EMEA
48.1		35.9		Owned and leased		737		680
5.4		3.7		Managed and franchised		82		70
53.5		39.6				819		750
8.4		5.3		Asia Pacific		129		101
100.0		100.0				1,532		1,896
				Operating Profit before Exceptional Items by Activity (1) (3)
				Americas
5.7		12.6		Owned and leased		15		54
10.7		7.0		Managed and upscale franchised		28		30
51.5		36.6		Midscale franchised		135		156
67.9		56.2				178		240
				EMEA
37.4		40.0		Owned and leased		98		171
10.3		7.3		Managed and franchised		27		31
47.7		47.3				125		202
9.2		4.2		Asia Pacific		24		18
(24.8)		(7.7	)	Other (4)		(65	)	(33	)
100.0		100.0				262		427

(1) The results of overseas operations have been translated into sterling at weighted average rates of exchange for the year. In the case of the US dollar, the translation rates are fiscal 2002: £1=$1.48 (2001: £1=$1.44).

(2) Amounts are reported by origin.

(3) Operating profit before exceptional items excludes profits/(losses) on sale of fixed assets and operations and other exceptional items.

(4) Other includes central service costs, dividends received from FelCor Lodging Trust Inc., goodwill amortization, significant contract termination receipts, rebates and other non-trading items.

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Operations

Ownership/Management Model

Hotels operates through four different business models to ensure a balance of growth, returns, risk and reward. Profits are broadly balanced between owned hotels, which have an opportunity for greater profits but are subject to greater volatility, and managed/franchised hotels, which have more stable income streams. The four models are:

• owned or leased (“O & L”), where a Group company both owns (or leases) and operates a hotel and, in the case of ownership, takes all the benefits and risks of ownership. Rooms owned or leased by IHG Hotels totaled 39,459 as at December 31, 2003, together representing 7% of its hotel rooms;

• management contract, where IHG Hotels manages the hotel for third-party owners under an IHG brand in return for a management fee and provides the system infrastructure necessary for the hotel to operate. Management contract fees are usually linked to a hotel’s revenues and often include an additional incentive fee, linked to profitability or cash flow. IHG Hotels operated 103,440 rooms under management contracts at December 31, 2003, representing 19% of its hotel rooms;

• joint venture, where a Group company directly or indirectly holds an equity interest in the hotel and receives a share of the benefits and risks of ownership in proportion to its stake. A management contract is generally entered into in conjunction with the joint venture; and

• franchise, where IHG Hotels neither own nor manage the hotel, but provide the use of the brand, systems and expertise. IHG Hotels derives revenues from a royalty or licensing fee payable by the franchisee for the right to operate under an IHG brand. This fee is often based on a percentage of room revenue. IHG Hotels operated 393,419 rooms under a franchise agreement as at December 31, 2003 with 84% of rooms in North and South America operating under this model. As at December 31, 2003, franchised hotels represented 74% of IHG’s total rooms.

The following table shows the number of hotels and rooms owned, operated or franchised by IHG at December 31, 2003, September 30, 2002 and September 30, 2001.

	Owned or Leased			Management Contracts and Joint Ventures			Franchised			Total
		No. of Hotels	No. of Rooms		No. of Hotels	No. of Rooms		No. of Hotels	No. of Rooms		No. of Hotels	No. of Rooms
2003		171	39,459		423	103,440		2,926	393,419		3,520	536,318
2002		190	42,642		314	86,761		2,821	386,122		3,325	515,525
2001		191	42,531		318	85,893		2,758	386,272		3,267	514,696

The Group sets quality and service standards for all of its hotel brands (including those operated under management contract or franchise arrangements) and operates a customer satisfaction and hotel quality measurement system to ensure those standards are met or exceeded. The quality measurement system includes an assessment of both physical property and customer service standards. In 2003 IHG relaunched the customer satisfaction tracking element of this assessment to better enable the company to respond to customer needs.

Global System

The Group uses a global system for reservations, IT, internet and its loyalty scheme (Priority Club Rewards). Across all its brands, the Group’s objective is to further exploit the scale and strength of its global system to drive revenue and operating efficiencies. The elements of the global system include:

Priority Club Rewards: This is one of the largest loyalty programs in the hotel industry, with approximately 19.2 million members, an increase in 2003 of more than 23%. It has alliances with 45 airlines which enable members to collect frequent flyer miles. IHG also has alliances with external partners such as car hire companies and credit card companies, which provide exposure and access to IHG’s system.

Central Reservation System: The Group operates the HolidexPlus and Holidex central reservation systems. The HolidexPlus and Holidex systems receive reservation requests entered on terminals located at most of its reservation centers, as well as from global distribution systems operated by a number of major corporations and travel agents. Where local hotel systems allow, the HolidexPlus and the Holidex systems immediately confirm reservations or indicate alternative accommodation available within IHG’s network. Confirmations are transmitted electronically to the hotel for which the reservation is made. By December 2003, all but 19 of the 3,520 IHG hotels had been upgraded to the HolidexPlus system.

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The Group estimates that, during 2003, these reservation systems (which include company reservation centers, global distribution systems and internet reservations) delivered around 29% of the Group’s global hotel room nights sold.

Internet: The Group introduced electronic hotel reservations in 1995. The Internet continues to be an important communications and distribution channel for the Group’s sales. During fiscal 2003, 7.5 million room nights, representing $710 million of revenue, were booked via the various Company branded websites, such as www.intercontinental.com and www.holiday-inn.com. The “Lowest Internet Rate Guarantee” program promises customers that if they find a better rate on the Internet than on the Group’s sites, the Group will honor the lower rate, plus a further 10% reduction on that rate.

Over 70% of room nights at the Group’s hotels that are booked on the web are now booked directly through the Group’s own brand sites.

Sales and Marketing

IHG targets its sales and marketing expenditure in each region on driving revenue and brand awareness or, in the case of sales investments, targeting segments such as corporate accounts, travel agencies and meeting organizers. The majority of IHG’s sales and marketing expenditure is funded by contractual fees paid by most hotels in the system.

The strategic goals for the global system as a whole include:

• adding further locations and improving guest satisfaction for its brands;

• continuing the focus on enrolments in Priority Club Rewards and increasing share of the total hotel spend to establish Priority Club Rewards as the number one program in the industry;

• making the direct channels the best available; and

• improving pricing structure.

Organization Review

Following the announcement in October 2002 of the Separation, the Group’s management initiated action in four key areas to improve operating performance of IHG Hotels:

• redesigning the organization to align it with the strategic priorities and speed up decision making;

• changing the management team to ensure the right people are in the right jobs;

• reducing the cost base through eliminating unnecessary work and streamlining processes; and

• optimizing capital deployment through a rigorous hotel by hotel review to determine appropriate levels of ownership and capital expenditure.

As a result of actions the Group has taken, it achieved the following in 2003:

• a new executive team, including well-respected hotel operators, was appointed and a new organization design was agreed comprising the following key business units:

• Global Brand Services (“GBS”), managing the global systems, reservations and loyalty club for the Group;

• Finance and Asset Management (“FAM”) managing the capital allocation, financial standards and reporting for the Group;

• Central Shared Services (“CSS”), operating many of the global transactional processes across Finance, HR and IT;

• three operating regions, namely EMEA, Americas and Asia Pacific, each headed by a seasoned hotel professional with at least 20 years industry experience each;

• Corporate Services, with responsibility for Corporate Governance, Risk Management, Risk Insurance, Internal Audit, Data Privacy, Intellectual Property, Group Legal and Company Secretariat; and

• Global HR, managing the talent in IHG around the world.

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Brands

Brands Overview

	December 31, 2003
Brands		Room Numbers	Hotels
InterContinental		45,046	135
Crowne Plaza		58,482	202
Holiday Inn		287,769	1,529
Express		120,298	1,455
Staybridge Suites		8,221	71
Candlewood Suites		12,569	109
Other		3,933	19
Total		536,318	3,520

InterContinental

	Americas Total	Americas O & L	EMEA Total	EMEA O & L	Asia Pacific
Average Room Rate $ (1)	129.87	161.92	131.80	162.41	124.46
Room Numbers (2)	15,074	4,421	20,842	4,779	9,130

(1) For the 12-month period ended December 31, 2003

(2) As at December 31, 2003

InterContinental is IHG’s global upper upscale hotel brand. The hotels are targeted at both business and leisure guests. InterContinental hotels are generally situated in prime locations in major cities and key resorts around the world and provide high quality amenities, generally reflecting the local culture. There were 135 InterContinental hotels in more than 60 countries which represented 8% of all of IHG hotel rooms as at December 31, 2003.

InterContinental hotels are principally owned, leased or managed by IHG Hotels. The brand is one of the top international upper upscale hotel brands based on room numbers and has more than 50 years of heritage in the segment. IHG’s competition includes international luxury chains (for example Four Seasons and Ritz Carlton) and upper upscale chains (for example, Marriott, Hilton, Hyatt and Westin).

Crowne Plaza

	Americas Total	Americas O & L	EMEA Total	EMEA O & L	Asia Pacific
Average Room Rate $ (1)	94.17	102.28	102.37	101.28	70.76
Room Numbers (2)	31,235	2,288	15,689	4,182	11,558

(1) For the 12-month period ended December 31, 2003

(2) As at December 31, 2003

Crowne Plaza is IHG’s global upscale hotel brand which has been developed as a stand-alone brand since acquisition of the Holiday Inn business and has grown to 202 hotels worldwide. The brand is targeted at the business guest, with a particular focus on meetings and related services. The upscale Crowne Plaza hotels and resorts are predominantly located in major and secondary cities and resorts around the world, typically in significant business centers, and provide the high level of comfort, amenities, services, facilities and meeting space expected of a full service hotel. Crowne Plaza represented 11% of IHG Hotels’ hotel rooms as at December 31, 2003.

The majority of the upscale Crowne Plaza hotels and resorts are franchised hotels. As at December 31, 2003, 53% of Crowne Plaza brand properties were in the Americas. The key competitors in this segment include Sheraton, Marriott, Hilton, Double-Tree, Wyndham and Radisson.

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Holiday Inn

	Americas Total	Americas O&L	EMEA Total	EMEA O&L	Asia Pacific
Average Room Rate $ (1)	78.01	74.04	75.21	89.11	55.32
Room Numbers (2)	213,389	2,665	54,997	15,782	19,383

(1) For the 12-month period ended December 31, 2003

(2) As at December 31, 2003

Holiday Inn is IHG’s midscale full service brand. Holiday Inn International was acquired in 1988 with the remaining North American business of Holiday Inn being acquired in 1990. In the last ten years, the brand has grown in EMEA and Asia Pacific, while its number of hotels has declined in the Americas. This decline has been more than offset by the growth in Express. The brand is targeted at the mid-market guest and is IHG Hotels’ largest global hotel brand based on room numbers. Holiday Inn is also one of the world’s most recognized hotel brands. IHG seeks to offer, through its Holiday Inn brand, good value for money with appropriate standards of products and services.

There were 1,529 Holiday Inn hotels located in more than 70 countries which represented 54% of all IHG’s hotel rooms as at December 31, 2003. The brand is predominantly franchised. As at December 31, 2003, 73% of the Holiday Inn branded hotels were located in the Americas.

Express

	Americas Total	EMEA Total	EMEA O&L	Asia Pacific
Average Room Rate $ (1)	72.83	74.96	57.98	54.32
Room Numbers (2)	106,796	13,270	995	232

(1) For the 12-month period ended December 31, 2003

(2) As at December 31, 2003

Express is IHG’s midscale limited service hotel brand. IHG recognized the need for a brand in this category in the early 1990s and subsequently developed Express to further the reach of the Holiday Inn brand and enter the midscale limited service segment. The brand has grown rapidly and aims to provide the room quality of midscale hotels without the associated full range of facilities. The brand is targeted at the value-conscious guest, as best evidenced by the “Stay Smart” marketing campaign in the United States.

There were 1,455 Express hotels worldwide, which represented 22% of IHG’s hotel rooms as at December 31, 2003. Express is the third largest brand in the US midscale limited service segment based on room numbers, and 89% of the Express branded rooms are located in the Americas. Express hotels are almost entirely franchised. The brand enjoys a RevPAR premium to many of its competitors in the United States. Express also has a solid and growing brand presence in the UK market where it faces competition from a variety of local market brands and independent hotels.

Staybridge Suites

	Americas Total	Americas O & L
Average Room Rate $ (1)	83.96	83.43
Room Numbers (2)	8,221	496

(1) For the 12-month period ended December 31, 2003

(2) As at December 31, 2003

Staybridge Suites is IHG’s organically developed upscale extended stay brand and offers self-catering services and amenities designed specifically for those on extended travel. The rooms provide more space than the typical hotel room, offering studios and one and two bedroom suites, with cooking and other facilities available in each room/suite. As at December 31, 2003, there were 71 Staybridge Suites hotels, all of which are located in the Americas, which represented 2% of all IHG’s hotel rooms. The first Staybridge Suites hotel was opened in 1998, with the fiftieth Staybridge Suites hotel following in November 2002, thereby demonstrating the fastest roll out of

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50 properties in its segment. In July 2003, the Group sold 16 Staybridge Suites hotels in the United States to HPT for $185 million. These hotels will, however, continue to operate within the Staybridge Suites brand as a result of the Group having entered into a management agreement relating to these hotels with HPT for a period of 20 years, with options to extend. In September 2003, HPT converted 14 other suite hotels to the Staybridge Suites brand, under IHG management. Staybridge Suites brands are divided broadly between franchised and managed models. The primary competitors include Residence Inn, Homewood, Summerfield and Hawthorne.

Candlewood Suites (1)

	Total
Average Room Rate $ (2)	56.71
Room Numbers (3)	12,569

(1) No operations of the Candlewood brand have been included in the 2003 Consolidated Financial Statements.

(2) For the 12-month period ended December 31, 2003

(3) As at December 31, 2003

The Candlewood Suites brand was acquired on December 31, 2003. This brand’s positioning in the midscale extended stay segment will complement Staybridge Suites’ upscale positioning. Candlewood Suites is an established brand of purpose built hotels with 109 properties on average of less than five years old. The major owner of Candlewood Suites properties is HPT, who owned 64 at the time of announcement and who, in a related transaction, purchased an additional 12 properties. IHG will manage all 76 of HPT’s properties under 20 year agreements, with options to extend.

Geographical Analysis

While IHG’s brands are in the main recognized globally, operational management is divided into three main geographic regions – North and South America (“Americas”), Europe, the Middle East and Africa (“EMEA”) and Asia and countries in the Pacific region (“Asia Pacific”). With its worldwide hotels operations and multiple ownership models, IHG is less dependent on the business cycle of any one country or region, although the US market is predominant. The following table shows information concerning the geographical locations of IHG’s hotels as at December 31, 2003.

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	Owned or Leased		Management Contracts and Joint Ventures		Franchised		Total
As at December 31, 2003	No. of Hotels	No. of Rooms	No. of Hotels	No. of Rooms	No. of Hotels	No. of Rooms	No. of Hotels	No. of Rooms
United States
InterContinental	7	3,451	5	1,812	1	150	13	5,413
Crowne Plaza	5	1,995	21	7,351	61	16,523	87	25,869
Holiday Inn	6	1,541	59	18,080	916	172,627	981	192,248
Holiday Inn Express	—	—	4	657	1,261	100,093	1,265	100,750
Staybridge Suites	3	376	31	3,808	35	3,714	69	7,898
Candlewood Suites	—	—	76	9,219	33	3,350	109	12,569
Other brands	—	—	6	1,221	—	—	6	1,221
Total	21	7,363	202	42,148	2,307	296,457	2,530	345,968
Rest of Americas
InterContinental	3	970	12	3,699	18	4,992	33	9,661
Crowne Plaza	1	293	1	217	17	4,856	19	5,366
Holiday Inn	2	1,124	6	1,444	120	18,573	128	21,141
Holiday Inn Express	—	—	—	—	56	6,046	56	6,046
Staybridge Suites	1	120	1	203	—	—	2	323
Candlewood Suites	—	—	—	—	—	—	—	—
Other brands	—	—	—	—	—	—	—	—
Total	7	2,507	20	5,563	211	34,467	238	42,537
Total Americas
InterContinental	10	4,421	17	5,511	19	5,142	46	15,074
Crowne Plaza	6	2,288	22	7,568	78	21,379	106	31,235
Holiday Inn	8	2,665	65	19,524	1,036	191,200	1,109	213,389
Holiday Inn Express	—	—	4	657	1,317	106,139	1,321	106,796
Staybridge Suites	4	496	32	4,011	35	3,714	71	8,221
Candlewood Suites	—	—	76	9,219	33	3,350	109	12,569
Other brands	—	—	6	1,221	—	—	6	1,221
Total	28	9,870	222	47,711	2,518	330,924	2,768	388,505
United Kingdom
InterContinental	2	653	1	445	—	—	3	1,098
Crowne Plaza	6	1,716	2	399	3	764	11	2,879
Holiday Inn	76	12,736	3	431	22	3,092	101	16,259
Holiday Inn Express	1	120	—	—	88	8,697	89	8,817
Staybridge Suites	—	—	—	—	—	—	—	—
Candlewood Suites	—	—	—	—	—	—	—	—
Other brands	—	—	—	—	—	—	—	—
Total	85	15,225	6	1,275	113	12,553	204	29,053
Europe
InterContinental	10	3,741	11	4,329	3	1,167	24	9,237
Crowne Plaza	10	2,466	6	1,665	18	3,883	34	8,014
Holiday Inn	15	3,046	10	1,978	157	21,876	182	26,900
Holiday Inn Express	7	875	6	625	24	2,134	37	3,634
Staybridge Suites	—	—	—	—	—	—	—	—
Candlewood Suites	—	—	—	—	—	—	—	—
Other brands	1	580	—	—	2	430	3	1,010
Total	43	10,708	33	8,597	204	29,490	280	48,795

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	Owned or Leased		Management Contracts and Joint Ventures		Franchised		Total
As at December 31, 2003	No. of Hotels	No. of Rooms	No. of Hotels	No. of Rooms	No. of Hotels	No. of Rooms	No. of Hotels	No. of Rooms
InterContinental	1	385	31	8,898	4	1,224	36	10,507
Crowne Plaza	—	—	11	3,035	6	1,761	17	4,796
Holiday Inn	—	—	20	3,678	37	8,160	57	11,838
Holiday Inn Express	—	—	—	—	6	819	6	819
Staybridge Suites	—	—	—	—	—	—	—	—
Candlewood Suites	—	—	—	—	—	—	—	—
Other brands	—	—	—	—	—	—	—	—
Total	1	385	62	15,611	53	11,964	116	27,960
Total EMEA
InterContinental	13	4,779	43	13,672	7	2,391	63	20,842
Crowne Plaza	16	4,182	19	5,099	27	6,408	62	15,689
Holiday Inn	91	15,782	33	6,087	216	33,128	340	54,997
Holiday Inn Express	8	995	6	625	118	11,650	132	13,270
Staybridge Suites	—	—	—	—	—	—	—	—
Candlewood Suites	—	—	—	—	—	—	—	—
Other brands	1	580	—	—	2	430	3	1,010
Total	129	26,318	101	25,483	370	54,007	600	105,808
Far East and Australasia (Asia Pacific)
InterContinental	2	729	17	6,084	7	2,317	26	9,130
Crowne Plaza	3	698	26	9,140	5	1,720	34	11,558
Holiday Inn	8	1,651	48	13,621	24	4,111	80	19,383
Holiday Inn Express	—	—	1	95	1	137	2	232
Staybridge Suites	—	—	—	—	—	—	—	—
Candlewood Suites	—	—	—	—	—	—	—	—
Other brands	1	193	8	1,306	1	203	10	1,702
Total	14	3,271	100	30,246	38	8,488	152	42,005
Total
InterContinental	25	9,929	77	25,267	33	9,850	135	45,046
Crowne Plaza	25	7,168	67	21,807	110	29,507	202	58,482
Holiday Inn	107	20,098	146	39,232	1,276	228,439	1,529	287,769
Holiday Inn Express	8	995	11	1,377	1,436	117,926	1,455	120,298
Staybridge Suites	4	496	32	4,011	35	3,714	71	8,221
Candlewood Suites	—	—	76	9,219	33	3,350	109	12,569
Other brands	2	773	14	2,527	3	633	19	3,933
Total	171	39,459	423	103,440	2,926	393,419	3,520	536,318

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Americas

In the Americas, the largest proportion of rooms is operated under the franchise business model primarily in the midscale segment (Holiday Inn and Express). Similarly, in the upscale segment, Crowne Plaza is predominantly franchised, whereas the InterContinental brand currently has a bias toward ownership and management. With 2,768 hotels, the Americas represented the bulk of hotels and approximately 59% of Hotels operating profit before central costs and exceptional items during the 15 months ended December 31, 2003. The key profit producing region is the United States, although IHG is also represented in the branded segment in each of Latin America, Canada, Mexico and the Caribbean.

EMEA

Comprising 600 hotels at the end of 2003, EMEA represented approximately 34% of Hotels operating profit before central costs and exceptional items during the 15 months ended December 31, 2003. The key profit producing regions are the United Kingdom and the main continental European gateway cities such as Paris and Frankfurt.

Asia Pacific

Asia Pacific represented 8% of Hotels rooms and 7% of Hotels operating profit before central costs and exceptional items during the 15 months ended December 31, 2003. IHG has a strong and growing presence in Asia Pacific, comprising 152 hotels in total. Currently underdeveloped parts of the Asia Pacific market are expected to generate significant growth in the hotel and tourism industry over the next decade. The Group believes that the region represents a good source of growth due to the current low penetration of brands offering the opportunity for IHG’s brands to build strong positions in key markets.

System Pipeline

At December 31, 2003, IHG had formally approved franchise applications for 286 hotels with 30,853 rooms, though the hotels had yet to enter the system. In addition, IHG had signed management contracts on a further 128 hotels (20,826 rooms), and these are expected to enter the system over the next two years. In addition three owned and leased hotels, with 699 rooms, are also due to enter the system. Approximately 15% of the rooms at December 31, 2003 in the pipeline were in the upper upscale and upscale InterContinental and Crowne Plaza brands.

There are no assurances that all of these hotels will open or enter the system. The construction, conversion and development of hotels is dependent upon a number of factors, including meeting brand standards, obtaining the necessary permits relating to construction and operation, the cost of constructing, converting and equipping such hotels and the ability to obtain suitable financing at acceptable interest rates. The supply of capital for hotel development in the United States and major economies may not continue at previous levels and consequently the systems pipeline could decrease.

Seasonality

Although the performance of individual hotels and geographic markets might be highly seasonal due to a variety of factors such as the tourist trade and local economic conditions, the geographical spread of IHG’s hotels in almost 100 countries and territories and the relative stability of the income stream from franchising activities diminish the effect of seasonality on the results of the Group.

Competition

The Group’s hotels compete with a wide range of facilities offering various types of lodging options and related services to the public. The competition includes several large and moderate sized hotel chains offering upper, mid and lower priced accommodation and also includes independent hotels in each of these market segments, particularly outside of North America where the lodging industry is much more fragmented. Major hotel chains which compete with the Group include Marriott International, Inc., Starwood Hotels & Resorts Worldwide, Inc., Choice Hotel International, Best Western International, Hilton Hotels Corporation, Hilton Group plc, Cendant Corporation, Four Seasons Hotels Inc. and Accor SA.

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SOFT DRINKS

Overview

The Group holds a significant interest in Britannia Soft Drinks Limited (“BSD”), the holding company for the Britvic Group, which is the second largest manufacturer of soft drinks, by volume, in the United Kingdom. Following the signing of the Exclusive Bottling Agreement (“EBA”) on March 10, 2004 on broadly similar terms as the original agreement dated January 5, 1987, the ownership of BSD is now split between the Group (47.5%), Allied Domecq Overseas (Canada) Limited and Whitbread Group PLC (each with 23.75%) and PepsiCo Inc. (5%). Under the EBA, the Britvic Group holds the exclusive franchise rights in Great Britain for the Pepsi and 7UP brands.

The Group will continue to consolidate the results of BSD as it continues to exercise dominant influence on the management of the company.

In conjunction with the EBA, the Group and other shareholders in BSD have agreed subject, inter alia, to market conditions, to consider an initial public offering of BSD, between January 1, 2005 and December 31, 2008.

Britvic’s Business and Brands

The Britvic Group owns an extensive portfolio of soft drinks brands that includes Robinsons, Tango, Britvic (juice and mixers), R Whites, Amé, J₂O, Purdey’s and Aqua Libra and has exclusive rights in perpetuity to Red Devil in the United Kingdom and the Republic of Ireland.

The Britvic Group’s operations are split between Britvic, which includes the Pepsi, Tango, R Whites, Britvic (juice and mixers) and 7UP brands, and Robinsons. Robinsons Soft Drinks Limited, a direct subsidiary of Britvic, holds the major brands acquired since Britvic Holdings Limited was initially set up by the IHG Group, Allied Domecq and Whitbread in 1987. This includes the Robinsons and Red Devil brands and also the Amé, Purdey’s and Aqua Libra brands which were owned by Orchid Drinks Limited, a business acquired by the Britvic Group in July 2000. Sales of Robinsons products accounted for approximately 28% of total net sales for the Britvic Group in 2003.

The Britvic Group also has a supply agreement for the sale of Abbey Well water for resale to licensed outlets and “impulse buy” outlets (excluding major multiple retailers such as supermarket chains). In addition to brand acquisitions, the Britvic Group has developed and maintained its portfolio of brands. It has achieved this through an active new product development program to generate new sub-brands and packaging initiatives. Notable among these are sub-brands such as J₂O and Robinsons’ Fruit Shoot. In addition, the Britvic Group has introduced a series of packaging types such as a children’s 250 ml pack for the Tango brand together with flavor extensions such as Tango Fruit Fling and limited edition seasonal Robinsons flavors.

The Britvic Group generated operating profits before exceptional items of £95 million on revenues of £820 million in the 15 months ended December 2003. This compares to operating profits before exceptional items of £63 million on revenues of £602 million in the year ended September 2002.

Strategy

The goal for the Britvic Group is for it to become the United Kingdom’s leading soft drinks manufacturer. To achieve this goal, the strategy for the Britvic Group is to build its share of the major volume and value segments within the carbonated soft drinks and still drinks markets. The Britvic Group continues to increase its market share by supporting its existing portfolio of brands and by a program of new product development and, where appropriate, acquisition.

Competition

The Britvic Group’s brands compete with many multi-national, national and regional producers and private label suppliers. The Britvic Group’s main competitor in the United Kingdom is Coca-Cola Enterprises (whose brands include Coca-Cola, Fanta, Sprite, Dr Pepper, Schweppes and Lilt), which is the overall soft drinks market leader (in terms of market share). The Britvic Group also faces significant competition from GlaxoSmithKline (Lucozade and Ribena), AG Barr (Irn-Bru and Orangina), Proctor & Gamble (Sunny Delight) and Tropicana UK Limited (fruit juices), which are each strong within specific sectors of the market. A number of smaller manufacturers dominate their individual sector and their combined influence is becoming more important. A significant example of this would be Red Bull (a leading energy drink).

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Production and Distribution

In fiscal 2003, the Britvic Group had six production plants which produced over 1.3 billion liters of soft drinks during fiscal 2003 and operated 12 retail distribution depots as well as a national distribution center for supplying the on-trade and off-trade.

Marketing

The success of the Britvic Group’s brands depends upon their quality and value for money and on brand marketing. Over the past three fiscal periods, the Britvic Group spent an average of approximately 20% of gross revenues on brand advertising, promotional and other related expenditure.

Britvic Group products are available in a wide variety of outlets in the United Kingdom, including grocery stores, supermarkets, gas stations, other non-licensed premises, off-licenses and restaurants, pubs, clubs and other licensed premises.

The Britvic Group has more than 47,000 dispense units installed in pubs and other trade outlets, including catering establishments. These installations produce mainly carbonated soft drinks from concentrates supplied by the Britvic Group. It also supplies over 20,000 vending machines which dispense a range of soft drinks in both cans and plastic bottles. The Britvic Group also has over 32,000 chiller cabinets installed in retail outlets.

Reliance on Suppliers

Fruit juice concentrates and other fruit raw materials, which are important ingredients for many of the Britvic Group’s products are obtained from various sources worldwide. One of the principal raw materials used by the Britvic Group is sugar. Adequate supplies of bulk sugar are available for the foreseeable future, although the Britvic Group is obliged to purchase its sugar requirements in the EU market, where prices are considerably higher than in other markets.

Reliance on Customers

Due to the nature of the markets in which Britvic operates, a high proportion of sales are accounted for by major customers in both the Take Home and Licensed On Premise sectors. Consumer demand for Britvic’s brands supports trading relationships with the Take Home sector, while major On Premise customers usually contract for soft drinks on an exclusive basis for periods of between two and five years. Britvic is well represented within both sectors, without over-reliance of any one, or group of, customers.

Seasonality

The volume of sales in the soft drinks business may be affected by weather and is seasonal, peaking in the summer months and at the time of holiday occasions, such as Christmas.

Regulation

The Food Safety Act 1990 effectively raised the quality standards demanded in the soft drinks industry. The Britvic Group has actively participated in the industry discussion processes which, it is believed, will ultimately result in legislation governing soft drinks products sold in the EU market.

TRADEMARKS

Group companies own a substantial number of service brands and product brands and the Group believes that its significant trademarks are protected in all material respects in the markets in which it currently operates.

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ORGANIZATIONAL STRUCTURE

Principal operating subsidiary undertakings

As of December 31, 2003 InterContinental Hotels Group PLC was the beneficial owner of all (unless specified) of the equity share capital, either itself or through subsidiary undertakings, of the following companies. Unless stated otherwise, companies are incorporated in Great Britain, registered in England and Wales and operate principally within the United Kingdom.

Corporate activities

Six Continents PLC (note a)

Hotels

InterContinental Hotels Limited (formerly Six Continents Hotels Limited)

InterContinental Hotels Group Operating Corporation (formerly Six Continents Hotels Operating Corporation, incorporated and operates principally in the United States)

InterContinental Hotels Group Services Company (formerly Six Continents Hotels Group Company)

InterContinental Hotels Group (UK) Limited (formerly Six Continents Hotels (UK) Limited)

Holiday Inn Limited

Soft Drinks

Britannia Soft Drinks Limited (50% Six Continents Investments Limited, 25% Whitbread PLC, 25% Allied Domecq PLC) (note b)

Britvic Soft Drinks Limited (90% Britannia Soft Drinks Limited, 10% PepsiCo Holdings Limited)

Robinsons Soft Drinks Limited (100% Britannia Soft Drinks Limited)

a Shares held directly by InterContinental Hotels Group PLC.

b At December 31, 2003, the Group held a majority of voting rights (50% plus one ordinary share) in Britannia Soft Drinks Limited. The shareholdings in BSD have been revised subsequent to the year end following the signing of the EBA and the Group now holds a 47% voting investment in, and exercises dominant influence over BSD, which is, accordingly, treated as a subsidiary.

c A list of subsidiary companies as of December 31, 2003 is filed as exhibit 8 to this Annual Report.

PROPERTY, PLANTS AND EQUIPMENT

Group companies own and lease properties throughout the world. The table below analyzes the net book value of land and buildings at December 31, 2003 by division and geographic segment. Approximately 70% of the properties by value were directly owned, with 28% held under leases having a term of 50 years or longer.

Net book value of land and buildings as at December 31, 2003		United Kingdom	Rest of Europe, the Middle East and Africa	United States	Rest of World	Total
	(£ million)
Hotels		1,004	877	509	380	2,770
Soft Drinks		66	—	—	—	66
Total		1,070	877	509	380	2,836

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Group properties include hotels and soft drinks production facilities. Approximately 52% of Hotels property values relate to the top 20 O&L hotels (in terms of value) of a total of 171 hotels, with an individual net book value range of £40 million to £212 million.

Property has been written down in the 15 months ended December 31, 2003 by £73 million following an impairment review of the hotel estate. The impairment has been measured by reference to the value of income-generating units, using either the higher of value in use or estimated recoverable amount. The discount rate used for value in use calculations was 11.4%.

Following the Separation, IHG undertook a detailed review of its owned and leased portfolio to identify opportunities to lower capital intensity. IHG’s policy is that assets will only be owned if they have strategic value or generate superior returns. IHG has now developed plans for each owned asset taking into account a wide range of different criteria including, where relevant, the state of the local market and readiness of the asset to be sold. IHG currently estimates that the disposal program will involve the further sale of assets with a net book value of between £800 million and £1 billion. The scale and complexity of the program means it will take some considerable time to complete. The disposal program is subject to no significant adverse changes arising in market conditions.

IHG has invested in a major refurbishment program at some of its leading InterContinental properties. (See “Item 4. Information on the Company – Acquisitions, Dispositions and Capital Expenditure”).

ENVIRONMENT

IHG is committed to all its operating companies having a responsibility to act in a way that respects the environment in which they operate. The Group’s hotels operate in nearly 100 countries and territories and its strong presence in the US and EU markets mean that it is affected by and is familiar with highly developed environmental laws and controls. IHG regularly considers environmental matters and seeks to embed good practice into its business strategies and operations. IHG was awarded membership of both the FTSE 4 Good Index Series and the Dow Jones Sustainability Index in 2003.

Group companies incur expenditure on technical advice, services and equipment in addressing the environmental laws and regulations enacted in the countries in which they operate. In 2003, such expenditure was not material in the context of their financial results.

It is not possible to forecast the overall Group expenditure to comply with environmental laws and regulations; this reflects the difficulty in assessing the risk of environmental accidents and the changing nature of laws and regulations. IHG expects, however, that it should be in a position to control such expenditure so that, although it may be considerable, it will be unlikely to have a material adverse effect on the Group’s financial position or results of operations.

ITEM 5.     OPERATING AND FINANCIAL REVIEW AND PROSPECTS

INTRODUCTION

On April 15, 2003, following shareholder and regulatory approval, Six Continents PLC separated into two new groups, InterContinental Hotels Group PLC, comprising the Hotels and Soft Drinks businesses, and Mitchells & Butlers plc, comprising the Retail and Standard Commercial Property Developments businesses. The Separation was accounted for under the principles of merger accounting which apply in the context of such group reconstructions. This Operating and Financial Review focuses on the performance of the continuing operations of the Group following the Separation.

Change in accounting year end

In order to bring the reporting timetable in line with the majority of comparable European and US hotel companies, IHG has changed its financial year end from September 30 to December 31. The latest statutory financial period covered by the Financial Statements is therefore the 15 months ended December 31, 2003. IHG is including in this document an unaudited profit and loss account for the 12 months ended December 31, 2003 and unaudited comparatives for the 12 months ended December 31, 2002. This “Item 5. Operating and Financial Review and Prospects” principally comments on results for the 12 months ended December 31, 2003, as the 12 month period ending December 31 will be the relevant reporting period going forward.

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Business and Overview

The Group operates hotels in nearly 100 countries and territories. The Group operates, manages and franchises six separate brand names and has over 3,500 hotels with over 535,000 rooms. The Group owns a significant interest in Britvic, the UK’s second largest manufacturer of soft drinks (measured by volume) which over the past five years has built a portfolio of brands addressing all sectors of the soft drinks market. Following the announcement in October 2002 of the Separation, the Hotels Division initiated action in four key areas in order to improve operating performance: (1) a redesign of the organization to align it behind the strategic priorities and to increase the speed of decision making; (2) changes to the management to ensure the right people are in the right jobs; (3) reduction of the cost base by eliminating unnecessary work and streamlining processes; and (4) optimization of capital deployment through a rigorous hotel by hotel review to determine appropriate levels of ownership and capital expenditure.

The organization review coincided with a difficult period for the hotel industry. Sluggish economies around the world, the threat of war in Iraq followed by war, the outbreak of SARS and the reluctance of Americans to travel abroad, contributed to the difficulties. The combination of the actions taken, together with a small improvement in trading conditions in some markets for the second half of 2003, led to some improvement in operating performance in the latter half of 2003.

The performance of the business is evaluated primarily on a segmental basis. Our segmental results are shown before allocation of central costs, interest expense, interest income and income taxes. Because of the fundamental reorganization that has taken place in the business over the past 15 months, it has not been practicable to restate the segmental information for the year ended September 30, 2001 on the segmental basis presented for the 15 months ended December 31, 2003 and for the year ended September 30, 2002.

The Group believes the period-over-period movement in revenue per available room (“RevPAR”) to be a meaningful indicator for the performance of the Group’s owned and leased hotels.

CRITICAL ACCOUNTING POLICIES UNDER UK GAAP AND US GAAP

The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and costs and expense during the reporting periods. On an ongoing basis, management evaluates its estimates and judgments, including those relating to revenue recognition, bad debts, inventories, investments, property, plant and equipment, goodwill and intangible assets, income taxes, financing operations, frequent guest program liability, self-insurance claims payable, restructuring costs, retirement benefits and contingencies and litigation.

Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions and conditions.

The Group’s critical accounting policies are set out below.

Revenue Recognition

Revenue is derived from the following sources: (1) owned and leased properties; (2) management and franchise fees; (3) sales of soft drinks; and (4) other revenues which are ancillary to the Group’s operations. Generally, revenue represents sales (excluding VAT and similar taxes) of goods and services, net of discounts, provided in the normal course of business and is recognized when services have been rendered. The following is a description of the composition of revenues of the Group.

Owned and leased hotels – revenue primarily derived from hotel operations, including the rental of rooms and food and beverage sales from a worldwide network of owned and leased hotels operated primarily under the Group’s proprietary brand names. Revenue is recognized when rooms are occupied and food and beverage is sold. These revenues are impacted by global economic conditions as well as relative market share of the local competitive set of hotels.

Management fees – fees earned from hotels managed by the Group, usually under long-term contracts with the hotel owner. Management fees include a base fee, which is generally a percentage of hotel revenue, and

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an incentive fee, which is generally based on the hotels’ profitability. Revenue is recognized when earned. These revenues are impacted by global economic conditions as well as competition from other hotel management companies.

Franchise fees – fees received in connection with the franchise of the Group’s brand names, usually under long-term contracts with the hotel owner. The Group charges franchise royalty fees as a percentage of rooms revenue. Revenue is recognized when earned. These revenues are impacted by global economic conditions as well as competition from other hotel franchise companies.

Soft Drinks – sales (excluding VAT and similar taxes) of goods and services, net of discounts, provided in the normal course of business.

Loyalty program

Priority Club Rewards enables members to earn points during each stay at an InterContinental Group hotel and redeem the points at a later date for free accommodation or other benefits. The future redemption liability is included in creditors less than, and greater than, one year in the consolidated balance sheets in the Consolidated Financial Statements and is estimated using actuarial methods based on statistical formulas that project timing of future point redemption based on historical levels to give eventual redemption rates and points values. The cost to operate the program is funded through hotel assessments.

Tangible and Intangible Assets

(i) Goodwill and other Intangible assets

Purchased goodwill and intangible assets are capitalized as intangible assets and amortized over their anticipated life.

Under UK GAAP, prior to October 1, 1998, goodwill arising on acquisitions was written off directly to reserves. Since October 1, 1998, acquired goodwill has been capitalized and amortized over a period not exceeding 20 years. On disposal of a business, the profit or loss on disposal is determined after incorporating the attributable amount of any purchased goodwill, including any previously written off to reserves. Under US GAAP, goodwill arising on acquisitions prior to July 1, 2001 was capitalized and amortized over its estimated useful life, not exceeding 40 years. For the purposes of US GAAP, the Group adopted Financial Accounting Standard (“FAS”) 142 ‘Goodwill and Other Intangible Assets’ on October 1, 2002 and from that date, goodwill including that which arose in the period from July 1, 2001 to October 1, 2002 is not amortized but reviewed annually for impairment.

Under US GAAP, separately identified intangible assets arising on acquisitions are capitalized and amortized over their useful lives. Under UK GAAP, these assets are included within goodwill.

The Company uses a discounted cash flow model to test indefinite life intangibles for impairment on an annual basis. The discounted cash flow model requires assumptions about the timing and amount of net cash inflows, economic projections, cost of capital and terminal values. Each of these can significantly affect the value of indefinite life intangibles.

The Company tests identified intangible assets with defined useful lives by comparing the carrying value to the sum of undiscounted cash flows expected to be generated by the asset.

(ii) Impairment of tangible fixed assets

Under UK GAAP and US GAAP the carrying value of both tangible and finite lived intangible fixed assets are assessed for indicators of impairment. The Company evaluates the carrying value of its long-lived assets based on its plans, at the time, for such assets and such qualitative factors as future development in the surrounding area, status of expected local competition and projected capital expenditure plans. Changes to the Company’s plans, including decisions to dispose of or change the intended use of an asset, can have a material impact on the carrying value of the asset.

In circumstances where indicators of impairment exist, under UK GAAP, the carrying value of an income-generating unit (“IGU”) is assessed by reference to the greater of value in use, which is defined as the present value of discounted cashflows, and net realizable value. The outcome of such an assessment is subjective, and the result sensitive to the discount rates applied in calculating the value in use, which will be dependent on the type of asset and its location. Any impairment arising on an income-generating unit, other than an impairment which represents a consumption of economic benefits, is eliminated against any specific revaluation reserve

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relating to the impaired assets in that income-generating unit with any excess being charged to the profit and loss account. Under US GAAP, the assessment of an IGU’s carrying value is by reference in the first instance to undiscounted cashflows. To the extent that undiscounted cashflows do not support carrying value, the fair value of assets must be calculated and the difference to the current carrying value charged to the profit and loss account.

During 2003, under UK GAAP, the Company recorded an impairment of its tangible fixed assets of £73 million, all of which relates to Hotels and represents 2% of the total carrying value of tangible fixed assets. This was recorded as a £51 million charge against operating profit and £22 million reversing previous revaluation gains. For the purposes of US GAAP, the Company recorded an impairment of its tangible fixed assets of £6 million, all of which relates to a small number of short leasehold hotels.

Under UK GAAP and US GAAP the Group reviews its fixed asset investments on an annual basis by comparing the carrying value to current market value in cases where the investment is traded on a public exchange. During 2003, the Group recorded provisions against fixed asset investments primarily comprising a charge for diminution in value of the Group’s interest in FelCor Lodging Trust Inc. a US hotel real estate investment trust. This charge reflects the directors’ view that the value of the investment is equivalent to market value at December 31, 2003.

OPERATING RESULTS

Accounting Principles

The following discussion and analysis is based on the Consolidated Financial Statements of the Group, which are prepared in accordance with UK GAAP. The principal differences between UK GAAP and US GAAP as they relate to the Group are discussed in Note 32 of Notes to the Financial Statements.

UK Urgent Issues Task Force (“UITF”) Abstract 38 ‘Accounting for ESOP Trusts’ has been applied for the first time in the period ended December 31, 2003. UITF 38 requires that ESOP shares should be deducted from shareholders’ funds rather then being shown as an asset and requires a profit and loss account charge in respect of all share awards issued at a discount to the market price on the award date. This change in accounting policy has been accounted for as a prior year adjustment and previously reported figures have been restated accordingly. The effect has been to decrease the Group’s net assets by £31 million as at September 30, 2002 with no impact on the profit and loss accounts for the 12 months ended September 30, 2002 and 2001.

Other than the above, the Consolidated Financial Statements have been prepared using accounting policies unchanged from the previous year.

For the 15 months ended December 31, 2003 the results include exceptional items totaling £400 million – see “15 months ended December 31, 2003 Compared to fiscal 2002 – Exceptional Items” below. Fiscal 2002 results include exceptional items totaling a net charge of £24 million and fiscal 2001 results include exceptional items totaling a net charge of £41 million. For the comparability for the periods presented, some performance indicators in this Operating and Financial Review and Prospects discussion have been calculated after eliminating these exceptional items. Such indicators are prefixed with “adjusted”. A reconciliation to the amounts under UK GAAP including such exceptional items is included in Note 9 of Notes to the Financial Statements.

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15 months ended December 2003 Compared with Fiscal 2002

GROUP RESULTS		15 months ended December 31, 2003		Year ended September 30, 2002		12 months ended December 31, 2003		12 months ended December 31, 2002		3 months ended December 31, 2002
	(£ million)
Turnover:
Hotels		1,870		1,532		1,487		1,538		383
Soft Drinks		820		602		674		611		146
Turnover from continuing operations		2,690		2,134		2,161		2,149		529
Discontinued operations		793		1,481		451		1,486		342
Total turnover		3,483		3,615		2,612		3,635		871
Operating profit before exceptional items from continuing operations:
Hotels		251		266		203		252		48
Soft Drinks		95		63		83		68		12
Total operating profit before exceptional items from continuing operations		346		329		286		320		60
Operating exceptional items		(51	)	(77	)	(51	)	(77	)	—
Operating profit after exceptional items from continuing operations		295		252		235		243		60
Discontinued operations		137		289		85		281		52
Total operating profit		432		541		320		524		112
Exceptional items:
Continuing operations:
Cost of fundamental reorganization		(67	)	—		(67	)	—		—
Separation costs		(51	)	(4	)	(48	)	(4	)	(3)
Profit on disposal of tangible fixed assets		4		2		4		2		—
Provision against fixed asset investments		(56	)	—		(56	)	—		—
Discontinued operations:
Separation costs		(41	)	—		(41	)	—		—
Loss on disposal of tangible fixed assets		(2	)	(2	)	(2	)	(2	)	—
Profit on disposal of Bass Brewers		—		57		—		57		—
Profit on ordinary activities before interest		219		594		110		577		109

Group turnover from continuing operations for the 15 months ended December 31, 2003 was £2,690 million (£2,134 million for the year ended September 30, 2002). Excluding the effect of the longer period ended December 31, 2003, the results reflected the downturn in economic conditions within Hotels offset by a strong performance from Soft Drinks, due in part to the summer trading conditions.

Profit on ordinary activities before interest and exceptional items from continuing operations for the 15 months ended December 31, 2003 was £346 million (£329 million for the year ended September 30, 2002), reflecting the downturn in economic conditions noted above, offset to some extent by cost savings in Hotels from the reorganization review and strong performance from Soft Drinks.

Exceptional items for the 15 months ended December 31, 2003 after tax totaled £336 million and included an operating exceptional item of £51 million and non-operating exceptional items totaled £213 million. Details of the exceptional items are outlined under the heading “Exceptional Items” below.

Group net cash flow for the 15 months ended December 31, 2003 was an outflow of £22 million (outflow of £305 million for the year ended September 30, 2002). Cash inflow from operations for the 15 months ended December 31, 2003 was £795 million, up £75 million from the year ended September 30, 2002. Increased non-operating outflows during the 15 months ended December 31, 2003 included a £136 million premium on the early settlement of debt and £66 million of Separation costs. These items were offset by a £173 million decrease in expenditure on tangible fixed assets and a £131 million increase in proceeds from the sale of tangible fixed assets.

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Basic earnings per share for the 15 months ended December 31, 2003 was 2.6p (62.5p for the year ended September 30, 2002). Adjusted earnings per share, after eliminating the effect of exceptional items, was 48.4p for the 15 months ended December 31, 2003 (51.4p for the year ended September 30, 2002). Dividends for the 15 months ended December 31, 2003 were 21.15p per share. A reconciliation of actual to adjusted earnings per share is set out in Note 9 of Notes to the Financial Statements.

In conjunction with the Separation, the Group reorganized its debt financing. As a result, the majority of the Group’s existing debt was repaid and new facilities put in place for IHG. Subsequently, IHG issued €600 million of Guaranteed Notes.

Subsequent to year end the Group has commenced an on-market share repurchase program. See “Liquidity and Capital Resources – Sources of Liquidity”.

Exceptional Items

Following a review of the hotel estate, tangible fixed assets were written down by £73 million. £51 million has been charged as an operating exceptional item and £22 million reverses previous revaluation gains.

Provisions against fixed asset investments of £56 million primarily comprises a charge for diminution in the value of the Group’s interest in FelCor Lodging Trust Inc., a US hotel real estate investment trust. This charge reflects the directors’ view that the value of the investment is equivalent to market value at December 31, 2003.

A charge of £67 million was incurred related to the fundamental reorganization in Hotels.

The Group incurred £228 million of non-operating exceptional costs before tax associated with the Separation. The total cost of the Separation was £124 million. Of this figure, £4 million was charged in 2002 and £28 million related to bank facility fees that will be amortized to profit over the period of the facility. IHG’s share of the non-facility fee element of costs is £51 million, and of the facility fees is £13 million. A premium of £136 million was paid on the repayment of the Group’s EMTN loans and £250 million 10 3/8% debenture in January and February 2003, respectively.

These operating and non-operating exceptional items, together with their related tax credits, have been excluded in the calculation of adjusted earnings per share.

Net Interest

During the 15 months ended December 31, 2003, the majority of the Group’s debt funding was refinanced. This involved the repayment of most of the existing debt, establishment of new debt facilities and the issuance of €600 million Guaranteed Notes.

The net interest charge for the 15 months ended December 31, 2003 was £47 million compared to £60 million for the year ended September 30, 2002. The reduction in the interest charge was principally due to a weaker US dollar, lower average interest rates and lower average debt levels.

Taxation

Excluding the impact of exceptional items, the Group’s tax charge for the 15 months ended December 31, 2003 represented an effective rate of 10.8%, compared with 28.1% for the year ended September 30, 2002. The equivalent effective rate (excluding exceptional items) for IHG, excluding MAB, was 3.3% for the 15 months ended December 31, 2003 compared with 24.6% for the year ended September 30, 2002. The rates were substantially lower in 2003 due to the impact of provision releases relating to tax matters which were settled during the year or in respect of which the relevant statutory limitation period expired.

Excluding the effect of exceptional items and prior year items, the Group’s tax rate for the 15 months ended December 31, 2003 was 35.9% (35.8% for the year ended September 30, 2002). The equivalent rate excluding MAB was 36.5% for the 15 months ended December 31, 2003 and for the year ended September 30, 2002 38.4%. The difference from the UK statutory rate of 30.0% arose primarily due to overseas profits being taxed at rates higher than the UK statutory rate.

Earnings and Dividends

Earnings per share for fiscal 2002 have been restated using the aggregate of the weighted average number of shares of InterContinental Hotels Group PLC and Six Continents PLC adjusted to equivalent shares of InterContinental Hotels Group PLC.

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For the 15 months ended December 31, 2003, earnings available for shareholders totaled £19 million, compared with £457 million for the year ended September 30, 2002. The equivalent earnings per share were 2.6p and 62.5p, respectively.

Earnings per share for the 15 months ended December 31, 2003 and the year ended 30 September 2002, adjusted to eliminate the distorting effect of exceptional items, were 48.4p and 51.4p, respectively. A reconciliation of actual to adjusted earnings per share is set out in Note 9 of Notes to the Financial Statements.

The board has proposed a final dividend of 9.45p per share, bringing the total dividend since Separation to 13.5p per share in line with the expected amount referred to in the 2002 Six Continents Annual Report on Form 20-F.

Cash flow and Capital Expenditure

The Group’s operating cash flow for the 15 months ended December 31, 2003 increased by £340 million to £547 million from £207 million for the year ended September 30, 2002. Group net capital expenditure was down £265 million to £248 million; including £265 million of proceeds from the sale of tangible assets for the 15 months ended December 31, 2003 (£134 million for the year ended September 30, 2002).

Net interest paid fell £32 million to £30 million for the 15 months ended December 31, 2003, from £62 million for the year ended September 30, 2002.

The reduction in tax paid of £127 million reflects, principally, tax repayments received during the period and the impact of exceptional costs.

Highlights for the 12 months ended December 31, 2003

The results for the period reflect activity for the 15 months ended December 31, 2003 including the discontinued operations of MAB for the period up until Separation. Given the scale of the events surrounding the Separation, the audited consolidated financial statements do not readily facilitate an understanding of the continuing operations of IHG on a stand alone basis. The Company has, therefore, prepared unaudited financial information which shows the results for the Group as if IHG had been independent and operating under the financing and taxation structure put in place at the time of the Separation for the 12 months ended December 31, 2003 and 2002. This financial information comprises the results of those businesses that form IHG following the Separation. Because of the nature of this financial information, it cannot give a complete picture of the financial position of the Group. The information is provided as guidance only and should not be viewed as a substitute for the audited consolidated financial statements; it is not audited. Significant changes were also made to the financing structure of the Group as part of the Separation, making the Group results difficult to compare year-on-year. The financial information therefore represents the Group results as reported but after excluding the results of MAB and after having been adjusted to reflect the changes made to the financing and taxation structure as part of the Separation, on the assumption that this structure had been in place since October 1, 2001. The financial information has been prepared using accounting policies consistent with those used in the Group financial statements.

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	12 months ended December 31
Hotel results		2003		2002		Change %
	(£ million)
Turnover:
Americas		525		569		(8	)
EMEA		807		800		1
Asia Pacific		114		128		(11	)
Central		41		41		—
		1,487		1,538		(3	)
Operating profit before exceptional items:
Americas		161		173		(7	)
EMEA		92		120		(23	)
Asia Pacific		12		26		(54	)
Central		(65	)	(80	)	(19	)
		200		239		(16	)
Corporate recharges (1)		3		13		(77	)
		203		252		(19	)

(1) Corporate recharges totalled £3 million for the 12 months ended December 31, 2003 (£13 million for the 12 months ended December 31, 2002). These adjustments relate principally to charges to MAB and pension credits.

Turnover. Hotels turnover decreased £51 million (3.3%) from £1,538 million for the 12 months ended December 31, 2002, to £1,487 million for the 12 months ended December 31, 2003. While revenue rose £7 million (0.9%) in EMEA, the Americas and Asia Pacific were negatively impacted by exchange rate movements. The decline of the US dollar against sterling by 9.7% from the first to fourth quarters resulted in sterling reported turnover in the Americas finishing the 12 months down 7.7% and Asia Pacific down 10.9%.

Operating profit. Hotels operating profit before exceptional items for the 12 months ended December 31, 2003 was £200 million, down 16.3% (12 months ended December 31, 2002 £239 million). Trading was depressed in the first and second quarters by the threat and then outbreak of the war in Iraq and the outbreak of SARS in Asia and Canada. The weakening of the US dollar against sterling had a negative impact in the second half of the year in the Americas. In EMEA the owned and leased estate was negatively impacted by the combined effects of pre-opening costs, hotels opening towards the end of the period, and increased depreciation charges associated with prior year refurbishments. A reduction in overheads primarily driven from the reorganization review helped to offset some of the profit declines.

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Americas

	12 months ended December 31
		2003		2002		Change %
	($ million)
Turnover:
Owned and leased		481		481		—
Managed		46		51		(10	)
Franchised		327		325		1
		854		857		—
Operating profit before exceptional items:
Owned and leased		32		38		(16	)
Managed		7		11		(36	)
Franchised		279		269		4
		318		318		—
Regional overheads		(56	)	(58	)	(3	)
Total ($ million)		262		260		1
Sterling equivalent (£ million) (1)		161		173		(7	)

(1) The results have been translated into pounds sterling at weighted average rates of exchange for the year. The translation rates are fiscal 2003: £1=$1.62 (2002: £1=$1.48).

Operating profit before exceptional items for the Americas region for the 12 months ended December 31, 2003 of $262 million, marginally ahead of 2002 ($260 million 12 months ended December 31, 2002). The weakening of the US dollar against sterling had a negative impact in the second half of the year on sterling reported results and the Americas finished the 12 months ended December 31, 2003 with operating profit before exceptional items in sterling of £161 million, down 7% from the 12 months ended December 31, 2002. Total Americas overheads including direct costs, were down 10%, with the separately disclosed regional overheads down 3% reflecting implementation of initiatives arising from the reorganization review.

RevPAR performance in the franchised estate finished the 12 months ended December 31, 2003 0.3% down from the prior year at $46.61. The war in Iraq in the first half of the year contributed to the decline. In the third and fourth quarters, as a result of an improvement in domestic travel, the franchised estate recorded 1.5% and 2.7% RevPAR growth respectively. All brands recorded a stronger second half to the year, with InterContinental, Express and Staybridge Suite franchises all recording over 3.5% year-on-year growth for the second six months.

RevPAR growth in the owned and managed estates followed a similar trend with the second half of the year significantly up on the first. The InterContinental owned estate, with its major gateway city exposure, grew year-on-year in each quarter as stability returned to the travel market. The InterContinental hotels in Chicago, New York, San Francisco and Miami all recorded strong growth in the second half of the year. In July 2003, IHG sold 16 Staybridge Suites to HPT for $185 million, retaining management and branding.

Managed results include the full profit and loss account for certain properties where IHG is responsible for the underlying operations. Operating profit before exceptional items in the managed estate fell due to RevPAR declines in the managed InterContinental and Crowne Plaza estates in North and Latin America, and the agreed payments made to HPT under our management contract. In September, HPT converted 14 additional suite hotels to IHG’s Staybridge Suite brand and management.

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EMEA

	12 months ended December 31
		2003		2002		Change %
	(£ million)
Turnover:
Owned and leased		746		739		1
Managed		38		37		3
Franchised		23		24		(4	)
		807		800		1
Operating profit before exceptional items:
Owned and leased		77		115		(33	)
Managed		19		21		(10	)
Franchised		18		14		29
		114		150		(24	)
Regional overheads		(22	)	(30	)	(27	)
Total		92		120		(23	)

The managed and franchised estate in EMEA opened 40 hotels with over 6,500 rooms. Of these hotels, 78% were new build. As at December 31, 2003, there were a further 96 hotels with over 18,000 rooms signed and under development.

Turnover in EMEA totalled £807 million for the 12 months ended December 31, 2003, an increase of £7 million on 2002. Owned and leased turnover grew by £7 million with the reopening during the year of the refurbished InterContinental Le Grand Paris, and the opening of the newly built Crowne Plaza Brussels Airport, Holiday Inn Paris Disney, and three Express hotels in Germany. EMEA operating profit before exceptional items totalled £92 million for the 12 months ended December 31, 2003. The conversion of revenue to operating profit was depressed by the owned and leased estate, where the combined effects of pre-opening costs, hotels opening towards the end of the period, and increased depreciation charges associated with prior year refurbishment, all negatively impacted costs. Regional overheads fell £8 million to £22 million for the 12 months ended December 31, 2003 (£30 million for the 12 months ended December 31, 2002) as a result of the reorganization initiatives.

RevPAR in the region for the 12 months ended December 31, 2003 was 0.7% lower than the prior 12 months at $56.36. The trend in the first half of the year was similar to that experienced in the Americas, with trading primarily depressed by the threat and then outbreak of the war in Iraq. In the second half of the year the UK market showed signs of recovery, although the picture was less clear in Europe, with both the German and French markets experiencing mixed trading conditions.

The Holiday Inn UK estate recorded five consecutive months of RevPAR growth to finish the year up 2.3%, primarily driven by increased occupancy. The UK regions, with their domestic focus, recovered earlier than London and recorded seven consecutive months of growth. In London, December 2003 trading was particularly strong with the majority of the owned estate recording double digit RevPAR growth to end the month up 12.3%.

Across EMEA the InterContinental estate finished the year with an overall RevPAR decline of 5.7%. While the owned InterContinental estate finished down 8.0% due to its exposure to the main European gateways, the managed Middle East estate traded more positively with the comparable Middle East estate recording RevPAR growth of 2.7%.

Crowne Plaza finished the 12 months with RevPAR growth of 3.3% due to growth in the managed and franchised estates of 11.1% and 3.2% respectively. This performance was helped by the Middle East estate which finished the 12 months ended December 31, 2003 up 29.5%.

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Franchise turnover fell due to a fall in RevPAR and exchange rate movements, offset by growth in system size. Franchise profits grew primarily due to savings in franchise overheads realized as part of the organizational review.

During the year the InterContinental Le Grand Paris reopened after a full refurbishment to position the property at the top of the Paris market. The Holiday Inn Paris Disney opened, giving representation at one of Europe’s leading family leisure destinations and the Crowne Plaza Brussels Airport opened at the end of the year, giving the brand another defining asset at a major European airport.

Asia Pacific

	12 months ended December 31
		2003		2002		Change %
	($ million)
Turnover:
Owned and leased		154		156		(1	)
Managed		26		30		(13	)
Franchised		5		6		(17	)
		185		192		(4	)
Operating profit before exceptional items:
Owned and leased		18		27		(33	)
Managed		15		24		(38	)
Franchised		4		5		(20	)
		37		56		(34	)
Regional overheads		(18	)	(17	)	6
Total ($ million)		19		39		(51	)
Sterling equivalent (£ million) (1)		12		26		(54	)

(1) The results have been translated into pounds sterling at weighted average rates of exchange for the year. The translation rates are fiscal 2003: £1=$1.62 (2002: £1=$1.48).

System growth continued in the region with a net increase of over 3,000 rooms operated under management agreements. Highlights of the new openings were five new InterContinental hotels in Thailand, Australia and India, and four Holiday Inns in Greater China. The new Holiday Inns in China brought the system size to 44 hotels. There are also 18 management agreements signed, but under development, which will extend IHG’s leadership in the key Greater China market.

Turnover in Asia Pacific for the 12 months ended December 31, 2003 was $185 million, down $7 million (4%) from the 12 months ended December 31, 2002. In addition to the impact of the war in Iraq, trading in Asia Pacific was depressed by the Bali bombing and the SARS outbreak.

Trading at the InterContinental Hong Kong fell sharply in March 2003 in connection with the outbreak of SARS, but recovery commenced in the third and fourth quarters. The opening of the award-winning Spoon restaurant in the InterContinental Hong Kong in October lifted non-rooms revenue. In Australia, the Rugby World Cup gave trading a boost in the second half of the year.

Initiatives to increase revenue within the region included the roll-out of local websites for China, Australia and New Zealand, and the opening of a Central Reservations Office based in Guangzhou, The People’s Republic Of China, supporting calls in Cantonese and Mandarin. The addition during the year of Air China as a Priority Club Rewards partner further strengthened our travel alliances in the region.

The region continues to explore innovative deal structures, and the Group was awarded the ‘Deal of the Year’ award at the 2003 Asia Pacific Hotel Investment conference for securing the management of the new InterContinental Bangkok and a neighbouring hotel to open as a Holiday Inn in 2005.

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Central

	12 months ended December 31
		2003		2002		Change %
	(£ million)
Turnover		41		41		—
Gross central costs		(106	)	(121	)	(12	)
Net central costs (£ million)		(65	)	(80	)	(19	)
Dollar equivalent ($ million) (1)		(105	)	(121	)	(13	)

(1) The results have been translated into US dollars at weighted average rates of exchange for the year. The translation rates are fiscal 2003: $1=£0.62 (2002: $1=£0.66).

Central overheads principally comprise the costs of global functions that were centralised following the reorganization review, reduced by Holidex fee income. The reduction in gross central costs from £121 million for the 12 months ended December 31, 2002 to £106 million for 2003, primarily reflects savings driven from the reorganization review.

Cash flow and Investment

Following the Separation, the Group undertook a detailed review of its owned and leased portfolio to identify opportunities to lower capital intensity. The Group’s strategy is that it will, in general, only own assets if they have strategic value or generate superior returns. The Group have now developed plans for each owned asset taking into account a wide range of different criteria, including where relevant the state of the local market and readiness of the asset to be sold. It is currently estimated that the disposal program will involve the further sale of assets with a net book value of between £800 million and £1 billion. The scale and complexity of the program means that it will take some considerable time to complete and is subject to there being no significant adverse changes in market conditions.

In the 12 months ended December 31, 2003 the Group completed sales of fixed assets with proceeds of £254 million with an overall gain on sale of £4 million. The Group is in active negotiations on further sales and has a pipeline of disposals.

In July 2003, the Group completed the sale of a 16 property Staybridge Suites portfolio to HPT, one of the largest US hotel real estate investment trusts, for $185 million. Investment had been made into the Staybridge Suites portfolio by the Group to enable rapid entry to the important US extended stay market. The disposal to HPT achieved a reduction in capital employed within the business while retaining management and branding of the hotels.

The Group’s strategic relationship with HPT expanded further with the conversion in September 2003 of 14 further HPT owned hotels to the Staybridge Suites brand.

The sale of the InterContinental London May Fair for £115 million was completed in September 2003. With an alternative property in London, and with this property in need of refurbishment, IHG took the opportunity to reduce capital intensity in the business at a favorable price in excess of £400,000 per room.

In October 2003, IHG announced the acquisition of the Candlewood Suites brand in the US for $15 million from Candlewood Hotel Corporation. This brand’s positioning in the midscale extended stay segment will complement Staybridge’s upscale positioning. Candlewood Suites is an established brand of purpose built hotels with 109 properties on average less than five years old. The major owner of Candlewood properties is HPT, which owned 64 properties at the time of announcement and which, in a related transaction, purchased an additional 12 properties. IHG will manage all 76 of HPT’s properties under 20-year agreements, with options to extend. The transaction concluded on December 31, 2003.

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Soft Drinks

	12 months ended December 31
		2003	2002	Change %
	(£ million)
Turnover		674	611	10
Operating profit		83	68	22

Soft Drinks continues to grow its market share in a number of key segments in which it operates. In addition to a strong investment program in its key brands, Soft Drinks is also committed to an active new product development program, which has recently brought additional success to the business through its J₂O and Fruit Shoot brands. While this investment is driving top line revenue growth, Soft Drinks is also focused on effective cost and asset management to deliver an even higher level of earnings and Return on Capital Employed growth.

Turnover. As a result of favorable summer trading conditions the overall UK soft drinks market grew 8%. Soft Drinks turnover of £674 million was up 10% on the previous year. In the 12 months ended December 31, 2003, Soft Drinks grew its share of the carbonates market with Tango having an outstanding year, with volumes up 14%. Both Pepsi and 7UP also performed well with volumes up 3% and 6%, respectively. Following good performance in 2002, Robinsons continued to grow with sales excluding Fruit Shoot up a further 4% in 2003. Investment was made in further capacity to support the success of Fruit Shoot and J₂O, with both brands leading their respective market segments with volume growth in 2003 of 54% and 95%, respectively.

Operating profit. The business continued its focus on effective cost control, which along with the increase in turnover, contributed to an overall operating profit before exceptional items increase of 22% to £83 million for the 12 months ended December 31, 2003.

Cash flow and Investment

Operating cash flow for the 12 months ended December 31, 2003 was £71 million. Capital expenditure of £55 million for the 12 months ended December 31, 2003 was driven by expansionary investment in additional Fruit Shoot and J₂O production capacity, together with significant investment in a business transformation program. This, in addition to implementing new IT infrastructure, will significantly enhance operating efficiency.

Discontinued Operations – Mitchells and Butlers

The audited Group results for the 15 months ended December 31, 2003 includes MAB operations for the 28 weeks from October 1, 2002 until the Separation on April 15, 2003. For the year ended September 30, 2002 MAB results are included for the full fiscal year.

For the 28 weeks until Separation, turnover from MAB operations was £793 million, up 0.9% from the comparable period in the prior year (£786 million in the 28 weeks ended April 13, 2002). Underlying the 0.9% rise in turnover was a 1.0% fall in drink sales and a 2.7% rise in food sales. These comparisons were adversely affected by the timing of the important Easter trading period, which fell after the 28 week period in 2003 but within the 2002 trading period. MAB turnover for the year ended September 30, 2002 was £1,481 million.

MAB operating profit before exceptional items for the 28 weeks prior to the Separation was £137 million (£146 million in the 28 weeks ended April 13, 2002). Gross operating margins were maintained despite the different Easter period, higher employment and property costs arising from regulatory changes, and an increase in the pension charge. The reduction in operating profit was largely due to higher depreciation costs. MAB operating profit for the year ended September 30, 2002 was £289 million.

Operating cash flow generated by MAB was £152 million for the 28 weeks prior to the Separation (£72 million in the 28 weeks ended April 13, 2002). The improvement over the 28 weeks ended April 13, 2002 was attributable to a £64 million reduction in net capital expenditure and a favourable movement in working capital of £17 million. MAB operating cash flow for the year ended September 30, 2002 was £145 million.

Fiscal 2002 Compared with Fiscal 2001

Group

Total turnover fell by 10.4% from £4,033 million in fiscal 2001 to £3,615 million in fiscal 2002 (including turnover from MAB of £1,481 million compared to £1,560 million). Total operating profit before exceptional

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items of £618 million compared with £792 million in fiscal 2001 (including £289 million from MAB compared to £306 million in fiscal 2001). Profit before tax was £534 million in fiscal 2002, compared with £690 million in fiscal 2001; excluding exceptional items in both years, adjusted profit before tax was £558 million against £731 million in the previous year. Basic earnings per ordinary share was 62.5p compared with 60.6p in fiscal 2001; eliminating the impact of exceptional items, the adjusted earnings per ordinary share was 51.4p compared with 66.6p for fiscal 2001.

During fiscal 2002, Group turnover from continuing operations of £2,134 million fell by 13.7% on the previous year. Turnover in Hotels decreased 19.2% to £1,532 million in fiscal 2002. Soft Drinks turnover of £602 million was up 5.4% on fiscal 2001.

Operating profit from continuing operations and before exceptional items was £329 million against £486 million in fiscal 2001. Hotels operating profit before exceptional items was £262 million, down £165 million against fiscal 2001. Soft Drinks had a successful year with operating profit growth of over 10%.

The exceptional items before tax of £24 million included an operating exceptional item of £77 million and non-operating exceptional items totaling £53 million – see “Fiscal 2002 Compared with Fiscal 2001 – Exceptional Items” below. These operating and non-operating exceptional items have been excluded from the calculation of adjusted earnings per share.

Profit before tax was £534 million compared with £690 million in fiscal 2001; excluding exceptional items, profit before tax was £558 million against £733 million in the previous year. The taxation charge includes an exceptional credit of £114 million in respect of the release of over provisions for tax in respect of prior years, a charge of £10 million in relation to property disposals and a credit of £1 million in relation to Separation costs. Excluding the impact of exceptional items, the tax charge represented an effective tax rate of 28.1%, compared with (adjusted) 30.3% for fiscal 2001.

The Group operating cash inflow of £207 million was £91 million greater than in fiscal 2001. This increase was due to the reduced level of net capital expenditure for the Group’s continuing operations which reduced to £513 million from last year’s level of £868 million. Net debt at the end of the fiscal year amounted to £1,177 million, resulting in a balance sheet gearing ratio of 22.0%.

Hotels

It has not been possible to restate the fiscal 2001 hotels segmental information on a comparable basis to the fiscal 2003 and 2002 comparison above. Accordingly, to facilitate the comparison of fiscal 2002 with fiscal 2001 this section of the Operating and Financial Review and Prospects presents fiscal 2002 results on the basis of the 2001 presentation.

Turnover. Hotels turnover decreased by 17.0% from $2,726 million in fiscal 2001 to $2,262 million in fiscal 2002. Turnover comparisons to 2001 were distorted by two non-comparable items. First, the conversion of the Bristol hotels from operating leases to management contracts, effective in the main from July 1, 2001, and second, the inclusion of 12 months of turnover from the Posthouse business compared with only six months in fiscal 2001.

Operating profit. Operating profit before operating exceptional items fell to $387 million against $613 million in fiscal 2001 due to the full year impact of post September 11, 2001 trading and continued threat of terrorist activities and general economic downturn. In sterling terms, operating profit was £262 million against £427 million in 2001, a fall of 38.6%. The weighted average US dollar exchange rate to sterling for the year was $1.48 against $1.44 for fiscal 2001, which was marginally detrimental to the Group when its result was translated into sterling.

The operating mix of the varying business models (O&L, management contract and franchise) demonstrated some resilience to the difficult trading conditions, with the franchise and management contract income streams being less affected by the downturn than the O&L business. In the Americas, “drive versus fly” became a key factor in the face of reduced air travel, particularly in the first half of the year. The O&L estate saw a significant fall in operating profit, while the midscale franchise business operating profit was less affected. Upper upscale markets in major US cities suffered due to their dependence upon domestic and international airline travel, whereas the “drive to” midscale segment (where IHG’s franchise business is focused on Holiday Inn and Holiday Inn Express) performed better.

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The decline in international travel also impacted EMEA and, in particular, those key air travel gateway cities where IHG’s upper upscale hotel properties are concentrated: London, Paris and Amsterdam. Asia Pacific was also adversely affected by the reduction in international travel.

Americas. The Americas system size grew by 81 hotels and 6,435 rooms to 2,604 hotels with 373,322 rooms at the end of fiscal 2002. The increase in the Holiday Inn Express franchise system continued with another 88 properties added in the year, which more than offset a reduction in Holiday Inn rooms. The extended-stay brand, Staybridge Suites, also continued its expansion, with 11 hotels added in the year. Total Americas operating profit was $264 million compared with $345 million in fiscal 2001, a 23% decline.

The Americas region was the hardest hit by the events of September 11, 2001. RevPAR for the first six months of fiscal 2002 fell by 23% for InterContinental, 21% for Crowne Plaza, 12.8% for Holiday Inn, 3.7% for Holiday Inn Express and 11.2% for Staybridge Suites. The remainder of the year saw an improvement in RevPAR, and resulted in RevPAR for the full year being down 15.0% from the prior year for InterContinental, 14.7% for Crowne Plaza, 7.8% for Holiday Inn, 1.7% for Holiday Inn Express and 2.5% for Staybridge Suites.

Performance of the O&L estate in the Americas is heavily dependent upon profits from the upscale hotel properties in key cities. For the full year, RevPAR for the nine comparable O&L InterContinental hotels was down 12.7% from the prior year, with occupancy 0.2 percentage points higher and average daily rates 13.0% lower. The refurbishments of the New York, Chicago, Miami and San Francisco InterContinental hotels were substantially completed during fiscal 2002.

Crowne Plaza’s O&L hotels were impacted principally by the reduction in business, meeting and conference travel, driven by general weakness in the economy. Crowne Plaza also underperformed its competitive set partly due to a lack of distribution relative to principal branded competition in its segment. As a result, Crowne Plaza O&L RevPAR fell by 13.8% for 2002. Overall, the Americas O&L business made an operating profit of $23 million against $78 million in fiscal 2001.

The overall size of the midscale franchise estate (over 2,000 franchised hotels for both Holiday Inn and Holiday Inn Express) and the resilience of the franchise model to economic slowdown, meant that the business was better able to weather the difficult trading conditions. Operating profit at $200 million was only 10.7% lower than in fiscal 2001. RevPAR for Holiday Inn and Holiday Inn Express was down 7.1% and 1.6% respectively.

Americas managed and upscale franchise operating profit of $41 million was $2 million lower than in fiscal 2001, reflecting the same economic difficulties that affected the O&L estate.

Europe, the Middle East and Africa. EMEA turnover grew by 9.2% to £819 million from £750 million in fiscal 2001. Fiscal 2002, however, included the full year benefit of the Posthouse business acquired in April 2001. Operating profit was £125 million versus £202 million in fiscal 2001. The US economic slowdown had a strong knock-on effect on European capital city hotels, particularly in London, where the reduction in both US business and leisure travel affected occupancy levels and RevPAR. Upscale properties in London, Paris, Frankfurt, Amsterdam and Rome were particularly affected by the reduced level of international travel following the events of September 11, 2001.

In the O&L estate, InterContinental RevPAR (excluding the Paris Le Grand InterContinental) was down by 14.4% on fiscal 2001. The Paris Le Grand InterContinental closed in December 2001 for major refurbishment, while the InterContinental Madrid completed its refurbishment program during fiscal 2002.

The Holiday Inn O&L estate included the full year impact of the Posthouse hotels acquired in 2001. In the United Kingdom, RevPAR for the estate on a comparable basis fell by 9.9% as a consequence of the tough trading conditions, particularly in London which saw RevPAR declines of 20.7% on last year, due to the performance of the airport and central London hotels.

In the rest of Europe, properties in key cities suffered through the downturn in international travel, as reflected in EMEA’s Holiday Inn O&L RevPAR, which fell by 9.5% against fiscal 2001. Similarly, Crowne Plaza O&L RevPAR in EMEA fell by 11.0%.

Overall, EMEA O&L hotels generated an operating profit of £98 million compared with £171 million in fiscal 2001. In order to drive revenue growth, the region continued to invest in marketing and targeted sales campaigns, particularly in the Holiday Inn UK business.

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Operating profit for the managed and franchised business was £27 million, down from £31 million in fiscal 2001. In the franchised estate, Holiday Inn RevPAR was marginally ahead of 2001 and Express grew by 8.4%, but upscale properties were impacted by global economic conditions and uncertainty in the Middle East.

Asia Pacific. Turnover of $191 million was 31.7% higher than in fiscal 2001, mainly due to the full year contribution from the InterContinental Hong Kong, acquired in August 2001. Asia Pacific operating profit was $36 million, compared with $26 million in fiscal 2001.

The events of September 11, 2001 particularly impacted the InterContinental Hong Kong, whose customer base of which includes a large international travel element. The Australian O&L hotels performed ahead of their competitive sets, although RevPAR was 6.5% down on the prior year with occupancy 3.6 percentage points lower, reflecting the poor economic conditions in the region.

Other. The Other segment, which comprised central service costs and goodwill amortization, less other income items, was $97 million compared with $48 million in fiscal 2001. Dividends received from FelCor fell by $13 million to $9 million, while fiscal 2001 included $10 million of income from lease terminations that were not repeated in fiscal 2002. Increased central overheads reflected the continued drive behind global brand marketing and advertising.

Cash flow and investment. Net capital expenditure amounted to £259 million and included proceeds from disposals of £108 million.

In the Americas, major expansion projects focused on the owned estate and included the Houston Galleria conversion from Crowne Plaza to InterContinental, the development of the InterContinental Buckhead Atlanta and ongoing investment in owned Staybridge properties. The InterContinental refurbishment program included expenditure on hotels in New York, Chicago, Miami and San Francisco.

In EMEA, significant expansion expenditure included the Crowne Plaza Birmingham NEC and the Holiday Inn Paris Disneyland. The InterContinental refurbishment program focused upon the Paris Le Grand and Madrid hotels, while Holiday Inn UK capital expenditure was focused on the former Posthouse estate brand conversion.

Soft Drinks

Turnover. Overall, turnover was up by 5.4% to £602 million in fiscal 2002 on volumes up 4.4% on fiscal 2001.

Soft Drinks increased both its market share and operating profit. Robinsons’ volumes were up 13.0% on fiscal 2001. Pepsi volumes were up over 9% on fiscal 2001.

Operating profit. Strong business controls resulted in operating profit growth of over 10% to £63 million.

Cash flow and Investment. During the year, Soft Drinks made significant investment in new product development and increased its capacity for Fruit Shoot production. On August 14, 2002, Soft Drinks purchased the business and the rights in the United Kingdom and Republic of Ireland for Red Devil, an energy drink. Operating cash inflow was £77 million compared with £99 million in fiscal 2001, after capital expenditure of £31 million, up £3 million on fiscal 2001.

Discontinued Operations – Mitchells and Butlers

Total turnover fell by 5.1% from £1,560 million in fiscal 2001 to £1,481 million in fiscal 2002. Underlying this decline was the sale in 2001 of 988 pubs to Nomura. Total operating profit before exceptional items was down 5.5% to £289 million.

Cash flow and investment. MAB generated an operating cash inflow of £145 million in fiscal 2002 after net capital expenditure of £226 million. During the year, £163 million was spent on outlet acquisitions, conversions and expansion, which included £55 million on conversion of the former Allied Domecq pubs to MAB brands and formats.

Exceptional Items

Tangible fixed assets were written down by £113 million following an impairment review of the hotel estate; £77 million was charged as an operating exceptional item and £36 million reversed previous revaluation gains. Non-operating exceptional items of £57 million included the release of £48 million of disposal provisions

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no longer required and the receipt of £9 million in respect of the finalization of completion accounts issues, both of which related to the disposal of Bass Brewers in August 2000. In addition, £4 million was charged for costs incurred to September 30, 2002, in evaluating the Separation proposals announced by the board on October 1, 2002.

The taxation charge included an exceptional credit of £114 million in respect of the release of tax provisions from prior years, a charge of £10 million in relation to property disposals, and a credit of £1 million in relation to the Separation costs referred to above.

Net Interest

The net interest charge was £60 million compared to £59 million in fiscal 2001. The effect of a higher level of net debt was offset by lower average interest rates, a weaker US dollar exchange rate against sterling and the impact of translation hedging as set out below.

The use of interest rate and currency swaps for hedging purposes reduced the Group’s interest charge by a net £19 million, representing the difference between sterling deposit rates and US dollar, euro or Australian dollar borrowing rates, together with the additional interest payable under the interest rate swaps.

Taxation

Excluding the impact of the exceptional items, the tax charge represents an effective rate of 28.1%, compared with 30.3% for fiscal 2001.

Excluding the effect of exceptional items and prior year items, the Group’s tax rate was 35.8%. The difference from the UK statutory rate of 30.0% arose primarily due to overseas profits being taxed at rates higher than the UK statutory rate.

Earnings and Dividends

Earnings totaled £457 million in fiscal 2002, compared with £443 million in fiscal 2001, and the equivalent basic earnings per share, restated to reflect an equivalent number of IHG shares, were 62.5p and 60.6p, respectively.

A final Six Continents PLC dividend of 24.6p per share was declared on February 13, 2003, bringing the total dividend for 2002 to 35.3p. When restated to reflect an equivalent number of IHG shares, the total dividend for 2002 totaled 41.7p.

Cash Flow and Capital Expenditure

Operating cash inflow of £207 million was £91 million higher than cash inflow for fiscal 2001 of £116 million. This reflected a much lower level of net capital expenditure in the fiscal year, which decreased from £868 million in fiscal 2001 to £513 million in fiscal 2002. Hotels net capital expenditure was £348 million lower than in fiscal 2001, due in part to the fact that fiscal 2001 included the acquisition of the InterContinental Hong Kong for $346 million. MAB’s net capital expenditure of £227 million included £163 million in respect of outlet acquisitions, conversions and expansion which included £55 million on conversion of the former Allied Domecq pubs to MAB brands and formats.

Payment of interest, dividends and taxation of £497 million was £16 million lower than in fiscal 2001. Net debt at September 30, 2002, was £1,177 million, compared with £1,001 million at the start of the fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

IHG’s policy is to maintain a combination of medium-term and long-term capital market borrowings and committed bank facilities to ensure that it has sufficient financial resources to meet its medium-term funding requirements. At December 31, 2003, net debt was £569 million and gearing (net debt expressed as a percentage of shareholders’ funds) was 22%. Long-term borrowing requirements were met through Guaranteed Notes denominated in euro. Short-term and medium-term borrowing requirements are principally met from drawing under committed bank facilities. At December 31, 2003, committed bank facilities amounted to £962 million and uncommitted facilities to £80 million; of these total facilities, only £559 million was utilized. At December 31, 2003 gross debt (including currency swaps) amounted to £1,935 million, comprising £952 million of US dollar

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borrowings, £24 million of sterling borrowings, £772 million of euro borrowings, £84 million of Hong Kong dollar borrowings and the remainder denominated in a variety of other currencies (after the effect of currency swaps).

The Group also held short-term deposits and investments (including currency swaps) at December 31, 2003 amounting to £1,366 million. Credit risk on treasury transactions is minimized by operating a policy on investment of surplus funds that generally restricts counterparties to those with an A credit rating or better or those providing adequate security. Limits are also set on the amounts invested with individual counterparties. Most of the Group’s surplus funds are held in the United Kingdom or United States and there are no material funds where repatriation is restricted as a result of foreign exchange regulations

The Group continues to comply with all of the financial covenants in its loan documentation, none of which represents a material restriction on funding or investment policy in the foreseeable future.

Details of exchange and interest rate risk and financial instruments are disclosed in “Item 11. Quantitative and Qualitative Disclosures about Market Risk”.

Cash From Operating Activities

Cash flow from operating activities is the principal source of cash used to fund the ongoing operating expenses, interest payments, maintenance capital expenditure and dividend payments of the Group. The Group believes that the requirements of its existing business and future investment can be met from cash generated internally, disposition of assets and businesses and external finance expected to be available to it.

Cash Used for Investing Activities

Subsequent to the year end the Group commenced an on-market share repurchase program of up to £250 million, representing approximately 6% of the issued share capital. The precise timing of purchases and length of the program will be dependent upon, among other things, market conditions. Purchases have commenced under the existing authority from shareholders, which is subject to renewal at the next Annual General Meeting. Any shares repurchased under this program will be cancelled.

As of December 31, 2003, the Group had committed contractual capital expenditure of £63 million. Contracts for expenditure on fixed assets are not authorized by the directors on an annual basis, as divisional capital expenditure is controlled by cash flow budgets. Authorization of major projects occurs shortly before contracts are placed.

The Group intends to invest approximately £300 million net capital expenditure in 2004. This level of capital expenditure is reviewed regularly during the year and may be increased or decreased in the light of prevailing economic and market conditions and other financial considerations.

Contractual Obligations

The Company had the following contractual obligations outstanding as of December 31, 2003:

		Total amounts committed	Less than 1 year	1-3 years	3-5 years	After 5 years
	(£ million)
Long-term debt		1,001	13	494	62	432
Operating lease obligations		1,068	50	91	74	853
Other long-term obligations (1)		49	25	24	—	—
Capital contracts placed		63	63	—	—	—
		2,181	151	609	136	1,285

(1) Other long-term obligations includes credit balances on currency swaps, interest rate swaps, and pension obligations.

The Company may provide performance guarantees to third-party owners to secure management contracts. The maximum exposure under such guarantees is £88 million. It is the view of the directors that, other than to the extent that liabilities have been provided for in the Consolidated Financial Statements, such guarantees are not expected to result in financial loss to the Group.

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As of December 31, 2003, the Group had outstanding letters of credit of £18 million mainly relating to self-insurance programs.

The Group may guarantee loans made to facilitate third-party ownership of hotels in which the Group has an equity interest and also a management contract. As of December 31, 2003, the Group was a guarantor of loans which could amount to a maximum of £18 million.

The Group has given warranties in respect of the disposal of certain of its former subsidiaries. The Company believes that, other than to the extent that liabilities have been provided for in the Consolidated Financial Statements, such warranties are not expected to result in financial loss to the Group.

Pension Plan Commitments

In April 2003, MAB became the sponsoring employer for the Six Continents Pension Plan and the Six Continents Executive Pension Plan. Approximately 30% of the assets and liabilities of these Plans were transferred to the new InterContinental Hotels UK Pension Plan and the Britvic Pension Plan, which were established with effect from April 1, 2003. The defined benefits sections of both Plans are closed to new members.

Both of these Plans were formally valued as at April 1, 2003 in order for the actuary to make recommendations regarding future service contribution requirements. For the InterContinental Hotels Plan in the year ending December 31, 2004, the employer contribution rates were set out at 10.8% and 25.7% of pensionable earnings of the members of the main and executive defined benefit sections respectively. For the Britvic Plan the rates were set at 11.3% and 30.5% respectively.

Additional Group contributions of £4.5 million to the InterContinental Hotels Plan and £8.0 million to the Britvic Plan were paid in April 2003. A further £1.0 million was paid into the Britvic Plan in January 2004.

The initial valuations did not cover the past service funding position, which will be considered at the next formal actuarial valuations as at April 1, 2004. Informal figures determined by the actuary as at December 31, 2003 showed the InterContinental Hotels Plan’s defined benefits to be 120% funded on the statutory minimum funding requirement (“MFR”) basis and 85% funded (representing a £21 million deficit) on an ongoing basis. The comparable figures for the Britvic Plan’s defined benefits were 127% funded on the MFR basis and 87% funded (representing a £34 million deficit) on an ongoing basis. Future funding requirements will be determined on a triennial basis following actuarial valuations.

The Company also maintains the US-based Inter-Continental Hotels Pension Plan. The Plan is closed to new members and pensionable service no longer accrues for current employee members. As at December 31, 2003 the assets at market value were $85 million and the liabilities (on a FAS 87 ‘Projected Benefits Obligation’ basis) $116 million, showing a deficit of $31 million. No Company contributions were made to this Plan over the 15 months to December 31, 2003. The statutory minimum that must be contributed by December 31, 2004 is $18 million.

The InterContinental Hotels Group will be exposed to the funding risks in relation to the defined benefit sections of the InterContinental Hotels and Britvic Plans and the Inter-Continental Hotels Pension Plan, as explained in “Item 3. Key Information – Risk Factors”.

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ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS AND SENIOR MANAGEMENT

Overall strategic direction of the Group is provided by the board of directors, comprising executive and non-executive directors, and members of the executive committee.

The directors and officers of InterContinental Hotels Group PLC as at April 8, 2004 are:

Directors

Name	Title	Initially appointed to the board	Date of next reappointment by shareholders (2)
Richard Hartman	Director and Managing Director, EMEA	2003	2004
Ralph Kugler (1)	Director	2003	2004
Robert C Larson (1)	Director	2003	2004
Richard North	Director and Chief Executive	2003	2004
	Chairman of Britvic Soft Drinks
Stevan Porter	Director and President, Americas	2003	2004
David Prosser (1)	Director and senior independent director	2003	2004
Richard Solomons	Director and Finance Director	2003	2004
Sir Howard Stringer (1)	Director	2003	2004
David Webster (1)	Chairman	2003	2004

Officers

Name	Title	Initially appointed
Peter Gowers	Executive Vice President, Global Brand Services	2003
A. Patrick Imbardelli	Managing Director, Asia Pacific	2003
Jim Larson	Executive Vice President, Human Resources	2003
Richard Winter	Company Secretary, General Counsel and Executive Vice President, Corporate Services	2003

(1) Non-executive director.

(2) All directors will be seeking reappointment at the Company’s Annual General Meeting on June 1, 2004.

Former Directors and Officers

During fiscal 2003, Sir Ian Prosser served as Chairman of the Company. Sir Ian retired as a director and Chairman on December 31, 2003.

Prior to Separation in April 2003, the following served as directors of Six Continents PLC: Roger Carr, Tim Clarke, Robert C Larson, Sir Geoffrey Mulcahy, Richard North, Thomas R Oliver, Sir Ian Prosser, Bryan Sanderson and Sir Howard Stringer.

Prior to Separation in April 2003, Karim Naffah and Richard Winter served as officers of Six Continents PLC.

Directors and officers

Richard Hartman
Joined the Group in 1999, as Managing Director, Asia Pacific. Subsequently, as Managing Director, EMEA, he was appointed an executive director in April 2003. Responsible for the business of all the Hotel brands and properties in the EMEA region. Aged 58.

Ralph Kugler
Appointed a director in April 2003, he is President of Unilever Home and Personal Care in Europe and has held a variety of senior positions globally for Unilever. He was previously President of Unilever in Latin America. Aged 48.

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Robert C Larson

Appointed a director in April 2003, he is Managing Director of Lazard Frères & Co LLC and Chairman of Lazard Frères Real Estate Investors, LLC. He served as a non-executive director of Six Continents PLC (formerly Bass PLC) from 1996 until April 2003. Aged 69.

Richard North

Joined the Group in 1994 as Group Finance Director. Appointed Chief Executive of the Hotels business in October 2002 in anticipation of the Company’s listing in April 2003. He is Chairman of Britvic Soft Drinks, a non-executive Director of LogicaCMG PLC, the Company’s representative on FelCor Lodging Trust Inc and a member of the Executive Committee of the World Travel & Tourism Council. Aged 54.

Stevan Porter

Joined the Group in 2001 as Chief Operating Officer of the Americas. Subsequently, as President of the Americas, he was appointed an executive director in April 2003. Responsible for the business of all the Hotel brands and properties in the Americas region. Aged 49.

David Prosser

Appointed a director in April 2003, he is Group Chief Executive of Legal & General Group Plc. He is a member of the Board of the Association of British Insurers and a director of the Royal Automobile Club Limited. Appointed senior independent director in January 2004. Aged 59.

Richard Solomons

Joined the Group in 1992, and held a variety of senior finance and operational roles. Appointed Finance Director of the Hotels business in October 2002 in anticipation of the Company’s listing in April 2003. Responsible for finance and asset management, tax, treasury and central shared services. Aged 42.

Sir Howard Stringer

Appointed a director in April 2003. He is a director of the Sony Corporation and Chairman and Chief Executive Officer of Sony Corporation of America. He served as a non-executive director of Six Continents PLC from 2002 until April 2003. Aged 62.

David Webster

Appointed Deputy Chairman and senior independent director in April 2003. Appointed non-executive Chairman on 1 January 2004. He was Chairman of Safeway plc from 1997 until March 2004 when he relinquished this position on completion of the sale of Safeway. Formerly a non-executive director of Reed Elsevier PLC. Aged 59.

Peter Gowers

Joined the Group in 1999 and appointed Executive Vice President, Global Brand Services in 2003. Responsible for Group strategy, worldwide marketing and distribution, loyalty programs and revenue management. Aged 31.

A. Patrick Imbardelli

Joined the Group in 2000 and appointed Managing Director, Asia Pacific in January 2003. Responsible for the business of all the Hotel brands and properties in the Asia Pacific region. Aged 43.

Jim Larson

Joined the Group in 2002 as Executive Vice President, Human Resources. Responsible for maximizing all factors of human capital investment. Aged 51.

Richard Winter

Joined the Group in 1994 as Director of Group Legal. Now Company Secretary, General Counsel and Executive Vice President, Corporate Services with responsibility for corporate governance, risk management, internal audit and a range of administrative matters. Aged 55.

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COMPENSATION

In fiscal 2003, the aggregate compensation (including pension contributions, bonus and awards under the long term incentive plans) of the directors and officers of the Company was £8,265,000. The aggregate amount set aside or accrued by the Company in fiscal 2003 to provide pension retirement or similar benefits for those individuals was £530,000. An amount of £2,275,000 was charged in fiscal 2003 in respect of bonuses payable to them under performance related cash bonus schemes and long term incentive plans.

Note 4 of Notes to the Financial Statements sets out the aggregate compensation of individual directors. The following are details of the Company’s principal share schemes, in which the directors of the Company participated during the period.

Former Six Continents Share Schemes

Under the terms of the Separation, holders of options under the Six Continents Executive Share Option Schemes were given the opportunity to exchange their Six Continents PLC options for equivalent value new options over IHG PLC shares. As a result of this exchange, 23,195,482 IHG PLC shares were put under option at prices ranging from 295.33p to 593.29p. The exchanged options are immediately exercisable and are not subject to performance conditions.

Options held under the Six Continents Savings Related Share Option Schemes by eligible UK employees became exercisable for a period of six months from April 11, 2003. Options exercised during this period resulted in the issue of 1,659,515 IHG PLC shares. The remainder of these options lapsed on October 11, 2003.

The Six Continents Employee Profit Share Scheme was available to UK employees with at least three years continuous service until 2002, following which, arising from changes introduced by the UK Government, no further profit allocations have been possible. In February 2003 the scheme released 1,408,292 Six Continents PLC shares out of profits appropriated to them by the Six Continents PLC board in 2000. Following Separation the Six Continents PLC shares held by the Trust on behalf of beneficiaries were exchanged for IHG PLC and MAB plc shares. As of March 22, 2004, 762,275 IHG PLC shares were held by the Trustees.

Under the terms of the Six Continents Special Deferred Incentive Plan, which enabled eligible employees to receive all or part of their annual bonus in the form of shares at the end of a specified period, 246,355 IHG PLC shares were transferred to 21 employees (including executive directors) in December 2003, reflecting entitlements existing prior to Separation.

New Share Plans established on Separation

Executive Share Option Plan

The Remuneration Committee, consisting solely of non-executive directors, may select employees, including executive directors, of the Group, for the grant of options to acquire ordinary shares in the Company. The option price will not be less than the market value of an ordinary share, or the nominal value if higher. The market value will be the quoted price on the business day preceding the date of grant, or the average of the middle market quoted prices on the three consecutive dealing days immediately preceding the date of grant. The International Schedule to the Scheme extends it to executives outside the United Kingdom. Grants of options under the Executive Share Option Plan are normally made annually and except in exceptional circumstances, will not, in any year, exceed three times annual salary for executive directors. A performance condition has to be met before options can be exercised. The performance condition is set by the Remuneration Committee.

In May and September 2003, options were granted to 170 employees over 7,375,272 IHG PLC shares at 438p and 491.75p per share, respectively. For options granted in 2003, the Company’s adjusted earnings per share over the three-year period ending December 31, 2005 must increase by at least nine percentage points over the increase in the UK Retail Prices Index for the same period for any of the award to vest.

Short Term Deferred Incentive Plan

The IHG Short Term Deferred Incentive Plan (the “STDIP”) enables eligible employees, including executive directors, to receive all or part of their bonus in the form of IHG PLC shares together with, in certain cases, a matching grant of free shares. The bonus and matching shares are deferred and released in equal amounts at the end of each of the three years following deferral. Participation in the STDIP is at the discretion of the IHG directors. The number of shares is calculated by dividing a specific percentage of the participant’s salary by the average share price for a period of days prior to the date on which the shares are granted. A number of executives participated in the plan during the period, but were not eligible to receive an award.

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Performance Restricted Share Plan

The Performance Restricted Share Plan allows executive directors and eligible employees to receive share awards, subject to the satisfaction of a performance condition, set by the Committee, which is normally measured over a three year period. Awards are normally made annually and, except in exceptional circumstances, will not exceed three times annual salary for executive directors. In determining the level of awards within this maximum limit, the Committee takes into account the level of Executive Share Options already granted to the same person. As of March 22, 2004 conditional rights over 5,281,020 IHG PLC shares had been awarded to 46 employees under the plan.

Sharesave Plan

The Sharesave Plan is a savings plan whereby employees contract to save a fixed amount each month with a Savings Institution for 3 or 5 years. At the end of the savings term, employees are given the option to purchase shares at a price set before savings began. The Sharesave Plan is available to all UK employees (including executive directors) employed by participating Group companies provided they have been employed for at least one year. The Plan provides for the grant of options to subscribe for ordinary shares at the higher of nominal value and not less than 80% of the middle market quotations of the ordinary shares on the three dealing days immediately following an announcement of results. As of March 22, 2004, 1,365,251 ordinary shares were subject to options under the Sharesave Plan at a subscription price of 420.5p, exercisable up to the year 2009.

Options and Ordinary Shares held by Directors

Details of the directors’ interests in the Company’s shares are set out below and in Note 4 of Notes to the Financial Statements.

BOARD PRACTICES

Service Agreements

The executive directors have service agreements with the Company. Prior to Separation, each of the executive directors of IHG, Richard Hartman, Richard North, Stevan Porter and Richard Solomons entered into service agreements with a notice period of 12 months. All new appointments are intended to have 12 month notice periods.

Sir Ian Prosser continued as executive Chairman of IHG under the terms of his previous service agreement until his normal retirement age of 60 years on July 5, 2003. After that date Sir Ian served as non-executive Chairman under revised terms, agreed prior to Separation, for a fixed period which expired on December 31, 2003.

Payments on Termination

No provisions for compensation for termination following change of control, or for liquidated damages of any kind, are included in the current directors’ contracts. In the event of any early termination of an executive director’s contract the policy is to seek to minimize any liability.

Upon retirement, and under certain other specified circumstances on termination of his employment, a director will become eligible to receive benefit from his participation in a Company pension plan. See Note 4 of Notes to the Financial Statements for details of directors’ pension entitlements at December 31, 2003.

Executive Committee

This Committee is chaired by the Chief Executive, Richard North. It consists of the executive directors and senior executives from the Group and the regions and usually meets monthly. Its role is to consider and manage a range of important strategic and business issues facing the Group. It is responsible for monitoring the performance of the regional Hotels businesses and the Britvic business and is authorised to approve capital and revenue investment within levels agreed by the board.

Audit Committee

The Audit Committee is chaired by David Webster. He will relinquish his role as Chairman of the Committee when a suitable replacement independent non-executive director has been approved by the Board. The Committee consists of all the non-executive directors (Ralph Kugler, Robert C Larson, David Prosser, Sir Howard Stringer and David Webster) and is scheduled to meet at least four times a year. The Committee assists

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the board in observing its responsibilities for ensuring that the Group’s financial systems provide accurate and up to date information on its financial position and that the Group’s published financial statements represent a true and fair reflection of this position. It also assists the board in ensuring that appropriate accounting policies, internal controls and compliance procedures are in place. The external auditor attends its meetings as does the Head of Internal Audit, who has direct access to the Chairman of the Committee.

To ensure that the independence and objectivity of the external auditor is not compromised, the Audit Committee has introduced a policy whereby all proposals for the provision of non-audit services by the external auditor must be pre-approved by the Audit Committee or its delegated member. At all times, the overriding consideration is to ensure that the provision of non-audit services does not impact the external auditor’s independence and objectivity.

Disclosure Committee

The Disclosure Committee, chaired by the Group’s Financial Controller, and comprising the Company Secretary and other senior executives, reports to the Chief Executive and the Finance Director, and to the Audit Committee. Its duties include ensuring that information required to be disclosed in reports pursuant to UK and US accounting, statutory or listing requirements, fairly represent the Group’s position in all material respects.

Remuneration Committee

The Remuneration Committee, chaired by David Prosser, consists of all the non-executive directors, excluding the non-executive Chairman (Ralph Kugler, Robert C Larson, David Prosser and Sir Howard Stringer), and meets at least three times a year. The Committee advises the board on overall remuneration policy. The Committee also determines, on behalf of the board, and with the benefit of advice from external consultants and members of the Human Resources department, the remuneration packages of the executive directors and other members of the Executive Committee. David Webster stepped down from the Committee upon his appointment as Chairman of the Company on January 1, 2004. No member of the Committee has any personal financial interest, other than as a shareholder, in the matters to be decided by the Committee.

Nomination Committee

The Nomination Committee’s quorum comprises any three non-executive directors although, where possible, all non-executive directors are present. It is chaired by the Chairman of the Company and is responsible for nominating, for the approval of the board, candidates for appointment to the board. The Committee generally engages external consultants to advise on candidates for Board appointments and did so in connection with the appointments of Messrs Kugler, Prosser and Webster. The Committee also assists the board in identifying and developing the role of the senior independent director.

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EMPLOYEES

The Group employed an average of 44,823 people worldwide in the 15 month period ended December 31 2003. Of these, approximately 79% were employed on a full-time basis and 21% were employed on a part-time basis.

The table below analyzes the distribution of the average number of employees for the last three fiscal periods by division and by geographic region.

	United Kingdom	Rest of Europe, the Middle East and Africa	United States		Rest of World	Total
			(Number	)
2003:
Hotels	11,174	5,585	5,704		4,648	27,111
Soft Drinks	2,698	—	—		—	2,698
InterContinental Hotels Group	13,872	5,585	5,704		4,648	29,809
Discontinued operations (1)	15,014	—	—		—	15,014
	28,886	5,585	5,704		4,648	44,823
2002:
Hotels	11,872	5,622	5,944		4,947	28,385
Soft Drinks	2,637	—	—		—	2,637
InterContinental Hotels Group	14,509	5,622	5,944		4,947	31,022
Discontinued operations	36,710	2,037	—		—	38,747
	51,219	7,659	5,944		4,947	69,769
2001:
Hotels	9,657	6,220	16,038		3,834	35,749
Soft Drinks	2,610	—	—		—	2,610
InterContinental Hotels Group	12,267	6,220	16,038		3,834	38,359
Discontinued operations	39,488	1,794	—		—	41,282
	51,755	8,014	16,038		3,834	79,641

(1) For the period from October 1, 2002 until Separation.

The decrease in employee numbers in InterContinental Hotels Group in the 15 month period was primarily due to the reorganization initiatives.

Under EU law, many employees of Group companies are now covered by the Working Time Regulations which came into force in the United Kingdom on October 1, 1998. These regulations implemented the European Working Time Directive and parts of the Young Workers Directive, and lay down rights and protections for employees in areas such as maximum working hours, minimum rest time, minimum days off and paid leave.

In the United Kingdom there is in place a national minimum wage under the National Minimum Wage Act. At December 31, 2003, the minimum wage for individuals under the age of 22 was £3.80 per hour and £4.50 per hour for individuals above the age of 22. This particularly impacts businesses in the hospitality and retailing sectors. Compliance with the National Minimum Wage Act is being monitored by the Low Pay Commission, an independent statutory body established by the UK Government.

Less than 5% of the Group’s UK employees are covered by collective bargaining agreements with trade unions.

Continual attention is paid to the external market in order to ensure that terms of employment are appropriate. The Group believes the Group companies will be able to conduct their relationships with trade unions and employees in a satisfactory manner.

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SHARE OWNERSHIP

The interests of the directors and officers in the shares of the Company at March 22, 2004 were as follows:

Directors	Ordinary shares of £1
Richard Hartman	30,345
Ralph Kugler	1,000
Robert C Larson	9,805
Richard North	171,470
Stevan Porter	56,754
David Prosser	5,000
Richard Solomons	17,956
Sir Howard Stringer	8,474
David Webster	5,824
Officers
Peter Gowers	—
A Patrick Imbardelli	7,929
Jim Larson	7,186
Richard Winter	8,244

The above shareholdings are all beneficial interests and include shares held on behalf of executive directors and officers by the Trustees of the Six Continents Employee Profit Share Scheme. None of the directors has a beneficial interest in the shares of any subsidiary.

On March 22, 2004, the executive directors’ technical interest in unallocated InterContinental Hotels Group PLC ordinary shares held by the Trustees of the ESOP was 2,157,501 shares.

The directors’ interests in options to subscribe for shares in InterContinental Hotels Group PLC are set out in Note 4 of Notes to the Financial Statements.

ITEM 7.     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

As far as is known to management, InterContinental Hotels is not directly or indirectly owned or controlled by another corporation or by any government. Under the provisions of Section 198 of the Companies Act, InterContinental Hotels has been advised of the following interests in its shares, being greater than 3% of its issued share capital as at the time of notification.

Identity of Person or Group	Number of shares/ADSs	Percent of Class
Dodge & Cox Funds (US)	25,106,594	3.4	%
Legal & General Group Plc (1)	29,924,045	4.1	%

(1) An interest in Six Continents PLC shares (representing 3.1% of the Company’s issued share capital) was disclosed in the Company’s Annual Reports on Form 20-F for fiscal 2002 and fiscal 2001.

The Company’s major shareholders do not have different voting rights from other shareholders of the Company. The Company does not know of any arrangements the operation of which may result in a change in its control.

As of March 10, 2004, 38,507,824 ADSs equivalent to 38,507,824 ordinary shares, or approximately 5% of the total ordinary shares in issue, were outstanding and were held by 1,163 holders. Since certain ordinary shares are registered in the names of nominees, the number of shareholders of record may not be representative of the number of beneficial owners.

As of March 10, 2004, there were a total of 93,299 record holders of ordinary shares, of whom 209 had registered addresses in the United States and held a total of 155,934 ordinary shares (0.02% of the total issued).

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RELATED PARTY TRANSACTIONS

Other than as herein described, the Company has entered into no related party transactions or loans. Richard North, as an InterContinental Hotels Group representative, is a non-executive director of FelCor Lodging Trust Inc, a US based franchisee of some of the Company’s hotel brands. Under the terms of an arrangement reached with Iain Napier, a former director of Six Continents, prior to the sale of Bass Brewers, he was entitled to certain benefits. Specifically, Mr Napier was entitled to an annuity (index linked at 5% per annum) after May 22, 2003 of approximately £24,000 per annum or an appropriate lump sum. In fiscal 2003, Mr Napier was paid £409,000 representing a lump sum under this agreement. (See Note 4 of Notes to the Financial Statements). Pursuant to an agreement dated February 12, 2003 Thomas R Oliver, a former director of Six Continents, is contracted to provide consultancy services to the Group. (See Note 4 of Notes to the Financial Statements).

During part of fiscal 2003, MAB was part of the Six Continents Group, and as a result the agreements entered into in connection with the Separation were with a related party at that time.

Summary of Main Agreements Relating to the Separation

Share Purchase Agreement to effect the MAB Transfer (the “MAB Transfer SPA”)

Under the MAB Transfer SPA, which was entered into between MAB and Six Continents PLC after MAB became the holding company of the Six Continents Group, Six Continents PLC transferred at book value the whole of the issued share capital of various Retail companies, namely Six Continents Retail Limited and Six Continents Retail Germany GmbH and their respective subsidiaries and subsidiary undertakings, and Six Continents Property Developments Limited to MAB (the “MAB Transfer”).

Under the MAB Transfer SPA, Six Continents PLC gave no warranties (other than as to ownership of the shares in the companies being transferred) and agreed to give certain limited indemnities to MAB. These indemnities were given to protect MAB against liabilities which it may incur and which relate exclusively or predominantly to InterContinental Hotels Group entities. In addition, Six Continents PLC indemnified MAB in respect of 50% of certain contingent liabilities which do not relate exclusively or predominantly to either MAB or InterContinental Hotels Group entities. These shared liabilities relate primarily to businesses which have been disposed of by the Six Continents Group or its subsidiaries in the past and where warranties or indemnities were given to third parties.

The MAB Transfer SPA also contained provisions relating to the allocation of tax liabilities and the conduct of the tax affairs of MAB and InterContinental Hotels Group relating to periods beginning before the reorganization was effected.

Separation Agreement

Following the MAB Transfer, an agreement was entered into between MAB and IHG PLC under which MAB agreed to transfer on the Separation date the whole of the issued share capital of Six Continents PLC (which at that point only owned the hotels business and soft drinks business) to IHG in consideration for which IHG allotted and issued IHG shares to the holders of MAB shares (the “Separation Agreement”). Each shareholder on the register of members of MAB, immediately before the transfer of the Six Continents PLC shares, received one IHG share for every MAB share held at that time. The holders of MAB ADSs on the ADR register maintained by the Depositary received one IHG ADS for every MAB ADS. A shareholder or ADR holder of MAB was not required to make any payment for the IHG shares or ADSs. The Separation did not affect the number of issued MAB shares or MAB ADSs.

All IHG shares received by MAB shareholders (including the Depositary) in connection with the Separation were credited as fully paid.

Under the Separation Agreement, MAB agreed to give certain limited indemnities to IHG. These indemnities were given to protect IHG against liabilities which it may incur but which relate exclusively or predominantly to Retail or SCPD. In addition, MAB indemnified IHG in respect of 50% of certain contingent liabilities which do not relate exclusively or predominantly to the Retail business and SCPD or to the hotels business and soft drinks business. These shared contingent liabilities relate primarily to businesses which have been disposed of by the Six Continents Group or its subsidiaries in the past and where warranties and indemnities were given.

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Relationship with Mitchells & Butlers plc

Following the Separation, MAB and IHG each operate as separate listed companies. There are no cross-directorships between MAB and IHG. The Transitional Services Agreement put in place on Separation contains certain obligations, which expired as of December 31, 2003. Certain other obligations are continuing. Neither the expired, nor the residual continuing obligations, are believed to be material.

Franchise Agreement for Express by Holiday Inn

Prior to Separation, a franchise agreement on arm’s length terms was entered into between a Group company (the “Licensor”) and an MAB Group company (the “Licensee”), pursuant to which the Licensor granted the Licensee the right to operate Express by Holiday Inn hotels operated by the Licensee. This license includes the rights to use the reservations and other systems of the Licensor, the trademarks and service marks and such other elements as designated from time to time by the Licensor, designed to identify “Express by Holiday Inn” hotels. In return, the Licensee pays a royalty to the Licensor, which is a pre-determined percentage of room revenues together with certain other fees as specified in the agreement. Each hotel has its own license agreement, which is typically for a ten-year period from the date of opening.

Britvic Supply Agreement

On February 7, 2003, Britvic Soft Drinks Limited and the MAB Group extended the terms of an existing Britvic Soft Drinks Limited supply agreement for five years from that date. Under the agreement, the MAB Group has a minimum purchase obligation for Britvic soft drinks across its estate which is well within the MAB Group’s actual usage levels.

ITEM 8.     FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

Financial Statements

See “Item 18. Financial Statements”.

Legal Proceedings

Group companies have extensive operations in the United Kingdom, as well as internationally, and are involved in a number of legal proceedings incidental to those operations. It is the Company’s view that the outcome of such proceedings, either individually or in the aggregate, is not likely to have a material effect on the results of the Group’s operations or its financial position.

Dividends

See “Item 3. Key Information – Dividends”.

SIGNIFICANT CHANGES

None.

ITEM 9.     THE OFFER AND LISTING

The principal trading market for the Company’s ordinary shares is the London Stock Exchange on which Six Continents shares were traded since its incorporation in 1967 until Separation in 2003 and on which InterContinental Hotels Group shares have been traded since Separation. The ordinary shares are also listed on the New York Stock Exchange trading in the form of ADSs evidenced by ADRs. Each ADS represents one ordinary share. InterContinental Hotels Group has a sponsored ADR facility with The Bank of New York as Depositary.

The last day of dealings in Six Continents shares and ADSs was on April 11, 2003 and the first day of dealings in InterContinental Hotels Group PLC and in Mitchells & Butlers plc shares and ADSs was April 15, 2003. The closing prices per Six Continents share and per ADS on April 11, 2003 were 592p and $9.36, respectively. The closing prices per IHG and per MAB share on April 15, 2003 were 372p and 222.5p, respectively. The closing prices per IHG and per MAB ADS on April 15, 2003 were $5.91 and $3.60, respectively.

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The following tables show, for the fiscal periods indicated, the reported high and low middle market quotations (which represent an average of closing bid and ask prices) for the ordinary shares on the London Stock Exchange, as derived from the Daily Official List of the UK Listing Authority, and the highest and lowest sales prices of the ADSs as reported on the New York Stock Exchange composite tape.

	£ per ordinary share			$ per ADS (1)
		High	Low		High	Low
Year ended September 30
1999		10.01	6.42		17.00	10.63
2000		8.42	5.80		13.75	8.50
2001		8.02	5.49		12.00	7.75
2002		7.83	5.41		11.73	7.49

15 months ended December 31
2003 – October 1 to April 11 Six Continents	6.34	4.62	10.08	7.73
2003 – April 15 to December 31 IHG	5.56	3.39	9.82	5.26

Year ended September 30
2002
First Quarter	7.34	6.00	10.97	8.73
Second Quarter	7.83	6.80	11.50	9.90
Third Quarter	7.80	6.66	11.80	10.11
Fourth Quarter	6.70	5.41	10.80	8.40

15 months ended December 31
First Quarter	5.90	4.60	9.23	7.94
Second Quarter	6.35	4.62	10.08	7.73
Third Quarter – April 1 to April 11 Six Continents	6.18	5.92	9.74	9.33
Third Quarter – April 15 to June 30	4.53	3.39	7.80	5.26
Fourth Quarter	5.25	4.40	8.52	7.13
Final Quarter	5.56	4.86	9.82	8.22
2004
First Quarter (through March 26, 2004)	5.77	4.80	10.76	8.92

Month ended
September 2003	5.12	4.76	8.52	7.64
October 2003	5.37	4.86	9.22	8.22
November 2003	5.56	5.20	9.55	8.99
December 2003	5.56	5.29	9.82	9.30
January 2004	5.76	5.29	10.80	9.57
February 2004	5.53	5.20	10.43	9.72
March 2004 (through March 26, 2004)	5.44	5.23	10.23	8.92

(1)     Intra day high and low prices.

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PLAN OF DISTRIBUTION

Not applicable.

SELLING SHAREHOLDERS

Not applicable.

DILUTION

Not applicable.

EXPENSES OF THE ISSUE

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

MEMORANDUM AND ARTICLES OF ASSOCIATION

The following summarizes material rights of holders of the Company’s ordinary shares under the material provisions of the Company’s memorandum and articles of association and English law. This summary is qualified in its entirety by reference to the Companies Act and the Company’s memorandum and articles of association. The Company’s memorandum and articles of association were filed as an exhibit to the Company’s Registration Statement on Form S-8 (File No. 1-10409) filed with the SEC on April 23, 2003.

The Company’s shares may be held in certificated or uncertificated form. No holder of the Company’s shares will be required to make additional contributions of capital in respect of the Company’s shares in the future.

In the following description, a “shareholder” is the person registered in the Company’s register of members as the holder of the relevant share.

Principal Objects

The Company is incorporated under the name InterContinental Hotels Group PLC and is registered in England and Wales with registered number 4551528. The Company’s memorandum of association provides that its objects include to acquire certain predecessor companies and carry on business as an investment holding company, to carry on business of brewers and distillers, licensed victuallers, to deal in commodities, to acquire and operate breweries, hotels and restaurants, as well as to carry on any other business which the Company may judge capable of enhancing the value of the Company’s property or rights. The memorandum grants to the Company a range of corporate capabilities to effect these objects.

Directors

Under the Company’s articles of association, a director may not vote in respect of any proposal in which he, or any person connected with him, has any material interest other than by virtue of his interests in securities of, or otherwise in or through, the Company. This is subject to certain exceptions relating to proposals (a) indemnifying him in respect of obligations incurred on behalf of the Company, (b) indemnifying a third party in respect of obligations of the Company for which the director has assumed responsibility under an indemnity or guarantee, (c) relating to an offer of securities in which he will be interested as an underwriter, (d) concerning another body corporate in which the director is beneficially interested in less than one percent of the issued shares of any class of shares of such a body corporate, (e) relating to an employee benefit in which the director will share equally with other employees and (f) relating to liability insurance that the Company is empowered to purchase for the benefit of directors of the Company in respect of actions undertaken as directors (or officers) of the Company.

The directors are empowered to exercise all the powers of the Company to borrow money, subject to the limitation that the aggregate amount of all moneys borrowed by the Company and its subsidiaries shall not

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exceed an amount equal to three times the Company’s share capital and aggregate reserves, unless sanctioned by an ordinary resolution of the Company.

Any director attaining 70 years of age shall retire at the next Annual General Meeting. Such a director may be reappointed but shall retire (and be eligible for reappointment) at the next Annual General Meeting.

Directors are not required to hold any shares of the Company by way of qualification.

Rights Attaching to Shares

Under English law, dividends are payable on the Company’s ordinary shares only out of profits available for distribution, as determined in accordance with accounting principles generally accepted in the United Kingdom and by the Companies Act. Holders of the Company’s ordinary shares are entitled to receive such dividends as may be declared by the shareholders in general meeting, rateably according to the amounts paid up on such shares, provided that the dividend cannot exceed the amount recommended by the directors.

The Company’s board of directors may pay shareholders such interim dividends as appear to them to be justified by the Company’s financial position. If authorized by an ordinary resolution of the shareholders, the board of directors may also direct payment of a dividend in whole or in part by the distribution of specific assets (and in particular of paid up shares or debentures of any other company).

Any dividend unclaimed after six years from the date the dividend was declared, or became due for payment, will be forfeited and will revert to the Company.

Voting Rights

Voting at any general meeting of shareholders is by a show of hands unless a poll, which is a written vote, is duly demanded. On a show of hands, every shareholder who is present in person or by proxy at a general meeting has one vote regardless of the number of shares held. On a poll, every shareholder who is present in person or by proxy has one vote for every £1 in nominal amount of the shares held by that shareholder. A poll may be demanded by any of the following:

• the chairman of the meeting;

• at least five shareholders entitled to vote at the meeting;

• any shareholder or shareholders representing in the aggregate not less than one-tenth of the total voting rights of all shareholders entitled to vote at the meeting; or

• any shareholder or shareholders holding shares conferring a right to vote at the meeting on which there have been paid-up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

A proxy form will be treated as giving the proxy the authority to demand a poll, or to join others in demanding one.

The necessary quorum for a general meeting is three persons carrying a right to vote upon the business to be transacted, whether present in person or by proxy.

Matters are transacted at general meetings of the Company by the proposing and passing of resolutions, of which there are three kinds:

• an ordinary resolution, which includes resolutions for the election of directors, the approval of financial statements, the cumulative annual payment of dividends, the appointment of auditors, the increase of authorized share capital or the grant of authority to allot shares;

• a special resolution, which includes resolutions amending the Company’s memorandum and articles of association, disapplying statutory pre-emption rights or changing the Company’s name; and

• an extraordinary resolution, which includes resolutions modifying the rights of any class of the Company’s shares at a meeting of the holders of such class or relating to certain matters concerning the Company’s winding up.

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An ordinary resolution requires the affirmative vote of a majority of the votes of those persons voting at a meeting at which there is a quorum.

Special and extraordinary resolutions require the affirmative vote of not less than three-fourths of the persons voting at a meeting at which there is a quorum.

In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting is entitled to cast the deciding vote in addition to any other vote he may have.

Annual General Meetings must be convened upon advance written notice of 21 days. Other meetings must be convened upon advance written notice of 21 days for the passing of a special resolution and 14 days for any other resolution, depending on the nature of the business to be transacted. The days of delivery or receipt of the notice are not included. The notice must specify the nature of the business to be transacted. The board of directors may if they choose make arrangements for shareholders who are unable to attend the place of the meeting to participate at other places.

Variation of Rights

If, at any time, the Company’s share capital is divided into different classes of shares, the rights attached to any class may be varied, subject to the provisions of the Companies Act, with the consent in writing of holders of three-fourths in value of the shares of that class or upon the adoption of an extraordinary resolution passed at a separate meeting of the holders of the shares of that class. At every such separate meeting, all of the provisions of the articles of association relating to proceedings at a general meeting apply, except that the quorum is to be the number of persons (which must be two or more) who hold or represent by proxy not less than one-third in nominal value of the issued shares of the class.

Rights in a Winding-up

Except as the Company’s shareholders have agreed or may otherwise agree, upon the Company’s winding up, the balance of assets available for distribution:

• after the payment of all creditors including certain preferential creditors, whether statutorily preferred creditors or normal creditors; and

• subject to any special rights attaching to any class of shares;

is to be distributed among the holders of ordinary shares according to the amounts paid-up on the shares held by them. This distribution is generally to be made in cash. A liquidator may, however, upon the adoption of an extraordinary resolution of the shareholders, divide among the shareholders the whole or any part of the Company’s assets in kind.

Limitations on Voting and Shareholding

There are no limitations imposed by English law or the Company’s memorandum or articles of association on the right of non-residents or foreign persons to hold or vote the Company’s ordinary shares or ADSs, other than the limitations that would generally apply to all of the Company’s shareholders.

MATERIAL CONTRACTS

The Separation agreements summarized in “Item 7. Major Shareholders and Related Party Transactions – Related Party Transactions – Summary of Main Agreements Relating to the Separation” are material contracts of the Group. In addition, the following contracts have been entered into otherwise than in the course of ordinary business by members of the Group either (i) in the two years immediately preceding the date of this document in the case of contracts which are or may be material or (ii) which contain provisions under which any Group member has any obligation or entitlement which is material to the Group as at the date of this document. To the extent that these agreements include representations, warranties and indemnities, such provisions are considered standard in an agreement of that nature, save to the extent identified below.

Disposal of Bass Brewers

The disposal agreement for Bass Brewers, including the business and assets of Bass Beers Worldwide, and Six Continents’ 80% shareholding in Praszke Pivovary, was entered into on June 14, 2000 between Six

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Continents and certain of its subsidiaries and Interbrew and certain of its subsidiaries. The transaction completed on August 22, 2000. Pursuant to the disposal agreement, certain subsidiaries of Interbrew acquired Bass Brewers from Six Continents’ subsidiaries. Both Six Continents and Interbrew guaranteed certain of their respective subsidiaries’ obligations under the disposal agreement.

The consideration for the sale of Bass Brewers was £2,300 million, comprising £1,426 million for the shares and assets and £874 million by way of repayment by Bass Brewers of net intra group debt owed to the Company (or members of the Group). An adjustment in respect of net assets was agreed on November 3, 2000. This involved a payment of £24 million from Interbrew to Six Continents. In fiscal 2002 a further payment of £9 million was received in respect of the finalization of completion account adjustments.

Under the disposal agreement, subsidiaries of Six Continents gave to Interbrew subsidiaries certain warranties and indemnities in relation to the shares and assets that were the subject of the disposal. In addition, Six Continents provided an indemnity in relation to the liabilities of Bass Holdings Limited (the holding company of Bass Brewers) arising out of that company having carried on the business of operation and management of licensed and unlicensed outlets as carried on by Six Continents Retail Limited, and other non-brewing businesses. MAB has indemnified the Group against claims relating to certain of these indemnities.

In connection with the disposal agreement, the parties entered into certain ancillary agreements on completion of the disposal which included: a soft drink supply agreement under which Six Continents PLC agreed to sell, or to procure the sale of, soft drinks to Bass Brewers for a term of five years; and ancillary intellectual property agreements governing the use of the Bass name and certain trademarks following the completion of the disposal.

Britvic Joint Venture Agreements

Britvic, Bass Public Limited Company (now Six Continents PLC), Whitbread and Company PLC, Allied-Lyons PLC and Allied Breweries Limited entered into a joint venture agreement dated February 10, 1986 under which Allied’s soft drinks business was acquired by Britvic (which at that time comprised the former soft drinks business of Six Continents and Whitbread and Company PLC in an existing joint venture) in exchange for which Allied received shares in Britvic. This agreement governs the relations of Six Continents, Whitbread and Allied as shareholders of Britvic. InterContinental Hotels became a party to this agreement (and Six Continents was released from its obligations) on March 10, 2004.

IHG Facility Agreement

On February 13, 2003, InterContinental Hotels Group PLC signed a new $2,650 million (subsequently reduced to $2,350 million) bank facility agreement with, among others, Barclays Capital, HSBC Bank plc, J.P. Morgan PLC, Salomon Brothers International Limited and The Royal Bank of Scotland plc acting as joint arrangers (the “Arrangers”) and HSBC Bank plc as agent.

Borrowings under the IHG Facility Agreement were made available in three tranches: tranche A consisted of a 364-day $887 million revolving loan credit facility with a 364-day term-out option; tranche B consists of a three-year $798 million term loan facility; and tranche C consists of a five-year $665 million revolving loan credit facility. Tranche A of the loan facility was repaid and canceled on October 20, 2003.

The interest margin payable on borrowings under the IHG Facility Agreement is determined by reference to the long-term credit rating of the Company and ranges from 0.70% per annum to 1.60% per annum. The margin was reduced by 0.05% per annum when tranche A was repaid and canceled and will be reduced by a further amount when tranche B is repaid and canceled, provided that the Company has an investment grade credit rating at that time.

Euro Medium Term Note Program

On October 20, 2003, InterContinental Hotels Group PLC issued €600 million of euro denominated Guaranteed Notes under its €1,000 million Medium Term Note facility established during fiscal 2003. The Guaranteed Notes, which have a final maturity date of October 20, 2010, carry a coupon of 4.75%, payable annually. IHG considers the restrictions and covenants relating to the notes to be customary for a facility of this nature.

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EXCHANGE CONTROLS

There are no restrictions on dividend payments to US citizens.

Although there are currently no UK foreign exchange control restrictions on the payment of dividends on the ordinary shares or the ADSs, from time to time English law imposes restrictions on the payment of dividends to persons resident (or treated as so resident) in or governments of (or persons exercising public functions in) certain countries (each of the foregoing, a “Prohibited Person”).

There are no restrictions under the articles of association or under English law that limit the right of non-resident or foreign owners to hold or vote the ordinary shares. However, under current English law, ordinary shares or ADSs may not be owned by a Prohibited Person. In addition, the Company’s articles of association contain certain limitations on the voting and other rights of any holder of ordinary shares, whose holding may, in the opinion of the directors, result in the loss or failure to secure the reinstatement of any license or franchise from any US governmental agency held by Six Continents Hotels Inc or any subsidiary thereof.

TAXATION

This section provides a summary of the material US federal income tax and UK tax consequences to US holders, as defined below, of owning and disposing of ordinary shares or ADSs of the Company. This section addresses only the tax position of a US holder who holds ordinary shares or ADSs as capital assets. This section does not, however, discuss the tax consequences of members of special classes of holders subject to special rules and holders that, directly or indirectly, hold 10% or more of the Company’s voting stock. This section does not generally deal with the position of a US holder who is resident or ordinarily resident in the United Kingdom for UK tax purposes or who is subject to UK taxation on capital gains or income by virtue of carrying on a trade, profession or vocation in the United Kingdom.

A US holder is a beneficial owner of shares or ADSs that is for US federal income tax purposes (i) a citizen or resident of the US, (ii) a US domestic corporation, (iii) an estate whose income is subject to US federal income tax regardless of its source, or (iv) a trust if a US court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.

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, and on UK tax laws and published practice of the UK Inland Revenue, all as currently in effect, and on the Double Taxation Convention between the United States and the United Kingdom that was ratified in March 2003 (the “New Treaty”) and the Double Taxation Convention between the United States and the United Kingdom as entered into force in 1980 (the “Old Treaty”). These laws are subject to change, possibly on a retroactive basis.

The provisions of the New Treaty were brought in on a number of different dates, each of which have now passed. However, a taxpayer may in any case elect to have the Old Treaty apply in its entirety for a period of twelve months after the applicable effective dates of the New Treaty. The New Treaty became effective in the United Kingdom on April 1, 2003 for corporation tax, on April 6, 2003 for income tax and capital gains tax, and on May 1, 2003 for taxes withheld at source. In the United States the New Treaty became effective on May 1, 2003 for taxes withheld at source and on January 1, 2004 for all other taxes.

This section is further based in part upon the representations of the Depositary and assumes that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms. For United States federal income tax purposes, a holder of ADRs evidencing ADSs will be treated as the owner of the shares represented by those ADRs. Generally, exchanges of ordinary shares for ADRs, and ADRs for ordinary shares, will not be subject to US federal income tax or UK taxation on capital gains.

Investors should consult their own tax advisor regarding the United States federal, state and local, the UK and other tax consequences of owning and disposing of shares and ADSs in their particular circumstances, and in particular whether they are eligible for the benefits of the New Treaty and/or the Old Treaty (and the advisability of making any election in relation to the application of the Old Treaty).

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Taxation of Dividends

United Kingdom Taxation

Under current UK tax law, the Company will not be required to withhold tax at source from dividend payments it makes. This position is reinforced by the New Treaty which does not impose UK withholding tax on dividends received by the US holder.

Under the Old Treaty, a US holder eligible for its benefits is entitled to a tax credit from the UK Inland Revenue equal to the amount of the tax credit available to an individual shareholder resident in the United Kingdom (i.e. one-ninth of the dividend received), but the amount of the dividend plus the amount of the refund are also subject to a notional withholding in an amount equal to the amount of the tax credit. The US holder therefore will not receive any repayment from the UK Inland Revenue in respect of a tax credit on a dividend paid by the Company.

United States Federal Income Taxation

Subject to the passive foreign investment company, or PFIC rules discussed below, a US holder is subject to US federal income taxation on the gross amount of any dividend paid by the Company out of its current or accumulated earnings and profits (as determined for US federal income tax purposes). Dividends paid to a non-corporate US holder in taxable years beginning after December 31, 2002 and before January 1, 2009 that constitute qualified dividend income will be taxable to the holder at a maximum tax rate of 15%, provided that the holder has a holding period of the shares or ADSs of more than 60 days during the 120-day period beginning 60 days before the ex-dividend date and meets other holding period requirements. The Internal Revenue Service recently announced that it will permit taxpayers to apply a proposed legislative change to this holding period requirement as if such change were already effective. This legislative “technical correction” would change the minimum required holding period, retroactive to January 1, 2003, to more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. The Company believes that dividends paid by the Company with respect to the shares or ADSs in 2003 constitute qualified dividend income.

Under the New Treaty, the US holder will include in gross income for United States federal income tax purposes only the amount of the dividend actually received from the Company, and the receipt of a dividend will not entitle the US holder to a foreign tax credit.

A US holder that is eligible for the benefits of the Old Treaty (and elects to apply such benefits) may include in the gross amount of the dividend the UK tax deemed withheld from the dividend payment pursuant to the Old Treaty, as described above. Subject to certain limitations, the UK tax deemed withheld in accordance with the Old Treaty and effectively paid over to the UK Inland Revenue will be creditable against the US holder’s US federal income tax liability, provided the US holder has properly filed Internal Revenue Service Form 8833. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% tax rate.

Dividends must be included in income when the US holder, in the case of shares, or the Depositary, in the case of ADSs, actually or constructively receives the dividend, and will not be eligible for the dividends-received deduction generally allowed to US corporations in respect of dividends received from other US corporations. Dividends will be income from sources outside the US, and will generally be “passive income” or “financial services income”, which is treated separately from other types of income for the purposes of computing any allowable foreign tax credit.

The amount of the dividend distribution will be the US dollar value of the pound sterling payments made, determined at the spot pound sterling/US dollar rate on the date the dividend distribution is includible in income, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in income to the date the payment is converted into US dollars will be treated as ordinary income or loss and, for foreign tax credit limitation purposes, from sources within the United States.

Distributions in excess of the Company’s current or accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a return of capital to the extent of the US holder’s basis in the shares or ADSs and thereafter as capital gain.

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Taxation of Capital Gains

United Kingdom Taxation

A US holder who is not resident or ordinarily resident for United Kingdom tax purposes in the United Kingdom will not be liable for UK taxation on capital gains realised or accrued on the sale or other disposal of ADSs or ordinary shares unless, at the time of the sale or other disposal, the US holder carries on a trade, profession or vocation in the United Kingdom through a branch, agency or permanent establishment and such ADSs or ordinary shares are or have been used, held or acquired for the purposes of such trade, profession or vocation.

A US holder of ADSs or ordinary shares who is an individual and who, broadly, has temporarily ceased to be resident or ordinarily resident in the UK for UK tax purposes for a period of less than five years of assessment and who disposes of ordinary shares or ADSs during that period may also be liable to UK tax on capital gains (subject to any available exemption or relief), notwithstanding the fact that such US holder was not resident or ordinarily resident in the United Kingdom at the time of the sale or other disposal. As described below, a US holder will be liable to US federal income tax on such gains.

United States Federal Income Taxation

Subject to the PFIC rules discussed below, a US holder that sells or otherwise disposes of shares or ADSs will recognize a capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realized and its tax basis, determined in US dollars, in the shares or ADSs. Generally, capital gain of a non-corporate US holder that is recognized on or after May 6, 2003 and before January 1, 2009 is taxed at a maximum rate of 15% where the holder has a holding period greater 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 losses is subject to limitations.

PFIC Rules

The Company believes that the Company shares and ADSs should not be treated as stock of a PFIC for US federal income tax purposes, but this conclusion is an annual factual determination and thus may be subject to change. If the Company were to be treated as a PFIC, unless a US holder elects to be taxed annually on a mark-to-market basis with respect to the Company shares or ADSs, gain realized on the sale or other disposition of Company shares or ADSs would in general not be treated as capital gain. Instead, gain would be treated as if the US holder had realized such gain ratably over the holding period for the Company shares or ADSs and, to the extent allocated to the first year in which the Company was a PFIC and subsequent years, would be taxed at the highest tax rate in effect 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. In addition, similar rules would apply to any “excess distribution” received on the Company shares or ADSs (generally, the excess of any distribution received on the Company shares or ADSs during the taxable year over 125% of the average amount of distributions received during a specified prior period), and the preferential rate for “qualified dividend income” would not apply.

Additional Tax Considerations

United Kingdom Inheritance Tax

An individual who is domiciled in the United States (for the purposes of the Estate and Gift Tax Convention) and is not a UK national as defined in the Convention will not be subject to UK inheritance tax in respect of ADSs on the individual’s death or on a transfer of the ADSs during their lifetime, provided that any applicable US federal gift or estate tax is paid, unless the ADSs are part of the business property of a UK permanent establishment or pertain to a UK fixed base of an individual used for the performance of independent personal services. Where the ADSs have been placed in trust by a settlor, they may be subject to UK inheritance tax unless, when the trust was created, the settlor was domiciled in the United States and was not a UK national. Where ADSs are subject to both UK inheritance tax and to US federal gift or estate tax, the Estate and Gift Tax Convention generally provides for either a credit against US federal tax liabilities for UK inheritance tax paid or for a credit against UK inheritance tax liabilities for US federal tax paid as the case may be.

United Kingdom Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)

The transfer of ordinary shares will generally be liable to stamp duty at the rate of 0.5% of the amount or value of the consideration given (rounded up to the nearest £5). An unconditional agreement to transfer ordinary shares will generally be subject to SDRT at 0.5% of the agreed consideration. However, if within the period of six years of the date of such agreement becoming unconditional an instrument of transfer is executed pursuant to the

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agreement and duly stamped, any liability to SDRT will usually be repaid, if already paid, or cancelled. The liability to pay stamp duty or SDRT is generally satisfied by the purchaser or transferee.

No stamp duty or SDRT will generally arise on a transfer of ordinary shares into CREST, unless such transfer is made for a consideration in money or money’s worth, in which case a liability to SDRT will arise, usually at the rate of 0.5% of the value of the consideration.

A transfer of ordinary shares effected on a paperless basis within CREST will generally be subject to SDRT at the rate of 0.5% of the value of the consideration.

Stamp duty, or SDRT, is generally payable upon the transfer or issue of ordinary shares to, or to a nominee or, in some cases, agent of, a person whose business is or includes issuing depositary receipts or the provision of clearance services. For these purposes, the current rate of stamp duty and SDRT is usually 1.5% (rounded up, in the case of stamp duty, to the nearest £5). The rate is applied, in each case, to the amount or value of the consideration or, in some circumstances, to the value or the issue price of the ordinary shares. In accordance with the terms of the deposit agreement, any tax or duty payable on deposits of ordinary shares by the depositary or by the custodian of the depositary will be charged to the party to whom ADSs are delivered against such deposits.

Provided that the instrument of transfer is not executed in the United Kingdom and remains at all subsequent times outside the United Kingdom, no stamp duty should be payable on the transfer of ADSs. An agreement to transfer ADSs in the form of depositary receipts will not give rise to a liability to SDRT.

DOCUMENTS ON DISPLAY

It is possible to read and copy documents referred to in this annual report on Form 20-F that have been filed with the SEC at the SEC’s public reference room located at 450 Fifth Street, NW, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. The Company’s SEC filings since May 22, 2002 are also publicly available through the SEC’s website located at http://www.sec.gov

ITEM 11.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Exchange and Interest Rate Risk, and Financial Instruments

The Group’s treasury policy is to manage financial risks that arise in relation to underlying business needs. The activities of the treasury function are carried out in accordance with board approved policies and are subject to regular audit. The treasury function does not operate as a profit center. Treasury activities include the use of spot and forward foreign exchange instruments, currency options, currency swaps, interest rate swaps and options, and forward rate agreements.

One of the primary objectives of the Group’s treasury risk management policy is to protect the financial covenant ratios in its loan documentation against the adverse impact of movements in interest rates and foreign exchange rates.

Movements in foreign exchange rates, particularly in the US dollar and the euro, can affect the Group’s reported net income, net assets, gearing (net debt expressed as a percentage of shareholders equity) and interest cover. As far as is reasonably practical, borrowings are taken out in foreign currencies (either directly or via currency swaps) which broadly match those in which the Group’s major overseas net assets are denominated. The interest on these borrowings hedges foreign currency denominated income streams. During the 15 months to December 31, 2003, the interest on US dollar borrowings hedged around 50% of the profit generated in US dollars, while interest on euro borrowings hedged around 86% of profit generated in euro and related currencies.

During fiscal 2002, the interest on US dollar borrowings hedged around 73% of the profit generated in US dollars, while interest on euro borrowings hedged around 85% of profit generated in euro and related currencies.

Foreign exchange transaction exposure is managed by the forward purchase of foreign currencies or the use of currency options. Most significant exposures of the Group are in currencies that are freely convertible.

Interest rate exposure is managed within parameters that stipulate that fixed rate borrowings should normally account for no less than 25%, and no more than 75%, of net borrowings for each major currency. This is achieved through the use of fixed rate debt, interest rate swaps and options (such as caps) and forward rate agreements. At December 31, 2003 56% of borrowings were at fixed rates and 44% were at variable rates. Based

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on the period end net debt position, and given the underlying maturity profile of investments, borrowings and hedging instruments at that date, a one percentage point rise in US dollar interest rates or a similar rise in euro rates would increase the net interest charge by approximately £4 million in each case. A similar movement in sterling rates would have the opposite effect, reducing the net interest charge by approximately £13 million.

At September 30, 2002, 34% of borrowings were at fixed rates and 66% were at variable rates. Based on the September 30, 2002 net debt position and given the underlying maturity profile of investments, borrowings and hedging instruments at that date, a one percentage point rise in US dollar interest rates or a similar rise in euro interest rates, would increase the net interest charge by approximately £8 million and £5 million, respectively. A similar movement in sterling rates would have the opposite effect, reducing the net interest charge by approximately £14 million.

Quantitative Information about Market Risk

Interest Rate Sensitivity

The tables below provide information about the Group’s derivative and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. For long-term debt obligations (excluding debt due entirely within one year), the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps and forward rate agreements, the table presents notional amounts and weighted average interest rates by expected maturity dates. Weighted average variable rates are based on rates set at the balance sheet date. The actual currencies of the instruments are indicated in parentheses.

At December 31, 2003	Expected to mature before December 31
	2004		2005		2006		2007		2008		Thereafter		Total		Fair value (1)
	(£ million, except percentages)
Long-Term Debt:
Fixed Rate (US dollar)	—		—		—		—		—		5.6		5.6		8.2
Average dollar interest rate	—		—		—		—		—		12.8	%	12.8	%	—
Fixed Rate (£)	—		—		—		18.1		—		2.8		20.9		20.6
Average interest rate	—		—		—		5.8	%	—		—		5.0	%	—
Fixed Rate (Euro)	0.9		0.8		1.0		31.9		9.7		420.2		464.5		466.4
Average interest rate	7.0	%	6.8	%	6.9	%	6.4	%	7.0	%	4.8	%	4.9	%	—
Variable Rate (various currencies)	1.9		41.0		451.2		1.4		1.4		2.6		499.5		499.5
Average interest rate	3.7	%	2.6	%	2.2	%	3.5	%	3.5	%	3.5	%	2.2	%	—
	(local currency million, except percentages)
Interest Rate Swaps and Forward rate agreements:
Principal (US dollar)	250		600		300		—		—		—		1,150		(44	)
Fixed rate payable	5.7	%	4.4	%	4.4	%	—		—		—		4.7	%	—
Variable rate receivable	1.2	%	1.2	%	1.2	%	—		—		—		1.2	%	—
Principal (Euro)	100		65		—		—		—		—		165		(4	)
Fixed rate payable	4.0	%	4.2	%	—		—		—		—		4.1	%	—
Variable rate receivable	2.2	%	2.2	%	—		—		—		—		2.2	%	—
Principal (Euro)	—		—		—		—		—		300		300		—
Variable rate payable	—		—		—		—		—		3.0	%	3.0	%	—
Fixed rate receivable	—		—		—		—		—		4.8	%	4.8	%	—
Principal (Australian dollar)	50		—		—		—		—		—		50		—
Fixed rate payable	4.7	%	—		—		—		—		—		4.7	%	—
Variable rate receivable	5.5	%	—		—		—		—		—		5.5	%	—
Principal (Hong Kong dollar)	370		—		—		—		—		—		370		(17	)
Fixed rate payable	5.2	%	—		—		—		—		—		5.2	%	—
Variable rate receivable	0.4	%	—		—		—		—		—		0.4	%	—

(1) Represents the net present value of the expected cash flows discounted at current market rates of interest.

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Interest rate option agreements

At December 31, 2003, the Group had not entered into any interest rate option agreements.

Exchange Risk Sensitivity

The following information provides details of the Group’s derivative and other financial instruments by currency presented in sterling equivalents. The tables above provide details of non-sterling denominated long-term debt obligations which are subject to foreign currency exchange rates movements while the table below presents amounts and weighted average rates of foreign currency forward exchange contracts held at December 31, 2003. All forward exchange agreements mature within one year.

	Receive for £
At December 31, 2003		Contract amount	Average contractual exchange rate
		(£ million)
US dollar		7.2	1.61
Euro		42.0	1.41
Total		49.2
Fair value		48.5

As part of the strategy to provide a currency hedge against currency net assets, the Group enters into currency swap agreements. A swap agreement has the effect of depositing cash surplus to immediate requirements and borrowing currencies which are required.

The Group had the following currency swap agreements at December 31, 2003:

		Deposited	Borrowed
		2003	2003
	(million)
Sterling to US dollar		£639	$1,097
Sterling to euro		£250	€364
Sterling to Australian dollar		£42	A$100
Sterling to New Zealand dollar		£19	NZ$51

ITEM 12.     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

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PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15.  CONTROLS AND PROCEDURES

As at the end of the period covered by this report, the Disclosure Committee carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)). These are defined as those controls and procedures designed to ensure that information required to be disclosed in reports filed under the Security Exchange Act of 1934 is recorded, processed, summarized and reported within the specified periods. Based on that evaluation, the Company’s management, including the Chief Executive and Finance Director, concluded that the Company’s disclosure controls and procedures were effective.

There have been no significant changes in the Company’s internal controls over financial reporting that occurred during the period covered by this Form 20-F that have materially affected, or are reasonably likely to materially affect, the Group’s internal control over financial reporting.

ITEM 16.  [RESERVED]

ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT

The Company does not currently have an “Audit Committee Financial Expert” as defined under the regulations of the US Securities and Exchange Commission. The board is nevertheless satisfied that the members of the Audit Committee, who also have access to independent experts and advisers, possess the appropriate skills and experience to carry out their duties as members of the Audit Committee. The board is seeking to add a member to the Audit Committee who meets the required definition, as soon as practicable.

ITEM 16B.  CODE OF ETHICS

The board has agreed the adoption of a specific Code of Ethics for Senior Financial Officers, consistent with the Company’s existing guidelines for proper business conduct. This Code of Ethics has been signed by the Chief Executive and the Finance Director of the Company and by the Group Financial Controller and regional financial heads. The Company has published its Code of Ethics for Senior Financial Officers on its website.

ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees for professional services provided by Ernst & Young LLP, the Group’s independent auditors in each of the last two fiscal periods in each of the following categories are:

		15 months ended December 31, 2003	Year ended September 30, 2002
	(£ million)
Audit fees		2.8	1.9
Audit related fees		7.2	3.2
Tax fees		1.2	1.2
All other fees		—	0.4
Total		11.2	6.7

Audit related fees include £6.3 million (2002 £1.7 million) in relation to the Separation and defense against a bid for Six Continents PLC in 2003. These costs have been charged to exceptional items (see Note 5 of Notes to the Financial Statements). Other audit related fees principally comprise accounting consultations, completion accounts and non-statutory reporting. Tax fees principally relate to tax compliance and tax advice services. Other fees in fiscal 2002 principally relate to Hotels internal audit services provided under an existing contract which has now been terminated.

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The Audit Committee has introduced a process to ensure that any non-audit services do not compromise the independence and objectivity of the external auditor and that relevant UK and US professional and regulatory requirements are met. A number of criteria are applied when deciding whether pre-approval for such services should be given. These include the nature of the service, the level of fees, and the practicality of appointing an alternative provider, having regard to the skills and experience required to supply the service effectively. Cumulative fees for audit and non-audit services are presented to the Audit Committee on a quarterly basis for review with all services provided under these pre-approval procedures. The Audit Committee is responsible for monitoring adherence to the pre-approval policy.

ITEM 16D.  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

ITEM 17.  FINANCIAL STATEMENTS

Not applicable.

ITEM 18.  FINANCIAL STATEMENTS

The following consolidated financial statements and related schedule, together with the report thereon of Ernst & Young LLP, are filed as part of this Annual Report:

	Page
Report and Consent of Independent Auditors	F-1
Financial Statements
Consolidated Profit and Loss Account for the 15 months ended December 31, 2003 and the years ended September 30, 2002 and 2001	F-2
Consolidated Statement of Total Recognized Gains and Losses for the 15 months ended December 31, 2003 and the years ended September 30, 2002 and 2001	F-3
Consolidated Balance Sheet at December 31, 2003 and September 30, 2002	F-4
Consolidated Statement of Changes in Shareholders’ Funds for the 15 months ended December 31, 2003 and the years ended September 30, 2002 and 2001	F-5
Consolidated Statement of Cash Flows for the 15 months ended December 31, 2003 and the years ended September 30, 2002 and 2001	F-7
Notes to the Financial Statements	F-8
Schedule for the 15 months ended December 31, 2003 and the years ended September 30, 2002 and 2001
Schedule II – Valuation and Qualifying Accounts	S-1

ITEM 19.  EXHIBITS

The following exhibits, other than Exhibits 13.1 and 13.2, are filed as part of this Annual Report:

Exhibit 1 Memorandum and Articles of Association of IHG (incorporated by reference to Exhibit 4 to InterContinental Hotels Group’s Registration Statement on S-8 (File No. 1-10409) filed with the SEC on April 23, 2003)

Exhibit 2(b)(i) Instruments defining the Rights of Holders of Long-Term Debt: The total amount of long-term debt securities of the Group authorized under any individual instrument, other than the “Amended and Restated Trust Deed” dated September 21, 2000 relating to the Company’s €2,000 million Debt Issuance Program originally constituted on October 9, 1998 (incorporated by reference to Exhibit 2 to Six Continents PLC’s Annual Report on Form 20-F (File No. 1-10409), dated December 20, 2001), and the “Trust Deed” dated September 24, 2003 relating to the Company’s €1,000 million Debt Issuance Program and filed as Exhibit 2(b)(i) hereto does not exceed 10% of the total assets of the Group on a consolidated basis. The Company agrees to furnish copies of any or all such instruments to the Securities and Exchange Commission upon request

79

Exhibit 4(a)(i) Agreement dated June 14, 2000 between the Company and others and Interbrew SA and others relating to the disposal of Bass Brewers (incorporated by reference to Exhibit 4 to Six Continents PLC’s Annual Report on Form 20-F (File No. 1-10409), dated December 21, 2000)

Exhibit 4(a)(ii) $2,650,000 Facility Agreement dated February 13, 2003 among IHG, Barclays Capital, HSBC Bank plc, J.P. Morgan PLC, Salomon Brothers International Limited and The Royal Bank of Scotland plc

Exhibit 4(a)(iii) Joint Venture Agreement, dated February 10, 1986, among Britannia Soft Drinks Limited, InterContinental Hotels Group PLC, Whitbread PLC, Allied Domecq PLC, Six Continents Investments Limited, Whitbread Group PLC and Allied Domecq Overseas (Canada) Limited

Exhibit 4(a)(iv) Mitchells & Butlers Group Transfer Share Purchase Agreement, dated April 15, 2003 (incorporated by reference to Exhibit 4(a)(ii) of Mitchells & Butlers plc’s Registration Statement on Form 20-F (file No. 001-31653), dated March 28, 2003)

Exhibit 4(a)(v) Separation Agreement dated April 15, 2003 between IHG and the Six Continents Group (incorporated by reference to Exhibit 4(a)(i) of Mitchells & Butlers plc’s Registration Statement on Form 20-F (file No. 001-31653), dated March 28, 2003)

Exhibit 4(c)(i) Richard Hartman’s service contract dated February 12, 2003

Exhibit 4(c)(ii) Richard North’s service contract dated February 12, 2003

Exhibit 4(c)(iii) Stevan Porter’s service contract dated February 12, 2003

Exhibit 4(c)(iv) Richard Solomons’ service contract dated February 12, 2003

Exhibit 4(c)(v) Sir Ian Prosser’s service contract dated February 12, 2003

Exhibit 4(c)(vi) Sir Ian Prosser’s service contract dated October 1, 1988 (incorporated by reference to Exhibit 4 of Six Continents PLC’s Annual Report on Form 20-F (File No. 1-10409), dated December 20, 2001)

Exhibit 4(c)(vii) Agreement, dated February 12, 2003, between Thomas R Oliver and Six Continents Hotels Limited (incorporated by reference to Exhibit 4 (c)(iv) of Six Continents PLC Annual Report on Form 20-F (File No. 1-10409) dated February 17, 2003)

Exhibit 4(c)(viii) Consultancy Agreement, dated February 12, 2003, between Thomas R Oliver and Six Continents Hotels Limited (incorporated by reference to Exhibit 4 (c)(v) of Six Continents PLC Annual Report on Form 20-F (File No.1-10409) dated February 17, 2003)

Exhibit 7 Computation of ratios of earnings to fixed charges

Exhibit 8 List of Subsidiaries

Exhibit 12.1 Certification of Richard North filed pursuant to 17 CFR 240.13a-14(c)

Exhibit 12.2 Certification of Richard Solomons filed pursuant to 17 CFR 240.13a-14(c)

Exhibit 13.1 Certification of Richard North furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.§1350 (a) and (b)

Exhibit 13.2 Certification of Richard Solomons furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.§1350 (a) and (b)

Exhibit 14(a) Consent of Ernst & Young LLP (included on page F-1)

80

INTERCONTINENTAL HOTELS GROUP PLC
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors

INTERCONTINENTAL HOTELS GROUP PLC

We have audited the accompanying consolidated balance sheets of InterContinental Hotels Group PLC as at December 31, 2003 and September 30, 2002, and the related consolidated profit and loss accounts and consolidated statements of total recognized gains and losses, changes in shareholders’ funds and cash flows for the 15 months ended December 31, 2003 and the years ended September 30, 2002 and 2001. Our audits also included the financial statement schedule listed in the Index at Item 18. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with United Kingdom auditing standards and United States generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of InterContinental Hotels Group PLC at December 31, 2003 and September 30, 2002, and the consolidated results of its operations and its consolidated cash flows for the 15 months ended December 31, 2003 and the years ended September 30, 2002 and 2001 in conformity with accounting principles generally accepted in the United Kingdom which differ in certain respects from those generally accepted in the United States (see Note 33 of Notes to the Financial Statements). Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

London, England
March 10, 2004

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements (Form F-3 No. 333-108084) and (Form S-8 Nos. 333-01572, 333-08336, 333-89508, 333-99785 and 333-104691) of InterContinental Hotels Group PLC of the reference to our name in “Item 3. Key Information” and our report dated March 10, 2004, on the consolidated financial statements and schedule both included in the Annual Report (Form 20-F) of InterContinental Hotels Group PLC for the 15 months ended December 31, 2003.

ERNST & YOUNG LLP

London, England
April 8, 2004

F-1

INTERCONTINENTAL HOTELS GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT

	15 months ended December 31						Year ended September 30
	2003						2002						2001
	Before exceptional items		Exceptional items		Total		Before exceptional items		Exceptional items		Total		Before exceptional items		Exceptional items		Total
	(£ million, except per ordinary share amounts)
Turnover – (Note 2)	3,483		—		3,483		3,615		—		3,615		4,033		—		4,033
Analyzed as:
Continuing operations	2,690		—		2,690		2,134		—		2,134		2,473		—		2,473
Discontinued operations	793		—		793		1,481		—		1,481		1,560		—		1,560
Costs and overheads, less other income – (Note 3)	(3,000	)	(51	)	(3,051	)	(2,997	)	(77	)	(3,074	)	(3,241	)	(43	)	(3,284	)
Operating profit – (Note 2)	483		(51	)	432		618		(77	)	541		792		(43	)	749
Analyzed as:
Continuing operations	346		(51	)	295		329		(77	)	252		486		(43	)	443
Discontinued operations	137		—		137		289		—		289		306		—		306
Non-operating exceptional items – (Note 5)	—		(213	)	(213	)	—		53		53		—		—		—
Analyzed as:
Continuing operations:
Cost of fundamental reorganization	—		(67	)	(67	)	—		—		—		—		—		—
Separation costs	—		(51	)	(51	)	—		(4	)	(4	)	—		—		—
Profit/(loss) on disposal of fixed assets	—		4		4		—		2		2		—		(2	)	(2	)
Provision against fixed asset investments	—		(56	)	(56	)	—		—		—		—		—		—
	—		(170	)	(170	)	—		(2	)	(2	)	—		(2	)	(2	)
Discontinued operations:
Separation costs	—		(41	)	(41	)	—		—		—		—		—		—
Loss on disposal of fixed assets	—		(2	)	(2	)	—		(2	)	(2	)	—		—		—
Profit on disposal of operations	—		—		—		—		57		57		—		2		2
	—		(43	)	(43	)	—		55		55		—		2		2
Profit on ordinary activities before interest – (Note 2)	483		(264	)	219		618		(24	)	594		792		(43	)	749
Interest receivable	104		—		104		116		—		116		165		—		165
Interest payable and similar charges – (Note 6)	(151	)	—		(151	)	(176	)	—		(176	)	(224	)	—		(224	)
Premium on early settlement of debt – (Note 5)	—		(136	)	(136	)	—		—		—		—		—		—
Profit on ordinary activities before taxation	436		(400	)	36		558		(24	)	534		733		(43	)	690
Tax on profit on ordinary activities – (Note 7)	(47	)	64		17		(157	)	105		(52	)	(222	)	(1	)	(223	)
Profit on ordinary activities after taxation	389		(336	)	53		401		81		482		511		(44	)	467
Minority equity interests	(34	)	—		(34	)	(25	)	—		(25	)	(24	)	—		(24	)
Earnings available for shareholders (i)	355		(336	)	19		376		81		457		487		(44	)	443
Dividends on equity shares – (Note 8)	(156	)	—		(156	)	(305	)	—		(305	)	(293	)	—		(293	)
Retained for reinvestment in the business	199		(336	)	(137	)	71		81		152		194		(44	)	150
Earnings per ordinary share – (Note 9)
Basic	48.4p		(45.8)p		2.6p		51.4p		11.1p		62.5p		66.6p		6.0p		60.6p
Diluted					2.6p						62.3p						60.2p

(i) A summary of the significant adjustments to earnings available for shareholders (net income) that would be required had United States generally accepted accounting principles been applied instead of those generally accepted in the United Kingdom is set out in Note 33 of Notes to the Financial Statements.

The Notes to the Financial Statements are an integral part of these Financial Statements.

F-2

INTERCONTINENTAL HOTELS GROUP PLC
CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES

		15 months ended December 31,		Year ended September 30
		2003			2002		2001
	(£ million)
Earnings available for shareholders		19			457		443
Reversal of previous revaluation gains due to impairment		(22	)		(36	)	—
Exchange differences (i) Goodwill eliminated — (Note 25)		(139	)		(98	)	9
Other assets and liabilities		79			62		(2	)
Other recognized gains and losses		(82	)		(72	)	7
Total recognized gains and losses for the period		(63	)		385		450
Prior year adjustment on adoption of FRS 19		—			(264	)	—
Total recognized gains and losses since previous year end		(63	)		121		450

(i) Foreign currency denominated net assets, including goodwill purchased prior to September 30, 1998 and eliminated against Group reserves, and related foreign currency borrowings and currency swaps, are translated at each balance sheet date giving rise to exchange differences which are taken to Group reserves as recognized gains and losses during the period.

(ii) The statement of comprehensive income required under United States generally accepted accounting principles is set out in Note 33 of Notes to the Financial Statements.

Note of historical cost Group profits and losses

		15 months ended December 31,		Year ended September 30
		2003			2002		2001
	(£ million)
Reported profit on ordinary activities before taxation		36			534		690
Realization of revaluation gains of previous periods		16			3		324
Adjustment for previously recognized revaluation losses		—			(37	)	—
Historical cost profit on ordinary activities before taxation		52			500		1,014
Historical cost (loss)/profit retained after taxation, minority equity interests and dividends		(121	)		118		474

The Notes to the Financial Statements are an integral part of these Financial Statements.

F-3

INTERCONTINENTAL HOTELS GROUP PLC
CONSOLIDATED BALANCE SHEET

	December 31,			September 30,
	2003			2002
				restated (i)
	(£ million)
Fixed assets
Intangible assets — (Note 15)		158			173
Tangible assets — (Note 16)		3,951			7,641
Investments — (Note 17)		172			218
		4,281			8,032
Current assets
Stocks — (Note 18)		44			91
Debtors — (Note 19)
Amounts falling due within one year		447			538
Amounts falling due after one year		76			91
Investments		377			218
Cash at bank and in hand		55			84
		999			1,022
Creditors: amounts falling due within one year — (Note 20)		(1,085	)		(2,273	)
Net current liabilities		(86	)		(1,251	)
Total assets less current liabilities		4,195			6,781
Creditors: amounts falling due after one year — (Note 21)		(1,085	)		(731	)
Provisions for liabilities and charges — (Note 22)
Deferred taxation		(314	)		(495	)
Other provisions		(79	)		(71	)
Minority equity interests		(163	)		(149	)
Net assets		2,554			5,335
Capital and reserves
Equity share capital		739			243
Share premium account		14			802
Revaluation reserve		258			1,020
Capital redemption reserve		—			853
Merger reserve		1,164			—
Other reserve		(11	)		(31	)
Profit and loss account		390			2,448
Equity shareholders’ funds (ii)		2,554			5,335

(i) Restated on the adoption of UITF 38 and for the reclassification of pension provisions (see Note 1).

(ii) A summary of the significant adjustments to shareholders’ funds that would be required had United States generally accepted accounting principles been applied instead of those generally accepted in the United Kingdom is set out in Note 33 of Notes to the Financial Statements.

The Notes to the Financial Statements are an integral part of these Financial Statements.

F-4

INTERCONTINENTAL HOTELS GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ FUNDS

	Share capital				Retained earnings and other reserves
	Number of ordinary shares (i)		Ordinary shares (i)		Share premium account (ii)		Revaluation reserve (ii)		Capital redemption reserve (ii)		Merger reserve	Other reserve (iii)		Profit and loss account		Total shareholders’ funds
	(millions)		(£ million)
At September 30, 2000	879		246		788		1,345		849		—	—		1,903		5,131
Prior year adjustment on adoption of UITF 38	—		—		—		—		—		—	(32	)	—		(32	)
At September 30, 2000 as restated	879		246		788		1,345		849		—	(32	)	1,903		5,099
Goodwill	—		—		—		—		—		—	—		(9	)	(9	)
Exchange adjustments on: assets	—		—		—		4		—		—	—		(5	)	(1	)
borrowings	—		—		—		—		—		—	—		8		8
Allotment of ordinary shares:
Option schemes (iv)	2		—		11		—		—		—	—		(2	)	9
Repurchase of ordinary shares	(15	)	(4	)	—		—		4		—	—		(103	)	(103	)
Realized revaluation surplus transferred to profit and loss account	—		—		—		(324	)	—		—	—		324		—
Retained income	—		—		—		—		—		—	—		150		150
At September 30, 2001 (iv)	866		242		799		1,025		853		—	(32	)	2,266		5,153
Goodwill – (Note 25)	—		—		—		—		—		—	—		98		98
Exchange adjustments on: assets	—		—		—		(3	)	—		—	—		(161	)	(164	)
borrowings and currency swaps	—		—		—		—		—		—	—		128		128
Allotment of ordinary shares:
Option schemes (v)	1		1		3		—		—		—	—		(1	)	3
Revaluation surplus realized on disposals	—		—		—		(3	)	—		—	—		3		—
Transfer of previously recognized revaluation losses	—		—		—		37		—		—	—		(37	)	—
Reversal of previous revaluation gains due to impairment	—		—		—		(36	)	—		—	—		—		(36	)
Allocation of shares in ESOP trusts	—		—		—		—		—		—	1		—		1
Retained income	—		—		—		—		—		—	—		152		152
At September 30, 2002 (iv)	867		243		802		1,020		853		—	(31	)	2,448		5,335
Separation of MAB:
Net assets of MAB eliminated	—		—		—		(743	)	—		—	—		(2,034	)	(2,777	)
Transfer to merger reserve	(133	)	491		(802	)	—		(853	)	1,164	—		—		—
MAB goodwill eliminated	—		—		—		—		—		—	—		50		50
Minority interest on transfer of pension prepayment	—		—		—		—		—		—	—		(7	)	(7	)
Reduction of shares in ESOP trusts	—		—		—		—		—		—	13		(5	)	8
Allotment of ordinary shares:
Option schemes (v)	5		5		14		—		—		—	—		(1	)	18
Allocation of shares in ESOP trusts	—		—		—		—		—		—	7		—		7
Goodwill – (Note 25)	—		—		—		—		—		—	—		139		139
Revaluation surplus realized on disposals	—		—		—		(16	)	—		—	—		16		—
Reversal of previous revaluation gains due to impairment	—		—		—		(22	)	—		—	—		—		(22	)
Exchange adjustments on: assets	—		—		—		19		—		—	—		(142	)	(123	)
borrowings and currency swaps	—		—		—		—		—		—	—		63		63
Retained loss	—		—		—		—		—		—	—		(137	)	(137	)
At December 31, 2003 (iv)	739		739		14		258		—		1,164	(11	)	390		2,554

(i) At September 30, 2001 and 2002 the authorized share capital of Six Continents PLC was £1,149 million, comprising 1,073 million ordinary shares of 28p each and 889 million cumulative preference shares of 95.5p each. All of the non-cumulative preference shares were redeemed by September 30, 2000.

InterContinental Hotels Group PLC (“IHG”) was incorporated in Great Britain and registered in England and Wales with registered number 4551528 on October 2, 2002 as a public limited company under the Companies Act 1985 with the name Hackplimco (No. 112) plc, and changed its name to InterContinental Hotels Group PLC on January 17, 2003.

On incorporation, the Company had an authorized share capital of £50,000, divided into 50,000 ordinary shares of £1 each, of which two ordinary shares were allotted, called up and fully paid. On February 6, 2003, the authorized share capital was increased to £10,000,050,000 by the creation of 9,999,950,000 additional ordinary shares of £1 each and one redeemable preference share of £50,000. The redeemable preference share so created was allotted and treated as paid up in full on this date.

The Notes to the Financial Statements are an integral part of these Financial Statements.

F-5

On April 15, 2003, the Separation of Six Continents PLC was completed and the entire issued share capital of Six Continents PLC was transferred to InterContinental Hotels Group PLC at fair market value, in exchange for the issue of 734 million fully paid ordinary shares of £1 each, which were admitted to the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange on that date. In accordance with the merger relief provisions of Sections 131 and 133 of the Companies Act 1985, the 734 million shares are recorded only at nominal value.

The redeemable preference share which was redeemed at par value on June 5, 2003, did not carry any right to receive dividends nor to participate in the profits of IHG.

The aggregate consideration in respect of ordinary shares issued in respect of option schemes during the period was £18 million (2002 £3 million, 2001 £9 million).

At the Annual General Meeting held on April 9, 2003 authority was given to the Company to purchase up to 14.99% of its own shares until the next Annual General Meeting, which will be held on June 1, 2004.

(ii) The share premium account, capital redemption reserve, revaluation reserve and merger reserve are not distributable.

(iii) Created on adoption of UITF 38 see Note 1. The other reserve comprises £10.5 million in respect of 2.2 million InterContinental Hotels Group PLC ordinary shares held by employee share trusts, with a market value at December 31, 2003 of £12 million.

(iv) Includes transfer of £1 million (2002 £1 million, 2001 £2 million) from the profit and loss account in respect of shares issued to the qualifying employee share ownership trust.

(v) Retained earnings and other reserves at December 31, 2003 were decreased by cumulative exchange adjustments of £63 million (2002 £142 million, 2001 £200 million).

The Notes to the Financial Statements are an integral part of these Financial Statements.

F-6

INTERCONTINENTAL HOTELS GROUP PLC CONSOLIDATED STATEMENT OF CASH FLOWS

	15 months ended December 31			Year ended September 30
	2003			2002			2001
	(£ million)
Operating activities – (Note 10)		795			720			984
Interest paid		(141	)		(186	)		(229	)
Costs associated with new facilities		(20	)		—			—
Premium on early settlement of debt		(136	)		—			—
Dividends paid to minority shareholders		(22	)		(13	)		(5	)
Interest received		111			124			160
Returns on investments and servicing of finance		(208	)		(75	)		(74	)
UK corporation tax received/(paid)		25			(96	)		(102	)
Overseas corporate tax paid		(21	)		(27	)		(47	)
Taxation		4			(123	)		(149	)
Paid:
Intangible fixed assets		(10	)		—			—
Tangible fixed assets		(475	)		(648	)		(939	)
Fixed asset investments		(37	)		(14	)		(37	)
Received:
Tangible fixed assets		265			134			101
Fixed asset investments		9			15			7
Capital expenditure and financial investment – (Note 12)		(248	)		(513	)		(868	)
Acquisitions		—			(24	)		(1,014	)
Cash and overdrafts acquired		—			—			262
Disposals		—			9			624
Cash and overdrafts disposed		—			—			(1	)
Separation costs		(66	)		—			—
Acquisitions and disposals		(66	)		(15	)		(129	)
Equity dividends		(299	)		(299	)		(290	)
Net cash flow		(22	)		(305	)		(526	)
Management of liquid resources – (Note 14)		(129	)		232			497
Financing – (Note 14)		206			63			(4	)
Movement in cash and overdrafts		55			(10	)		(33	)

(i) The significant differences between the cash flow statement presented above and that required under United States generally accepted accounting principles are described in Note 33 of Notes to the Financial Statements.

The Notes to the Financial Statements are an integral part of these Financial Statements.

F-7

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 1 — Accounting Policies

Basis of accounting

The financial statements of InterContinental Hotels Group are prepared under the historical cost convention as modified by the revaluation of certain tangible fixed assets. They have been drawn up to comply with applicable United Kingdom accounting standards, including Urgent Issues Task Force (“UITF”) Abstract 38 ‘Accounting for ESOP Trusts’ which has been applied for the first time in the 15 months ended December 31, 2003. An explanation of the effect of UITF 38 and a summary of the significant accounting policies are set out below.

Pensions provisions previously included in debtors and creditors: amounts falling due after one year have been reclassified within other provisions for liabilities and charges. Prior year amounts have been reclassified. There has been no overall impact on the Group’s net assets or profit and loss account.

UITF 38

UITF 38 ‘Accounting for ESOP Trusts’ was adopted for the first time in the 15 months ended December 31, 2003. UITF 38 requires that ESOP shares should be deducted from shareholders’ funds rather than being shown as an asset. This change in accounting policy has been accounted for as a prior year adjustment and previously reported figures have been restated accordingly. The effect has been to decrease the Group’s net assets by £31 million in 2002 (2001 £32 million) with no impact on the profit and loss account. UITF 38 has no impact on cash flows.

Separation transaction

On April 15, 2003, following shareholder and regulatory approval, Six Continents PLC separated into two new listed groups, InterContinental Hotels Group PLC comprising the Hotels and Soft Drinks businesses and Mitchells & Butlers plc comprising the Retail and Standard Commercial Property Developments (“SCPD”) businesses. The mechanics of the Separation are detailed below.

The legal structure of the transaction was such that Mitchells & Butlers plc acquired 100% of the issued share capital of Six Continents PLC following implementation of a Court approved Scheme of Arrangement under Section 425 of the Companies Act 1985. Shareholders of Six Continents PLC were allotted one Mitchells & Butlers plc share and an entitlement to a cash payment of 81p per share for each Six Continents PLC share held. This resulted in the issue of 866,665,032 Mitchells & Butlers plc ordinary shares of £4.20 each plus an undertaking to pay £702 million in cash.

On April 12, 2003, Six Continents PLC transferred the Retail and SCPD businesses to Mitchells & Butlers plc for £1,744 million and also paid a dividend to Mitchells & Butlers plc of the same amount.

On April 13, 2003, the ordinary share capital of Mitchells & Butlers plc was sub-divided and consolidated on a 50 to 59 basis which resulted in a reduction of the number of ordinary shares in issue to 734,461,900 with each share having a nominal value of £4.956.

On April 15, 2003, Mitchells & Butlers plc investment in Six Continents PLC was revalued to its market value. On the same day, the Court approved a reduction in the capital of Mitchells & Butlers plc. An amount equivalent to the market value of Six Continents PLC was returned to shareholders by the transfer of Six Continents PLC to InterContinental Hotels Group PLC and the issue by InterContinental Hotels Group PLC of ordinary shares to the shareholders of Mitchells & Butlers plc.

The Company issued 734,461,900 ordinary £1 shares, which were recorded at nominal value. In accordance with Sections 131 and 133 of the Companies Act 1985, no premium was recognized on the shares issued. On consolidation, the difference between the nominal value of the Company’s shares issued and the amount of the share capital, share premium and capital redemption reserve of £1,164 million of Six Continents PLC at the date of Separation has been credited to the merger reserve.

Merger Accounting

The consolidated financial statements have been prepared in accordance with the principles of merger accounting as applicable to group reorganizations as set out in Financial Reporting Standard (“FRS”) 6

F-8

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 1 — Accounting Policies (continued)

‘Acquisitions and Mergers’. The financial statements have been prepared under merger accounting principles in order to present a true and fair view of the Group’s results and financial position, which has required the Group to utilize the overriding requirement of Section 227(6) of the Companies Act 1985.

The true and fair override requirement has been utilized as the Separation has been accounted for using merger accounting principles as applicable to group reorganizations, although it does not satisfy all the conditions required under Schedule 4A to the Companies Act 1985 and FRS 6. Mitchells & Butlers plc acquired Six Continents PLC for consideration that included a non-share element equivalent to more than 10% of the nominal value of the share element of the consideration. Schedule 4A and FRS 6 require such transfers to be accounted for using acquisition accounting principles which would have resulted in the restatement at fair value of the assets and liabilities acquired, the recognition of goodwill and the consolidation of post acquisition results only. In the opinion of the directors, as the rights of shareholders were not affected by these internal company transfers, the financial statements would fail to give a true and fair view of the Group’s results and financial position if acquisition accounting had been used. The effects of this departure cannot reasonably be quantified.

Basis of consolidation

The financial statements comprise the financial statements of the parent company and its subsidiary undertakings (together, the “Group”). The results of those businesses acquired or disposed of are consolidated for the period during which they were under the Group’s dominant influence.

During 2003, the Company changed its fiscal year end to December 31 and thus its financial statements for its last fiscal period are presented for the 15 months ended December 31, 2003 as permitted by the Companies Act 1985. In accordance with the transition period reporting requirements of the US Securities and Exchange Commission, an unaudited analysis of the financial statements and notes thereto for this 15 month period showing the three month period ended December 31, 2002 and the 12 month period ended December 31, 2003 is presented in Note 32 of Notes to the Financial Statements.

Foreign currencies

Transactions in foreign currencies are recorded at the exchange rates ruling on the dates of the transactions, adjusted for the effects of any hedging arrangements. Assets and liabilities denominated in foreign currencies are translated into sterling at the relevant rates of exchange ruling at the balance sheet date.

The results of overseas operations are translated into sterling at weighted average rates of exchange for the period. Exchange differences arising from the retranslation of opening net assets (including any goodwill previously eliminated against shareholders’ funds) denominated in foreign currencies and foreign currency borrowings and currency swap agreements used to hedge those assets are taken directly to shareholders’ funds. All other exchange differences are taken to the profit and loss account.

Treasury instruments

Net interest arising on interest rate agreements is taken to the profit and loss account.

Premiums payable on interest rate agreements are charged to the profit and loss account over the term of the relevant agreements.

Currency swap agreements are retranslated at exchange rates ruling at the balance sheet date with the net amount being included in either current asset investments or borrowings. Interest payable or receivable arising from currency swap agreements is taken to the profit and loss account on a gross basis over the term of the relevant agreements.

Gains or losses arising on forward exchange contracts are taken to the profit and loss account in line with the transactions they are hedging.

F-9

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 1 — Accounting Policies (continued)

Fixed assets and depreciation

(i)     Goodwill

Any excess of purchase consideration for an acquired business over the fair value attributed to its separately identifiable assets and liabilities represents goodwill. Goodwill is capitalized as an intangible asset. Goodwill arising on acquisitions prior to September 30, 1998 was eliminated against shareholders’ funds. To the extent that goodwill denominated in foreign currencies continues to have value, it is translated into sterling at each balance sheet date and any movements are accounted for as set out under ‘foreign currencies’ above. On disposal of a business, any goodwill relating to the business and previously eliminated against shareholders’ funds, is taken into account in determining the gain or loss on disposal.

(ii)     Other intangible assets

On acquisition of a business, no value is attributed to other intangible assets which cannot be separately identified and reliably measured. No value is attributed to internally generated intangible assets.

(iii)     Tangible assets

Freehold and leasehold land and buildings are stated at cost, or valuation, less depreciation. All other fixed assets are stated at cost less depreciation. Repairs and maintenance costs are expensed as incurred.

When implementing FRS 15 ‘Tangible Fixed Assets’ in the year ended September 30, 2000, the Group did not adopt a policy of revaluing properties. The transitional rules of FRS 15 were applied so that the carrying values of properties include an element resulting from previous valuations.

(iv)     Revaluation

Surpluses or deficits arising from previous professional valuations of properties, realized on the disposal of an asset, are transferred from the revaluation reserve to the profit and loss account reserve.

(v)     Impairment

Any impairment arising on an income-generating unit, other than an impairment which represents a consumption of economic benefits, is eliminated against any specific revaluation reserve relating to the impaired assets in that income-generating unit with any excess being charged to the profit and loss account.

(vi)     Depreciation and amortization

Goodwill and other intangible assets are amortized over their estimated useful lives, generally 20 years.

Freehold land is not depreciated. All other tangible fixed assets are depreciated to a residual value over their estimated useful lives, namely:

Freehold buildings	50 years
Leasehold buildings	Lesser of unexpired term of lease and 50 years
Fixtures, fittings and equipment	3-25 years
Plant and machinery	4-20 years

All depreciation and amortization is charged on a straight-line basis.

F-10

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 1 — Accounting Policies (continued)

Fixed assets and depreciation (continued)

(vii)     Investments

Fixed asset investments are stated at cost less any provision for diminution in value.

Deferred taxation

Deferred tax assets and liabilities are recognized, subject to certain exceptions, in respect of all material timing differences between the recognition of gains and losses in the financial statements and for tax purposes. Those timing differences recognized include accelerated capital allowances, unrelieved tax losses and short-term timing differences. Timing differences not recognized include those relating to the revaluation of fixed assets in the absence of a commitment to sell the assets, the gain on sale of assets rolled into replacement assets and the distribution of profits from overseas subsidiaries in the absence of any commitment by the subsidiary to make the distribution.

Deferred tax assets are recognized to the extent that it is regarded as more likely than not that they will be recovered.

Deferred tax is calculated on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Leases

Operating lease rentals are charged to the profit and loss account on a straight-line basis over the term of the lease.

Pensions

The Group continues to account for pensions in accordance with Statement of Standard Accounting Practice (“SSAP”) 24 ‘Accounting for pension costs’. The regular cost of providing pensions to current employees is charged to the profit and loss account over the average expected service life of those employees. Variations in regular pension cost are amortized over the average expected service life of current employees on a straight line basis.

Accumulated differences between the amount charged to the profit and loss account and the payments made to the pension plans are treated as either prepayments or other provisions for liabilities and charges in the balance sheet.

The additional disclosures required by the transitional arrangements of FRS 17 ‘Retirement Benefits’ are given in Note 4.

Self insurance

The Group is self-insured for various levels of general liability, workers’ compensation and employee medical and dental insurance coverage. Insurance liabilities include projected settlements for known and incurred, but not reported claims. Projected settlements are estimated based on historical trends and actuarial data.

Stocks

Stocks are stated at the lower of cost and net realizable value.

Trade debtors

Trade debtors are recognized and carried at original amount earned less an allowance for any doubtful accounts. An allowance for doubtful accounts is made when collection of the full amount is no longer probable.

F-11

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 1 — Accounting Policies (continued)

Revenue recognition

Revenue is derived from the following sources: owned and leased properties; management fees; franchise fees; sale of soft drinks and other revenues which are ancillary to the Group’s operations. Generally, revenue represents sales (excluding VAT and similar taxes) of goods and services, net of discounts, provided in the normal course of business and is recognized when services have been rendered. The following is a description of the composition of revenues of the Group.

Owned and leased – primarily derived from hotel operations, including the rental of rooms and food and beverage sales from a worldwide network of owned and leased hotels operated primarily under the Group’s brand names. Revenue is recognized when rooms are occupied and food and beverage is sold.

Management fees – earned from hotels managed by the Group, usually under long-term contracts with the hotel owner. Management fees include a base fee, which is generally a percentage of hotel revenue, and an incentive fee, which is generally based on the hotels’ profitability. Revenue is recognized when earned.

Franchise fees – received in connection with the franchise of the Group’s brand names, usually under long-term contracts with the hotel owner. The Group charges franchise royalty fees as a percentage of room revenue. Revenue is recognized when earned.

Soft Drinks – sales (excluding VAT and similar taxes) of goods and services, net of discounts, provided in the normal course of business.

Loyalty program

The hotel loyalty program, Priority Club Rewards, enables members to earn points during each stay at an InterContinental Hotels Group hotel and redeem the points at a later date for free accommodation or other benefits. The future redemption liability is included in creditors less than, and greater than, one year and is estimated using actuarial methods to give eventual redemption rates and points values. The cost to operate the program is funded through hotel assessments.

Use of estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2 — Segmental Analysis

The results of overseas operations have been translated into sterling at weighted average rates of exchange for the period. In the case of the US dollar, the translation rate is £1 = $1.62 (2002 £1 = $1.48, 2001 £1 = $1.44). In the case of the euro, the translation rate is £1 = €1.47 (2002 £1 = €1.60, 2001 £1 = €1.62).

Foreign currency denominated assets and liabilities have been translated into sterling at the rates of exchange on the last day of the period. In the case of the US dollar, the translation rate is £1 = $1.78 (2002 £1 = $1.56, 2001 £1 = $1.47). In the case of the euro, the translation rate is £1 = €1.41 (2002 £1 = €1.59, 2001 £1 = €1.61).

F-12

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 2 — Segmental Analysis (continued)

During fiscal 2003, IHG undertook a fundamental review of the Hotels organization. Following this review, management in the regions now concentrate on the key revenue and profit drivers of the regional businesses, while key global functions have been centralized to maximize the benefits of scale and drive process efficiencies. As a result of these changes, the segmental analysis presented below for the year ended September 30, 2002 has been restated to reflect the new organizational structures. It has not been practicable to restate 2001 on this basis and hence 2002 and 2001 are shown to reflect the previous Group structure.

		Americas		EMEA		Asia Pacific		Central		Total Hotels		Soft Drinks	Total		Discontinued (ii)		Total Group
15 months ended December 31, 2003 (i)	(£ million)
Turnover		661		1,010		148		51		1,870		820	2,690		793		3,483
Operating profit before exceptional items		195		114		22		(80	)	251		95	346		137		483
Operating exceptional items		(9	)	(41	)	(1	)	—		(51	)	—	(51	)	—		(51	)
Operating profit after operating exceptional items		186		73		21		(80	)	200		95	295		137		432
Non-operating exceptional items:
Cost of fundamental reorganization		(11	)	(17	)	(2	)	(37	)	(67	)	—	(67	)	—		(67	)
Separation costs		—		—		—		(51	)	(51	)	—	(51	)	(41	)	(92	)
Profit/(loss) on disposal of fixed assets		10		(6	)	—		—		4		—	4		(2	)	2
Provision against fixed asset      investments		(9	)	—		—		(47	)	(56	)	—	(56	)	—		(56	)
Profit on ordinary activities before interest		176		50		19		(215	)	30		95	125		94		219

Year ended September 30, 2002 (i)
Turnover	570		794		128		40		1,532		602	2,134		1,481		3,615
Operating profit before exceptional items	173		125		23		(55	)	266		63	329		289		618
Operating exceptional items	(39	)	(24	)	(14	)	—		(77	)	—	(77	)	—		(77	)
Operating profit after operating exceptional items	134		101		9		(55	)	189		63	252		289		541
Non-operating exceptional items:
Separation costs	—		—		—		(4	)	(4	)	—	(4	)	—		(4	)
(Loss)/profit on disposal of fixed assets	(7	)	9		—		—		2		—	2		(2	)	—
Profit on disposal of operations	—		—		—		—		—		—	—		57		57
Profit on ordinary activities before interest	127		110		9		(59	)	187		63	250		344		594

Footnotes on page F-16.

F-13

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 2 — Segmental Analysis (continued)

The following tables show operating profit by segment for the year ended September 30, 2002 and the year ended September 30, 2001. As it has not been practicable to restate segmental information for the year ended September 30, 2001 to conform with the new presentation resulting from the new structure following the fundamental reorganization of the Hotels business, the 2002 financial information is presented on the same basis.

	Americas		EMEA		Asia Pacific		Other		Total Hotels		Soft Drinks	Other		Total		Discontinued (ii)		Total Group
	(£ million)
Year ended September 30, 2002 (i)
Turnover	584		819		129		—		1,532		602	—		2,134		1,481		3,615
Operating profit before exceptional items	178		125		24		(65	)	262		63	4		329		289		618
Operating exceptional items	(39	)	(24	)	(14	)	—		(77	)	—	—		(77	)	—		(77	)
Operating profit after operating exceptional items	139		101		10		(65	)	185		63	4		252		289		541
Non-operating exceptional items:
Separation costs	—		—		—		—		—		—	(4	)	(4	)	—		(4	)
(Loss)/profit on disposal of      fixed assets	(7	)	9		—		—		2		—	—		2		(2	)	—
Profit on disposal of operations	—		—		—		—		—		—	—		—		57		57
Profit on ordinary activities before interest	132		110		10		(65	)	187		63	—		250		344		594
Year ended September 30, 2001 (i)
Turnover	1,045		750		101		—		1,896		571	6		2,473		1,560		4,033
Operating profit before exceptional items	240		202		18		(33	)	427		57	2		486		306		792
Operating exceptional items	(11	)	(18	)	—		(14	)	(43	)	—	—		(43	)	—		(43	)
Operating profit after operating exceptional items	229		184		18		(47	)	384		57	2		443		306		749
Non-operating exceptional items:	—		—		—		—		—		—	—		—		—		—
Loss on disposal of fixed assets	—		—		—		—		—		1	(3	)	(2	)	—		(2	)
Profit on disposal of operations	—		—		—		—		—		—	—		—		2		2
Profit on ordinary activities      before interest	229		184		18		(47	)	384		58	(1	)	441		308		749

Turnover

	15 months ended December 31, 2003 (i)		Year ended September 30, 2002 (i)		Year ended September 30, 2001 (i)
	By origin	By destination	By origin	By destination	By origin	By destination
	(£ million)
United Kingdom	2,131	2,124	2,491	2,485	2,446	2,440
Rest of Europe, the Middle East and Africa	506	513	411	416	441	446
United States of America	571	571	476	476	908	908
Rest of Americas	127	127	108	108	137	137
Asia Pacific	148	148	129	130	101	102
	3,483	3,483	3,615	3,615	4,033	4,033

Footnotes on the following page.

F-14

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 2 — Segmental Analysis (continued)

Profit on ordinary activities before interest

	15 months ended December 31,		Year ended September 30
	2003 (i)		2002 (i)	2001 (i)
	(£ million)
United Kingdom	117		436	416
Rest of Europe, the Middle East and Africa	(7	)	57	113
United States of America	63		78	165
Rest of Americas	28		16	40
Asia Pacific	18		7	15
	219		594	749

(i) Other than for Soft Drinks which reflects the 64 weeks ended December 20, 2003 (2002 52 weeks, 2001 52 weeks) and Mitchells & Butlers plc which reflects the 28 weeks ended April 12, 2003 (2002 52 weeks, 2001 52 weeks).

(ii) Discontinued operations relate to Mitchell & Butlers plc for all periods presented and in 2002 and 2001 also included a profit on disposal of Bass Brewers of £57 million and £38 million, respetively, relating to the finalization of completion accounts.

Depreciation and Amortization

	15 months ended December 31, 2003	Year ended September 30, 2002
	(£ million)
Hotels
Americas	54	46
Asia Pacific	16	11
EMEA	95	66
Central	30	16
	195	139
Soft Drinks	54	46
Continuing operations	249	185
Discontinued operations	54	86
	303	271

Depreciation and amortization for the year ended September 30, 2001 for the Hotels division was £115 million, Soft Drinks was £38 million and discontinued operations was £85 million.

F-15

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 2 — Segmental Analysis (continued)

Assets

	December 31,				September 30,
	2003				2002 restated (i)
		Total	Net operating			Total	Net operating
	(£ million)
Hotels
Americas		1,146	859			1,458	1,134
EMEA		3,183	2,422			3,036	2,502
Asia Pacific		481	457			467	448
		4,810	3,738			4,961	4,084
Soft Drinks		470	300			405	246
InterContinental Hotels Group PLC (ii)		5,280	4,038			5,366	4,330
Discontinued operations (ii)		—	—			3,682	3,493
		5,280	4,038			9,048	7,823
Non-operating assets:
Current asset investments			377				218
Cash at bank and in hand			55				84
Corporate taxation			37				1
Non-operating liabilities:
Borrowings			(1,001	)			(1,479	)
Proposed dividend of parent company			(70	)			(213	)
Proposed dividend for minority shareholders			(16	)			—
Corporate taxation			(389	)			(455	)
Deferred taxation			(314	)			(495	)
Minority equity interests			(163	)			(149	)
Net assets			2,554				5,335
United Kingdom		2,329	1,586			5,963	5,202
Rest of Europe, the Middle East and Africa		1,324	1,136			1,160	1,039
United States of America		1,020	751			1,328	1,013
Rest of Americas		126	108			130	121
Asia Pacific		481	457			467	448
		5,280	4,038			9,048	7,823
Net non-operating liabilities			(1,484	)			(2,488	)
Net assets			2,554				5,335
Footnotes on following page.

F-16

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 2 — Segmental Analysis (continued)

	September 30,				September 30,
	2002 restated (i)				2001 restated (i)
		Total	Net operating			Total	Net operating
	(£ million)
Hotels (iii)		4,961	4,084			5,142	3,917
Soft Drinks		405	246			375	252
InterContinental Hotels Group PLC (ii)		5,366	4,330			5,517	4,169
Discontinued operations (ii)		3,682	3,493			3,549	3,351
		9,048	7,823			9,066	7,520
Non-operating assets:
Current asset investments			218				366
Cash at bank and in hand			84				67
Corporate taxation			1				9
Non-operating liabilities:
Borrowings			(1,479	)			(1,434	)
Proposed dividend			(213	)			(207	)
Corporate taxation			(455	)			(548	)
Deferred taxation			(495	)			(487	)
Minority equity interests			(149	)			(133	)
Net assets			5,335				5,153
United Kingdom		5,963	5,202			5,917	4,941
Rest of Europe, the Middle East and Africa		1,160	1,039			1,088	930
United States of America		1,328	1,013			1,462	1,100
Rest of Americas		130	121			99	77
Asia Pacific		467	448			500	472
		9,048	7,823			9,066	7,520
Net non-operating liabilities			(2,488	)			(2,367	)
Net assets			5,335				5,153

(i) Restated on the adoption of UITF 38 (see Note 1).

(ii) InterContinental Hotels Group PLC comprises continuing operations. Discontinued operations relate to Mitchells & Butlers plc.

(iii) Hotels includes Other activities previously disclosed separately, excluding the assets of SCPD which was included within Retail on Separation.

F-17

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 3 — Costs and Overheads, Less Other Income

	15 months ended December 31, 2003						Year ended September 30, 2002
		Continuing (i)		Discontinued (i)	Total			Continuing (i)		Discontinued (i)		Total
	(£ million)
Raw materials and consumables		484		204	688			360		377		737
Changes in stocks of finished goods and work in progress		(1	)	2	1			3		(5	)	(2	)
Staff costs – (Note 4)		815		198	1,013			659		378		1,037
Depreciation of tangible fixed assets		236		54	290			175		86		261
Impairment of tangible fixed assets		51		—	51			77		—		77
Amortization of goodwill		13		—	13			9		1		10
Hire of plant and machinery		18		17	35			19		30		49
Property rentals		65		24	89			58		42		100
Income from fixed asset investments		(3	)	—	(3	)		(8	)	—		(8	)
Other external charges		717		157	874			530		283		813
		2,395		656	3,051			1,882		1,192		3,074
Operating exceptional items included above:
Impairment of tangible fixed assets		51		—	51			77		—		77

	Year ended September 30, 2001
		Continuing (i)		Discontinued (i)	Total
	(£ million)
Raw materials and consumables		378		410	788
Staff costs – (Note 4)		708		390	1,098
Depreciation of tangible fixed assets		144		84	228
Amortization of goodwill		9		1	10
Hire of plant and machinery		17		34	51
Property rentals		179		37	216
Income from fixed asset investments		(18	)	—	(18	)
Other external charges		613		298	911
		2,030		1,254	3,284
Operating exceptional items included above:
Staff costs		2		—	2
Other external charges		41		—	41
		43		—	43

(i) Continuing operations comprises InterContinental Hotels Group PLC. Discontinued operations relate to Mitchells & Butlers plc for all periods presented and in 2002 and 2001 also included a profit on disposal of Bass Brewers (2002 £57 million, 2001 £38 million).

Auditors’ remuneration paid to Ernst & Young LLP

	15 months ended December 31		Year ended September 30
		2003		2002	2001
	(£ million)
Audit fees		2.8		1.9	1.8
Audit related fees		7.2		3.2	3.8
Tax fees		1.2		1.2	1.3
Other fees		—		0.4	0.4
		11.2		6.7	7.3

Audit related fees for UK services were £6.6 million (2002 £4.1 million, 2001 £3.2 million) and include £6.3 million (2002 £1.7 million, 2001 £nil million) in relation to Separation and bid defense, which have been charged to exceptional items (see Note 5).

F-18

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 3 — Costs and Overheads, Less Other Income (continued)

The Audit Committee has introduced a process to ensure that any non-audit services do not compromise the independence and objectivity of the external auditor, and that relevant UK and US professional and regulatory requirements are met. A number of criteria are applied when deciding whether pre-approval for such services should be given. These include the nature of the service, the level of fees, and the practicality of appointing an alternative provider, having regard to the skills and experience required to supply the service effectively. Cumulative fees for audit and non-audit services are presented to the Audit Committee on a quarterly basis for review. The Audit Committee is responsible for monitoring adherence to the pre-approval policy.

Note 4 — Staff

Costs

	15 months ended December 31		Year ended September 30
		2003		2002	2001
	(£ million)
Wages and salaries		884		942	997
Social security costs		96		84	89
Pensions		33		11	12
		1,013		1,037	1,098

Employee numbers

Average number of persons employed, including part-time employees:

	15 months ended December 31		Year ended September 30
		2003		2002	2001
	(Number)
Hotels		27,111		28,385	35,749
Soft Drinks		2,698		2,637	2,610
InterContinental Hotels Group PLC (i)		29,809		31,022	38,359
Discontinued operations (i)		15,014		38,747	41,282
		44,823		69,769	79,641

(i) InterContinental Hotels Group PLC comprises continuing operations. Discontinued operations relate to Mitchells & Butlers plc.

Pensions

	15 months ended December 31			Year ended September 30
		2003			2002		2001
	(£ million)
Regular cost		33			35		29
Variations from regular cost		(7	)		(28	)	(28	)
Notional interest on prepayment		(4	)		(3	)	(2	)
Pension cost in respect of the principal plans		22			4		(1	)
Other plans		11			7		13
		33			11		12

F-19

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

Retirement and death benefits are provided for eligible Group employees in the United Kingdom principally by the InterContinental Hotels UK Pension Plan which covers approximately 2,000 employees and the Britvic Pension Plan which covers approximately 2,300 employees. The plans are predominantly defined benefit schemes for current members. For new entrants, the plans will provide defined contribution benefits. The assets of the plans are held in self-administered trust funds separate from the Group’s assets. The Group also maintains a US-based InterContinental Hotels Pension Plan. This plan is now closed to new members and pensionable service no longer accrues for current employee members. In addition, the Group operates a number of minor pension schemes outside the United Kingdom, the most significant of which is a defined contribution scheme in the United States; there is no material difference between the pension costs of, and contributions to, these schemes.

On April 1, 2003, two new pension schemes were created for InterContinental Hotels Group PLC in the UK when Mitchells & Butlers Retail Limited become the sponsoring employer for the Six Continents Pension Plan and the Six Continents Executive Pension Plan. Approximately 30% of the assets and liabilities of these plans were transferred to the new InterContinental Hotels UK Pension Plan and the Britvic Pension Plan, which were established with effect from April 1, 2003.

The Group continues to account for its defined benefit obligations in accordance with SSAP 24. The pension costs related to the two UK principal plans are assessed in accordance with the advice of independent qualified actuaries using the projected unit method. They reflect the March 31, 2002 actuarial valuations of the Six Continents PLC pension plans. The significant assumptions in these valuations were that wages and salaries increase on average by 4% per annum, the long-term return on assets is 6.3% per annum and pensions increase by 2.5% per annum. The average expected remaining service life of current employees is 13 years.

At March 31, 2002, the market value of the combined assets of the Six Continents PLC pension plans was £1,187 million and the value of the assets was sufficient to cover 100% of the benefits that had accrued to members after allowing for expected increases in earnings.

In the period to December 31, 2003, the Group made regular contributions to the two UK principal plans of £26 million (2002 £18 million, 2001 £17 million) and additional contributions of £13 million (2002 £15 million, 2001 £nil million). The agreed employer contribution rates to the defined benefit arrangements for the year to December 31, 2004 are 10.8% for the staff section of the InterContinental Hotels UK Pension Plan and 25.7% for the executive section and 11.3% for the staff section of the Britvic Pension Plan and 30.5% for the executive section.

Certain pension benefits and post retirement insurance obligations are provided on an unfunded basis. Where assets are not held with the specific purpose of matching the liabilities of unfunded schemes, a provision is included within other provisions for liabilities and charges. Liabilities are generally assessed annually in accordance with the advice of independent actuaries.

FRS 17 disclosures

The valuations used for FRS 17 disclosures are based on the results of the actuarial valuations at March 31, 2002 updated by independent qualified actuaries to December 31, 2003. Scheme assets are stated at market value at December 31, 2003 and the liabilities of the schemes have been assessed as at the same date using the projected unit method. As the principal plans are now closed as defined benefit schemes, the current service cost as calculated under the projected unit method will increase as members approach retirement.

F-20

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

The principal assumptions used by the actuaries to determine the liabilities on a FRS 17 basis were:

	December 31, 2003					September 30, 2002					September 30, 2001
		UK		US			UK		US			UK		US
Wages and salaries increases		4.3	%	—			3.8	%	—			3.9	%	—
Pension increases		2.8	%	—			2.3	%	—			2.4	%	—
Discount rate		5.4	%	6.3	%		5.5	%	6.8	%		6.1	%	7.5	%
Inflation rate		2.8	%	—			2.3	%	—			2.4	%	—

The combined assets of the principal schemes and expected rate of return were:

UK Schemes	Long-term rate of return expected at December 31, 2003	Value at December 31, 2003	Long-term rate of return expected at September 30, 2002	Value at September 30, 2002	Long-term rate of return expected at September 30, 2001	Value at September 30, 2001
	(%)	(£ million)	(%)	(£ million)	(%)	(£ million)
Equities	8.0	238	8.0	507	7.5	700
Bonds	5.4	117	4.7	397	5.1	304
Other	—	—	8.0	92	7.5	94
Total market value of assets		355		996		1,098

US Schemes
Equities	9.2	29	11.2	27	11.5	29
Bonds	6.0	19	6.2	22	7.0	25
Total market value of assets		48		49		54

								September 30
	December 31, 2003								2002		2001
		UK		US		Total			Total		Total
	(£ million)
Total market value of assets		355		48		403			1,045		1,152
Present value of scheme liabilities		(477	)	(102	)	(579	)		(1,415	)	(1,207	)
Deficit in the scheme		(122	)	(54	)	(176	)		(370	)	(55	)
Related deferred tax asset		37		21		58			116		21
Net pension liability		(85	)	(33	)	(118	)		(254	)	(34	)

F-21

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

If FRS 17 had been recognized in the financial statements, the effects would have been as follows:

	15 months ended December 31, 2003							Year ended September 30, 2002
		UK		US		Total			Total
	(£ million)
Operating profit charge
Current service cost		32		—		32			31
Past service cost		2		—		2			—
Total operating profit charge		34		—		34			31
Finance income
Expected return on pension scheme assets		49		5		54			80
Interest on pension scheme liabilities		(53	)	(8	)	(61	)		(76	)
Net (expense)/return		(4	)	(3	)	(7	)		4
Actuarial loss recognized in the Statement of Total Recognized Group Gains and Losses (“STRGL”)
Actual return less expected return on pension scheme assets		32		5		37			(182	)
Experience gains and losses arising on the scheme liabilities		(17	)	(1	)	(18	)		(23	)
Changes in assumptions underlying the present value of the scheme liabilities		(111	)	(10	)	(121	)		(126	)
Actuarial loss recognized in the STRGL		(96	)	(6	)	(102	)		(331	)
Movement in deficit during the period
At start of period		(315	)	(55	)	(370	)		(55	)
Current service cost		(32	)	—		(32	)		(31	)
Past service cost		(2	)	—		(2	)		—
Contributions		39		2		41			40
Finance income		(4	)	(3	)	(7	)		4
Actuarial loss		(96	)	(6	)	(102	)		(331	)
Separation of MAB		288		—		288			—
Exchange adjustments		—		8		8			3
At end of period		(122	)	(54	)	(176	)		(370	)

	15 months ended December 31, 2003							Year ended September 30, 2002
		UK		US		Total			Total
History of experience gains and losses
Difference between the expected and actual return on scheme assets
Amount (£ million)		32		5		37			(182	)
Percentage of scheme assets		9	%	10	%	9	%		(17%	)
Experience gains and losses on scheme liabilities
Amount (£ million)		(17	)	(1	)	(18	)		(23	)
Percentage of the present value of the scheme liabilities		(4%	)	(1%	)	(3%	)		(2%	)
Total amount recognized in the STRGL
Amount (£ million)		(96	)	(6	)	(102	)		(331	)
Percentage of the present value of the scheme liabilities		(20%	)	(6%	)	(18%	)		(23%	)

F-22

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

	December 31, 2003					September 30, 2002 restated (i)
		Net assets		Profit and loss account reserve			Net assets		Profit and loss account reserve
	(£ million)
Group net assets and reserves reconciliation
As reported		2,554		390			5,335		2,448
Less: SSAP 24 pension prepayment (net of tax of £14 million (2002 £26 million))		(33	)	(33	)		(62	)	(62	)
SSAP 24 pension provision (net of tax of £16 million (2002 £14 million))		30		30			25		25
FRS 17 net pension liability		(118	)	(118	)		(254	)	(254	)
Restated for FRS 17		2,433		269			5,044		2,157

(i) Restated on the adoption of UITF 38 (see Note 1).

Policy on remuneration of executive directors and senior executives

The following policy has applied since Separation and will apply in future years, subject to ongoing review.

Total level of remuneration

The Remuneration Committee aims to ensure that remuneration packages are offered which:

• attract high quality executives in an environment where compensation levels are based on global market practice;

• provide appropriate retention strength against loss of key executives;

• drive aligned focus and attention to key business initiatives and appropriately reward their achievement;

• support equitable treatment between members of the same executive team; and

• facilitate global assignments and relocation.

The Committee is aware that, as a UK listed company, IHG PLC’s incentive arrangements may be expected to recognize UK investor guidelines. However, given the global nature of the Hotels business, an appropriate balance needs to be drawn in the design of relevant remuneration packages between domestic and international expectations.

The main components

The Group operates performance-related reward policies. These are designed to provide the appropriate balance between fixed remuneration and variable “risk” reward, which is linked to the performance of both the Group and the individual. Group performance-related measures are chosen carefully to ensure a strong link between reward and true underlying financial performance, and emphasis is placed on particular areas requiring executive focus. Individual performance is measured through an assessment of comprehensive business unit deliverables, demonstrated leadership behaviors, modeling the Group values and the achievement of specific key performance objectives. At the executive level, key performance objectives are linked directly to the Group’s strategic priorities. At a minimum, the individual performance of the executive directors is assessed on an annual basis.

The normal policy for executive directors is that, using ‘target’ or ‘expected value’ calculations, their performance-related incentives will equate to approximately 70% of total annual remuneration (excluding benefits).

F-23

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

The main components of remuneration are:

Basic salary

The salary for each executive director is based on individual performance and on information from independent professional sources on the salary levels for similar jobs in groups of comparable companies. Internal relativities and salary levels in the wider employment market are also taken into account.

In addition, benefits are provided to executive directors in accordance with the policy applying to other executives in their geographic location.

Annual performance bonus

Within the Short Term Deferred Incentive Plan, challenging performance goals are set and these must be achieved before the maximum bonus becomes payable. These goals include both personal objectives and targets linked to the Group’s financial performance. For executive directors, the maximum bonus opportunity is 100% of salary, with 30% linked to personal objectives, 35% to adjusted earnings per share and 35% to earnings before exceptional items, interest and taxation. The bonus will normally be paid in IHG PLC shares and deferred. Matching shares may also be awarded up to 0.5 times the deferred amount. Such awards are conditional on the directors’ continued employment with the Group until the release date. The shares will normally be released in equal amounts at the end of each of the three years following deferral.

The executive directors will be expected to hold all shares earned from the Group’s remuneration plans until the value of their holding equates to twice their basic salary or three times in the case of the Chief Executive.

Bonuses are not pensionable.

Executive share options

The Committee believes that share ownership by executive directors and senior executives strengthens the link between the individual’s personal interest and that of the shareholders. Grants of options are normally made annually and, except in exceptional circumstances, will not, in any year, exceed three times annual salary for executive directors.

A performance condition has to be met before options can be exercised. The performance condition is set by the Committee. For options granted in 2003, the Company’s adjusted earnings per share over the three-year period ending December 31, 2005 must increase by at least nine percentage points over the increase in the UK Retail Prices Index (“RPI”) for the same period for one-third of the options granted to vest; 12 percentage points over the increase in RPI for the same period for two-thirds of the options granted to vest; and 15 percentage points over the increase in RPI for the same period for the full award to vest. This was felt to be a realistic but challenging condition in the current economic climate. The achievement or otherwise of the performance condition is assessed, based on the Group’s published results; such assessment is then reviewed by the external auditor.

Executive directors were granted options on May 30, 2003 as shown on page F-33.

It is the current intention for similar performance conditions to apply to options granted in 2004 and later years.

Executive share options are not pensionable.

ShareSave Plan

Executive directors are entitled to participate in all-employee share schemes. Options granted under the IHG Sharesave Plan are not subject to performance conditions and are not pensionable.

F-24

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

Performance Restricted Shares

The Performance Restricted Share Plan allows executive directors and eligible employees to receive share awards, subject to the satisfaction of a performance condition, set by the Committee, which is normally measured over a three-year period. Awards are normally made annually and, except in exceptional circumstances, will not exceed three times annual salary for executive directors. In determining the level of awards within this maximum limit, the Committee takes into account the level of executive share options granted to the same person. The grant of awards is restricted so that in each year the aggregate of (i) 20% of the market value of the executive share options and (ii) 33% of the market value of Performance Restricted Shares, will not exceed 130% of annual salary, taking the market value in each case as at the date of grant.

For the 2003/05 cycle, performance will be measured by reference to:

•   the increase in IHG PLC Total Shareholder Return (“TSR”) over the Performance Period relative to 11 identified comparator companies; Accor, De Vere, Hilton Group, Hilton Hotels Corp, Host Marriott, Marriott Hotels, Millenium & Copthorne, NH Hotels, Sol Melia, Starwood Hotels and Thistle (up to the point at which this company ceased to be listed); and

•   the increase in IHG Return On Capital Employed (“ROCE”) over the performance period.

In respect of TSR performance, 10% of the award will be released for the achievement of 6th place within the TSR Group and 50% of the award will be released for the achievement of 1st or 2nd place. In respect of ROCE performance, 10% of the award will be released for the achievement of 30% growth and 50% of the award will be released for the achievement of 80% growth. Vesting between all stated points will be on a straight line basis.

It is the current intention that similar performance targets will apply to awards made in 2004 and later years.

A ‘transitional’ award was also made in 2003, subject to TSR performance over the period to December 31, 2004. For executive directors the maximum value of this award equated to 140% of salary.

Benefits under the Performance Restricted Share Plan are not pensionable.

Companies used for comparison

In assessing levels of pay and benefits, IHG compares the packages offered by different groups of comparator companies.

These groups are chosen having regard to participants’:

•   size – turnover, profits and the number of people employed;

•   diversity and complexity of businesses;

•   geographical spread of businesses; and

•   industry type.

External consultants are used to advise the Committee on the structure and level of pay and benefits in IHG’s markets.

Policy on external appointments

The Company recognizes that its directors may be invited to become non-executive directors of other companies and that such duties can broaden experience and knowledge, and benefit the business. Executive directors are, therefore, allowed to accept one non-executive appointment (excluding positions where the director is appointed as the Company’s representative), subject to board approval, as long as this is not likely to lead to a conflict of interest, and to retain the fees received. Richard North receives £36,000 per annum for his services as a non-executive director.

F-25

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

Contracts of service

(i) Policy

The Remuneration Committee’s policy is for executive directors to have rolling contracts with a notice period of 12 months.

Prior to the Separation, each of the following executive directors, Richard Hartman, Richard North, Stevan Porter and Richard Solomons entered into service agreements with a notice period of 12 months. All new appointments are intended to have 12 month notice periods.

No provisions for compensation for termination following change of control, or for liquidated damages of any kind, are included in the current directors’ contracts. In the event of any early termination of an executive director’s contract the policy is to seek to minimize any liability.

Sir Ian Prosser continued as executive Chairman under the terms of his previous service agreement until his normal retirement age of 60 years on July 5, 2003. After that date Sir Ian served as non-executive Chairman under revised terms, agreed prior to Separation, for a fixed period which expired on December 31, 2003.

Non-executive directors, Ralph Kugler, Robert C Larson, David Prosser, Sir Howard Stringer and David Webster signed letters of appointment effective from the listing of IHG PLC. David Webster became non-executive Chairman of the Company on January 1, 2004 on new terms.

(ii) Directors’ contracts

Directors	Contract effective date	Unexpired term/ notice period
Richard Hartman	April 15, 2003	12 months
Richard North	April 15, 2003	12 months
Stevan Porter	April 15, 2003	12 months
Richard Solomons	April 15, 2003	12 months
Sir Ian Prosser	July 6, 2003	Expired

Policy regarding pensions

UK-based executive directors and senior employees participate on the same basis in the executive section of the InterContinental Hotels UK Pension Plan and, if appropriate, the InterContinental Executive Top-Up Scheme. Stevan Porter and senior US-based executives participate in US retirement benefits plans. Executives in other countries, who do not participate in these plans, will participate in local plans, or the Six Continents International Retirement Income Plan.

F-26

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

Directors’ emoluments since the listing of InterContinental Hotels Group PLC on April 15, 2003

					Total emoluments excluding pensions
		Basic salaries and fees	Performance payments	Benefits		4.15.03 to 12.31.03	Year ended September 30
								2002	2001
	(£ thousand)
Executive directors
Richard North		429	398	27		854		629	889
Richard Hartman		260	214	189		663		—	—
Stevan Porter		264	218	28		510		—	—
Sir Ian Prosser*		183	276	5		464		971	1,200
Richard Solomons		250	232	15		497		—	—
Non-executive directors
Ralph Kugler**		30	—	—		30		—	—
Robert C Larson		30	—	—		30		36	36
David Prosser#		35	—	—		35		—	—
Sir Ian Prosser*		196	—	11		207		—	—
Sir Howard Stringer		30	—	—		30		13	—
David Webster•++		57	—	—		57		—	—
Total		1,764	1,338	275		3,377		1,649	2,125

* Became non-executive Chairman on July 6, 2003.

** All fees due to Ralph Kugler were paid to Unilever.

# Fees paid to David Prosser included a proportion of a £7,500 per annum fee payable to the Chairman of the Remuneration Committee in recognition of the additional responsibilities of this role.

• Fees paid to David Webster included a proportion of an £80,000 per annum fee payable to the senior independent director in recognition of the additional responsibilities of this role.

++ Became non-executive Chairman on January 1, 2004 for which a fixed fee of £275,000 per annum is paid.

Thomas Oliver retired from Six Continents PLC on March 31, 2003 and has not served as a director of IHG PLC. However, he has an ongoing consultancy agreement in respect of which he received fees of £115,000 during the period. In addition, he had an ongoing healthcare benefit of £7,000 during the period.

The figures above represent emoluments earned as directors during the period since the listing of IHG PLC following Separation. Comparative figures for 2002 and 2001 apply only to those directors who also served as directors of Six Continents PLC. ‘Performance payments’ include payments in respect of participation in the Short Term Deferred Incentive Plan (but excluding any matching shares) and payments from the Performance Restricted Share Plan ‘transitional incentive’ for the period ended December 31, 2003 (further details of which are set out below under Long Term Reward).

‘Benefits’ incorporate all tax assessable benefits arising from the individual’s employment. For Sir Ian Prosser and Messrs Hartman, North and Solomons, this relates in the main to the provision of a fully expensed company car and private healthcare cover. In addition, Mr Hartman received housing, child education and relocation benefits. For Stevan Porter, benefits relate in the main to private healthcare cover and relocation.

F-27

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

Short Term Deferred Incentive Plan

The table below shows the vesting of shares during the period, representing entitlements earned prior to Separation and carried forward.

Short Term Deferred Incentive Plan (STDIP)	STDIP shares held at 4.15.03*	Vesting date	STDIP shares awarded during the period 4.15.03 to 12.31.03	STDIP shares vested during the period 4.15.03 to 12.31.03	Award Date	Market price per share at award date**	Market price per share at vesting date	STDIP shares held at 12.31.03	Vesting date	Value based on share price at 12.31.03*** £
Directors
Richard North	39,628	12.18.03	—	39,628	12.18.02	335.5p	540.75p
	3,789	5.31.04						3,789	5.31.04	20,444
Stevan Porter	55,428	12.18.03	—	55,428	12.18.01	434.3p	540.75p
	55,428	12.18.04						55,428	12.18.04	293,214

Messrs Hartman, North, Porter and Solomons participated in the STDIP during the period April 15, 2003 to December 31, 2003, but were not eligible to receive an award.

* IHG PLC shares provided at 372p per share in equal value exchange for Six Continents PLC shares outstanding at April 14, 2003 under the Six Continents Special Deferred Incentive Plan.

** Award originally made in Six Continents PLC shares. The share prices shown are the equivalent IHG PLC share prices, based on a five day average immediately preceding the award date.

*** The IHG PLC share price on December 31, 2003 was 529p per share.

F-28

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

Directors’ emoluments from Six Continents PLC from October 1, 2002 to April 14, 2003

					Total emoluments excluding pensions
		Basic salaries and fees	Performance payments	Benefits		10.01.02 to 4.15.03	2002	2001
	(£ thousand)
Executive directors
Tim Clarke*		322	26	14		362	694	725
Iain Napier (resigned September 4, 2000)*+		—	—	409		409	—	985
Richard North		282	31	16		329	629	889
Thomas Oliver*++		263	409	283		955	956	1,267
Sir Ian Prosser		438	38	12		488	971	1,200
Non-executive directors
Roger Carr*		56	—	—		56	46	38
Robert C Larson		23	—	—		23	36	36
Sir Peter Middleton (retired July 31, 2001)*		—	—	—		—	—	30
Sir Geoffrey Mulcahy*		23	—	—		23	36	36
Sir Michael Perry (retired July 31, 2001)*		—	—	—		—	—	61
Bryan Sanderson*		23	—	—		23	36	6
Sir Howard Stringer		23	—	—		23	13	—
Total		1,453	504	734		2,691	3,417	5,273

* In accordance with the principle of full disclosure, details of emoluments earned by former directors of Six Continents PLC who have not served as directors of IHG PLC have also been presented.

+ As previously disclosed, Iain Napier, a former director, was entitled to certain benefits under the terms of an agreement reached with him prior to the sale of Bass Brewers. Specifically, Mr Napier was entitled to an annuity (index linked at 5% per annum) after May 22, 2003 of approximately £24,000 per annum or an appropriate lump sum. The figure above represents the lump sum paid to Iain Napier in this regard.

++ Thomas Oliver retired on March 31, 2003 and, under the terms of his contract, was repatriated to the United States.

Six Continents Special Deferred Incentive Plan (SDIP)

	SDIP shares held at 10.1.02	Vesting date	SDIP shares awarded during the period 10.1.02 to 4.14.03	Market price per share at award date**	Vesting date	SDIP shares vested during the period 10.1.02 to 4.14.03	Award date	Market price per share at award date**	Market price per share at vesting date	SDIP shares held at 4.14.03	Vesting date	Value based on share price at 4.14.03*** £
Directors+
Tim Clarke	44,433	12.18.02	23,790	534p	12.18.03	44,433	12.18.01	691.1p	502p	23,790	12.18.03	140,837
			2,195	592p	5.31.04					2,195	5.31.04	12,994
Richard North	72,348	12.18.02	24,901	534p	12.18.03	72,348	12.18.01	691.1p	502p	24,901	12.18.03	147,414
			2,381	592p	5.31.04					2,381	5.31.04	14,096
Thomas Oliver*	74,104	4.16.03	20,806	534p	4.16.03					94,910	4.16.03	561,867

+ Neither Tim Clarke nor Thomas Oliver, both former directors of Six Continents PLC, have served as directors of IHG PLC.

* The vesting date for all awards applicable to Thomas Oliver was extended from March 10, 2003 to April 16, 2003.

** The share prices shown are based on a five day average immediately preceding the award date.

*** The Six Continents PLC share price on April 14, 2003 was 592p per share.

F-29

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

Directors’ emoluments — Totals excluding employers’ pension contributions, for fiscal 2003, 2002 and 2001

		Basic salaries and fees	Performance Payments	Benefits	Total emoluments excluding pensions
	(£ thousand)
Total 2003		3,217	1,842	1,009	6,068
Total 2002		2,600	563	254	3,417
Total 2001		2,490	1,517	1,266	5,273

Directors’ pensions

The following information relates to the pension arrangements provided for Richard Hartman (from September 2, 2003), Richard North, Sir Ian Prosser, Richard Solomons and Tim Clarke under the Six Continents Executive Pension Plan (“the SC Plan”) up to March 31, 2003, and the executive section of the InterContinental Hotels UK Pension Plan (“the IC Plan”) from April 1, 2003. In the cases of Richard North, Richard Solomons and Tim Clarke, they were also members of the unfunded Six Continents Executive Top-Up Scheme (“SCETUS”) up to April 14, 2003, and Richard Hartman, Richard North and Richard Solomons were members of the unfunded InterContinental Executive Top-Up Scheme (“ICETUS”) from April 15, 2003 (September 2, 2003 in the case of Richard Hartman). Richard Hartman was a member of the Six Continents International Retirement Income Plan (“SCIRIP”) until September 1, 2003 at which point his UK pension arrangements replaced his international retirement arrangements. The SC Plan and executive section of the IC Plan are similar in that they are funded, Inland Revenue approved, final salary, occupational pension schemes. The main features applicable to the executive directors are: a normal pension age of 60; pension accrual of 1/30th of final pensionable salary for each year of pensionable service; life assurance cover of four times pensionable salary; pensions payable in the event of ill health; and spouses’ and dependants’ pensions on death.

All plan benefits are subject to Inland Revenue limits. Where such limitation is due to the earnings ‘cap’, SCETUS and/or ICETUS are used to increase pension and death benefits to the level that would otherwise have applied. The SCIRIP is a Jersey-based funded international defined contribution plan.

Thomas Oliver (up to April 2003) and Stevan Porter have retirement benefits provided via the 401(k) Retirement Plan for employees of Six Continents Hotels Inc. (“401(k)”) and the Six Continents Hotels Inc. Deferred Compensation Plan (“DCP”). The 401(k) is a tax qualified plan providing benefits on a defined contribution basis, with the member and the relevant company both contributing. The DCP is a non-tax qualified plan, providing benefits on a defined contribution basis, with the member and the relevant company both contributing.

April 15, 2003 to December 31, 2003

Directors’ pension benefits	Age at 12.31.03	Directors’ Contributions (note 1)	Transfer value of accrued pension			Increase in transfer value over the period, less directors’ contributions	Increase in accrued pension (note 2)	Increase in accrued pension (note 3)	Accrued Pension at 12.31.03 (note 4)
				4.15.03	12.31.03 (note 5)
		(£)		(£)	(£)	(£)	(£pa)	(£pa)	(£pa)
Richard Hartman	57	3,700		—	652,200	648,500	38,400	38,400	38,400
Richard North	53	9,900		1,930,700	2,423,800	483,200	32,500	28,100	180,000
Sir Ian Prosser	60	7,200		11,153,800	11,352,500	191,500	7,500	7,500	573,100
Richard Solomons	42	9,900		418,500	569,400	141,000	18,000	16,300	75,500

Footnotes on following page.

F-30

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

October 1, 2002 to April 14, 2003

Directors’		Directors’	Transfer value of accrued pension			Increase in transfer value over the period less	Increase in accrued	Accrued Pension at
Pension Benefits	Age at 04.14.03	Contributions (note 1)		10.1.02 (note 5)	4.14.03	directors’ contributions	pension (note 2)	4.14.03 (note 4)
		(£)		(£)	(£)	(£)	(£pa)	(£pa)
Tim Clarke	46	7,300		1,261,000	1,903,500	635,200	15,000	208,200
Richard North	53	7,300		1,408,400	1,903,700	515,000	12,800	147,500
Sir Ian Prosser	59	21,600		10,727,100	11,153,800	405,100	17,800	565,600
Richard Solomons	41	7,300		288,700	418,500	122,500	6,600	57,500

note 1: Contributions paid in the period by the directors under the terms of the plans. Richard Hartman’s contributions were paid after December 31, 2003. The aggregate of the company contributions was £258,700.

note 2: The absolute increase in accrued pension during the period.

note 3: The increase in accrued pension during the period excluding any increase for inflation, on the basis that increases to accrued pensions are applied at October 1.

note 4: Accrued pension is that which would be paid annually on retirement at 60, based on service to the end of the period.

note 5: The transfer value in respect of Sir Ian Prosser as at October 1, 2002 has been restated to allow for his right to draw the accrued pension without deduction, which was already funded and charged in previous accounts, and to allow for a 3% increase to his annual salary for pension purposes on October 1, 2001 and 2002. The transfer value shown in respect of Sir Ian as at December 31, 2003 is the figure at his date of retirement of July 5, 2003.

The figures shown in the above tables relate to the final salary plans only. For defined contribution plans, the contributions made by and in respect of Richard Hartman, Thomas Oliver and Stevan Porter are:

	Company contribution October 1, 2002 to April 14, 2003				Company contribution April 15, 2003 to December 31, 2003
		SCIRIP	DCP	401(k)		SCIRIP	DCP	401(k)
		(£)	(£)	(£)		(£)	(£)	(£)
Richard Hartman		27,700	—	—		22,800	—	—
Thomas Oliver		—	54,100	4,900		—	13,100	—
Stevan Porter		—	21,900	7,700		—	18,900	300

The aggregate of these contributions was £171,400.

Directors’ emoluments — Totals relating to employers’ pension contributions for fiscal 2003, 2002 and 2001

	Employers’ pension contributions
	(£ thousand)
Total 2003	430
Total 2002	374
Total 2001	332

F-31

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

The following additional information relates to directors’ pensions under the various plans.

Dependants’ Pensions

On the death of a director before his normal retirement age, a widow’s pension equal to one-third of his own pension is payable; a child’s pension of one-sixth of his pension is payable for each of a maximum of two eligible children. On the death of a director after payment of his pension commences, a widow’s pension of two-thirds of the director’s full pension entitlement is payable; in addition, a child’s pension of one-sixth of his full pension entitlement is payable for each of a maximum of two eligible children.

Early Retirement Rights

After leaving the service of the relevant company, the director has the right to draw his accrued pension at any time after his 50th birthday, subject to a discount for early payment.

Pension Increases

All pensions (in excess of Guaranteed Minimum Pensions) are subject to contractual annual increases in line with the annual rise in RPI, subject to a maximum of 5% per annum. In addition, it is current policy to pay additional increases based on two-thirds of any rise in RPI above 5% per annum.

Other Discretionary Benefits

Other than the discretionary pension increases mentioned above, there are no discretionary practices which are taken into account in calculating transfer values on leaving service.

Long Term Reward

The Performance Restricted Share Plan was introduced on Separation and in 2003 there were three cycles in operation.

The awards made in respect of the performance period ended December 31, 2003, which are to be paid in cash, were:

Directors		Awards held at 4.15.03	Pre-tax awards granted during period to 12.31.03	Total pre-tax awards held at 12.31.03
	(£ thousand)
Richard Hartman		—	214	214
Richard North		—	398	398
Stevan Porter		—	218	218
Sir Ian Prosser*		—	276	276
Richard Solomons		—	232	232

This ‘transitional’ award was based on performance during the period to December 31, 2003 where the performance measure related to the achievement of actual and annualised overhead reduction targets. The award is to be paid in cash, equivalent to 66% of salary.

* Sir Ian Prosser’s award was pro-rated to reflect his actual service during the performance period following his retirement from the role of executive Chairman on July 5, 2003.

F-32

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

The awards made in respect of the Performance Restricted Share Plan cycles ending on December 31, 2004 and December 31, 2005 and the maximum pre-tax number of ordinary shares due if performance targets are achieved in full are:

	Awards held at 4.15.03 Ordinary shares	Awards granted during period to 12.31.03 max potential entitlement Ordinary shares					Max potential entitlement at 12.31.03 Ordinary shares	Value based on share price of 445p at award
								(£ thousand)
Directors			2003/04	*	2003/05	**
Richard Hartman	—		111,930		167,900		279,830	1,245
Richard North	—		188,760		283,140		471,900	2,100
Stevan Porter	—		113,810		170,710		284,520	1,266
Sir Ian Prosser***	—		65,410		65,410		130,820	582
Richard Solomons	—		110,110		165,160		275,270	1,225
								6,418

* This ‘transitional’ award is based on performance to December 31, 2004 where the performance measure relates to the Company’s total shareholder return against a group of 11 other comparator companies. The number of shares released will be graded, according to where the Company finishes in the comparator group, with 100% of the award being released for first or second position and 20% of the award being released for sixth place. Below sixth place there will be no release.

** This award is based on performance to December 31, 2005 where the performance measure relates to both the Company’s total shareholder return against a group of 11 other comparator companies and growth in return on capital employed. Further details of the performance measure are set out on page F-25.

*** Sir Ian Prosser’s award was pro-rated to reflect his actual service during the performance period following his retirement from the role of executive Chairman on July 5, 2003.

F-33

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

Directors’ Options

	Ordinary shares under option
	Six Continents Options held at 10.1.02 or date of appointment	Equivalent value IHG Options rolled over following Separation+	Granted during the period		Lapsed during the period		Exercised during the period		Options held at 12.31.03	Weighted average option price (p)	Option Price (p)
Richard Hartman	213,100	364,388								398.98
			250,684	*							438.00
A									364,388	398.98
C									250,684	438.00
Total	213,100	364,388	250,684		—		—		615,072	414.88
Richard North	416,400	712,017								388.66
			410,958	*							438.00
			2,193	**							420.50
A									693,379	383.16
B									18,638	593.29
C									413,151	437.91
Total	416,400	712,017	413,151		—		—		1,125,168	406.74
Stevan Porter	104,200	178,176								409.36
			254,883	*							438.00
A									178,176	409.36
C									254,883	438.00
Total	104,200	178,176	254,883		—		—		433,059	426.22
Sir Ian Prosser	722,075	1,234,704								430.84
							33,343	o			304.10
							1,105	#			350.00
					532	***	1,054	#			366.00
A									1,157,461	428.87
B									41,209	593.29
Total	722,075	1,234,704	—		532		35,502		1,198,670	434.52
Richard Solomons	211,858	362,261								374.92
			239,726	*							438.00
			3,769	**							420.50
					3,862	***	854	#			351.00
A									335,487	360.90
B									22,058	593.29
C									243,495	437.73
Total	211,858	362,261	243,495		3,862		854		601,040	400.55

+ The number and the exercise prices of options over IHG PLC shares exchanged for former options over Six Continents PLC shares were calculated in accordance with a formula based on the closing Six Continents PLC and opening IHG PLC share prices, both averaged over a five-day period. All outstanding rolled over options are immediately exercisable and the latest date that any rolled over options may be exercised is October 2012.

A Where options are exercisable and the market price per share at December 31, 2003 was above the option price;

B Where the options are exercisable but the market price per share at December 31, 2003 was below the option price; and

C Where options are not yet exercisable.

* Share options under the IHG Executive Share Option Plan were granted on May 30, 2003 at an option price of 438p. These options are exercisable between May 2006 and May 2013, subject to the achievement of the performance condition.

** Share options under the IHG Sharesave Plan were granted on December 19, 2003 at an option price of 420.5p. These options are exercisable between March 2007 and March 2009.

Footnotes continue on next page

F-34

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 4 — Staff (continued)

*** Represents the entitlement to IHG PLC shares which lapsed on October 11, 2003 under the former Six Continents Sharesave Schemes, due to early termination of individual sharesave contracts, as a consequence of the Separation.

o Represents rolled over options under the Six Continents 1985 Executive Share Option Scheme which would otherwise have lapsed on October 11, 2003, as a consequence of the Separation.

# Represents rolled over options under the Six Continents Sharesave Schemes which would otherwise have lapsed on October 11, 2003 as a consequence of the Separation.

Option prices range from 295.33p to 593.29p per IHG PLC share. The closing market value share price on December 31, 2003 was 529p and the range during the period from listing on April 15, 2003 to December 31, 2003 was 339p to 556.25p per share.

The gain on exercise by directors in aggregate was £69,491 in the period ended December 31, 2003 (no gains in the year ended September 30, 2002).

Directors’ shareholdings

Executive directors	December 31, 2003 InterContinental Hotels Group PLC Ordinary shares of £1	October 1, 2002* Six Continents PLC Ordinary shares of 28p**
Richard Hartman	30,345	35,808
Richard North	171,470	80,649
Stevan Porter	56,754	19,348
Richard Solomons	17,956	20,182
Non-executive directors
Ralph Kugler	1,000	—
Robert C Larson***	9,805	11,571
Sir Ian Prosser	270,060	276,238
David Prosser	5,000	—
Sir Howard Stringer	8,474	—
David Webster****	824	793

* Or date of appointment, if later.

** These share interests were in Six Continents PLC prior to the Separation in April 2003. For every 59 Six Continents PLC shares held on April 11, 2003, shareholders received 50 IHG PLC and 50 Mitchells & Butlers plc shares plus 81p in cash per Six Continents PLC share.

*** Held in the form of American Depositary Receipts.

**** David Webster purchased a further 5,000 shares in the Company on March 16, 2004.

The above shareholdings are all beneficial interests and include shares held by directors’ spouses and other connected persons, shares held on behalf of executive directors by the Trustees of the Six Continents Employee Profit Share Scheme and of the Company’s ESOP. None of the directors has a beneficial interest in the shares of any subsidiary.

At December 31, 2003, the executive directors, as potential beneficiaries under the Company’s ESOP, were each technically deemed to be interested in 2,222,519 unallocated IHG PLC shares held by the Trustees of the ESOP. In the period from December 31, 2003 to March 10, 2004 a further 65,018 shares were released from the ESOP, reducing the number of shares in which the executive directors hold a residual interest to 2,157,501 in total.

The Company’s Register of Directors’ Interests, which is open to inspection at the Registered Office, contains full details of directors’ shareholdings and share options.

F-35

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 5 – Exceptional Items

	15 months ended December 31						Year ended September 30
	2003						2002						2001
	Continuing operations (i)		Discontinued operations (i)		Total		Continuing operations (i)		Discontinued operations (i)		Total		Continuing operations (i)		Discontinued operations (i)		Total
	(£ million)
Operating exceptional items:
Hotels impairment charge (ii)	(51	)	—		(51	)	(77	)	—		(77	)	—		—		—
Hotels exceptional costs (iii)	—		—		—		—		—		—		(43	)	—		(43	)
Total operating exceptional items	(51	)	—		(51	)	(77	)	—		(77	)	(43	)	—		(43	)
Non-operating exceptional items:
Cost of fundamental reorganization (iv)	(67	)	—		(67	)	—		—		—		—		—		—
Separation costs (v)	(51	)	(41	)	(92	)	(4	)	—		(4	)	—		—		—
Profit/(loss) on disposal of fixed assets	4		(2	)	2		2		(2	)	—		(2	)	—		(2	)
Provision against fixed asset investments (vi)	(56	)	—		(56	)	—		—		—		—		—		—
Profit/(loss) on disposal of operations
Bass Brewers (vii)	—		—		—		—		57		57		—		38		38
Other operations (viii)	—		—		—		—		—		—		—		(36	)	(36	)
	(170	)	(43	)	(213	)	(2	)	55		53		(2	)	2		—
Total exceptional items before interest and taxation	(221	)	(43	)	(264	)	(79	)	55		(24	)	(45	)	2		(43	)
Premium on early settlement of debt (ix)	(136	)	—		(136	)	—		—		—		—		—		—
Tax credit/(charge) on above items	36		28		64		(10	)	1		(9	)	10		(11	)	(1	)
Exceptional tax credit (x)	—		—		—		—		114		114		—		—		—
Total exceptional items after interest and taxation	(321	)	(15	)	(336	)	(89	)	170		81		(35	)	(9	)	(44	)

(i) Continuing operations comprise InterContinental Hotels Group PLC. Discontinued operations relate to Mitchells & Butlers plc for all periods presented and in 2002 and 2001 also included profits on disposal of Bass Brewers of £57 million and £38 million respectively, relating to the finalization of completion accounts and in 2002 included an exceptional tax credit representing the release of over provisions of tax in relation to Bass Brewers and other businesses.

(ii) Tangible fixed assets were written down by £73 million (2002 £113 million, 2001 £mil million) following an impairment review of the hotel estate. £51 million (2002 £77 million, 2001 £nil million) was charged above as an operating exceptional item and £22 million (2002 £36 million, 2001 £nil million) reversed previous revaluation gains (see F-4).

(iii) Related to reorganization, restructuring and strategic appraisal costs in the InterContinental Hotels division.

(iv) Relates to a fundamental reorganization of the Hotels business. The cost includes redundancy entitlements, property exit costs and other implementation costs.

(v) On April 15, 2003, the Separation of Six Continents PLC was completed. Costs of the Separation and bid defense total £96 million. Of the costs, £4 million were incurred in the year to September 30, 2002, the remainder in the period to December 31, 2003.

(vi) Relates to a provision for diminution in value in the Group’s investment in FelCor Lodging Trust Inc. and other fixed asset investments and reflects the directors’ view of the fair value of the holdings.

(vii) Bass Brewers was disposed of in August 2000. The profit in 2002 comprises £9 million received in respect of the finalization of completion account adjustments, together with the release of disposal provisions no longer required of £48 million. The profit in 2001 arose from deferred consideration and the finalization of the pension scheme transfer.

(viii) Related to and resulting from the disposal of 988 smaller unbranded pubs by MAB.

(ix) Relates to the premiums paid on the repayment of the Group’s £250 million 10 3/8% debenture and EMTN loans. £23 million of the associated tax credit is shown as relating to discontinued operations as a result of the terms relating to Group relief in the Separation Agreement.

(x) Represents the release of over provisions for tax in respect of prior years.

F-36

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 6 — Interest Payable and Similar Charges

	15 months ended December 31		Year ended September 30
		2003		2002	2001
	(£ million)
Bank loans and overdrafts		38		21	26
Other		113		155	198
		151		176	224

Note 7 — Tax on Profit on Ordinary Activities

	15 months ended December 31, 2003							Year ended September 30
Tax charge		Before exceptional items		Exceptional items		Total			2002		2001
	(£ million)
UK corporation tax at 30% (2002 30%, 2001 30%):
Current year		42		(38	)	4			106		95
Prior years		(80	)	—		(80	)		(129	)	(13	)
		(38	)	(38	)	(76	)		(23	)	82
Foreign tax:
Current year		72		(3	)	69			65		92
Prior years		(20	)	—		(20	)		(1	)	20
		52		(3	)	49			64		112
Total current tax		14		(41	)	(27	)		41		194
Deferred tax:
Origination and reversal of timing differences		53		(23	)	30			17		72
Adjustments to estimated recoverable deferred tax assets		(11	)	—		(11	)		11		(35	)
Prior years		(9	)	—		(9	)		(17	)	(8	)
Total deferred tax		33		(23	)	10			11		29
Tax on profit on ordinary activities		47		(64	)	(17	)		52		223
Further analyzed as tax relating to:
Profit before exceptional items		47		—		47			157		222
Exceptional items (see Note 5):
Operating		—		—		—			—		(10	)
Non-operating		—		(64	)	(64	)		9		11
Tax credit		—		—		—			(114	)	—
		47		(64	)	(17	)		52		223

F-37

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 7 — Tax on Profit on Ordinary Activities (continued)

Tax reconciliations

Reconciliation of current tax rate

		15 months ended December 31		Year ended September 30
		2003			2002		2001
	(%)
UK corporation tax standard rate		30.0			30.0		30.0
Permanent differences		20.7			1.3		0.3
Capital allowances in excess of depreciation		(12.6	)		(3.7	)	(2.6	)
Other timing differences		(104.2	)		(1.3	)	(1.0	)
Net effect of different rates of tax in overseas businesses		46.1			3.1		0.3
Adjustment to tax charge in respect of prior years		(276.7	)		(2.9	)	1.0
Capital gains		—			—		(0.1	)
Other		2.1			—		—
Exceptional items		219.9			(18.8	)	0.2
Effective current tax rate		(74.7	)		7.7		28.1
Effective current tax rate before exceptional items		3.2			26.1		28.0

Reconciliation of overall tax rate

		15 months ended December 31		Year ended September 30
		2003			2002		2001
	(%)
UK corporation tax standard rate		30.0			30.0		30.0
Permanent differences		20.7			1.3		0.3
Net effect of different rates of tax in overseas businesses		46.1			4.0		0.8
Adjustment to tax charge in respect of prior years		(302.8	)		(6.0	)	(0.2	)
Capital gains		—			—		(0.1	)
Other		4.6			(0.6	)	(0.5	)
Exceptional items		154.4			(19.0	)	1.9
Effective tax rate		(47.0	)		9.7		32.2

Factors which may affect future tax charges

The key factors which may affect future tax charges include the availability of accelerated tax depreciation, utilization of unrecognized losses, changes in tax legislation, settlements with tax authorities and the proportion of profits subjected to higher overseas tax rates.

F-38

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 8 — Dividends

		15 months ended December 31	Year ended September 30 restated (i)				15 months ended December 31	Year ended September 30 restated (i)
		2003		2002	2001		2003		2002	2001
	(pence per share)					(£ million)
Dividends on ordinary shares
Interim Six Continents PLC		7.65		12.58	12.27		56		92	86
Proposed final Six Continents PLC		—		29.14	28.20		—		213	207
Interim InterContinental Hotels Group PLC		4.05		—	—		30		—	—
Proposed final InterContinental Hotels Group PLC		9.45		—	—		70		—	—
		21.15		41.72	40.47		156		305	293

The proposed final IHG dividend is payable on the shares in issue at March 26, 2004.

(i) Restated based on an equivalent number of shares of InterContinental Hotels Group PLC.

Note 9 — Earnings per Ordinary Share

Basic earnings per ordinary share is calculated by dividing the earnings available for shareholders of £19 million (2002 £457 million, 2001 £443 million) by 733 million (2002 731 million, 2001 731 million), being the weighted average number of ordinary shares, excluding investment in own shares, in issue during the period. The weighted average number of shares in issue has been based on the aggregate of the weighted average number of shares of InterContinental Hotels Group PLC and Six Continents PLC adjusted to equivalent shares of InterContinental Hotels Group PLC. The comparatives have been restated accordingly.

Diluted earnings per ordinary share is calculated by adjusting basic earnings per ordinary share to reflect the notional exercise of the weighted average number of dilutive ordinary share options outstanding during the period. The resulting weighted average number of ordinary shares is 733 million (2002 734 million, 2001 736 million).

Adjusted earnings per ordinary share is calculated as follows:

		15 months ended December 31	Year ended September 30 restated
		2003		2002		2001
	(pence per ordinary share)
Basic earnings		2.6		62.5		60.6
Exceptional items, less tax thereon		45.8		(11.1	)	6.0
Adjusted earnings		48.4		51.4		66.6

Adjusted earnings per ordinary share is disclosed in order to show performance undistorted by exceptional items.

F-39

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 10 — Cash flow from operating activities

	15 months ended December 31			Year ended September 30
		2003			2002		2001
	(£ million)
Operating profit before exceptional items		483			618		792
Depreciation and amortization		303			271		238
Earnings before interest, taxation, depreciation and amortization and exceptional items		786			889		1,030
Other non-cash items		(2	)		(4	)	1
Increase in stocks		(1	)		(1	)	—
(Increase)/decrease in debtors		(10	)		(92	)	83
Increase/(decrease) in creditors		69			(37	)	(94	)
Provisions expended – (Note 22)		(10	)		(18	)	(13	)
Operating activities before expenditure relating to exceptional items		832			737		1,007
Cost of fundamental reorganization		(37	)		—		—
Operating exceptional expenditure		—			(17	)	(23	)
Operating activities		795			720		984
Net capital expenditure – (Note 12)		(248	)		(513	)	(868	)
Operating cash flow – (Note 13)		547			207		116

Note 11 — Net Debt

	Cash and overdrafts							Liquid resources			Financing
		Cash at bank and in hand		Overdrafts		Total			Current asset investments			Other borrowings due within one year		Other borrowings due after one year		Total
	(£ million)
At October 1, 2000		125		(49	)	76			862			(70	)	(1,213	)	(345	)
Net cash flow		(538	)	12		(526	)(i)		—			—		—		(526	)
Management of liquid resources and financing		493		—		493	(i)		(497	)		(276	)	186		(94	)
Other movements arising on acquisitions		—		—		—			—			(38	)	—		(38	)
Exchange and other adjustments		(13	)	—		(13	)		1			6		8		2
At September 30, 2001		67		(37	)	30			366			(378	)	(1,019	)	(1,001	)
Net cash flow		(276	)	(29	)	(305	)(i)		—			—		—		(305	)
Management of liquid resources and financing		295		—		295	(i)		(232	)		(414	)	354		3
Exchange adjustments		(2	)	—		(2	)		84			10		34		126
At September 30, 2002		84		(66	)	18			218			(782	)	(631	)	(1,177	)
Net cash flow		(86	)	64		(22	)(i)		—			—		—		(22	)
Management of liquid resources and financing		77		—		77	(i)		129			758		(369	)	595
Separation of MAB		(7	)	—		(7	)		(7	)		4		—		(10	)
Exchange and other adjustments		(13	)	(3	)	(16	)		37			12		12		45
At December 31, 2003		55		(5	)	50			377			(8	)	(988	)	(569	)

Current asset investments include currency swaps.

(i) Represents a movement in cash and overdrafts of £55 million inflow (2002 £10 million outflow, 2001 £33 million outflow) (see Consolidated Statement of Cash Flows).

F-40

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 12 — Net Capital Expenditure

	15 months ended December 31			Year ended September 30
	2003			2002
	(£ million)
Hotels
Americas		(42	)		92
EMEA		103			121
Asia Pacific		37			4
Central		24			39
		122			256
Soft Drinks		65			31
InterContinental Hotels Group PLC (i)		187			287
Discontinued operations (i)		61			226
		248			513

(i) InterContinental Hotels Group PLC comprises continuing operations. Discontinued operations relate to Mitchells & Butlers plc.

Net capital expenditure for the year ended September 30, 2001 for the Hotels division was £552 million, Soft Drinks was £28 million and discontinued operations was £288 million.

Note 13 — Operating Cash Flow

	15 months ended December 31		Year ended September 30
		2003		2002		2001
	(£ million)
Hotels		336		(15	)	(82	)
Soft Drinks		59		77		99
InterContinental Hotels Group PLC (i)		395		62		17
Discontinued operations (i)		152		145		99
		547		207		116

(i) InterContinental Hotels Group PLC comprises continuing operations. Discontinued operations relate to Mitchells & Butlers plc for all periods presented and in 2001 includes £43 million related to Bass Brewers.

F-41

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 14 — Management of Liquid Resources and Financing

	15 months ended December 31,			Year ended September 30
		2003			2002		2001
	(£ million)
New borrowings (i)		18,672			8,260		5,510
Net commercial paper repaid		—			—		(21	)
Other borrowings repaid (i)		(19,061	)		(8,200	)	(5,399	)
		(389	)		60		90
Debt assumed by MAB		577			—		—
Ordinary shares issued by InterContinental Hotels Group PLC and Six Continents PLC		18			3		9
Ordinary shares repurchased		—			—		(103	)
Financing		206			63		(4	)
Movement in liquid resources (ii)		(129	)		232		497
		77			295		493

(i) Includes amounts rolled over under bank loan facilities.

(ii) Liquid resources primarily comprise short-term deposits of less than one year, short-term investments and currency swaps.

F-42

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 15 — Intangible Fixed Assets

	Goodwill
	(£ million)
Year ended September 30, 2002
Cost:
At October 1, 2001		189
Exchange adjustments		(3	)
Acquisitions		11
At September 30, 2002		197
Amortization:
At October 1, 2001		15
Exchange adjustments		(1	)
Provided		10
At September 30, 2002		24
Net book value at September 30, 2002		173
15 months ended December 31, 2003
At October 1, 2002		197
Acquisitions		10
Separation of MAB		(15	)
At December 31, 2003		192
Amortization:
At October 1, 2002		24
Provided		13
Separation of MAB		(3	)
At December 31, 2003		34
Net book value at December 31, 2003		158

F-43

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 16 — Tangible Fixed Assets

By activity

	Hotels			Soft Drinks			Total			Discontinued(i)			Total Group
	(£ million)
Year ended September 30, 2002
Cost or valuation:
At October 1, 2001		4,234			408			4,642			3,521			8,163
Exchange and other adjustments		(87	)		—			(87	)		—			(87	)
Additions		364			36			400			254			654
Disposals		(113	)		(36	)		(149	)		(53	)		(202	)
Impairment		(36	)		—			(36	)		—			(36	)
At September 30, 2002		4,362			408			4,770			3,722			8,492
Depreciation:
At October 1, 2001		290			175			465			140			605
Exchange and other adjustments		(16	)		—			(16	)		—			(16	)
Provided		133			42			175			86			261
On disposals		(17	)		(29	)		(46	)		(30	)		(76	)
Impairment		77			—			77			—			77
At September 30, 2002		467			188			655			196			851
Net book value at September 30, 2002		3,895			220			4,115			3,526			7,641
15 months ended December 31, 2003
Cost or valuation:
At October 1, 2002		4,362			408			4,770			3,722			8,492
Exchange and other adjustments		2			4			6			1			7
Additions		314			66			380			81			461
Disposals		(281	)		(27	)		(308	)		(64	)		(372	)
Separation of MAB		—			—			—			(3,740	)		(3,740	)
Impairment		(22	)		—			(22	)		—			(22	)
At December 31, 2003		4,375			451			4,826			—			4,826
Depreciation:
At October 1, 2002		467			188			655			196			851
Exchange and other adjustments		(7	)		1			(6	)		—			(6	)
Provided		186			50			236			54			290
On disposals		(37	)		(24	)		(61	)		(40	)		(101	)
Separation of MAB		—			—			—			(210	)		(210	)
Impairment		51			—			51			—			51
At December 31, 2003		660			215			875			—			875
Net book value at December 31, 2003		3,715			236			3,951			—			3,951

(i) Discontinued operations relate to Mitchells & Butlers plc.

Tangible fixed assets have been written down in total by £73 million (2002 £113 million, 2001 £nil million) following an impairment review of the hotel estate. The impairment has been measured by reference to the value in use of income-generating units, using either the higher of value in use or estimated recoverable amount. The discount rate used for value in use calculations was 11.4%.

F-44

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 16 — Tangible Fixed Assets (continued)

By category

	Land and buildings			Fixtures, fittings and equipment			Plant and machinery			Total
	(£ million)
Year ended September 30, 2002
Cost or valuation:
At October 1, 2001		5,836			2,198			129			8,163
Exchange and other adjustments		(59	)		(28	)		—			(87	)
Additions		261			381			12			654
Disposals		(96	)		(101	)		(5	)		(202	)
Impairment		(36	)		—			—			(36	)
At September 30, 2002		5,906			2,450			136			8,492
Depreciation:
At October 1, 2001		51			480			74			605
Exchange and other adjustments		(4	)		(12	)		—			(16	)
Provided		26			223			12			261
On disposals		(3	)		(69	)		(4	)		(76	)
Impairment		77			—			—			77
At September 30, 2002		147			622			82			851
Net book value at September 30, 2002		5,759			1,828			54			7,641
15 months ended December 31, 2003
Cost or valuation:
At October 1, 2002		5,906			2,450			136			8,492
Exchange and other adjustments		11			(8	)		4			7
Additions		139			291			31			461
Disposals		(221	)		(146	)		(5	)		(372	)
Separation of MAB		(2,809	)		(930	)		(1	)		(3,740	)
Impairment		(22	)		—			—			(22	)
At December 31, 2003		3,004			1,657			165			4,826
Depreciation:
At October 1, 2002		147			622			82			851
Exchange and other adjustments		3			(10	)		1			(6	)
Provided		28			243			19			290
On disposals		(13	)		(83	)		(5	)		(101	)
Separation of MAB		(48	)		(162	)		—			(210	)
Impairment		51			—			—			51
At December 31, 2003		168			610			97			875
Net book value at December 31, 2003		2,836			1,047			68			3,951

F-45

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 16 — Tangible Fixed Assets (continued)

Land and buildings

	December 31,					September 30,
	2003					2002
		Cost or valuation	Depreciation		Net book value		Cost or valuation	Depreciation		Net book value
	(£ million)
Freehold		2,109	(107	)	2,002		4,692	(94	)	4,598
Leasehold: unexpired term of more than 50 years		825	(25	)	800		948	(16	)	932
unexpired term of 50 years or less		70	(36	)	34		266	(37	)	229
		3,004	(168	)	2,836		5,906	(147	)	5,759

Cost or valuation of properties comprises:

		December 31,	September 30,
		2003	2002
	(£ million)
1999 valuation		1,567	3,032
1992 valuation		17	29
Cost		1,420	2,845
		3,004	5,906

Properties

Properties, comprising land, buildings and certain fixtures, fittings and equipment, are included above at cost or valuation, less depreciation as required. The transitional rules of FRS 15 have been followed, permitting the carrying values of properties as at October 1, 1999 to be retained.

The most recent valuation of properties was undertaken in 1999 and covered all properties then owned by the Group other than hotels acquired or constructed in that year and leasehold properties having an unexpired term of 50 years or less. This valuation was undertaken by external Chartered Surveyors and internationally recognized valuers (Jones Lang LaSalle Hotels) in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. The basis of valuation was predominantly existing use value and had regard to trading potential.

Historical cost

The comparable amounts under the historical cost convention for properties would be:

		December 31,		September 30,
		2003		2002
	(£ million)
Cost		2,931		4,998
Depreciation		(177	)	(199	)
Net book value		2,754		4,799

F-46

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 17 — Fixed Asset Investments

	Investments and advances restated (i)
	(£ million)
Year ended September 30, 2002
Cost:
At October 1, 2001	364
Exchange and other adjustments	(19	)
Additions	14
Disposals and repayments	(20	)
At September 30, 2002	339
Provision for diminution in value:
At October 1, 2001	130
Exchange and other adjustments	(7	)
On disposals	(2	)
At September 30, 2002	121
Net book value at September 30, 2002	218
15 months ended December 31, 2003
Cost:
At October 1, 2002	339
Exchange adjustments	(34	)
Reclassifications	6
Additions	42
Disposals and repayments	(12	)
At December 31, 2003	341
Provision for diminution in value:
At October 1, 2002	121
Exchange adjustments	(20	)
Reclassifications	3
Provisions made (ii)	65
At December 31, 2003	169
Net book value at December 31, 2003	172

(i) Restated on the adoption of UITF 38 (see Note 1).

(ii) Relates to a provision for diminution in value of the Group’s investment in FelCor Lodging Trust Inc. and other fixed asset investments.

F-47

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 17 — Fixed Asset Investments (continued)

Analysis of investments and advances

	December 31, 2003			September 30, 2002 restated (i)
		Cost less amount written off	Market value		Cost less amount written off	Market value
	(£ million)
Listed investments (i)		64	66		116	87
Unlisted investments		108			102
		172			218

(i) Restated on the adoption of UITF 38 (see Note 1).

All listed investments are listed on a recognized investment exchange.

Note 18 — Stocks

		December 31,	September 30,
		2003	2002
	(£ million)
Raw materials		9	8
Work in progress		—	22
Finished goods		21	47
Consumable stores		14	14
		44	91

Note 19 — Debtors

	December 31, 2003				September 30, 2002 restated(i)
		Total		After one year		Total		After one year
	(£ million)				(£ million)
Trade debtors		316				339
Less: Provision for bad and doubtful debts		(39	)			(50	)
		277				289
Other debtors (net of provisions for bad and doubtful debts £6 million) (2002 £5 million)		104		17		153		2
Corporate taxation		37		7		1		—
Pension prepayment		47		47		88		88
Other prepayments		58		5		98		1
		523		76		629		91

(i) Restated for the reclassification of pension provisions (see Note 1).

F-48

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 20 — Creditors: amounts falling due within one year

		December 31,	September 30,
		2003	2002
	(£ million)
Borrowings — (Note 23)		13	848
Trade creditors		133	178
Corporate taxation		389	455
Other taxation and social security		46	82
Accrued charges		235	274
Proposed dividend of parent company		70	213
Proposed dividend for minority shareholders		16	—
Other creditors		183	223
		1,085	2,273

Note 21 — Creditors: amounts falling due after one year

			September 30,
		December 31, 2003	2002 restated (i)
	(£ million)
Borrowings — (Note 23)		988	631
Other creditors and deferred income		97	100
		1,085	731

(i) Restated for the reclassification of pension provisions (see Note 1).

F-49

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 22 — Deferred Taxation and Other Provisions for Liabilities and Charges

				Other provisions for liabilities and charges
		Deferred Taxation			Hotels Reorganization (ii)		MAB Reorganization		Onerous contracts (iii)		Pensions (iv)	Other (v)		Total
	(£ million)
At October 1, 2001		487			—		9		22		—	73		104
Reclassification of pension balances		—			—		—		—		36	—		36
At October 1, 2001 (restated)		487			—		9		22		36	73		140
Profit and loss account		11			—		2		—		3	(56	)	(51	)
Expenditure		—			—		—		(10	)	—	(8	)	(18	)
Exchange and other adjustments		(3	)		—		—		—		—	—		—
At September 30, 2002		495			—		11		12		39	9		71
Profit and loss account		10			67		—		(6	)	6	(1)		66
Expenditure		—			(37	)	(2	)	(4	)	—	(4	)	(47	)
Exchange and other adjustments		(2	)		(3	)	(6	)	3		1	—		(5	)
Separation of MAB		(189	)		—		(3	)	—		—	(3	)	(6	)
At December 31, 2003		314			27		—		5		46	1		79

(i) Restated for the reclassification of pension provisions (see Note 1).

(ii) Relates to the Hotels reorganization charged as a non-operating exceptional item and is expected to be largely utilized in the year to 31 December 2005.

(iii) Primarily relates to onerous fixed lease contracts acquired with the InterContinental hotels business and having expiry dates to 2008.

(iv) Relates to unfunded post retirement benefit plans (see Note 4).

(v) Represents liabilities with varying expected utilization dates. During 2002, disposal provisions no longer required of £48 million were released to the profit and loss account as a non-operating exceptional item (see Note 5).

Deferred taxation

		December 31,		September 30,
Analyzed as tax on timing differences related to:		2003		2002
	(£ million)
Fixed assets		252		437
Deferred gains on loan notes		123		125
Losses		(37	)	(67	)
Pension prepayment		14		26
Other		(38	)	(26	)
		314		495

The deferred tax asset of £37 million (2002 £67 million) recognized in respect of losses includes £6 million (2002 £30 million) of capital losses available to be utilized against the realization of capital gains which are recognized as a deferred tax liability and £31 million (2002 £37 million) in respect of revenue tax losses. Tax losses with a value of £317 million (2002 £157 million), including capital losses with a value of £112 million (2002 £111 million), have not been recognized as their use is uncertain or not currently anticipated.

No provision has been made for deferred tax on the sale of properties at their revalued amounts. The total amount unprovided is estimated at £215 million (2002 £348 million restated(i)).

No provision has been made for deferred tax on the sale of properties where gains have been, or are expected to be, deferred against expenditure on replacement assets for an indefinite period until the sale of the replacement assets. The total amount unprovided is estimated at £52 million (2002 £166 million restated (i)). It is not anticipated that any such tax will be payable in the foreseeable future.

(i)     Restated following a review of historical tax basis and unrealized gains in respect of the Group’s properties, principally related to MAB.

F-50

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 23 — Borrowings

Analysis of borrowings

	December 31, 2003				September 30, 2002
		Within one year	After one year	Total		Within one year	After one year	Total
	(£ million)
Secured bank loans and overdrafts:
Bank loans (i)		3	57	60		4	55	59
Unsecured bank loans and overdrafts:
Bank loans		5	489	494		579	46	625
Overdrafts		5	—	5		66	—	66
Total bank loans and overdrafts		13	546	559		649	101	750
Secured — other borrowings:
2016 debenture stock 10.375% (ii)		—	—	—		—	250	250
Other debenture stock and loans (iii)		—	1	1		7	2	9
Unsecured — other borrowings:
2003 Guaranteed Notes 6.625% ($300 million)		—	—	—		192	—	192
2007 Guaranteed Notes 5.75% (£250 million)		—	18	18		—	250	250
2010 Guaranteed Notes 4.75% (€600 million)		—	420	420		—	—	—
Other loan stock (iv)		—	3	3		—	28	28
Total other borrowings		—	442	442		199	530	729
Total borrowings		13	988	1,001		848	631	1,479

(i) Secured by way of mortgage over individual hotel properties. The terms, rates of interest and currencies of these bank loans vary.

(ii) Secured by a first floating charge on the assets of Six Continents PLC and certain of its UK subsidiaries and by cross guarantees given by these subsidiaries.

(iii) Secured on the individual assets purchased by using such borrowings. The terms, rates of interest and currencies of these borrowings vary.

(iv) Amounts due after more than one year at September 30, 2002, include borrowings of £16 million bearing interest at a fixed rate of 4.52%.

The weighted average interest rate on overdrafts outstanding at December 31, 2003 is 4.75% (September 30, 2002 5.00%). Interest on all other borrowings is at variable rates unless otherwise stated. Interest on the unsecured bank loans drawn at December 31, 2003 is at a weighted average rate of 2.2% (September 30, 2002 2.6%). All borrowings are redeemable at par.

F-51

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 23 — Borrowings (continued)

Analysis by year of repayment

	December 31, 2003				September 30, 2002
		Bank loans and overdrafts	Other borrowings	Total		Bank loans and overdrafts	Other borrowings	Total
	(£ million)
Due:
Within one year		13	—	13		649	199	848
Between one and two years		42	—	42		3	11	14
Between two and three years		452	—	452		12	—	12
Between three and four years		33	18	51		32	16	48
Between four and five years		11	—	11		24	—	24
Thereafter
By installment		3	—	3		12	—	12
Other than by installment		5	424	429		18	503	521
Due after more than one year		546	442	988		101	530	631
Total borrowings		559	442	1,001		750	729	1,479
Amounts repayable by installments, some of which fall due after five years		22	—	22		23	—	23

Facilities committed by banks

		December 31, 2003	September 30, 2002
	(£ million)
Utilized		554	684
Unutilized		408	944
		962	1,628
Unutilized facilities expire:
Within one year		—	590
After one year but before two years		36	30
After two years		372	324
		408	944

F-52

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 24 — Financial Instruments

The following disclosures provide information regarding the effect of financial instruments on the financial assets and liabilities of the Group, other than short-term debtors and creditors.

Interest rate risk

In order to manage interest rate risk, the Group enters into interest rate swap, interest rate option and forward rate agreements. At December 31, 2003 and September 30, 2002 notional principal balances and related interest rates under interest rate swaps and forward rate agreements were:

	Expected to mature before December 31
Interest rate swaps and forward rate
agreements		2004		2005		2006		2007	2008	Thereafter		Total		Fair value (i)
At December 31, 2003
Principal		$250	m	$600	m	$300	m	—	—	—		$1,150	m	$(44)m
Fixed rate payable		5.7	%	4.4	%	4.4	%	—	—	—		4.7	%
Variable rate receivable		1.2	%	1.2	%	1.2	%	—	—	—		1.2	%
Principal		€100	m	€65	m	—		—	—	—		€165	m	€(4)m
Fixed rate payable		4.0	%	4.2	%	—		—	—	—		4.1	%
Variable rate receivable		2.2	%	2.2	%	—		—	—	—		2.2	%
Principal		—		—		—		—	—	€300	m	€300	m	—
Variable rate payable		—		—		—		—	—	3.0	%	3.0	%
Fixed rate receivable		—		—		—		—	—	4.8	%	4.8	%
Principal		A$50	m	—		—		—	—	—		A$50	m	—
Fixed rate payable		4.7	%	—		—		—	—	—		4.7	%
Variable rate receivable		5.5	%	—		—		—	—	—		5.5	%
Principal		HK$370	m	—		—		—	—	—		HK$370	m	HK$(17)m
Fixed rate payable		5.2	%	—		—		—	—	—		5.2	%
Variable rate receivable		0.4	%	—		—		—	—	—		0.4	%

(i) Represents the net present value of the expected cash flows discounted at current market rates of interest.

The principal indicates the extent of the use of the instrument, but exposure is limited to the interest rate differential on the principal. At December 31, 2003 the risk was approximately equal to the fair value shown. The variable rates shown are those prevailing on December 31, 2003.

F-53

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 24 — Financial Instruments (continued)

	Expected to mature before September 30
Interest rate swaps and forward rate
agreements		2003		2004		2005		2006		2007		Thereafter		Total		Fair Value (i)
At September 30, 2002
Principal		$505	m	$100	m	$300	m	$250	m	$150	m	—		$1,305	m	$(51	)m
Fixed rate payable		3.6	%	6.0	%	5.1	%	4.2	%	4.2	%	—		4.3	%
Variable rate receivable		1.8	%	1.8	%	1.8	%	1.8	%	1.8	%	—		1.8	%
Principal		£200	m	£50	m	—		—		—		£250	m	£500	m	£19	m
Variable rate payable		4.3	%	4.0	%	—		—		—		4.6	%	4.4	%
Fixed rate receivable		4.2	%	6.8	%	—		—		—		5.8	%	5.2	%
Principal		€256	m	—		—		—		—		—		€256	m	€(3	)m
Fixed rate payable		4.5	%	—		—		—		—		—		4.5	%
Variable rate receivable		3.4	%	—		—		—		—		—		3.4	%
Principal		—		—		—		€25	m	—		—		€25	m	€1	m
Variable rate payable		—		—		—		3.7	%	—		—		3.7	%
Fixed rate receivable		—		—		—		4.5	%	—		—		4.5	%
Principal		—		A$50	m	—		—		—		—		A$50	m	—
Fixed rate payable		—		4.7	%	—		—		—		—		4.7	%
Variable rate receivable		—		4.9	%	—		—		—		—		4.9	%
Principal		—		HK$700	m	—		—		—		—		HK$700	m	HK$(11	)m
Fixed rate payable		—		3.2	%	—		—		—		—		3.2	%
Variable rate receivable		—		1.8	%	—		—		—		—		1.8	%
Principal (ii)		—		$150	m	—		$150	m	—		—		$300	m	$(10	)m
Fixed rate payable		—		5.4	%	—		3.9	%	—		—		4.6	%
Principal (ii)		—		€50	m	€115	m	—		—		—		€165	m	€(2	)m
Fixed rate payable		—		4.0	%	4.1	%	—		—		—		4.1	%
Principal (ii)		—		—		HK$370	m	—		—		—		HK$370	m	HK$(8	)m
Fixed rate payable		—		—		5.2	%	—		—		—		5.2	%

(i) Represents the net present value of the expected cash flows discounted at current market rates of interest.

(ii) Contracts entered into before September 30, 2002 and commencing after that date with variable rates set in accordance with the contracts on commencement.

The principal indicates the extent of the use of the instrument, but exposure is limited to the interest rate differential on the principal. At September 30, 2002 the risk was approximately equal to the fair value shown. The variable interest rates are those prevailing on September 30, 2002.

Interest rate option agreements

At December 31, 2003, the Group had not entered into any interest rate option agreements. At September 30, 2002, the Group had entered into the following interest rate option agreements:

	2002
		Principal		Cap rate		Swap rate		Maturity
US dollar swaption — Interest payable		$250	m	—		3.47	%	2005
US dollar cap — Interest payable		$100	m	4.00	%	—		2005

F-54

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 24 — Financial Instruments (continued)

At December 31, 2003 and September 30, 2002, the interest rate profile of the Group’s material financial assets and liabilities, after taking account of the interest rate swap agreements and currency swap agreements detailed above, was:

												Interest at fixed rate
							Principal						Weighted	Weighted average period for
	Net debt		Currency Swap agreements		Total			at variable rate (i)		at fixed rate			average rate	which rate is fixed
					(£ million)								(%)	(years)
At December 31, 2003
Current asset investments and cash at bank and in hand:
Sterling	377		934		1,311			1,311		—			—	—
US dollar	9		—		9			9		—			—	—
Other	46		—		46			46		—			—	—
Borrowings:
Sterling	(24	)	—		(24	)		(3	)	(21	)		5.0	4.1
US dollar	(337	)	(615	)	(952	)		(301	)	(651	)		4.7	1.5
Euro	(514	)	(258	)	(772	)		(403	)	(369	)		4.8	4.7
Hong Kong dollar	(84	)	—		(84	)		(57	)	(27	)		5.2	0.8
Other	(42	)	(61	)	(103	)		(82	)	(21	)		4.7	0.7
	(569	)	—		(569	)		520		(1,089	)		4.8	2.6
At September 30, 2002
Current asset investments and cash at bank and in hand:
Sterling	196		2,153		2,349			2,349		—			—	—
US dollar	30		—		30			30		—			—	—
Other	76		—		76			76		—			—	—
Borrowings:
Sterling	(532	)	—		(532	)		(327	)	(205	)		10.2	13.5
US dollar	(463	)	(1,490	)	(1,953	)		(1,195	)	(758	)		5.4	2.1
Euro	(183	)	(628	)	(811	)		(598	)	(213	)		4.9	1.9
Hong Kong dollar	(215	)	—		(215	)		(158	)	(57	)		3.2	1.0
Other	(86	)	(35	)	(121	)		(104	)	(17	)		4.7	2.0
	(1,177	)	—		(1,177	)		73		(1,250	)		6.0	4.2

(i) Primarily based on the relevant inter-bank rate.

At December 31, 2003, the Group had investments and advances totaling £172 million (2002 £218 million) on which no interest is receivable and which do not have a maturity date. These interests are denominated primarily in US dollars.

The Group had other creditors and deferred income, denominated primarily in US dollars, due after one year of £97 million at December 31, 2003 (2002 £100 million) on which no interest is payable.

F-55

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 24 — Financial Instruments (continued)

Currency risk

In order to manage currency risk, the Group enters into agreements for the forward purchase or sale of foreign currencies as well as currency options. Foreign currency flows in respect of imports and exports are also netted where practical. As virtually all foreign exchange gains and losses are charged to the Statement of Total Recognized Group Gains and Losses under the hedging provisions of SSAP 20 ‘Foreign Currency Translation’, no disclosure of the remaining currency risks has been provided on the grounds of materiality.

At December 31, 2003, the Group had contracted to exchange within one year the equivalent of £49 million (2002 £35 million) of various currencies.

Currency swap agreements

The Group had entered into the following currency swap agreements at December 31, 2003 and September 30, 2002:

	Deposited			Borrowed
		2003	2002		2003	2002
Sterling to US dollar		£639m	£1,518m		$1,097m	$2,331m
Sterling to euro		£250m	£640m		€364m	€999m
Sterling to Australian dollar		£42m	£35m		A$100m	A$100m
Sterling to New Zealand dollar		£19m	—		NZ$51m	—

Liquidity risk

A liquidity analysis of the Group’s borrowings is provided in Note 23, along with details of the Group’s material unutilized committed borrowing facilities.

The liquidity analysis of the Group’s other financial liabilities at December 31, 2003 and September 30, 2002 is set out below.

		December 31, 2003	September 30, 2002 restated (i)
	(£ million)
Other creditors and deferred income
Due:
between one and two years		36	36
between two and five years		35	39
after five years		26	25
		97	100

(i) Restated for the reclassification of pension provisions (see Note 1).

F-56

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 24 — Financial Instruments (continued)

Fair values

The net book values and related fair values of the Group’s financial assets and liabilities at December 31, 2003 and September 30, 2002 are:

	December 31,					September 30,
	2003					2002 restated (i)
		Net book value		Fair value			Net book value		Fair value
	(£ million)
Fixed asset investments		172		174			218		189
Cash and overdrafts		50		50			18		18
Current asset investments		361		361			178		178
Currency swap agreements		16		20			40		44
Other borrowings		(996	)	(1,000	)		(1,413	)	(1,535	)
Net debt		(569	)	(569	)		(1,177	)	(1,295	)
Other financial liabilities		(97	)	(97	)		(100	)	(100	)
Interest rate swap agreements		—		(29	)		—		(24	)
Forward exchange contracts		—		(1	)		—		(1	)
		(494	)	(522	)		(1,059	)	(1,231	)

(i) Restated on the adoption of UITF 38 and for the reclassification of pension provisions (see Note 1).

The fair values of listed fixed asset investments and borrowings are based on market prices at the year end. Other assets and liabilities have been fair valued by discounting expected future cash flows to present value.

Hedges

The Group’s unrecognized gains and losses for the year on derivative financial instruments are:

		Gains		Losses		Total
	(£ million)
Unrecognized at October 1, 2001		10		(21	)	(11	)
Recognized in the year		(5	)	16		11
Arising in the year but not recognized		19		(40	)	(21	)
Unrecognized at September 30, 2002		24		(45	)	(21	)
Recognized in the period		(2	)	31		29
Arising in the period but not recognized		(18	)	(16	)	(34	)
Unrecognized at December 31, 2003		4		(30	)	(26	)
Expected to be recognized in the year ending December 31, 2004		3		(6	)	(3	)
Expected to be recognized thereafter		1		(24	)	(23	)

Counterparty risk

The Group is exposed to loss in the event of non-performance by the counterparties to the above agreements but such non-performance is not expected to occur.

F-57

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 25 — Goodwill eliminated

Goodwill purchased prior to September 30, 1998 and eliminated against Group reserves is as follows:

		Cost of goodwill eliminated		Exchange adjustments		Total
	(£ million)
Eliminated to September 30, 2001		2,403		220		2,623
Exchange adjustments		—		(98	)	(98	)
Eliminated to September 30, 2002		2,403		122		2,525
Separation of MAB		(50	)	—		(50	)
Exchange adjustments		—		(139	)	(139	)
Eliminated to December 31, 2003		2,353		(17	)	2,336

Note 26 — Major Acquisitions and Disposals

Year ended September 30, 2001

In the year the Group acquired the Posthouse hotel business.

		Net book value		Fair value adjustments		Fair value
	(£ million)
Goodwill		381		(381	) (i)	—
Tangible fixed assets		1,058		(160	) (ii)	898
Current assets (excluding cash)		31		—		31
Cash		262		—		262
Creditors due within one year		(41	)	(37	) (iii)	(78	)
Borrowings		(38	)	—		(38	)
Deferred taxation		—		(41	) (iv)	(41	)
Net assets		1,653		(619	)	1,034
Consideration:
Preference shares (v)						(20	)
Cash						(1,014	)
Goodwill						—

          The Posthouse hotel business was acquired on April 4, 2001. The consideration shown includes costs and working capital and net debt adjustments. The main fair value adjustments are:

(i) write off of goodwill arising on a prior transaction;

(ii) revaluation of hotels;

(iii) reassessment of creditors including corporate tax and other acquired liabilities; and

(iv) reassessment of the deferred taxation effect of all timing differences including those relating to fair value adjustments.

(v) Preference shares were issued by a subsidiary undertaking.

For the period October 1, 2000 to the date of acquisition and for its preceding financial year ended September 30, 2000, the Posthouse business generated operating profit of £40 million and £80 million, respectively.

The pro forma effect on earnings of this acquisition is not significant.

F-58

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 26 — Major Acquisitions and Disposals (continued)

Year ended September 30, 2002

There were no major acquisitions or disposals in the year ended September 30, 2002.

15 months ended December 31, 2003

Separation of MAB

	£ million
Net assets disposed
Intangible assets	12
Tangible assets	3,530
Stocks	47
Debtors	140
Current asset investments	7
Cash at bank and in hand	7
Creditors: amounts falling due within one year	(244	)
Provisions for liabilities and charges	(195	)
Debt assumed by MAB	(577	)
	2,727
Goodwill previously eliminated against reserves	50
	2,777

There were no major acquisitions in the 15 months ended December 31, 2003.

Note 27 — Share Options

Former Six Continents Share Schemes

Under the terms of the Separation, holders of options under the Six Continents Executive Share Option Schemes were given the opportunity to exchange their Six Continents PLC options for equivalent value new options over IHG PLC shares. As a result of this exchange, 23,195,482 IHG PLC shares were put under option at prices ranging from 295.33p to 593.29p. The exchanged options are immediately exercisable and are not subject to performance conditions. The latest date that any rolled over options may be exercised is October 2012.

Options held under the Six Continents Savings Related Share Option Schemes by eligible UK employees became exercisable for a period of six months from April 11, 2003. Options exercised during this period resulted in the issue of 1,659,515 IHG PLC shares. The remainder of these options lapsed on October 11, 2003.

New Share Plans established on Separation

Executive Share Option Plan

The Remuneration Committee, consisting solely of non-executive directors, may select employees, including executive directors, of the Group, for the grant of options to acquire ordinary shares in the Company. The option price will not be less than the market value of an ordinary share, or the nominal value if higher. The market value will be the quoted price on the business day preceding the date of grant, or the average of the middle market quoted prices on the three consecutive dealing days immediately preceding the date of grant. The International Schedule to the Scheme extends it to executives outside the United Kingdom. Grants of options under the Executive Share Option Plan are normally made annually and except in exceptional circumstances, will not, in any year, exceed three times annual salary for executive directors. A performance condition has to be met before options can be exercised. The performance condition is set by the Remuneration Committee.

In May and September 2003, options were granted to 170 employees over 7,375,272 IHG PLC shares at 438p and 491.75p per share, respectively. For options granted in 2003, the Company’s adjusted earnings per share over the three-year period ending December 31, 2005 must increase by at least nine percentage points over

F-59

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 27 — Share Options (continued)

the increase in the UK Retail Prices Index for the same period for any of the award to vest. Options granted in 2003 are exercisable between 2006 and 2013, subject to achievement of the performance condition.

Performance Restricted Share Plan

The Performance Restricted Share Plan allows executive directors and eligible employees to receive share awards, subject to the satisfaction of a performance condition, set by the Remuneration Committee, normally measured over a three-year period. Awards are normally made annually and, except in exceptional circumstances, will not exceed three times salary for executive directors. In determining the level of awards within this maximum limit, the Remuneration Committee takes into account the level of Executive Share Options already granted to the same person. As of March 22, 2004 conditional rights over 5,281,020 IHG PLC shares had been awarded to 46 employees under the plan. The plan provides for the grant of ‘nil cost options’ to participants as an alternative to conditional share awards. As of March 22, 2004 no such nil cost options had been granted.

Sharesave Plan

The Sharesave Plan is a savings plan whereby employees contract to save a fixed amount each month with a Savings Institution for three or five years. At the end of the savings term, employees are given the option to purchase shares at a price set before savings began. The Sharesave Plan is available to all UK employees (including executive directors) employed by participating Group companies provided they have been employed for at least one year. The plan provides for the grant of options to subscribe for ordinary shares at the higher of nominal value and not less than 80% of the middle market quotations of the ordinary shares on the three dealing days immediately following an announcement of results. As of March 22, 2004, 1,365,251 ordinary shares were subject to options under the Sharesave Plan at a subscription price of 420.5p, exercisable up to the year 2009.

US Employee Stock Purchase Plan

The US Employee Stock Purchase Plan will allow eligible employees resident in the United States an opportunity to acquire Company ADSs on advantageous terms. The plan, when operational, will comply with Section 423 of the US Internal Revenue Code of 1986. The option to purchase ADSs may be offered only to employees of designated subsidiary companies. The option price may not be less than the lesser of either 85% of the fair market value of an ADS on the date of grant or 85% of the fair market value of an ADS on the date of exercise. Options granted under the plan must generally be exercised within 27 months from the date of grant. The plan was not operated during fiscal 2003 and at March 22, 2004 no options had been granted under the plan.

In any ten-year period, not more than 10% of the issued ordinary share capital of the Company may be allocated under all the employee share plans operated by the Company. In addition, in any ten-year period, not more than 5% of the issued ordinary share capital may be allocated under the discretionary share plans operated by the Company. These limits include rights to ordinary shares issued in respect of options granted under the former Six Continents Share Schemes referred to above.

F-60

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 27 — Share Options (continued)

Movements in the options outstanding under these schemes for the 15 months ended December 31, 2003 and the years ended September 30, 2001 and 2002 are as follows:

	InterContinental Hotels Group Employee Savings Share Schemes					InterContinental Hotels Group Executive Share Option Schemes
	No. of shares			Range of option prices		No. of shares			Range of option prices
	(000)			(pence)		(000)			(pence)
Options outstanding at October 1, 2000		7,378			367.0-886.0		16,637			469.4-1,014.5
Granted		1,061			626.0-626.0		4,651			723.0-723.0
Exercised		(1,345	)		367.0-886.0		(375	)		476.6-746.0
Lapsed or canceled		(3,021	)		367.0-886.0		(267	)		597.0-1,014.5
Options outstanding at September 30, 2001		4,073			400.0-886.0		20,646			469.4-1,014.5
Granted		1,883			600.0-600.0		5,308			700.0-700.4
Exercised		(285	)		400.0-734.0		(198	)		505.0-746.0
Lapsed or canceled		(876	)		400.0-886.0		(3,109	)		469.4-1,014.5
Options outstanding at September 30, 2002		4,795			470.0-886.0		22,647			505.0-1,014.5
Granted		—			—		658			527.5
Exercised		(31	)		470.0-654.0		(24	)		505.0-527.5
Lapsed or canceled		(969	)		470.0-886.0		(163	)		584.0-1,014.5
Transferred to MAB		—			—		(9,523	)		505.0-1,014.5
Closing Six Continents PLC share options		3,795			470.0-886.0		13,595			505.0-1,014.5
Rolled over share options		2,694			—		9,651			—
Opening InterContinental Hotels Group PLC share options		6,489			350.0-518.1		23,246			295.3-593.3
Granted		1,375			420.5		7,375			438.0-491.7
Exercised		(1,661	)		350.0-518.1		(3,242	)		295.3-466.7
Lapsed or canceled		(4,830	)		350.0-518.1		(159	)		304.1-438.0
Options outstanding at December 31, 2003		1,373			420.5		27,220			295.3-593.3
Options exercisable:
At December 31, 2003		—			—		19,998			295.3-593.3
At September 30, 2002		384			470.0-734.0		4,052			505.0-1,014.5
At September 30, 2001		300			400.0-886.0		5,790			469.5-851.5
Fair value of options granted during the period ended:
December 31, 2003					176.2					99.3
September 30, 2002					122.6					160.7
September 30, 2001					165.0					142.0

The weighted average fair values of options granted were estimated using the Black-Scholes option pricing model with the following assumptions: dividend yield of 3% (2002 5%, 2001 5%) expected volatility of 30% (2002 26%, 2001 32%), risk free interest rate of 5% (2002 5%, 2001 6%) and expected life of 3 to 5 years (2002 3 to 5 years, 2001 5 years).

F-61

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 27 — Share Options (continued)

Movements in the options outstanding under the option schemes for the 15 months ended December 31, 2003 and the years ended September 30, 2002 and 2001 and the related weighted average option prices are as follows:

	InterContinental Hotels Group Employee Savings Share Schemes					InterContinental Hotels Group Executive Share Option Schemes
	No. of shares			Weighted average option price		No. of shares			Weighted average option price
	(000)			(pence)		(000)			(pence)
Options outstanding at October 1, 2000		7,378			657.7		16,637			711.3
Granted		1,061			626.0		4,651			723.0
Exercised		(1,345	)		568.7		(375	)		578.3
Lapsed or canceled		(3,021	)		707.6		(267	)		785.6
Options outstanding at September 30, 2001		4,073			641.9		20,646			715.4
Granted		1,883			600.0		5,308			700.4
Exercised		(285	)		474.7		(198	)		600.3
Lapsed or canceled		(876	)		673.9		(3,109	)		720.5
Options outstanding at September 30, 2002		4,795			629.5		22,647			707.7
Granted		—			—		658			527.5
Exercised		(31	)		493.7		(24	)		519.0
Lapsed or canceled		(969	)		641.0		(163	)		695.5
Transferred to MAB		—			—		(9,523	)		712.9
Closing Six Continents PLC		3,795			627.7		13,595			695.8
Conversion into InterContinental Hotels Group PLC share options		2,694			—		9,651			—
Rolled over InterContinental Hotels Group PLC share options		6,489			367.2		23,246			413.5
Granted		1,375			420.5		7,375			439.6
Exercised		(1,661	)		364.8		(3,242	)		375.7
Lapsed or canceled		(4,830	)		368.0		(159	)		433.5
Options outstanding at December 31, 2003		1,373			420.5		27,220			424.9
Options exercisable:
At December 31, 2003		—			—		19,998			419.6
At September 30, 2002		384			665.9		4,052			848.7
At September 30, 2001		300			624.2		5,790			759.3

F-62

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 27 — Share Options (continued)

Summarized information about options outstanding at December 31, 2003 under the share option schemes is as follows:

	Options outstanding						Options exercisable
Range of exercise prices (pence)	Number outstanding		Weighted average remaining contract life		Weighted average option price		Number exercisable		Weighted average option price
	(000)		(years)		(pence)		(000)		(pence)
InterContinental Hotels Group Employee Savings Share Schemes
420.5		1,373		3.8		420.5		—		—
InterContinental Hotels Group Executive Share Option Schemes
295.3 to 353.8		5,310		6.2		344.3		5,310		344.3
353.9 to 498.0		21,173		7.8		439.3		13,951		439.2
498.1 to 593.3		737		4.3		593.3		737		593.3
		27,220		7.4		424.9		19,998		419.6

Note 28 – Financial Commitments

The Group has annual commitments under noncancelable operating leases which expire as follows:

	December 31,				September 30,
	2003				2002
	Properties		Other		Properties		Other
	(£ million)
Within one year		1		2		3		4
Between one and five years		10		5		17		9
After five years		32		—		75		—
		43		7		95		13

Total commitments under non-cancellable operating leases at December 31, 2003 are as follows:

	December 31, 2003
	(£ million)
Due within one year		50
One to two years		47
Two to three years		44
Three to four years		41
Four to five years		33
Thereafter		853
		1,068

There are a number of property and equipment leases used in the Group’s operations where, in addition to a specified minimum rental, the leases provide for contingent rentals based on percentages of revenue. The average remaining term of these leases, which generally contain renewal options, is approximately 12 years. No material restrictions or guarantees exist in the Group’s lease obligations.

F-63

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 29 — Contracts for Expenditure on Fixed Assets

	December 31,		September 30,
	2003		2002
	(£ million)
Contracts placed for expenditure on fixed assets not
provided for in the financial statements		63		314

Note 30 — Contingencies

Contingent liabilities not provided for in the financial statements relate to:

	December 31,		September 30,
	2003		2002
	(£ million)
Guarantees		11		16

In limited cases, the Group may provide performance guarantees to third-party owners to secure management contracts. The maximum exposure under such guarantees is £88 million. It is the view of the directors that, other than to the extent that liabilities have been provided for in these financial statements, such guarantees are not expected to result in financial loss to the Group.

As of December 31, 2003 the Group had outstanding letters of credit of approximately £18 million mainly relating to self-insurance programs.

The Group may guarantee loans made to facilitate third-party ownership of hotels that the Group has an equity interest in and manages. As of December 31, 2003 the Group was a guarantor of loans which could reach a maximum of £18 million.

The Group has given warranties in respect of the disposal of certain of its former subsidiaries. It is the view of the directors that, other than to the extent that liabilities have been provided for in these financial statements, such warranties are not expected to result in financial loss to the Group.

Note 31 — Companies Act 1985

These financial statements do not comprise the Company’s “statutory accounts” within the meaning of Section 240 of the Companies Act 1985 of Great Britain. Statutory accounts for the period ended December 31, 2003 will be delivered to the Registrar of Companies for England and Wales in due course and statutory accounts for the years ended September 30, 2002 and 2001 have been so delivered. The auditors’ reports on such accounts were unqualified.

Note 32 — Fifteen months ended December 31, 2003

As discussed in Note 1, during 2003 the Company changed its fiscal year end to December 31 and thus its financial statements for its last fiscal period are presented for the 15 months ended December 31, 2003 as permitted by the Companies Act 1985. In accordance with the transition period reporting requirements of the US Securities and Exchange Commission, an unaudited analysis of the financial statements and notes thereto for this 15 month period showing the three month period ended December 31, 2002 and the 12 month period ended December 31, 2003 is presented below.

F-64

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

(a) Consolidated profit and loss account

	Unaudited						Unaudited
	Three months ended December 31, 2002						12 months ended December 31, 2003							15 months ended December 31, 2003
	Before exceptional items		Exceptional items		Total			Before exceptional items		Exceptional items		Total		Before exceptional items		Exceptional items		Total
	(£ million, except per ordinary share amounts)
Turnover	871		—		871			2,612		—		2,612		3,483		—		3,483
Analyzed as:
Continuing operations	529		—		529			2,161		—		2,161		2,690		—		2,690
Discontinued operations	342		—		342			451		—		451		793		—		793
Costs and overheads, less other income	(759	)	—		(759	)		(2,241	)	(51	)	(2,292	)	(3,000	)	(51	)	(3,051	)
Operating profit	112		—		112			371		(51	)	320		483		(51	)	432
Analyzed as:
Continuing operations	60		—		60			286		(51	)	235		346		(51	)	295
Discontinued operations	52		—		52			85		—		85		137		—		137
Non-operating exceptional items	—		(3	)	(3	)		—		(210	)	(210	)	—		(213	)	(213	)
Analyzed as:
Continuing operations:
Cost of fundamental reorganization	—		—		—			—		(67	)	(67	)	—		(67	)	(67	)
Separation costs	—		(3	)	(3	)		—		(48	)	(48	)	—		(51	)	(51	)
Profit on disposal of fixed assets	—		—		—			—		4		4		—		4		4
Provision against fixed asset      investments	—		—		—			—		(56	)	(56	)	—		(56	)	(56	)
	—		(3	)	(3	)		—		(167	)	(167	)	—		(170	)	(170	)
Discontinued operations:
Separation costs	—		—		—			—		(41	)	(41	)	—		(41	)	(41	)
Loss on disposal of fixed assets	—		—		—			—		(2	)	(2	)	—		(2	)	(2	)
	—		—		—			—		(43	)	(43	)	—		(43	)	(43	)
Profit on ordinary activities before interest	112		(3	)	109			371		(261	)	110		483		(264	)	219
Interest receivable	27		—		27			77		—		77		104		—		104
Interest payable and similar charges	(39	)	—		(39	)		(112	)	—		(112	)	(151	)	—		(151	)
Premium on early settlement of debt	—		—		—			—		(136	)	(136	)	—		(136	)	(136	)
Profit/(loss) on ordinary activities before taxation	100		(3	)	97			336		(397	)	(61	)	436		(400	)	36
Tax on profit/(loss) on ordinary activities	(29	)	—		(29	)		(18	)	64		46		(47	)	64		17
Profit/(loss) on ordinary activities after taxation	71		(3	)	68			318		(333	)	(15	)	389		(336	)	53
Minority equity interests	(4	)	—		(4	)		(30	)	—		(30	)	(34	)	—		(34	)
Earnings available for shareholders	67		(3	)	64			288		(333	)	(45	)	355		(336	)	19
Dividends on equity shares	—		—		—			(156	)	—		(156	)	(156	)	—		(156	)
Retained for reinvestment in the business	67		(3	)	64			132		(333	)	(201	)	199		(336	)	(137	)
Earnings per ordinary share
Basic	9.1	p	(0.4	)p	8.7	p		39.3p		(33.2	)p	(6.1	)p	48.4p		(45.8	)p	2.6	p
Diluted					8.7	p						(6.1	)p					2.6	p

F-65

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

(b) Consolidated statement of total recognized gains and losses

	Unaudited Three months ended December 31, 2002	Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(£ million)
Earnings available for shareholders	64	(45	)	19
Reversal of previous revaluation gains due to impairment	—	(22	)	(22	)
Exchange differences
Goodwill eliminated	—	(139	)	(139	)
Other assets and liabilities	9	70		79
Other recognized gains and losses	9	(91	)	(82	)
Total recognized gains and losses for the period	73	(136	)	(63	)

(c) Note of historical cost Group profits and losses

	Unaudited Three months ended December 31, 2002	Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(£ million)
Reported profit/(loss) on ordinary activities before taxation	97	(61	)	36
Realization of revaluation gains of previous periods	2	14		16
Historical cost profit/(loss) on ordinary activities before taxation	99	(47	)	52
Historical cost profit/(loss) retained after taxation, minority equity interests and dividends	66	(187	)	(121	)

F-66

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

(d) Consolidated statement of cash flows

		Unaudited Three months ended December 31, 2002		Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(£ million)
Operating activities		164		631		795
Interest paid		(39	)	(102	)	(141	)
Costs associated with new facilities		—		(20	)	(20	)
Premium on early settlement of debt		—		(136	)	(136	)
Dividends paid to minority shareholders		—		(22	)	(22	)
Interest received		35		76		111
Returns on investments and servicing of finance		(4	)	(204	)	(208	)
UK corporation tax (paid)/received		(14	)	39		25
Overseas corporate tax paid		(14	)	(7	)	(21	)
Taxation		(28	)	32		4
Paid:
Intangible fixed assets		—		(10	)	(10	)
Tangible fixed assets		(127	)	(348	)	(475	)
Fixed asset investments		(1	)	(36	)	(37	)
Received:
Tangible fixed assets		6		259		265
Fixed asset investments		2		7		9
Capital expenditure and financial investment		(120	)	(128	)	(248	)
Separation costs		(7	)	(59	)	(66	)
Acquisitions and disposals		(7	)	(59	)	(66	)
Equity dividends		—		(299	)	(299	)
Net cash flow		5		(27	)	(22	)
Management of liquid resources		43		(172	)	(129	)
Financing		15		191		206
Movement in cash and overdrafts		63		(8	)	55

F-67

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

(e) Segmental analysis

Three months ended December 31, 2002 (unaudited)		Americas	EMEA	Asia Pacific	Central		Total Hotels		Soft Drinks	Total		Discontinued	Total Group
	(£ million)
Turnover		136	203	34	10		383		146	529		342	871
Operating profit after operating exceptional items		34	22	10	(18	)	48		12	60		52	112
Non-operating exceptional items:
Separation costs		—	—	—	(3	)	(3	)	—	(3	)	—	(3	)
Profit on ordinary activities before interest		34	22	10	(21	)	45		12	57		52	109

12 months ended December 31, 2003 (unaudited)
Turnover	525		807		114		41		1,487		674	2,161		451		2,612
Operating profit before exceptional items	161		92		12		(62	)	203		83	286		85		371
Operating exceptional items	(9	)	(41	)	(1	)	—		(51	)	—	(51	)	—		(51	)
Operating profit after operating exceptional items	152		51		11		(62	)	152		83	235		85		320
Non-operating exceptional items:
Cost of fundamental reorganization	(11	)	(17	)	(2	)	(37	)	(67	)	—	(67	)	—		(67	)
Separation costs	—		—		—		(48	)	(48	)	—	(48	)	(41	)	(89	)
Profit/(loss) on disposal of fixed assets	10		(6	)	—		—		4		—	4		(2	)	2
Provision against fixed asset investments	(9	)	—		—		(47	)	(56	)	—	(56	)	—		(56	)
Profit on ordinary activities before interest	142		28		9		(194	)	(15	)	83	68		42		110

15 months ended December 31, 2003
Turnover	661		1,010		148		51		1,870		820	2,690		793		3,483
Operating profit before exceptional items	195		114		22		(80	)	251		95	346		137		483
Operating exceptional items	(9	)	(41	)	(1	)	—		(51	)	—	(51	)	—		(51	)
Operating profit after operating exceptional items	186		73		21		(80	)	200		95	295		137		432
Non-operating exceptional items:
Cost of fundamental reorganization	(11	)	(17	)	(2	)	(37	)	(67	)	—	(67	)	—		(67	)
Separation costs	—		—		—		(51	)	(51	)	—	(51	)	(41	)	(92	)
Profit/(loss) on disposal of fixed assets	10		(6	)	—		—		4		—	4		(2	)	2
Provision against fixed asset investments	(9	)	—		—		(47	)	(56	)	—	(56	)	—		(56	)
Profit on ordinary activities before interest	176		50		19		(215	)	30		95	125		94		219

F-68

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

Turnover by geographic region

	Unaudited Three months ended December 31, 2002			Unaudited 12 months ended December 31, 2003			15 months ended December 31, 2003
		By origin	By destination		By origin	By destination		By origin	By destination
	(£ million)
United Kingdom		598	598		1,533	1,526		2,131	2,124
Rest of Europe, the Middle East and Africa		95	95		411	418		506	513
United States of America		117	117		454	454		571	571
Rest of Americas		27	27		100	100		127	127
Asia Pacific		34	34		114	114		148	148
		871	871		2,612	2,612		3,483	3,483

Profit on ordinary activities before interest by geographic region

		Unaudited Three months ended December 31, 2002	Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(£ million)
United Kingdom		67	50		117
Rest of Europe, the Middle East and Africa		8	(15	)	(7	)
United States of America		17	46		63
Rest of Americas		7	21		28
Asia Pacific		10	8		18
		109	110		219

F-69

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

(f) Costs and overheads, less other income

	Unaudited					Unaudited
	Three months ended December 31, 2002					12 months ended December 31, 2003					15 months ended December 31, 2003
		Continuing		Discontinued			Continuing		Discontinued			Continuing		Discontinued
	(£ million)
Raw materials and consumables		93		102			391		102			484		204
Changes in stocks of finished goods and work in progress		—		(11	)		(1	)	13			(1	)	2
Staff costs (see note (g))		173		89			642		109			815		198
Depreciation of tangible fixed assets		49		22			187		32			236		54
Impairment of tangible fixed assets		—		—			51		—			51		—
Amortization of goodwill		2		1			11		(1	)		13		—
Hire of plant and machinery		4		8			14		9			18		17
Property rentals		14		10			51		14			65		24
Income from fixed asset investments		(1	)	—			(2	)	—			(3	)	—
Other external charges		135		69			582		88			717		157
		469		290			1,926		366			2,395		656
Discontinued per above		290					366					656
		759					2,292					3,051

Operating exceptional items included above:

Impairment of tangible fixed assets — — 51 — 51 —

Auditors’ remuneration paid to Ernst & Young LLP

		Unaudited Three months ended December 31, 2002	Unaudited 12 months ended December 31, 2003	15 months ended December 31, 2003
	(£ million)
Audit fees		0.5	2.3	2.8
Audit related fees		3.4	3.8	7.2
Tax fees		0.3	0.9	1.2
		4.2	7.0	11.2

(g) Staff

Costs

		Unaudited Three months ended December 31, 2002	Unaudited 12 months ended December 31, 2003	15 months ended December 31, 2003
	(£ million)
Wages and salaries		231	653	884
Social security costs		22	74	96
Pensions		9	24	33
		262	751	1,013

F-70

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

Pensions

		Unaudited Three months ended December 31, 2002		Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(£ million)
Regular cost		9		24		33
Variations from regular cost		(2	)	(5	)	(7	)
Notional interest on prepayment		(1	)	(3	)	(4	)
Pension cost in respect of the principal plans		6		16		22
Other plans		3		8		11
		9		24		33

(h) Exceptional items

	Unaudited						Unaudited
	Three months ended December 31, 2002						12 months ended December 31, 2003							15 months ended December 31, 2003
		Continuing operations		Discontinued operations	Total			Continuing operations		Discontinued operations		Total			Continuing operations		Discontinued operations		Total
	(£ million)
Operating exceptional items:
Hotels impairment charge		—		—	—			(51	)	—		(51	)		(51	)	—		(51	)
Total operating exceptional items		—		—	—			(51	)	—		(51	)		(51	)	—		(51	)
Non-operating exceptional items:
Cost of fundamental      reorganization		—		—	—			(67	)	—		(67	)		(67	)	—		(67	)
Separation costs		(3	)	—	(3	)		(48	)	(41	)	(89	)		(51	)	(41	)	(92	)
Profit/(loss) on disposal of      fixed assets		—		—	—			4		(2	)	2			4		(2	)	2
Provision against fixed      asset investments		—		—	—			(56	)	—		(56	)		(56	)	—		(56	)
		(3	)	—	(3	)		(167	)	(43	)	(210	)		(170	)	(43	)	(213	)
Total exceptional items before interest and taxation		(3	)	—	(3	)		(218	)	(43	)	(261	)		(221	)	(43	)	(264	)
Premium on early settlement of debt		—		—	—			(136	)	—		(136	)		(136	)	—		(136	)
Tax credit on above items		—		—	—			36		28		64			36		28		64
Total exceptional items after interest and taxation		(3	)	—	(3	)		(318	)	(15	)	(333	)		(321	)	(15	)	(336	)

F-71

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

(i) Interest

		Unaudited Three months ended December 31, 2002	Unaudited 12 months ended December 31, 2003	15 months ended December 31, 2003
	(£ million)
Interest payable and similar charges:
Bank loans and overdrafts		9	29	38
Other		30	83	113
		39	112	151
Interest receivable		27	77	104

(j) Tax on profit on ordinary activities

Tax charge		Unaudited Three months ended December 31, 2002		Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(£ million)
UK corporation tax at 30%:
Current year		18		(14	)	4
Prior years		(4	)	(76	)	(80	)
		14		(90	)	(76	)
Foreign tax:
Current year		9		60		69
Prior years		(5	)	(15	)	(20	)
		4		45		49
Total current tax		18		(45	)	(27	)
Deferred tax:
Origination and reversal of timing differences		11		19		30
Adjustments to estimated recoverable deferred tax assets		—		(11	)	(11	)
Prior years		—		(9	)	(9	)
Total deferred tax		11		(1	)	10
Tax on profit on ordinary activities		29		(46	)	(17	)
Further analyzed as tax relating to:
Profit before exceptional items		29		18		47
Exceptional items (see note (h)):
Non-operating		—		(64	)	(64	)
		29		(46	)	(17	)

F-72

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

Tax reconciliations

Reconciliation of current tax rate		Unaudited Three months ended December 31, 2002		Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(%)
UK corporation tax standard rate		30.0		30.0		30.0
Permanent differences		1.8		(9.5	)	20.7
Capital allowances in excess of depreciation		(3.5	)	1.9		(12.6	)
Other timing differences		(4.2	)	55.3		(104.2	)
Net effect of different rates of tax in overseas businesses		2.6		(23.4	)	46.1
Adjustment to tax charge in respect of prior years		(9.8	)	149.3		(276.7	)
Other		0.8		—		2.1
Exceptional items		1.0		(129.3	)	219.9
Effective current tax rate		18.7		74.3		(74.7	)

Reconciliation of overall tax rate		Unaudited Three months ended December 31, 2002		Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(%)
UK corporation tax standard rate		30.0		30.0		30.0
Permanent differences		1.8		(9.5	)	20.7
Net effect of different rates of tax in overseas businesses		2.6		(23.4	)	46.1
Adjustment to tax charge in respect of prior years		(6.1	)	170.7		(302.8	)
Other		0.8		(1.3	)	4.6
Exceptional items		1.0		(90.4	)	154.4
Effective tax rate		30.1		76.1		(47.0	)

F-73

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

(k) Cash flow from operating activities

		Unaudited Three months ended December 31, 2002		Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(£ million)
Operating profit before exceptional items		112		371		483
Depreciation and amortization		74		229		303
Earnings before interest, taxation, depreciation and amortization and exceptional items		186		600		786
Other non-cash items		1		(3	)	(2	)
(Increase)/decrease in stocks		(13	)	12		(1	)
(Increase)/decrease in debtors		(18	)	8		(10	)
Increase in creditors		10		59		69
Provisions expended		(2	)	(8	)	(10	)
Operating activities before expenditure relating to exceptional items		164		668		832
Cost of fundamental reorganization		—		(37	)	(37	)
Operating activities		164		631		795
Net capital expenditure		(120	)	(128	)	(248	)
Operating cash flow		44		503		547

(l) Net debt

	Unaudited
		Cash and overdrafts		Current asset investments		Borrowings		Total
	(£ million)
At October 1, 2002		18		218		(1,413	)	(1,177	)
Net cash flow		5		—		—		5
Management of liquid resources and financing		58		(43	)	(15	)	—
Exchange and other adjustments		—		20		10		30
At December 31, 2002		81		195		(1,418	)	(1,142	)
Net cash flow		(27	)	—		—		(27	)
Management of liquid resources and financing		19		172		404		595
Separation of MAB		(7	)	(7	)	4		(10	)
Exchange and other adjustments		(16	)	17		14		15
At December 31, 2003		50		377		(996	)	(569	)

F-74

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

(m) Management of liquid resources and financing

		Unaudited Three months ended December 31, 2002		Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(£ million)
New borrowings		1,598		17,074		18,672
Other borrowings repaid		(1,583	)	(17,478	)	(19,061	)
		15		(404	)	(389	)
Debt assumed by MAB		—		577		577
Ordinary shares issued by InterContinental Hotels Group PLC		—		18		18
Financing		15		191		206
Movement in liquid resources		43		(172	)	(129	)
		58		19		77

(n) Net capital expenditure

		Unaudited Three months ended December 31, 2002	Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(£ million)
Hotels
Americas		14	(56	)	(42	)
EMEA		54	49		103
Asia Pacific		4	33		37
Central		5	19		24
		77	45		122
Soft Drinks		10	55		65
InterContinental Hotels Group PLC		87	100		187
Discontinued operations		33	28		61
		120	128		248

F-75

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

(o) Operating cash flow

		Unaudited Three months ended December 31, 2002		Unaudited 12 months ended December 31, 2003	15 months ended December 31, 2003
	(£ million)
Hotels		28		308	336
Soft Drinks		(12	)	71	59
InterContinental Hotels Group PLC		16		379	395
Discontinued operations		28		124	152
		44		503	547

(p) Earnings per share

Basic earnings per ordinary share is calculated by dividing the earnings available to shareholders of £64 million for the three months ended December 31, 2002, £45 million loss for the 12 months ended December 31, 2003 and £19 million for the 15 months ended December 31, 2003, by 731 million, 733 million and 733 million, respectively being the weighted average number of shares, excluding investment in own shares, in issue during the period.

Diluted earnings per ordinary share is calculated by adjusting basic earnings per ordinary share to reflect the notional exercise of the weighted average number of dilutive ordinary share options outstanding during the period. The resultant number of shares is 731 million for the three months ended December 31, 2002, 733 million for the 12 months ended December 31, 2003 and 733 million for the 15 months ended December 31, 2003.

F-76

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 32 — Fifteen months ended December 31, 2003 (continued)

Pensions

	UK Pension Benefits
		Unaudited Three months ended December 31, 2002		Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(£ million)
Service cost		8		24		32
Interest cost		18		35		53
Expected return on plan assets		(17	)	(32	)	(49	)
Net amortization and deferral		5		9		14
Cost of contractual benefits recognized		—		2		2
Net periodic pension cost		14		38		52

	US Pension Benefits
		Unaudited Three months ended December 31, 2002		Unaudited 12 months ended December 31, 2003		15 months ended December 31, 2003
	(£ million)
Interest cost		2		5		7
Expected return on plan assets		(1	)	(4	)	(5	)
Recognized net actuarial gain		—		2		2
Net periodic pension cost		1		3		4

	US Pension Benefits
		Unaudited Three months ended December 31, 2002	Unaudited 12 months ended December 31, 2003	15 months ended December 31, 2003
	(£ million)
Interest cost		—	1	1
Net periodic pension cost		—	1	1

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles

The Group’s financial statements are prepared in accordance with accounting principles generally accepted in the United Kingdom (“UK GAAP”) which differ from those generally accepted in the United States (“US GAAP”). The significant differences, as they apply to the Group, are summarized below.

This US GAAP information provides a reconciliation between earnings available for shareholders under UK GAAP and net income under US GAAP and between shareholders’ funds under UK GAAP and shareholders’ equity under US GAAP, respectively.

F-77

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

During 2003, the Company changed its fiscal year to December 31 and thus its financial statements for its last fiscal period are presented for the 15 months ended December 31, 2003 as permitted by the Companies Act 1985. In accordance with the transition reporting period reporting requirements of the US Securities and Exchange Commission, an unaudited analysis of the financial statements and notes thereto for this 15 month period showing the three-month period ended December 31, 2002 and the 12 month period ended December 31, 2003 is presented in Note 32. The unaudited analysis of the significant adjustments for the purposes of US GAAP for the 15 month period are analysed in Note 33.

Classification of borrowings

Under US GAAP the amounts shown as repayable after one year for unsecured bank loans and overdrafts drawn under or supported by bank facilities with maturities of up to five years and amounting to £489 million (2002 £46 million) would be classified as current liabilities.

Pension costs

The Group provides for the cost of retirement benefits based upon consistent percentages of employees’ pensionable pay as recommended by independent qualified actuaries. Under US GAAP, the projected benefit obligation (pension liability) in respect of the Group’s principal pension plans would be matched against the fair value of the plans’ assets and would be adjusted to reflect any unrecognized obligations or assets in determining the pension cost or credit for the year.

At December 31, 2003, the accumulated benefit obligations exceeded the fair value of the plans’ assets. In these circumstances, US GAAP would require the recognition of the difference as a balance sheet liability and the elimination of any amounts previously recognized as a prepaid pension cost. An equal amount, but not exceeding the amount of unrecognized past service cost, would be recognized as an intangible asset with the balance reported in other comprehensive income.

Intangible fixed assets

Under UK GAAP, prior to October 1, 1998, goodwill arising on acquisitions was eliminated against reserves. Since October 1, 1998, acquired goodwill has been capitalized and amortized over a period not exceeding 20 years. On disposal of a business, the profit or loss on disposal is determined after incorporating the attributable amount of any purchased goodwill, including any previously written off to reserves. Under US GAAP, goodwill arising on acquisitions prior to July 1, 2001 would be capitalized and amortized over its estimated useful life, not exceeding 40 years. For the purposes of US GAAP, the Group adopted Statement of Financial Accounting Standards (“FAS”) 142 ‘Goodwill and Other Intangible Assets’ on October 1, 2002 and from that date, goodwill including that which arose in the period from July 1, 2001 to October 1, 2002 would not be amortized but would be reviewed annually for impairment.

Under US GAAP, separately identified intangible assets arising on acquisitions would be capitalized and amortized over their useful lives. Under UK GAAP, these assets are included within goodwill.

Under UK GAAP, where purchase consideration is contingent on a future event, the cost of acquisition includes a reasonable estimate of the amount expected to be payable in the future. Under US GAAP, contingent consideration is not recognized until the related contingencies are resolved.

Impairment of goodwill

Under UK GAAP, goodwill is reviewed for potential impairment where there is an indicator that impairment may have occurred. The impairment is measured by comparing the carrying value of goodwill for each income-generating unit (“IGU”) with the higher of net realizable value and value in use. Under US GAAP, goodwill impairment reviews are also conducted when an indicator of impairment exists, in addition to an annual goodwill impairment test required by FAS 142. The impairment is measured by comparing the carrying value of each reporting unit with its fair value. Where the carrying value, including any separately identified intangible assets, is greater than the fair value, the impairment loss is based on the excess of the carrying value of goodwill

F-78

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

over the implied fair value of the goodwill. Where reporting units identified under US GAAP differ from IGUs identified under UK GAAP, a reconciling item may arise.

Tangible fixed assets

Prior to October 1, 1999, the Group’s properties were valued from time to time by professionally qualified external valuers. Book values were adjusted to accord with the valuations, except where a directors’ valuation was deemed more appropriate. Under US GAAP, revaluations would not have been permitted.

Depreciation is based on the book value of assets, including revaluation where appropriate. Prior to October 1, 1999, freehold pubs and hotels were not depreciated under UK GAAP, as any charge would have been immaterial given that such properties were maintained, as a matter of policy, by a program of repair and maintenance such that their residual values were at least equal to their book values. Following the introduction of FRS 15, which was implemented by the Group with effect from October 1, 1999, all properties are depreciated under UK GAAP. There is now no difference between UK GAAP and US GAAP with regard to depreciation policies.

Under UK GAAP, the impairment of tangible fixed assets is measured by reference to discounted cash flows. Under US GAAP, if the carrying value of assets is supported by undiscounted cash flows, there would be no impairment.

The Group recognizes a profit on disposal of fixed assets provided substantially all the risks and rewards of ownership have transferred. For the purposes of US GAAP, the Group would account for sales of real estate in accordance with FAS 66 ‘Accounting for Sales of Real Estate’. Gains on sales of real estate are deferred if there is a continuing involvement with the property. Consequently, for the purposes of US GAAP, the Group has reduced gains on sales where this criterion exists.

Staff costs

The Group charges against earnings the cost of shares acquired to settle awards under certain incentive schemes. The charge is based on an apportionment of the cost of shares over the period of the scheme. Prior to Separation, for the purposes of US GAAP, the Group accounted for those plans under the recognition and measurement provisions of Accounting Principles Board (“APB”) Opinion 25 ‘Accounting for Stock Issue Employees’ and related interpretations. Under APB 25 these awards would be accounted for as variable plans and the charge would be based on the intrinsic value of the shares using the share price at the balance sheet date. Effective from the date of Separation, the Group adopted the preferable fair value recognition provisions of FAS 123 ‘Accounting for Stock-Based Compensation’. The Group selected the modified prospective method of adoption described in FAS 148 ‘Accounting for Stock-Based Compensation – Transition and Disclosure’. Compensation cost recognized since Separation are the same as those which would have been recognized had the fair value method of FAS 123 been applied from its original effective date. In accordance with the modified prospective method of adoption, results for years prior to 2002 have not been restated.

The Group provides certain compensation arrangements in the United States through a rabbi trust. Under UK GAAP, the net deficit is recorded as a provision in the accounts and the net change in the underlying value of the assets and liabilities is recorded as a charge (or credit) to the profit and loss account. Under US GAAP, the marketable securities held by the rabbi trust would be accounted for in accordance with US GAAP for those assets and, accordingly, any change in their value would be recorded in other comprehensive income. The deferred compensation obligation would be recorded as a liability with a corresponding charge (or credit) to compensation cost.

Severance and restructuring costs

Under UK GAAP, severance costs are provided for in the financial statements if it is determined that a constructive or legal obligation has arisen from a restructuring program where it is probable that it will result in the outflow of economic benefits and the costs involved can be estimated with reasonable accuracy. Under US

F-79

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

GAAP, severance costs are recognized over the remaining service period to termination. Accordingly, timing differences between UK GAAP and US GAAP arise on the recognition of such costs.

Deferred taxation

The Group provides for deferred taxation in respect of timing differences, subject to certain exceptions, between the recognition of gains and losses in the financial statements and for tax purposes. Timing differences recognized, include accelerated capital allowances, unrelieved tax losses and short-term timing differences. Under US GAAP, deferred taxation would be computed on all temporary differences between the tax bases and book values of assets and liabilities which will result in taxable or tax deductible amounts arising in future years. Deferred taxation assets under UK GAAP and US GAAP are recognized only to the extent that it is more likely than not that they will be realized.

Fixed asset investments

Fixed asset investments are stated at cost less any provision for diminution in value. Under US GAAP, these investments are recorded at market value and unrealized gains and losses are reported in other comprehensive income except for other than temporary which would be recognized in the profit and loss account.

Derivative instruments and hedging

The Group enters into derivative instruments to limit its exposure to interest rate and foreign exchange risk. Under UK GAAP, these instruments are measured at cost and accounted for as hedges, whereby gains and losses are deferred until the underlying transaction occurs. Under US GAAP, all derivative instruments (including those embedded in other contracts) are recognized on the balance sheet at their fair values. Changes in fair value would be recognized in net income unless specific hedge criteria are met. If a derivative qualifies for hedge accounting as defined under US GAAP, changes in fair value are recognized periodically in net income or in shareholders’ equity as a component of other comprehensive income depending on whether the derivative qualifies as a fair value or cash flow hedge. Substantially all derivatives held by the Group during the period did not qualify for hedge accounting under US GAAP.

Guarantees

The Group gives guarantees in connection with obtaining long-term management contracts. Under UK GAAP, a contingent liability under such guarantees is not recognized unless it is probable that it will result in a future loss to the Group. For the purposes of US GAAP, under FASB Interpretation (“FIN”) 45 ‘Guarantors Accounting and Disclosure Requirements for Guarantees, Including Direct Guarantees of Indebtedness of Others in the Year’, at the inception of guarantees issued after December 31, 2002, the Group would record the fair value of the guarantee as an asset and a liability, which would then be amortized over the life of the contract.

Proposed dividends

Final ordinary dividends are provided for in the year in respect of which they are proposed by the board for approval by the shareholders. Under US GAAP, dividends would not be provided for until the year in which they are declared.

Reimbursements

Under UK GAAP, reimbursements of costs incurred on behalf of managed hotel properties are not reflected in the profit and loss accounts. These costs primarily relate to payroll costs where the Group is the employer. Reimbursements are made based upon the costs incurred with no added margin. For purposes of US GAAP, such reimbursements would be included in turnover and operating expenses.

Exceptional items

Certain exceptional items are shown on the face of the profit and loss account statement after operating profit. Under US GAAP, these items would be classified as operating profit or expenses.

F-80

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Exceptional items for the 15 and 12 months ended December 31, 2003 include restructuring charges associated with the fundamental reorganization within the Hotels business which is an expressly permitted exceptional item in accordance with FRS 3.

Discontinued operations

For the purposes of the reconciliations of Net (loss)/income in accordance with US GAAP, discontinued operations are the same for both UK GAAP and US GAAP. Under US GAAP, the results of operations from discontinued activities and the profit/(loss) on disposal are reported as separate line items immediately before net income.

The summary of the significant adjustments to earnings available to shareholders and to shareholders’ funds which would be required if US GAAP had been applied instead of UK GAAP have been restated, as required by APB 20, to reflect changes to deferred taxation arising during the year resulting from a review of historical tax basis and unrealized gains in respect of the Group’s properties, relating principally to an acquisition by MAB with a consequential adjustment to goodwill in prior years.

Net (loss)/income in accordance with US GAAP

The significant adjustments required to convert earnings available for shareholders in accordance with UK GAAP to net (loss)/income in accordance with US GAAP are:

	Unaudited Three months ended		Unaudited 12 months ended		15 months ended		Year ended September 30
	December 31, 2002		December 31, 2003		December 31, 2003		2002 restated (i)		2001 restated (i)
	(£ million)
Earnings available for shareholders in accordance with UK GAAP	64		(45	)	19		457		443
Adjustments:
Pension costs	(9	)	(14	)	(23	)	(21	)	(22	)
Amortization of intangible fixed assets	(4	)	(5	)	(9	)	(105	)	(108	)
Impairment of intangible fixed assets on adoption of FAS 142	(712	)	—		(712	)	—		—
Depreciation of tangible fixed assets	—		(4	)	(4	)	—		—
Disposal of tangible fixed assets	3		5		8		6		339
Impairment of tangible fixed assets	—		45		45		77		—
Provisions	(1	)	3		2		—		(4	)
Staff costs	—		(6	)	(6	)	—		(1	)
Deferred revenue	—		3		3		—		—
Change in fair value of derivatives (ii)	7		26		33		79		(5	)
Deferred taxation:
on above adjustments	2		4		6		(4	)	26
methodology	(2	)	14		12		7		6
	(716	)	71		(645	)	39		231
Minority share of above adjustments	—		3		3		3		2
	(716	)	74		(642	)	42		233
Net (loss)/income in accordance with US GAAP	(652	)	29		(623	)	499		676

See page F-83 for footnotes.

F-81

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

The condensed consolidated income statement presented below reflects the adjustments to attributable profit for the year.

	Unaudited Three months ended		Unaudited 12 months ended		15 months ended		Year ended September 30
	December 31, 2002		December 31, 2003		December 31, 2003		2002 restated (i)		2001 restated (i)
	(£ million, except per ADS amounts)
Net sales	546		2,275		2,821		2,241		2,496
Operating and administrative expense	(495	)	(2,150	)	(2,645	)	(1,947	)	(2,139	)
Interest expense, net	(2	)	(158	)	(160	)	(17	)	(1	)
Income/(loss) before income tax expense	49		(33	)	16		277		356
Income tax expense	(15	)	59		44		(89	)	(143	)
Minority interest	(4	)	(27	)	(31	)	(22	)	(22	)
Income from continuing operations before cumulative effect on prior years of change in accounting principle	30		(1	)	29		166		191
Discontinued operations:
Income, net of tax (v) (vii)	30		30		60		162		460
Surplus on disposal, net of tax (vi) (viii)	—		—		—		171		25
	30		30		60		333		485
Cumulative effect on prior years of adoption of      FAS 142	(712	)	—		(712	)	—		—
Net (loss)/income	(652	)	29		(623	)	499		676
Per ordinary share and American Depositary Share (iii)
Basic
Income/(loss) before cumulative effect on prior years of change in accounting principle:
Continuing operations before effect of restatement	4.1p		(0.1)p		4.0p		15.0p		26.1p
Effect of restatement for the period	—		—		—		7.7p		—
Total continuing operations as restated	4.1p		(0.1)p		4.0p		22.7p		26.1p
Discontinued operations before effect of      restatement	4.1p		4.1p		8.2p		46.9p		70.6p
Effect of restatement for the period	—		—		—		(1.3)p		(4.3)p
Total discontinued operations as restated	4.1p		4.1p		8.2p		45.6p		66.3p
Cumulative effect on prior years of adoption of FAS 142	(97.1)p		—		(97.1)p		—		—
Net (loss)/income	(88.9)p		4.0p		(84.9)p		68.3p		92.4p
Diluted
Income/(loss) before cumulative effect on prior years of change in accounting principle:
Continuing operations before effect of restatement	4.1p		(0.1)p		4.0p		14.9p		26.0p
Effect of restatement for the period	—		—		—		7.7p		—
Total continuing operations as restated	4.1p		(0.1)p		4.0p		22.6p		26.0p
Discontinued operations before effect of      restatement	4.1p		4.1p		8.2p		46.7p		70.2p
Effect of restatement for the period	—		—		—		(1.3)p		(4.3)p
Total discontinued operations as restated	4.1p		4.1p		8.2p		45.4p		65.9p
Cumulative effect on prior years of adoption of FAS 142	(97.1)p		—		(97.1)p		—		—
Net (loss)/income	(88.9)p		4.0p		(84.9)p		68.0p		91.9p

Footnotes on the following page.

F-82

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

(i) Restated following a review of historical tax basis and unrealized gains in respect of the Group’s properties used in prior years. This has resulted in additional goodwill of £145 million arising on an acquisition in 2000. The impact on the income statement has been to increase the amortization of intangible fixed assets by £4 million in 2002 and £4 million in 2001, and to decrease the deferred tax methodology charge by £50 million in 2002 and an increase of £27 million in 2001.

(ii) Comprises net gains in the fair value of derivatives that do not qualify for hedge accounting of £28 million (2002 £75 million, 2001 £12 million losses) and net gains reclassified form other comprehensive income of £5 million (2002 £4 million, 2001 £7 million).

(iii) Calculated by dividing net (loss)/income in accordance with US GAAP of £623 million loss (2002 £499 million income, 2001 £676 million income), by 733 million (2002 731 million, 2001 731 million) shares, being the weighted average number of ordinary shares in issue during the period. Each American Depositary Share represents one ordinary share.

(iv) Calculated by adjusting basic net (loss)/income in accordance with US GAAP to reflect the notional exercise of the weighted average number of dilutive ordinary share options outstanding during the period. The resulting weighted average number of ordinary shares is 733 million (2002 734 million, 2001 736 million).

(v) Discontinued operations relate to Mitchells & Butlers plc for all periods presented and Bass Brewers in fiscal 2002 and 2001.

(vi) Relates to profit on disposal of Bass Brewers relating to the finalization of completion accounts and the release of prior over provisions for tax.

(vii) Tax for the 15 months ended December 31, 2003 of £9 million (12 months ended December 31, 2003 (unaudited) of £5 million credit, three months ended December 31, 2002 (unaudited) of £14 million, 2002 £40 million, 2001 £39 million).

(viii) Tax for the 15 months ended December 31, 2003 of £nil million (12 months ended December 31, 2003 (unaudited) of £nil million, three months ended December 31, 2002 (unaudited) of £nil million, 2002 £114 million credit, 2001 £13 million).

F-83

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Comprehensive income

Comprehensive income under US GAAP is as follows:

	Unaudited Three months ended December 31		Unaudited 12 months ended December 31		15 months ended December 31		Year ended September 30
	2002		2003		2003		2002		2001
	(£ million)
Net (loss)/income in accordance with US GAAP	(652	)	29		(623	)	499		676
Other comprehensive income:
Transfer to MAB of minimum pension liability      on April 1, 2003, net of tax of £108 million	—		253		253		—		—
Minimum pension liability, net of tax of      £22 million (three months (unaudited)      £16 million, 12 months (unaudited)      £6 million, 2002 £108 million,      2001 £nil million)	(37	)	(14	)	(51	)	(253	)	—
Change in valuation of marketable securities,      net of tax of £nil million (2002 £nil million,      2001 £9 million credit)	(9	)	40		31		(1	)	(56	)
Change in fair value of derivatives, net of tax      of £1 million (three months (unaudited)      £nil million, 12 months (unaudited)      £1 million, 2002 £1 million,      2001 £2 million)	(1	)	(3	)	(4	)	(3	)	(5	)
Cumulative effect on prior years of adoption of      FAS 133 in 2001	—		—		—		—		(6	)
Currency translation differences	(21	)	(99	)	(120	)	(107	)	11
	(68	)	177		109		(364	)	(56	)
Comprehensive (loss)/income in accordance with US GAAP	(720	)	206		(514	)	135		620

Movements in other comprehensive income amounts (net of related tax) are as follows:

	Minimum pension liability adjustment		Change in valuation of marketable securities		Derivative financial instruments gains/(losses)		Currency translation differences		Total
	(£ million)
At October 1, 2000	—		28		—		248		276
Effect on adoption of FAS 133 in 2001	—		—		16		(22	)	(6	)
Movement in the year	—		(56	)	(5	)	11		(50	)
At September 30, 2001	—		(28	)	11		237		220
Movement in the year	(253	)	(1	)	(3	)	(107	)	(364	)
At September 30, 2002	(253	)	(29	)	8		130		(144	)
Movement in the three months to December 31, 2002 (unaudited)	(37	)	(9	)	(1	)	(21	)	(68	)
Movement in the 12 months to December 31, 2003 (unaudited)	239		40		(3	)	(99	)	177
Movement in the 15 months to December 31, 2003	202		31		(4	)	(120	)	109
At December 31, 2003	(51	)	2		4		10		(35	)

F-84

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Shareholders’ equity in accordance with US GAAP

The significant adjustments required to convert shareholders’ funds in accordance with UK GAAP to shareholders’ equity in accordance with US GAAP are:

	December 31, 2003		September 30, 2002 restated (i)
	(£ million)
Shareholders’ funds in accordance with UK GAAP	2,554		5,335
Adjustments:
Intangible fixed assets:
Cost: goodwill	837		2,269
other	843		1,194
Accumulated amortization	(257	)	(958	)
	1,423		2,505
Intangible asset – minimum pension liability	6		24
	1,429		2,529
Tangible fixed assets:
Cost	(68	)	(956	)
Accumulated depreciation	33		(133	)
	(35	)	(1,089	)
Fixed asset investments:
Investments and advances	2		(29	)
Current assets:
Pension prepayment	(47	)	(88	)
Other debtors	22		25
Derivatives	4		24
Creditors: amounts falling due within one year:
Other creditors	(2	)	—
Proposed dividend of parent company	70		213
Proposed dividend for minority shareholders	16		—
Derivatives	(6	)	(3	)
Creditors: amounts falling due after one year:
Other creditors	(114	)	(18	)
Borrowings	—		4
Derivatives	(24	)	(41	)
Provisions for liabilities and charges:
Provisions	25		19
Accrued pension cost	(54	)	(235	)
Deferred taxation:
on above adjustments	(238	)	(206	)
methodology	(169	)	(161	)
	879		944
Minority share of above adjustments	(53	)	(58	)
	826		886
Shareholders’ equity in accordance with US GAAP	3,380		6,221

Footnote on the following page.

F-85

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

(i) Restated for UITF 38 (see Note 1), which has not changed the overall shareholders’ equity in accordance with US GAAP, and following a review of historical tax basis and unrealized gains in respect of the Group’s properties. This has resulted in additional goodwill of £145 million arising on an acquisition in 2000. At September 30, 2002 the impact was to increase the US GAAP adjustment for intangible fixed assets by £134 million and reduce the deferred tax methodology adjustment by £53 million. The overall impact has increased previously reported shareholders’ equity under US GAAP by £187 million.

Additional information required by US GAAP in respect of earnings per share

The following table sets forth the computation of basic and diluted earnings per share from continuing operations under US GAAP:

		Unaudited Three months ended December 31,	Unaudited 12 months ended December 31,		15 months ended December 31,	Year ended September 30
		2002	2003		2003		2002	2001
	(£ million, except for ADS amounts)
Numerator:
Numerator for basic and diluted earnings per ordinary share and ADS – continuing activities before cumulative effect on prior years of change in accounting principle		30	(1	)	29		166	191
Denominator:
Denominator for basic earnings per ordinary share and ADS		733	733		733		731	731
Effect of dilutive securities:
Employee share options		—	—		—		3	5
Denominator for diluted earnings per ordinary share and ADS		733	733		733		734	736
Basic earnings per ordinary share and ADS from continuing operations		4.1p	(0.1)p		4.0p		22.7p	26.1p
Diluted earnings per ordinary share and ADS from continuing operations		4.1p	(0.1)p		4.0p		22.6p	26.0p

Consolidated statement of cash flows

The consolidated statement of cash flows prepared under UK GAAP presents substantially the same information as that required under US GAAP but may differ, with regard to classification of items within the statements and as regards the definition of cash under UK GAAP and cash and cash equivalents under US GAAP.

US GAAP requires that cash and cash equivalents include short-term highly liquid investments but do not include bank overdrafts. Under UK GAAP, cash flows are presented separately for operating activities, dividends received from associates, returns on investments and servicing of finance, taxation, capital expenditure and financial investment, acquisitions, equity dividends and management of liquid resources and financing. US GAAP, however, require only three categories of cash flow activity to be reported: operating, investing and financing. Cash flows from taxation and returns on investments and servicing of finance shown under UK GAAP would, with the exception of dividends paid to minority shareholders, be included as operating activities under US GAAP. The payment of dividends would be included as a financing activity under US GAAP. Under US GAAP, capitalized interest is treated as part of the cost of the asset to which it relates and is thus included as part of investing cash flows. Under UK GAAP all interest is treated as part of returns on investments and servicing of

F-86

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

finance. Under US GAAP capital expenditure and financial investment and acquisitions are reported within investing activities.

The categories of cash flow activity under US GAAP can be summarized as follows:

		Unaudited Three months ended December 31,		Unaudited 12 months ended December 31,		15 months ended December 31,		Year ended September 30
		2002		2003		2003			2002		2001
	(£ million)
Cash inflow from operating activities		132		481		613			535		766
Cash outflow on investing activities		(127	)	(200	)	(327	)		(320	)	(1,169	)
Cash outflow from financing activities		(32	)	(147	)	(179	)		(220	)	(311	)
(Decrease)/increase in cash and cash equivalents		(27	)	134		107			(5	)	(714	)
Effect of foreign exchange rate changes		20		1		21			82		(12	)
Cash and cash equivalents
At start of the fiscal period		301		294		301			224		950
At end of the fiscal period		294		429		429			301		224

Additional information required by US GAAP in respect of the Group’s principal pension plans

The pension cost for these plans computed in accordance with the requirements of US GAAP comprises:

	UK Pension Benefits							US Pension Benefits							US Postretirement Benefits
		15 months ended December 31 2003		Year ended September 30 2002		Year ended September 30 2001			15 months ended December 31 2003		Year ended September 30 2002		Year ended September 30 2001			15 months ended December 31 2003	Year ended September 30 2002	Year ended September 30 2001
	(£ million)
Service cost		34		31		29			—		—		—			—	—	—
Interest cost		53		66		59			7		9		7			1	1	1
Expected return on plan assets		(49	)	(76	)	(170	)		(5	)	(4	)	(6	)		—	—	—
Net amortization and deferral		14		2		90			—		—		—			—	—	—
Recognized net actuarial gain		—		—		—			2		—		—			—	—	—
Net periodic pension cost		52		23		8			4		5		1			1	1	1

F-87

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

The major assumptions used in computing the pension expense were:

	UK Pension Benefits				US Pension Benefits				US Postretirement Benefits
		15 months ended December 31, 2003	Year ended September 30, 2002	Year ended September 30, 2001		15 months ended December 31, 2003	Year ended September 30, 2002	Year ended September 30, 2001		15 months ended December 31, 2003	Year ended September 30, 2002	Year ended September 30, 2001
Expected long-term rate of return on plan assets		6.9%	7.0%	7.0%		8.0%	9.0%	9.5%		—	—	—
Discount rate		5.4%	5.5%	6.1%		6.3%	6.8%	7.5%		6.3%	6.8%	7.5%
Expected long-term rate of earnings increases		4.3%	3.8%	3.9%		3.5%	3.5%	3.5%		—	—	—

The plans’ expected return on assets, as shown above, is based on the Company’s expectations of long-term average rates of return to be achieved by the underlying investment portfolios. In establishing this assumption, management considers historical and expected returns for the asset classes in which the plans are invested, as well as current economic and capital market conditions.

The assumed health care cost trends rates for medical and dental plans at December 31, 2003 and September 30, 2002 and 2001 are as follows:

	2003	2002	2001
Health care cost trend rate assumed for next year	10.0%	7.5%	8.0%
Rate that the cost trend rate gradually declines	4.5%	5.0%	5.0%
Year that rate reaches the assumed ultimate rate	2014	2007	2007

A one-percentage point increase/(decrease) in assumed health care costs trend rate would increase/(decrease) the accumulated post-employment benefit obligations as of December 31, 2003, by £1 million, and would increase/(decrease) the total of the service and interest cost components of net post-employment health care cost for the period then ended by approximately £nil million.

Change in Benefit Obligation	UK Pension Benefits					US Pension Benefits					US Postretirement Benefits
		15 months ended December 31, 2003		Year ended September 30, 2002			15 months ended December 31, 2003		Year ended September 30, 2002			15 months ended December 31, 2003		Year ended September 30, 2002
Benefit obligation at beginning of period		1,311		1,107			95		92			9		8
Service cost		34		31			—		—			—		—
Members contributions		6		7			—		—			—		—
Interest expense		53		66			7		9			1		1
Benefits paid		(50	)	(48	)		(7	)	(6	)		(1	)	(1	)
Age-related national insurance rebates		5		1			—		—			—		—
Actuarial loss arising in the period		128		147			7		6			3		1
Separation of MAB		(1,010	)	—			—		—			—		—
Foreign exchange		—		—			(12	)	(6	)		—		—
Benefit obligation at end of period		477		1,311			90		95			12		9

F-88

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

The following table sets forth movements in fair value of the plan assets and the projected benefit obligation of the principal plan.

	UK Pension Benefits					US Pension Benefits					US Postretirement Benefits
		15 months ended December 31, 2003		Year ended September 30, 2002			15 months ended December 31, 2003		Year ended September 30, 2002			15 months ended December 31, 2003		Year ended September 30, 2002
Fair value of plan assets at beginning of period		996		1,098			49		54			—		—
Contributions payable		45		40			1		6			1		1
Age-related national insurance rebates		5		1			—		—			—		—
Benefits paid		(50	)	(48	)		(7	)	(6	)		(1	)	(1	)
Expected return on assets		—		76			—		—			—		—
Actuarial loss on assets		81		(171	)		10		(7	)		—		—
Separation of MAB		(722	)	—			—		—			—		—
Foreign exchange		—		—			(5	)	2			—		—
Fair value of plan assets at end of period		355		996			48		49			—		—
Accumulated benefit obligation (all vested)		409		1,214			88		92			12		9
Fair value of plan assets		355		996			48		49			—		—
Projected benefit obligation		(477	)	(1,311	)		(90	)	(95	)		(12	)	(9	)
Net plan (obligation)/assets		(122	)	(315	)		(42	)	(46	)		(12	)	(9	)
Unrecognized transitional (asset)/obligation, net of amortization		(1	)	(9	)		—		—			—		—
Unrecognized prior service cost		5		22			—		—			—		—
Unrecognized net loss		142		453			20		23			3		1
Net asset/(obligation) recognized		24		151			(22	)	(23	)		(9	)	(8	)
The amounts recognized in the balance sheet consist of:
Accrued pension cost		(54	)	(235	)		(40	)	(44	)		(8	)	(8	)
Pension costs		—		—			—		—			(1	)	—
Intangible asset		6		24			—		—			—		—
Other comprehensive income (before tax)		72		362			18		21			—		—
Net asset/(obligation) recognized		24		151			(22	)	(23	)		(9	)	(8	)

F-89

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Additional information required by US GAAP in respect of Group’s share options

Accounting and disclosure of stock-based compensation

FAS 123 ‘Accounting for Stock-Based Compensation’, established accounting disclosure standards for stock-based employee compensation plans. The statement gives companies the option of continuing to account for such costs under the intrinsic value accounting provisions set out in Accounting Principles Board Opinion 25 “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations. Prior to Separation, for the purposes of US GAAP, the Group accounted for those plans under the recognition and measurement provisions of APB 25. Under APB 25 these awards would be accounted for as variable plans and the charge would be based on the intrinsic value of the shares using the share price at the balance sheet date. Had the Group chosen to account for such costs under FAS 123, net (loss)/income for the 15 months ended December 31, 2003 would have been a loss of £631 million (2002 £497 million income, 2001 £672 million income), basic net income per ordinary share and ADS would have been (86.1)p (2002 68.0p, 2001 91.9p) and diluted net income per ordinary share and ADS would have been (86.1)p (2002 67.7p, 2001 91.3p).

Effective from the date of Separation, the Group adopted the fair value recognition provisions of FAS 123. The Group selected the modified prospective method of adoption described in FAS 148 ‘Accounting for Stock-Based Compensation – Transition and Disclosure’. Compensation costs recognized since Separation is the same as that which would have been recognized had the fair value method of FAS 123 been applied from its original effective date. In accordance with the modified prospective method of adoption, results for years prior to 2002 have not been restated.

Details of the fair values of stock awards in the year are given in Note 27. Because options vest over several years and additional options grants are expected, the effects of these hypothetical calculations are not likely to be representative of similar future calculations.

Concentrations of credit risk

Potential concentrations of credit risk to the Group consist principally of short-term cash investments, trade loans and trade debtors.

The Group only deposits short-term cash surpluses with counterparties with an A credit rating or better, or those providing adequate security and, by policy, limits the amount of credit exposure to any one bank or institution. Trade debtors in the United Kingdom comprise a large, widespread customer base. Trade debtors in the United States are widely dispersed and include a significant amount of debtors due from InterContinental Hotels franchisees.

At December 31, 2003, the Group did not consider there to be any significant concentration of credit risk.

F-90

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Fair values of financial instruments

The following information is presented in compliance with the requirements of US GAAP. The carrying amounts and fair values of the material financial instruments of the Group are as follows:

	December 31, 2003					September 30, 2002 restated (i)
		Carrying amount		Fair value			Carrying amount		Fair value
	(£ million)
Assets
Cash		55		55			84		84
Current asset investments		377		381			218		222
Listed investments		64		66			116		87
Unlisted investments		108		108			102		102
Liabilities
Total borrowings
Loan capital and noncurrent bank loans		(988	)	(992	)		(830	)	(952	)
Current bank loans and overdrafts		(13	)	(13	)		(649	)	(649	)
Off-balance sheet instruments
Interest rate swaps		—		(29	)		—		(24	)
Foreign exchange contracts		—		(1	)		—		(1	)

(i) Restated on the adoption of UITF 38 (see Note 1).

The following methods and assumptions were used by the Group in establishing its fair value disclosures for financial instruments:

Cash: the carrying amount reported in the balance sheet for cash at bank approximates to its fair value.

Current asset investments: the carrying amount reported in the balance sheet for current asset investments approximates their fair value.

Listed investments: these investments are valued based on market prices.

Unlisted investments: the fair value of these investments approximates their replacement cost.

Borrowings: the fair value of the Group’s loan capital and noncurrent bank loans (including short-term portion) are estimated using quoted prices, or where such prices are not available, discounted cash flow analyses, based on available market rates of interest for similar types of arrangements and maturities. The carrying amount of the bank loans and overdrafts approximates their fair value.

Off-balance sheet instruments: the fair value of the Group’s interest rate swaps is based on discounted cash flow analyses. The fair value of other instruments is based on contracted and relevant exchange rates.

F-91

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Additional information required by US GAAP in respect of accounting for the impairment of fixed assets and fixed assets to be disposed of

A summary of the impairment charges that have been recognized under US GAAP is as follows:

		Unaudited Three months ended December 31,	Unaudited 12 months ended December 31,		15 months ended December 31,		Year ended September 30
		2002	2003		2003			2002		2001
	(£ million)
Assets to be disposed of		—	9		9			14		—
Assets to be held and used		—	6		6			—		—
Total		—	15		15			14		—
Disclosed as:
Impairment charges recognized under UK GAAP:
Operating exceptional –      impairment charges		—	51		51			77		—
Non-operating exceptional –      provision for loss on disposal		—	9		9			14		—
Charge for the year under UK GAAP		—	60		60			91		—
Less: Adjustment to impairment recognized under US GAAP		—	(45	)	(45	)		(77	)	—
Total charge before cumulative effect of a change in accounting principle		—	15		15			14		—
Add: Cumulative effect on adoption of FAS 142 under US GAAP		712	—		712			—		—
		712	15		727			14		—
Charged against:
Intangible assets – goodwill		712	—		712			—		—
Tangible assets		—	15		15			14		—
		712	15		727			14		—

The £712 million goodwill impairment charge recognized as a result of the implementation of FAS 142 under US GAAP includes £225 million in respect of Americas Hotels owned and leased operations and £487 million in respect of EMEA hotels owned and leased operations. The FAS 142 impairment charges recorded in respect of these two reporting units have arisen as a result of the present value of projected cash flows of these reporting units being insufficient to cover the carrying value of the net asset, including both pre and post 1998 goodwill. Reporting units have been determined by reference to the way IHG conducts business and reflects internal management structures. FAS 142 does not provide prescriptive guidance for the allocation of goodwill hence for the purposes of the impairment review trademark balances have been allocated to reporting units based on historic revenue figures and goodwill has been allocated on the basis of historic operating profit, which management consider to be the most appropriate methodology.

F-92

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

The operating exceptional charge recognized under UK GAAP of £51 million recognised in 2003, and £77 million recognized in 2002 relate to various hotels within Americas, EMEA and Asia Pacific, where it has been necessary to make an impairment charge for the difference in these hotels’ carrying values compared to the higher of value in use or net realizable value.

With the exception of the impairment charge of £6 million in 2003 in respect of short leasehold properties, the UK GAAP impairment charge is reversed under US GAAP as the impairment test is first performed using undiscounted cash flows and is therefore shown as a reduction in the difference between the charge under UK GAAP and US GAAP in the reconciliation to US GAAP accounting principles.

Additional information required by US GAAP in respect of accounting for intangible assets subject to amortization

Other intangible assets subject to amortization consist of:

	December 31, 2003					September 30, 2002
		Cost	Accumulated amortization		Net book value		Cost	Accumulated amortization		Net book value
	(£ million)
Management & franchise contracts		326	(291	)	35		413	(308	)	105
Other		4	—		4		4	—		4
		330	(291	)	39		417	(308	)	109

The estimated aggregate amortization expense for each of the next five years is £5 million, £5 million, £5 million, £4 million and £4 million. The weighted average remaining life of intangible assets subject to amortization is 12 years.

Additional information required by US GAAP in respect of accounting for intangible assets not subject to amortization

	December 31, 2003				September 30, 2002
		Hotels	Soft Drinks	Total		Hotels	Soft Drinks	MAB	Total
	(£ million)
Goodwill		907	122	1,029		1,674	122	188	1,984
Trademarks		513	—	513		585	—	—	585
Total		1,420	122	1,542		2,259	122	188	2,569

F-93

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Additional pro forma information required by US GAAP in respect of FAS 142

FAS 142 requires that in the period of adoption, and until all periods presented are accounted for in accordance with the standard, a reconciliation of reported net income to the adjusted net income should be disclosed along with adjusted earnings per share, as if the standard had been adopted for each period.

Net (loss)/income and, basic and diluted earnings per ordinary share and ADS, adjusted to exclude amortization expense no longer required due to the adoption of FAS 142, are as follows:

		Unaudited Three months		Unaudited 12 months		15 months		Year ended September 30
		ended		ended		ended
		December 31, 2002		December 31, 2003		December 31, 2003			2002 restated (i)		2001 restated (i)
	(£ million, except per ADS amounts)
Net (loss)/income in accordance with US GAAP, as reported		(652	)	29		(623	)		499		676
Add back: goodwill amortization		—		—		—			69		70
trademarks amortization		—		—		—			13		13
Pro forma net income in accordance with US GAAP		(652	)	29		(623	)		581		759
Pro forma basic net (loss)/income per ordinary share and ADS (ii)		(88.9	)p	4.0	p	(84.9	)p		68.3	p	92.4	p
Add back: goodwill amortization		—		—		—			9.4	p	9.6	p
trademarks amortization		—		—		—			1.8	p	1.8	p
Pro forma basic net (loss)/income per ordinary share and ADS		(88.9	)p	4.0	p	(84.9	)p		79.5	p	103.8	p
Pro forma diluted net (loss)/income per ordinary share and ADS (iii)		(88.9	)p	4.0	p	(84.9	)p		68.0	p	91.9	p
Add back: goodwill amortization		—		—		—			9.4	p	9.5	p
trademarks amortization		—		—		—			1.8	p	1.8	p
Pro forma diluted net (loss)/income per ordinary share and ADS		(88.9	)p	4.0	p	(84.9	)p		79.2	p	103.2	p

(i) Restated following a review of historical tax basis and unrealized gains in respect of the Group’s properties. This has resulted in additional goodwill of £145 million arising on an acquisition in 2000. The impact on the income statement has been to increase the amortization of intangible fixed assets by £4 million in 2002 and £4 million in 2001, and to decrease the deferred tax methodology charge by £50 million in 2002 and an increase of £27 million in 2001.

F-94

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

Additional information required by US GAAP in respect of deferred taxation

The analysis of the deferred taxation liability required by US GAAP is as follows:

		15 months ended December 31, 2003		Year ended September 30, 2002
	(£ million)
Deferred taxation liabilities:
Excess of book value over taxation value of fixed assets		667		886
Other temporary differences		188		243
		855		1,129
Deferred taxation assets:
Taxation effect of losses carried forward		(37	)	(67	)
Taxation effect of pension cost liability		(13	)	(87	)
Other temporary differences		(84	)	(60	)
		(134	)	(214	)
		721		915
Of which:
Current		(4	)	(18	)
Noncurrent		725		933
		721		915

The taxation effect of losses carried forward is stated net of a valuation allowance of £317 million (2002 £157 million).

Additional information required under US GAAP in respect of restructuring provisions

	IHG									MAB
		Employee costs		Facilities costs		Other costs		IHG total		Reorganization		Group total
	(£ million)
Balance at October 1, 2000		—		—		—		—		10		10
Expenditure		—		—		—		—		(1	)	(1	)
Balance at September 30, 2001		—		—		—		—		9		9
Profit and loss account		—		—		—		—		2		2
Balance at September 30, 2002		—		—		—		—		11		11
Expenditure		—		—		—		—		(1	)	(1	)
Balance at December 31, 2002		—		—		—		—		10		10
Exchange and other adjustments		—		(3	)	—		(3	)	(6	)	(9	)
Profit and loss account		30		13		15		58		—		58
Expenditure		(23	)	(3	)	(11	)	(37	)	(1	)	(38	)
Separation of MAB		—		—		—		—		(3	)	(3	)
Balance at December 31, 2003		7		7		4		18		—		18

F-95

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

New Accounting Standards

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, and Interpretation of Accounting Research Bulletin No. 51, which requires a variable interest entity (“VIE”) to be consolidated by its primary beneficiary (“PB”). The PB is the party that absorbs a majority of the VIE’s expected losses and/or receives a majority of the expected residual returns.

In December 2003, the FASB revised FIN 46 (“FIN 46-(R)”), delaying the effective date for certain entities created before February 1, 2003 and making other amendments to clarify the application of guidance. In adopting FIN 46 and in anticipation of adopting FIN 46-(R), the Group has evaluated its various variable interests to determine whether they are VIEs. These variable interests, which generally represent a modest interest relative to other investors in the ventures, are primarily related to the Group’s strategy to expand its role as a third-party manager of hotels, allowing the Group to increase the presence of its lodging brands and gain additional cash flow. The process identified the following types of variable interests: a) loans to ventures b) equity investments in ventures usually less than 30% of the equity c) other types of guarantees/contributions to ventures owning hotels to secure the management or franchise contract. The Group also reviewed its other management and franchise agreements related to hotels that the Group has no other investments in and concluded that such arrangements were not variable interest since the Group is paid commensurate with the services provided and on the same level as other operating liabilities and the hotel owners retain the right to terminate the arrangements.

Of the 3,349 managed or franchised hotels, the Group does not anticipate identifying more than 12 fixed asset investments in which it has a variable interest. The Group’s outstanding loan balances exposed to losses as a result of its involvement in entities with a variable interest totaled £6 million at December 31, 2003. Equity investments and other types of investments related to these variable interests totaled £62 million at December 31, 2003. Information concerning the Group’s exposure to guarantees and commitments is summarized in Note 30 – Contingencies.

The Group has adopted FIN 46 for entities created subsequent to February 1, 2003 as of December 31, 2003 and will adopt FIN 46-(R) as of the end of the year ending December 31, 2004. The adoption of FIN 46 did not result in the consolidation of any VIEs, nor is the adoption of FIN 46-(R) expected to result in the consolidation of any VIEs.

The Group has entered into management contracts with HPT that included guarantees and long-term deposits. The Group has determined that this arrangement constitutes a VIE and that the Group is not the PB. The maximum exposure to loss is £67 million.

F-96

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 33 — Differences between United Kingdom and United States Generally Accepted Accounting Principles (continued)

In December 2003, the FASB issued FAS 132 (revised 2003), ‘Employees’ Disclosures about Pensions and Other Postretirement Benefits’. FAS 132-(R) retains the disclosure requirements in the original FAS 132, but requires additional disclosures related to plan assets, plan obligations, cash flows and net periodic benefit cost of defined benefit pension and other postretirement plans. The Group adopted FAS 132-(R) effective December 31, 2003. FAS 132-(R) is effective December 31, 2004.

In May 2003, the FASB issued FAS 150 ‘Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity’. This standard establishes guidance for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity, and is effective for financial instruments entered into or modified after May 31, 2003. As a result of further discussion by the FASB on October 8, 2003, the FASB announced that minority interests in consolidated partnerships with specified finite lives should be reclassified as liabilities and presented at fair market value unless the interests are convertible into equity of the parent. Fair market value adjustments occurring subsequent to July 1, 2003 should be recorded as a component of interest expense. At their October 29, 2003 meeting, the FASB agreed to indefinitely defer the implementation of their announcement at the October 8, 2003 meeting regarding the accounting treatment of minority interests in finite life partnerships. Therefore, until a final resolution is reached, the Group will not implement this aspect of the standard. If the Group were to adopt this aspect of the standard under its current provisions, it is not expected to have a material impact on the Group’s financial statements.

Note 34 — Consolidating Guarantor and Non-Guarantor Information

The Company has filed a registration statement on Form F-3 in respect of Guaranteed debt securities of up to $1 billion. The debt securities will be guaranteed by Six Continents PLC, unless otherwise indicated in a prospectus supplement.

Presented below is condensed consolidating financial information for the Parent (InterContinental Hotels Group PLC), the Guarantor Subsidiary (Six Continents PLC) and the Non-Guarantor Subsidiaries for the results of operations and cash flows for the 15 months ended December 31, 2003, 12 months ended December 31, 2003, three months ended December 31, 2002, years ended September 30, 2002, 2001 and balance sheets as of December 31, 2003, September 30, 2002 and September 30, 2001. The condensed consolidating financial information in respect of the three months ended December 31, 2002 and 12 months ended December 31, 2003 is unaudited. Investments in subsidiaries are accounted for by the Parent or the Guarantor Subsidiary on the equity method of accounting. Earnings of subsidiaries are accounted for in the Parent’s or Guarantor Subsidiary’s Investments in subsidiaries account. The elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

As the differences between UK GAAP and US GAAP are the same for the Parent, the Guarantor Subsidiary and the Non-Guarantor Subsidiaries, the differences are not included in the following condensed consolidated financial information.

The significant differences between UK GAAP and US GAAP, which predominantly relate to the Non-Guarantor Subsidiaries, are described in Note 33.

F-97

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Profit and Loss Account 15 months ended December 31, 2003
	Parent			Guarantor Subsidiary			Non-guarantor subsidiaries			Eliminations			Consolidated
	(£ million)
Turnover		—			—			3,483			—			3,483
Costs and overheads, less other income		(1	)		1			(3,051	)		—			(3,051	)
Operating (loss)/profit		(1	)		1			432			—			432
Non-operating exceptional items		—			(108	)		(105	)		—			(213	)
(Loss)/profit on ordinary activities before interest		(1	)		(107	)		327			—			219
Net interest payable and similar charges		(5	)		(31	)		(11	)		—			(47	)
Premium on early settlement of debt		—			(136	)		—			—			(136	)
Net interest from/(to) other Group companies		4			(81	)		77			—			—
Equity in profit before taxation of subsidiaries		38			393			—			(431	)		—
Profit/(loss) on ordinary activities before taxation		36			38			393			(431	)		36
Tax on profit/(loss) on ordinary activities		17			17			(41	)		24			17
Profit/(loss) on ordinary activities after taxation		53			55			352			(407	)		53
Minority equity interests		(34	)		(34	)		(34	)		68			(34	)
Earnings available for shareholders		19			21			318			(339	)		19

F-98

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Statement of Total Recognized Gains and Losses and Reconciliation of Movement in Shareholders’ Funds
	15 months ended December 31, 2003
	Parent			Guarantor Subsidiary			Non- guarantor subsidiaries			Eliminations			Consolidated
	(£ million)
Earnings available for shareholders		19			21			318			(339	)		19
Reversal of previous revaluation gains due to impairment		(22	)		(22	)		(22	)		44			(22	)
Exchange differences
Goodwill eliminated		(139	)		(139	)		(139	)		278			(139	)
Other assets and liabilities		79			79			80			(159	)		79
Other recognized gains and losses		(82	)		(82	)		(81	)		163			(82	)
Total recognized gains and losses for the period		(63	)		(61	)		237			(176	)		(63	)
Dividends		244			(456	)		—			56			(156	)
Issue of InterContinental Hotels Group PLC ordinary shares		18			—			—			—			18
Net assets of MAB eliminated on separation		—			(2,777	)		(2,777	)		2,777			(2,777	)
MAB goodwill eliminated on separation		—			50			50			(50	)		50
Minority interest on transfer of pension prepayment		(7	)		(7	)		(7	)		14			(7	)
Movement in shares in ESOP trusts		15			6			—			(6	)		15
Movement in goodwill – exchange differences		139			139			139			(278	)		139
Recognized on Separation		2,208			22			(1,224	)		(1,006	)		—
Net movement in shareholders’ funds		2,554			(3,084	)		(3,582	)		1,331			(2,781	)
Shareholders’ funds at beginning of period		—			5,335			8,654			(8,654	)		5,335
Shareholders’ funds at end of period		2,554			2,251			5,072			(7,323	)		2,554

F-99

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Balance Sheets
	December 31, 2003
	Parent			Guarantor Subsidiary			Non- guarantor subsidiaries			Eliminations			Consolidated
	(£ million)
Intangible assets		—			—			158			—			158
Tangible assets		—			7			3,944			—			3,951
Investments		—			—			172			—			172
Investments in subsidiaries		2,251			5,072			—			(7,323	)		—
Fixed assets		2,251			5,079			4,274			(7,323	)		4,281
Stocks		—			—			44			—			44
Debtors		—			105			418			—			523
Amounts due from other Group companies		795			1,061			2,960			(4,816	)		—
Investments		—			358			19			—			377
Cash at bank and in hand		3			4			48			—			55
Current assets		798			1,528			3,489			(4,816	)		999
Creditors – amounts falling due within one year:
Amounts due to other Group companies		—			(2,343	)		—			2,343			—
Overdrafts		—			(37	)		32			—			(5	)
Other borrowings		—			—			(8	)		—			(8	)
Other creditors		(75	)		(35	)		(962	)		—			(1,072	)
Net current assets/(liabilities)		723			(887	)		2,551			(2,473	)		(86	)
Total assets less current liabilities		2,974			4,192			6,825			(9,796	)		4,195
Creditors – amounts falling due after one year:
Borrowings		(420	)		(507	)		(61	)		—			(988	)
Other creditors		—			—			(97	)		—			(97	)
Amounts due to other Group companies		—			(1,412	)		(1,061	)		2,473			—
Provisions for liabilities and charges:
Deferred taxation		—			—			(314	)		—			(314	)
Other provisions		—			(22	)		(57	)		—			(79	)
Minority interests		—			—			(163	)		—			(163	)
Net assets		2,554			2,251			5,072			(7,323	)		2,554
Share capital		739			243			1,809			(2,052	)		739
Profit and loss and other reserves		1,815			2,008			3,263			(5,271	)		1,815
Shareholders’ funds		2,554			2,251			5,072			(7,323	)		2,554

F-100

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Statement of Cash Flows
	15 months ended December 31, 2003
		Parent		Guarantor Subsidiary		Non-guarantor subsidiaries		Eliminations	Consolidated
	(£ million)
Operating activities		2		15		778		—	795
Interest paid		(1	)	(365	)	225		—	(141	)
Costs associated with new facilities		—		(13	)	(7	)	—	(20	)
Premium on early settlement of debt		—		(136	)	—		—	(136	)
Dividends paid to minority shareholders		—		—		(22	)	—	(22	)
Interest received		4		257		(150	)	—	111
Returns on investments and servicing of finance		3		(257	)	46		—	(208	)
UK corporation tax received/(paid)		—		87		(62	)	—	25
Overseas corporate tax paid		—		—		(21	)	—	(21	)
Taxation		—		87		(83	)	—	4
Paid:
Intangible fixed assets		—		—		(10	)	—	(10	)
Tangible fixed assets		—		(3	)	(472	)	—	(475	)
Fixed asset investments		—		—		(37	)	—	(37	)
Received:
Tangible fixed assets		—		4		261		—	265
Fixed asset investments		7		—		2		—	9
Capital expenditure and financial investment		7		1		(256	)	—	(248	)
Acquisitions		—		—		—		—	—
Separation costs		—		(39	)	(27	)	—	(66	)
Acquisitions and disposals		—		(39	)	(27	)	—	(66	)
Equity dividends		(30	)	(269	)	—		—	(299	)
Net cash flow		(18	)	(462	)	458		—	(22	)
Management of liquid resources and financing		21		528		(472	)	—	77
Movement in cash and overdrafts		3		66		(14	)	—	55

F-101

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Profit and Loss Account
	Three months ended December 31, 2002 (unaudited)
		Parent		Guarantor Subsidiary		Non-guarantor subsidiaries		Eliminations		Consolidated
	(£ million)
Turnover		—		—		871		—		871
Costs and overheads, less other income		—		(1	)	(758	)	—		(759	)
Operating (loss)/profit		—		(1	)	113		—		112
Non-operating exceptional items		—		(3	)	—		—		(3	)
(Loss)/profit on ordinary activities before interest		—		(4	)	113		—		109
Net interest payable and similar charges		—		(7	)	(5	)	—		(12	)
Net interest (to)/from other Group companies		—		(13	)	13		—		—
Equity in profit before taxation of subsidiaries		97		121		—		(218	)	—
Profit/(loss) on ordinary activities before taxation		97		97		121		(218	)	97
Tax on profit/(loss) on ordinary activities		(29	)	(29	)	(29	)	58		(29	)
Profit/(loss) on ordinary activities after taxation		68		68		92		(160	)	68
Minority equity interests		(4	)	(4	)	(4	)	8		(4	)
Earnings available for shareholders		64		64		88		(152	)	64

F-102

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Statement of Total Recognized Gains and Losses
	Three months ended December 31, 2002 (unaudited)
		Parent		Guarantor Subsidiary		Non-guarantor subsidiaries		Eliminations		Consolidated
	(£ million)
Earnings available for shareholders		64		64		88		(152	)	64
Exchange differences
Goodwill eliminated		(30	)	(30	)	(30	)	60		(30	)
Other assets and liabilities		39		39		39		(78	)	39
Other recognized gains and losses		9		9		9		(18	)	9
Total recognized gains and losses for the period		73		73		97		(170	)	73

F-103

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Statement of Cash Flows
	Three months ended December 31, 2002 (unaudited)
		Parent	Guarantor Subsidiary		Non- guarantor subsidiaries		Eliminations	Consolidated
	(£ million)
Operating activities		—	18		146		—	164
Interest paid		—	(86	)	47		—	(39	)
Interest received		—	70		(35	)	—	35
Returns on investments and servicing of finance		—	(16	)	12		—	(4	)
UK corporation paid		—	—		(14	)	—	(14	)
Overseas corporate tax paid		—	—		(14	)	—	(14	)
Taxation		—	—		(28	)	—	(28	)
Paid:
Tangible fixed assets		—	—		(127	)	—	(127	)
Fixed asset investments		—	—		(1	)	—	(1	)
Received:
Tangible fixed assets		—	—		6		—	6
Fixed asset investments		—	1		1		—	2
Capital expenditure and financial investment		—	1		(121	)	—	(120	)
Separation costs		—	—		(7	)	—	(7	)
Acquisitions and disposals		—	—		(7	)	—	(7	)
Net cash flow		—	3		2		—	5
Management of liquid resources and financing		—	39		19		—	58
Movement in cash and overdrafts		—	42		21		—	63

F-104

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Profit and Loss Account
	12 months ended December 31, 2003 (unaudited)
		Parent		Guarantor Subsidiary		Non-guarantor subsidiaries		Eliminations		Consolidated
	(£ million)
Turnover		—		—		2,612		—		2,612
Costs and overheads, less other income		(1	)	2		(2,293	)	—		(2,292	)
Operating (loss)/profit		(1	)	2		319		—		320
Non-operating exceptional items		—		(105	)	(105	)	—		(210	)
(Loss)/profit on ordinary activities before interest		(1	)	(103	)	214		—		110
Net interest payable and similar charges		(5	)	(24	)	(6	)	—		(35	)
Premium on early settlement of debt		—		(136	)	—		—		(136	)
Net interest from/(to) other Group companies		4		(68	)	64		—		—
Equity in profit before taxation of subsidiaries		(59	)	272		—		(213	)	—
(Loss)/profit on ordinary activities before taxation		(61	)	(59	)	272		(213	)	(61	)
Tax on (loss)/profit on ordinary activities		46		46		(12	)	(34	)	46
(Loss)/profit on ordinary activities after taxation		(15	)	(13	)	260		(247	)	(15	)
Minority equity interests		(30	)	(30	)	(30	)	60		(30	)
Earnings available for shareholders		(45	)	(43	)	230		(187	)	(45	)

F-105

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Statement of Total Recognised Gains and Losses
	12 months ended December 31, 2003 (unaudited)
	Parent		Guarantor Subsidiary		Non- guarantor subsidiaries		Eliminations		Consolidated
	(£ million)
Earnings available for shareholders	(45	)	(43	)	230		(187	)	(45	)
Reversal of previous revaluation gains due to impairment	(22	)	(22	)	(22	)	44		(22	)
Exchange differences
Goodwill eliminated	(109	)	(109	)	(109	)	218		(109	)
Other assets and liabilities	40		40		41		(81	)	40
Other recognized gains and losses	(91	)	(91	)	(90	)	181		(91	)
Total recognized gains and losses for the period	(136	)	(134	)	140		(6	)	(136	)

F-106

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Statement of Cash Flows
	12 months ended December 31, 2003 (unaudited)
	Parent		Guarantor Subsidiary		Non- guarantor subsidiaries		Eliminations	Consolidated
	(£ million)
Operating activities	2		(3	)	632		—	631
Interest paid	(1	)	(279	)	178		—	(102	)
Costs associated with new facilities	—		(13	)	(7	)	—	(20	)
Premium on early settlement of debt	—		(136	)	—		—	(136	)
Dividends paid to minority shareholders	—		—		(22	)	—	(22	)
Interest received	4		187		(115	)	—	76
Returns on investments and servicing of finance	3		(241	)	34		—	(204	)
UK corporation tax received/(paid)	—		87		(48	)	—	39
Overseas corporate tax paid	—		—		(7	)	—	(7	)
Taxation	—		87		(55	)	—	32
Paid:
Intangible fixed assets	—		—		(10	)	—	(10	)
Tangible fixed assets	—		(3	)	(345	)	—	(348	)
Fixed asset investments	—		—		(36	)	—	(36	)
Received:
Tangible fixed assets	—		4		255		—	259
Fixed asset investments	7		(1	)	1		—	7
Capital expenditure and financial investment	7		—		(135	)	—	(128	)
Acquisitions	—		—		—		—	—
Separation costs	—		(39	)	(20	)	—	(59	)
Acquisitions and disposals	—		(39	)	(20	)	—	(59	)
Equity dividends	(30	)	(269	)	—		—	(299	)
Net cash flow	(18	)	(465)		456		—	(27	)
Management of liquid resources and financing	21		489		(491	)	—	19
Movement in cash and overdrafts	3		24		(35	)	—	(8	)

F-107

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Profit and Loss Account
	Year ended September 30, 2002 (unaudited)
	Parent	Guarantor Subsidiary		Non- guarantor subsidiaries		Eliminations		Consolidated
	(£ million)
Turnover	—	—		3,615		—		3,615
Costs and overheads, less other income	—	2		(3,076	)	—		(3,074	)
Operating profit	—	2		539		—		541
Non-operating exceptional items	—	(3	)	56		—		53
(Loss)/profit on ordinary activities before interest	—	(1	)	595		—		594
Net interest payable and similar charges	—	(33	)	(27	)	—		(60	)
Net interest (to)/from other Group companies	—	(49	)	49		—		—
Equity in profit before taxation of subsidiaries	—	617		—		(617	)	—
Profit/(loss) on ordinary activities before taxation	—	534		617		(617	)	534
Tax on profit/(loss) on ordinary activities	—	(52	)	(77	)	77		(52	)
Profit/(loss) on ordinary activities after taxation	—	482		540		(540	)	482
Minority equity interests	—	(25	)	(25	)	25		(25	)
Earnings available for shareholders	—	457		515		(515	)	457

F-108

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Statement of Total Recognized Gains and Losses and Reconciliation of Movement in Shareholders’ Funds
	Year ended September 30, 2002
	Parent	Guarantor Subsidiary		Non- guarantor subsidiaries		Eliminations		Consolidated
	(£ million)
Earnings available for shareholders	—	457		515		(515	)	457
Reversal of previous revaluation gains due to impairment	—	(36	)	(36	)	36		(36	)
Exchange differences
Goodwill eliminated	—	(98	)	(98	)	98		(98	)
Other assets and liabilities	—	62		62		(62	)	62
Other recognized gains and losses	—	(72	)	(72	)	72		(72	)
Total recognized gains and losses for the period	—	385		443		(443	)	385
Dividends	—	(305	)	—		—		(305	)
Issue of Six Continents PLC ordinary shares	—	3		—		—		3
Movement in shares in ESOP trusts	—	1		—		—		1
Movement in goodwill – exchange differences	—	98		98		(98	)	98
Net movement in shareholders’ funds	—	182		541		(541	)	182
Shareholders’ funds at beginning of period	—	5,153		8,113		(8,113	)	5,153
Shareholders’ funds at end of period	—	5,335		8,654		(8,654	)	5,335

F-109

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Balance Sheets
	September 30, 2002
	Parent	Guarantor Subsidiary		Non- guarantor subsidiaries		Eliminations		Consolidated
	(£ million)
Intangible assets	—	—		173		—		173
Tangible assets	—	10		7,631		—		7,641
Investments	—	—		218		—		218
Investments in subsidiaries	—	8,654		—		(8,654	)	—
Fixed assets	—	8,664		8,022		(8,654	)	8,032
Stocks	—	—		91		—		91
Debtors	—	212		417		—		629
Amounts due from other group companies	—	620		2,794		(3,414	)	—
Investments	—	157		61		—		218
Cash at bank and in hand	—	4		80		—		84
Current assets	—	993		3,443		(3,414	)	1,022
Creditors – amounts falling due within one year:
Amounts due to other Group companies	—	(1,464	)	—		1,464		—
Overdrafts	—	(67	)	1		—		(66	)
Other borrowings	—	(579	)	(203	)	—		(782	)
Other creditors	—	(282	)	(1,143	)	—		(1,425	)
Net current (liabilities)/assets	—	(1,399	)	2,098		(1,950	)	(1,251	)
Total assets less current liabilities	—	7,265		10,120		(10,604	)	6,781
Creditors – amounts falling due after one year:
Borrowings	—	(572	)	(59	)	—		(631	)
Other creditors	—	—		(100	)	—		(100	)
Amounts due to other Group companies	—	(1,330	)	(620	)	1,950		—
Provisions for liabilities and charges:
Deferred taxation	—	(21	)	(474	)	—		(495	)
Other provisions	—	(7	)	(64	)	—		(71	)
Minority interests	—	—		(149	)	—		(149	)
Net assets	—	5,335		8,654		(8,654	)	5,335
Share capital	—	243		1,922		(1,431	)	734
Profit and loss and other reserves	—	5,092		6,732		(7,223	)	4,601
Shareholders’ funds	—	5,335		8,654		(8,654	)	5,335

F-110

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Statement of Cash Flows
	Year ended September 30, 2002
		Parent	Guarantor Subsidiary		Non-guarantor subsidiaries		Eliminations	Consolidated
	(£ million)
Operating activities		—	(72	)	792		—	720
Interest paid		—	(379	)	193		—	(186	)
Dividends paid to minority shareholders		—	—		(13	)	—	(13	)
Interest received		—	291		(167	)	—	124
Returns on investments and servicing of finance		—	(88	)	13		—	(75	)
UK corporation tax received/(paid)		—	60		(156	)	—	(96	)
Overseas corporate tax paid		—	—		(27	)	—	(27	)
Taxation		—	60		(183	)	—	(123	)
Paid:
Tangible fixed assets		—	(1	)	(647	)	—	(648	)
Fixed asset investments		—	—		(14	)	—	(14	)
Received:
Tangible fixed assets		—	1		133		—	134
Fixed asset investments		—	2		13		—	15
Capital expenditure and financial investment		—	2		(515	)	—	(513	)
Acquisitions		—	—		(24	)	—	(24	)
Disposals		—	—		9		—	9
Acquisitions and disposals		—	—		(15	)	—	(15	)
Equity dividends		—	(299	)	—		—	(299	)
Net cash flow		—	(397	)	92		—	(305	)
Management of liquid resources and financing		—	433		(138	)	—	295
Movement in cash and overdrafts		—	36		(46	)	—	(10	)

F-111

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Profit and Loss Account
	Year ended September 30, 2001
		Parent	Guarantor Subsidiary		Non-guarantor subsidiaries		Eliminations		Consolidated
	(£ million)
Turnover		—	—		4,033		—		4,033
Costs and overheads, less other income		—	(3	)	(3,281	)	—		(3,284	)
Operating (loss)/profit		—	(3	)	752		—		749
Non-operating exceptional items		—	12		(12	)	—		—
Profit on ordinary activities before interest		—	9		740		—		749
Net interest payable and similar charges		—	(34	)	(25	)	—		(59	)
Net interest (to)/from other Group companies		—	(17	)	17		—		—
Equity in profit before taxation of subsidiaries		—	732		—		(732	)	—
Profit/(loss) on ordinary activities before taxation		—	690		732		(732	)	690
Tax on profit/(loss) on ordinary activities		—	(223	)	(239	)	239		(223	)
Profit/(loss) on ordinary activities after taxation		—	467		493		(493	)	467
Minority equity interests		—	(24	)	(24	)	24		(24	)
Earnings available for shareholders		—	443		469		(469	)	443

F-112

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Statement of Total Recognized Gains and Losses and Reconciliation of Movement in Shareholders’ Funds
	Year ended September 30, 2001
		Parent	Guarantor Subsidiary		Non-guarantor subsidiaries		Eliminations		Consolidated
	(£ million)
Earnings available for shareholders		—	443		469		(469	)	443
Exchange differences
Goodwill eliminated		—	9		9		(9	)	9
Other assets and liabilities		—	(2	)	(2	)	2		(2	)
Other recognized gains and losses		—	7		7		(7	)	7
Total recognized gains and losses for the period		—	450		476		(476	)	450
Dividends		—	(293	)	—		—		(293	)
Issue of Six Continents PLC ordinary shares		—	9		—		—		9
Repurchase of ordinary shares		—	(103	)	—		—		(103	)
Movement in goodwill – exchange differences		—	(9	)	(9	)	9		(9	)
Net movement in shareholders’ funds		—	54		467		(467	)	54
Shareholders’ funds at beginning of period		—	5,099		7,646		(7,646	)	5,099
Shareholders’ funds at end of period		—	5,153		8,113		(8,113	)	5,153

F-113

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS

Note 34 — Consolidating Guarantor and Non-Guarantor Information (continued)

	Consolidated Statement of Cash Flows
	12 months ended September 30, 2001
		Parent	Guarantor Subsidiary		Non- guarantor subsidiaries		Eliminations	Consolidated
	(£ million)
Operating activities		—	(40	)	1,024		—	984
Interest paid		—	(447	)	218		—	(229	)
Dividends paid to minority shareholders		—	—		(5	)	—	(5	)
Interest received		—	391		(231	)	—	160
Returns on investments and servicing of finance		—	(56	)	(18	)	—	(74	)
UK corporation tax paid		—	(22	)	(80	)	—	(102	)
Overseas corporate tax paid		—	—		(47	)	—	(47	)
Taxation		—	(22	)	(127	)	—	(149	)
Paid:
Tangible fixed assets		—	(1	)	(938	)	—	(939	)
Fixed asset investments		—	—		(37	)	—	(37	)
Received:
Tangible fixed assets		—	(1	)	102		—	101
Fixed asset investments		—	1		6		—	7
Capital expenditure and financial investment		—	(1	)	(867	)	—	(868	)
Acquisitions		—	—		(752	)	—	(752	)
Disposals		—	—		623		—	623
Acquisitions and disposals		—	—		(129	)	—	(129	)
Equity dividends		—	(290	)	—		—	(290	)
Net cash flow		—	(409	)	(117	)	—	(526	)
Management of liquid resources and financing		—	375		118		—	493
Movement in cash and overdrafts		—	(34	)	1		—	(33	)

F-114

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F-115

INTERCONTINENTAL HOTELS GROUP PLC

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Description		Balance at beginning of period	Additions charged to costs and expenses	Exchange differences		Deductions		Balance at end of period
	(£ million)
15 months ended December 31, 2003
Provisions for bad and doubtful debts		55	9	(6	)	(13	)	45
Three months ended December 31, 2003 (unaudited)
Provision for bad and doubtful debts		55	2	(2	)	(5	)	50
12 months ended December 31, 2003 (unaudited)
Provision for bad and doubtful debts		50	7	(4	)	(8	)	45
Year ended September 30, 2002
Provisions for bad and doubtful debts		41	24	1		(9	)	55
Year ended September 30, 2001
Provisions for bad and doubtful debts		32	16	—		(7	)	41

S-1

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

INTERCONTINENTAL HOTELS GROUP PLC
(Registrant)

By: /s/ Richard Solomons

Name: Richard Solomons
Title: Finance Director

Date: April 8, 2004

S-2

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EXHIBIT INDEX

Exhibit Number Exhibit Description

Exhibit 1 Memorandum and Articles of Association of IHG (incorporated by reference to Exhibit 4 to InterContinental Hotels Group’s Registration Statement on S-8 (File No. 1-10409) filed with the SEC on April 23, 2003)

Exhibit 2(b)(i) Instruments defining the Rights of Holders of Long-Term Debt: The total amount of long-term debt securities of the Group authorized under any individual instrument, other than the “Amended and Restated Trust Deed” dated September 21, 2000 relating to the Company’s €2,000 million Debt Issuance Program originally constituted on October 9, 1998 (incorporated by reference to Exhibit 2 to Six Continents PLC’s Annual Report on Form 20-F (File No. 1-10409), dated December 20, 2001), and the “Trust Deed” dated September 24, 2003 relating to the Company’s €1,000 million Debt Issuance Program and filed as Exhibit 2(b)(i) hereto does not exceed 10% of the total assets of the Group on a consolidated basis. The Company agrees to furnish copies of any or all such instruments to the Securities and Exchange Commission upon request

Exhibit 4(a)(i) Agreement dated June 14, 2000 between the Company and others and Interbrew SA and others relating to the disposal of Bass Brewers (incorporated by reference to Exhibit 4 to Six Continents PLC’s Annual Report on Form 20-F (File No. 1-10409), dated December 21, 2000)

Exhibit 4(a)(ii) $2,650,000 Facility Agreement dated February 13, 2003 among IHG, Barclays Capital, HSBC Bank plc, J.P. Morgan PLC, Salomon Brothers International Limited and The Royal Bank of Scotland plc

Exhibit 4(a)(iii) Joint Venture Agreement, dated February 10, 1986, among Britannia Soft Drinks Limited, InterContinental Hotels Group PLC, Whitbread PLC, Allied Domecq PLC, Six Continents Investments Limited and Whitbread Group PLC and Allied Domecq Overseas (Canada) Limited

Exhibit 4(a)(iv) Mitchells & Butlers Group Transfer Share Purchase Agreement, dated April 15, 2003 (incorporated by reference to Exhibit 4(a)(ii) of Mitchells & Butlers plc’s Registration Statement on Form 20-F (file No. 001-31653), dated March 28, 2003)

Exhibit 4(a)(v) Separation Agreement dated April 15, 2003 between IHG and the Six Continents Group (incorporated by reference to Exhibit 4(a)(i) of Mitchells & Butlers plc’s Registration Statement on Form 20-F (file No. 001-31653), dated March 28, 2003)

Exhibit 4(c)(i) Richard Hartman’s service contract dated February 12, 2003

Exhibit 4(c)(ii) Richard North’s service contract dated February 12, 2003

Exhibit 4(c)(iii) Stevan Porter’s service contract dated February 12, 2003

Exhibit 4(c)(iv) Richard Solomons’ service contract dated February 12, 2003

Exhibit 4(c)(v) Sir Ian Prosser’s service contract dated February 12, 2003

Exhibit 4(c)(vi) Sir Ian Prosser’s service contract dated October 1, 1988 (incorporated by reference to Exhibit 4 of Six Continents PLC’s Annual Report on Form 20-F (File No. 1-10409), dated December 20, 2001)

Exhibit 4(c)(vii) Agreement, dated February 12, 2003, between Thomas R Oliver and Six Continents Hotels Limited (incorporated by reference to Exhibit 4 (c)(iv) of Six Continents PLC Annual Report on Form 20-F (File No. 1-10409) dated February 17, 2003)

Exhibit 4(c)(viii) Consultancy Agreement, dated February 12, 2003, between Thomas R Oliver and Six Continents Hotels Limited (incorporated by reference to Exhibit 4 (c)(v) of Six Continents PLC Annual Report on Form 20-F (File No.1-10409) dated February 17, 2003)

Exhibit 7 Computation of ratios of earnings to fixed charges

Exhibit 8 List of Subsidiaries

Exhibit 12.1 Certification of Richard North filed pursuant to 17 CFR 240.13a-14(c)

Exhibit 12.2 Certification of Richard Solomons filed pursuant to 17 CFR 240.13a-14(c)

Exhibit 13.1 Certification of Richard North furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.§1350 (a) and (b)

Exhibit 13.2 Certification of Richard Solomons furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.§1350 (a) and (b)

Exhibit 14(a) Consent of Ernst & Young LLP (included on page F-1)

EX-2

Exhibit 2(b)(i)

CONFORMED COPY

Dated 24TH SEPTEMBER, 2003,


TRUST DEED

between

INTERCONTINENTAL HOTELS GROUP PLC
as Issuer

and

SIX CONTINENTS PLC
as Guarantor

and

HSBC TRUSTEE (C.I.) LIMITED
as Trustee

relating to

€1,000,000,000
Debt Issuance Programme

Arranged by

J.P. MORGAN SECURITIES LTD.


For InterContinental Hotels Group PLC and Six Continents PLC:

LINKLATERS
One Silk Street
London EC2Y 8HQ

For HSBC Trustee (C.I.) Limited

ALLEN & OVERY
One New Change
London EC4M 9QQ

	TABLE OF CONTENTS
		PAGE
1.	Definitions and Interpretation	1
2	Issue of Notes and Covenant to Pay	6
3	Form of the Notes	8
4	Stamp Duties and Taxes	9
5	Guarantee	9
6	Application of moneys received by the Trustee	11
7	Covenants	12
8	Remuneration and Indemnification of the Trustee	15
9	Provisions supplemental to the Trustee Acts	16
10	Trustee liable for negligence	19
11	Waiver and proof of default	19
12	Trustee not precluded from entering into contracts	19
13	Modification	19
14	Appointment, Retirement and Removal of the Trustee	20
15	Notes held In Clearing Systems and Couponholders	21
16	Currency Indemnity	21
17	Enforcement	22
18	Substitution	22
19	Communications	24
20	Contracts (Rights of Third Parties) Act 1999	24
21.	General	24

SCHEDULES
SCHEDULE 1	Form of Temporary Global Note	25
SCHEDULE 2	Form of Permanent Global Note	31
SCHEDULE 3	Form of Global Certificate	40
SCHEDULE 4	Form of Bearer Note	44
SCHEDULE 5	Form of Certificate	47
SCHEDULE 6	Terms and Conditions of The Notes	51
SCHEDULE 7	Form of Coupon	68
SCHEDULE 8	Form of Talons	71
SCHEDULE 9	Form of Receipt	73
SCHEDULE 10	Provisions for Meetings of Noteholders	74

 THIS TRUST DEED is made on 24th September, 2003 between

(1) INTERCONTINENTAL HOTELS GROUP PLC (the Issuer) of 20 North Audley Street, London W1K 6WN;

(2) SIX CONTINENTS PLC (the Guarantor) of 20 North Audley Street, London W 1 K 6WN; and

(3) HSBC TRUSTEE (C.I.) LIMITED (the Trustee, which expression, where the context so admits, includes any other trustee for the time being of this Trust Deed).

WHEREAS

(A) The Issuer proposes to issue from time to time debt securities in an aggregate principal amount outstanding at any one time not exceeding the Programme Limit in accordance with the Programme Agreement (the Programme) and to be constituted under this Trust Deed.

(B) The Guarantor has agreed to guarantee the said Notes and to enter into certain covenants set out in this Trust Deed.

(C) The Trustee has agreed to act as trustee of this Trust Deed on the following terms and conditions.

THIS DEED WITNESSES AND IT IS DECLARED as follows

1.	DEFINITIONS AND INTERPRETATION
1.1	Definitions In this Trust Deed:

Agency Agreement means the amended and restated agency agreement relating to the Programme dated 24th September, 2003 between the Issuer, the Guarantor, the Trustee, HSBC Bank plc as initial Issuing and Paying Agent and the other Agents mentioned in it

Agents means the Issuing and Paying. Agent, the other Paying Agents, the Calculation Agent, the Registrar, the other Transfer Agents or any of them

Auditors means the auditors for the time being of the Issuer or, as the case may be, the Guarantor or, if they are unable or unwilling to carry out any action requested of them under this Trust Deed, such other firm of accountants as may be nominated or approved in writing by the Trustee for the purpose

Bearer Note means a Note that is in bearer form being substantially in the form set out in Schedule 4, and includes any replacement Bearer Note issued pursuant to the Conditions and any temporary Global Note or permanent Global Note

Calculation Agent means any person named as such in the Conditions or any Successor Calculation Agent

Certificate means a registered certificate representing one or more Registered Notes of the same Series and, save as provided in the Conditions, comprising the entire holding by a Noteholder of his Registered Notes of that Series and, save in the case of Global Certificates, being substantially in the form set out in Schedule 5

Clearstream, Luxembourg means Clearstream Banking, sociéteé anonyme

Conditions means in respect of the Notes of each Series the terms and conditions applicable thereto which shall be substantially in the form set out in Schedule 6 as modified, with respect to any Notes represented by a Global Certificate or a Global Note, by the provisions of such Global Certificate or Global Note, shall incorporate any additional provisions forming part of such terms and conditions set out in the applicable Pricing Supplement(s) relating to the Notes of that Series and shall be endorsed on the Definitive Notes subject to amendment and completion as referred to in the first paragraph of Schedule 6 and any reference to a particularly numbered Condition shall be construed accordingly

Contractual Currency means, in relation to any payment obligation of any Note, the currency in which that payment obligation is expressed and, in relation to Clause 8 (Remuneration and Indemnification of the Trustee), pounds sterling or such other currency as may be agreed between the Issuer and the Trustee from time to time

Coupons means the bearer coupons relating to interest bearing Bearer Notes or, as the context may require, a specific number of them being substantially in the form set out in Schedule 7 and includes any replacement Coupons issued pursuant to the Conditions

Definitive Note means a Bearer Note in definitive form having, where appropriate, Coupons, Receipt(s) and/or a Talon attached on issue and, unless the context requires otherwise, means a Certificate (other than a Global. Certificate) and includes any replacement Note or Certificate issued pursuant to the Conditions

Euroclear means Euroclear Bank S.A./N.V. as operator of the Euroclear System

Event of Default means an event described in Condition 10 that, if so required by that Condition, has been certified by the Trustee to be, in its opinion, materially prejudicial to the interests of the Noteholders

Exchangeable Bearer Note means a Bearer Note that is exchangeable in accordance with its terms for a Registered Note

Extraordinary Resolution has the meaning set out in Schedule 10

Global Certificate means a Certificate substantially in the form set out in Schedule 3 representing Registered Notes of one or more Tranches of the same Series that are registered in the name of a nominee for Euroclear, Clearstream, Luxembourg and/or any other clearing system

Global Note means a temporary Global Note and/or, as the context may require, a permanent Global Note

holder in relation to a Note, Receipt, Coupon or Talon, and Couponholder, Receiptholder and Noteholder have the meanings given to them in the Conditions

2

Issuing and Paying Agent means HSBC Bank plc or any Successor Issuing and Paying Agent in each case at its specified office

Moody’s means Moody’s Investors Service, Limited

Notes means the debt securities to be issued by the Issuer pursuant to the Programme Agreement, constituted by this Trust Deed and for the time being outstanding or, as the context may require, a specific number or Series of them

outstanding means, in relation to the Notes, all the Notes issued except (a) those that have been redeemed in accordance with the Conditions, (b) those in respect of which the date for redemption has occurred and the redemption moneys (including all interest accrued on such Notes to the date for such redemption and any interest payable after such date) have been duly paid to the Trustee or to the Issuing and Paying Agent as provided in Clause 2 (Issue of Notes and Covenant to Pay) and remain available for payment against presentation and surrender of Notes, Certificates, Receipts and/or Coupons, as the case may be, (c) those that have become void or in respect of which claims have become prescribed, (d) those that have been purchased and are required to be surrendered for cancellation as provided in the Conditions, (e) those mutilated or defaced Bearer Notes that have been surrendered and cancelled in exchange for replacement Bearer Notes, (f) (for the purpose only of determining how many Notes are outstanding and without prejudice to their status for any other purpose) those Bearer Notes alleged to have been lost, stolen or destroyed and in respect of which replacement Notes have been issued, (g) those Exchangeable Bearer Notes that have been exchanged for Registered Notes, and (h) any temporary Global Note to the extent that it shall have been exchanged for a permanent Global Note and any Global Note to the extent that it shall have been exchanged for one or more Definitive Notes, in either case pursuant to its provisions provided that for the purposes of (1) ascertaining the right to attend and vote at any meeting of the Noteholders, (2) the determination of how many Notes are outstanding for the purposes of Condition 10, 11 and Schedule 10 (Provisions for Meetings of Noteholders), (3) the exercise of any discretion, power or authority that the Trustee is required, expressly or impliedly, to exercise in or by reference to the interests of the Noteholders and (4) the certification (where relevant) by the Trustee as to whether an Event of Default or a Potential Event of Default is in its opinion materially prejudicial to the interests of the Noteholders, those Notes that are beneficially held by or on behalf of the Issuer, the Guarantor or any of their respective Subsidiaries and not yet cancelled shall (unless no longer so held) be deemed not to remain outstanding

Paying Agents means the persons (including the Issuing and Paying. Agent) referred to as such in the Conditions or any Successor Paying Agents in each case at their respective specified offices

permanent Global Note means a Global Note representing Bearer Notes of one or more Tranches of the same Series, either on issue or upon exchange of a temporary Global Note, or part of it, and which shall be substantially in the form set out in Schedule 2 (or in such other form as may be agreed between the Issuer, the Agent and the Relevant Dealer(s))

Potential Event of Default means an event or circumstance that would with the giving of notice, expiry of any applicable grace period or appropriate period of time and/or fulfilment of any other requirement provided for in Condition 10 become an Event of Default

3

Pricing Supplement means, in relation to a Tranche, a pricing supplement, supplemental to the offering circular relating to the Programme, issued specifying the relevant issue details of such Tranche, substantially in the form contained in Schedule B to the Procedures Memorandum

Procedures Memorandum means the memorandum detailing the administrative procedures and guidelines relating to the settlement of issues of Notes (other than Syndicated Issues)

Programme Agreement means the amended and restated Programme Agreement relating to the Programme dated 24th September, 2003 between the Issuer, the Guarantor, J.P. Morgan Securities Ltd. and the other dealers named in it

Programme Limit means the maximum aggregate principal amount of Notes that may be issued and. outstanding at any time under the Programme, as such limit may be increased pursuant to the Programme Agreement

Receipts means the receipts for the payment of instalments of principal in respect of Bearer Notes of which the principal is repayable in instalments or, as the context may require, a specific number of them substantially in the form set out in Schedule 9 and includes any replacement Receipts issued pursuant to the Conditions

Redemption Amount has the meaning given to it in the Conditions

Register means the register maintained by the Registrar

Registered Note means a Note in registered form

Registrar means the person named as such in the Conditions or any Successor Registrar in each case at its specified office

Relevant Dealer has the meaning given to that term in the Programme Agreement

Series means a series of Notes comprising one or more Tranches issued by the Issuer, whether or not issued on the same_. date, that (except in respect of the first payment of interest and their issue price) have identical terms on issue and are expressed to have the same series number

specified office means, in relation to a Paying Agent, the Registrar or a Transfer Agent the office identified with its name at the end of the Conditions or any other office approved by the Trustee and notified to Noteholders pursuant to Clause 7.10 (Change in Agents)

Standard & Poor’s means Standard & Poor’s Ratings Group, a division of the McGraw-Hill Companies, Inc.

Subsidiary means any subsidiary of the Issuer or, as the case may be, the Guarantor within the meaning of sections 736 and 736A of the Companies Act 1985

Successor means, in relation to an Agent such other or further person as may from time to time be appointed by the Issuer and the Guarantor as such Agent with the written approval of, and on terms approved in writing by, the Trustee and notice of whose appointment is given to Noteholders pursuant to Clause 7.10 (Change in Agents)

4

Successor in Business means in relation to the Issuer or, as the case may be, the Guarantor any company which, as the result of any amalgamation, merger or reconstruction, either:

(i) owns beneficially the whole or substantially the whole of the undertaking, property and assets owned by the Issuer or, as the case may be, the Guarantor immediately prior thereto; or

(ii) carries on, as successor to the Issuer or, as the case may be, the Guarantor, the whole or substantially the whole of the business carried on by the Issuer or, as the case may be, the Guarantor immediately prior thereto;

Talons mean talons for further Coupons or, as the context may require, a specific number of them substantially in the form set out in Schedule 8 and includes any replacement Talons issued pursuant to the Conditions

temporary Global Note means a Global Note representing Bearer Notes of one or more Tranches of the same Series on issue and which shall be substantially in the form set out in Schedule 1 (or in such other form as may be agreed between the Issuer, the Agent and the Relevant Dealer(s))

Tranche means, in relation to a Series, those Notes of that Series that are issued on the same date at the same issue price and in respect of which the first payment of interest is identical

Transfer Agents means the persons (including the Registrar) referred to as such in the Conditions or any Successor Transfer Agents in each case at their specified offices

trust corporation means a trust corporation (as defined in the Law of Property Act 1925) or a corporation entitled to act as a trustee pursuant to applicable foreign legislation relating to trustees and

Trustee Acts means the Trustee Act 1925 and the Trustee Act 2000.

1.2 Construction of Certain References   References to:

(a) costs, charges, remuneration or expenses include any value added, turnover or similar tax charged in respect thereof;

(b) an action, remedy or method of judicial proceedings for the enforcement of creditors’ rights include references to the action, remedy or method of judicial proceedings in jurisdictions other than England as shall most nearly approximate thereto;

(c) guarantees or to an obligation being guaranteed shall be deemed to include, respectively, references to indemnities or an indemnity being given in respect thereof;

(d) words and expressions defined in the Agency Agreement, the Programme Agreement, the Conditions or used in the applicable Pricing Supplement shall have the same meaning where used herein unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and this Trust Deed this Trust Deed shall prevail and, in the event of inconsistency between the Agency Agreement or this Trust Deed and the applicable Pricing Supplement, the applicable Pricing Supplement shall prevail; and

5

(e) listing and listed in relation to any Notes shall, in relation to the London Stock Exchange plc, be construed to mean that such Notes have been admitted to the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange plc’s market for listed securities.

1.3 Headings shall be ignored in construing this Trust Deed.

1.4 Contracts References in this Trust Deed to this Trust Deed or any other document are to this Trust Deed or those documents as amended, supplemented or replaced from time to time in relation to the Programme and include any document that amends, supplements or replaces them.

1.5 Schedules The Schedules are part of this Trust Deed and have effect accordingly and terms defined there and not in the main body of this Trust Deed shall have the meaning given to them there.

1.6 Alternative Clearing System References in this Trust Deed to Euroclear and/or Clearstream, Luxembourg shall, wherever the context so permits, be deemed to include reference to any additional or alternative clearing system approved by the Issuer, the Trustee and the Issuing and Paying Agent.

1.7 Contracts (Rights of Third Parties) Act 1999 A person who is not a party to this Trust Deed has no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Trust Deed but this does not affect any right or remedy of a third party which exists or is available apart from that Act.

2 ISSUE OF NOTES AND COVENANT TO PAY

2.1 Issue of Notes The Issuer may from time to time issue Notes in Tranches of one or more Series on a continuous basis with no minimum issue size in accordance with the Programme Agreement. By not later than 3.00 p.m. (London time) on the third business day in London (which for this purpose shall be a day on which commercial banks are open for business in London) preceding each proposed issue date, the Issuer shall give written notice or procure that it is given to the Trustee of the proposed issue of such Tranche, specifying the details to be included in the relevant Pricing Supplement. Upon the issue by the Issuer of any Notes expressed to be constituted by this Trust Deed, such Notes shall forthwith be constituted by this Trust Deed without any further formality and irrespective of whether or not the issue of such debt securities contravenes any covenant or other restriction in this Trust Deed or the Programme Limit.

2.2 Separate Series The provisions of Clauses 2.3 (Covenant to Pay), 2.4 (Discharge), 2.5 (Payment after a Default) and 2.6 (Rate of Interest After a Default) and of Clauses 3 (Form of the Notes) to 17 (Enforcement) and Schedule 10 (Provisions for Meetings of Noteholders) (all inclusive) shall apply mutatis mutandis separately and independently to the Notes of each Series and in such Clauses and Schedule the expressions “Noteholders”, “Certificates”, “Receipts”, “Coupons”, “Couponholders” and “Talons”, together with all other terms that relate to Notes or their Conditions, shall be construed as referring to those of the particular Series in question and not of all Series unless expressly so provided, so that each Series shall be constituted by a separate trust pursuant to Clause 2.3 (Covenant to Pay) and that, unless expressly provided, events affecting one Series shall not affect any other.

6

2.3 Covenant to Pay The Issuer shall on any date when any Notes become due to be redeemed, in whole or in part in accordance with the Conditions, unconditionally pay to or to the order of the Trustee in the Contractual Currency in the principal financial centre for the Contractual Currency (or, where the Contractual Currency is euro, in the jurisdiction in which the account specified by the Trustee is located) in same day funds the Redemption Amount of the Notes becoming due for redemption on that date together with any applicable premium and shall (subject to the Conditions) until such payment (both before and after judgment) unconditionally so pay to or to the order of the Trustee interest on the principal amount of the Notes outstanding as set out in the Conditions (subject to Clause 2.6 (Rate of Interest After a Default)) provided that (1) payment of any sum due in respect of the Notes made to the Issuing and Paying Agent as provided in the Agency Agreement shall, to that extent, satisfy such obligation except to the extent that there is failure in its subsequent payment to the relevant Noteholders or Couponholders under the Conditions and (2) a payment made after the due date or as a result of the Note becoming repayable following an Event of Default shall be deemed to have been made when the full amount due has been received by the Issuing and Paying Agent or the Trustee and notice to that effect has been given to the Noteholders (if required under Clause 7.8 (Notice of Late Payment)), except to the extent that there is failure in its subsequent payment to the relevant Noteholders or Couponholders under the Conditions. This covenant shall only have effect each time Notes are issued and outstanding, when the Trustee shall hold the benefit of this covenant on trust for the Noteholders and Couponholders of the relevant Series.

2.4 Discharge Subject to Clause 2.5 (Payment after a Default), any payment to be made in respect of the Notes, Receipts or the Coupons by the Issuer or the Trustee may be made as provided in the Conditions (subject always to proviso (1) of Clause 2.3 (Covenant to Pay)) and any payment so made shall (subject to Clause 2.3) to that extent be a good discharge to the Issuer or the Trustee, as the case may be.

2.5	Payment after a Default At any time after an Event of Default or a Potential Event of Default has occurred the Trustee may:
(a)	by notice in writing to the Issuer and the Guarantor, the Paying Agents, the Transfer Agents and the Calculation Agent, require the Paying Agents, the Transfer Agents and the Calculation Agent, until notified by the Trustee to the contrary, so far as permitted by applicable law:

(i) to act as Paying Agents, Transfer Agents and Calculation Agent of the Trustee under this Trust Deed and the Notes on the terms of the Agency Agreement (with consequential amendments as necessary and except that the Trustee’s liability for the indemnification, remuneration and expenses of the Paying Agents, the Transfer Agents and the Calculation Agent shall be limited to the amounts for the time being held by the Trustee in respect of the Notes on the terms of this Trust Deed) and thereafter to hold all Notes, Certificates, Receipts, Coupons and Talons and all moneys, documents and records held by them in respect of Notes, Certificates, Receipts, Coupons and Talons to the order of the Trustee or

7

(ii) to deliver all Notes, Certificates, Receipts, Coupons and Talons and all moneys, documents and records held by them in respect of the Notes, Certificates, Receipts, Coupons and Talons to the Trustee or as the Trustee directs in such notice and

(b) by notice in writing to the Issuer and the Guarantor require each of them to make all subsequent payments in respect of the Notes, Receipts and Coupons to or to the order of the Trustee and not to the Issuing and Paying Agent.

2.6 Rate of Interest After a Default If the Notes bear interest at a floating or other variable rate and they become immediately due and repayable under the Conditions, the rate and/or amount of interest payable in respect of them shall continue to be calculated by the Calculation Agent in accordance with the Conditions (with consequential amendments as necessary) except that the rates of interest need not be published unless the Trustee otherwise requires. The first period in respect of which interest shall be so calculable shall commence on the expiry of the Interest Period during which the Notes become so repayable.

3 FORM OF THE NOTES

3.1 The Global Notes The Notes of each Tranche shall initially be represented by a temporary Global Note, a permanent Global Note or one or more Certificates in the principal amount of the Tranche being issued. Interests in temporary Global Notes shall be exchangeable for Definitive Notes, Registered Notes or interests in permanent Global Notes as set out in each temporary Global Note. Interests in permanent Global Notes shall be exchangeable for Definitive Notes and/or Registered Notes as set out in each permanent Global Note.

3.2 The Definitive Notes The Definitive Notes, Receipts, Coupons and Talons shall be serially numbered and security printed and the Certificates shall be printed, in each case in accordance with applicable legal and stock exchange requirements substantially in the forms set out in Schedules 4 to 9. The Notes and Certificates (other than Global Certificates) shall be endorsed with the Conditions.

3.3 Signature The Notes, Certificates, Receipts, Coupons and Talons shall be signed manually or in facsimile by a director of the Issuer, the Notes shall be authenticated by or on behalf of the Issuing and Paying Agent and the Certificates shall be authenticated by or on behalf of the Registrar. The Issuer may use the facsimile signature of a person who at the date of this Trust Deed is such a director even if at the time of issue of any Notes, Certificates, Receipts, Coupons or Talons he no longer holds that office. Notes, Certificates, Receipts, Coupons and Talons so executed and authenticated shall be or, in the case of Certificates, represent binding and valid obligations of the Issuer.

3.4 Ownership of Notes etc. Except as ordered by a court of competent jurisdiction or as otherwise required by law, the Issuer, the Guarantor, the Trustee and the Agents (notwithstanding any notice to the contrary and whether or not any Note, Receipt or Coupon is overdue and notwithstanding any notation of ownership or writing on any Note, Receipt, Coupon or Talon or notice of any previous loss or theft thereof) (i) for the purpose of making payment thereon or on account thereof may deem and treat the bearer of any Note, Receipt, Coupon or Talon as the absolute owner thereof and of all rights thereunder free from all encumbrances, and shall not be required to obtain proof of such ownership or as to the identity of the bearer of any Note, Receipt, Coupon or Talon, and (ii) for all other purposes may deem and treat:–

8

(a) the bearer of any Definitive Note, Receipt, Coupon or Talon, and

(b) each person for the time being shown in the records of Euroclear or Clearstream, Luxembourg as having a particular nominal amount of any Global Note credited to his securities account (ignoring references in the records of any clearance system producing records for these purposes to any of Euroclear or Clearstream, Luxembourg as an accountholder therein)

as the absolute owner thereof free from all encumbrances and shall not be required to obtain proof of such ownership (other than, in the case of any person for the time being so shown in the records of Euroclear or Clearstream, Luxembourg, a certificate or letter of confirmation signed on behalf of Euroclear or Clearstream, Luxembourg) or as to the identity of the bearer of any Definitive Note, Receipt, Coupon or Talon.

4 STAMP DUTIES AND TAXES

4.1 Stamp Duties     The Issuer, failing whom the Guarantor, shall pay any stamp, issue, documentary or other taxes and duties, including interest and penalties, payable in Belgium, Luxembourg, the United Kingdom and the country of each Contractual Currency in respect of the creation, issue and offering of the Notes, Certificates, Receipts, Coupons and Talons and the execution or delivery of this Trust Deed. The Issuer shall also indemnify the Trustee, the Noteholders and the Couponholders from and against all stamp, issue, documentary or other taxes paid by any of them in any jurisdiction in connection with any action properly taken by or on behalf of the Trustee or, as the case may be, the Noteholders or the Couponholders to enforce the Issuer’s or the Guarantor’s obligations under this Trust Deed or the Notes, Certificates, Receipts, Coupons or Talons.

4.2 Change of Taxing Jurisdiction     If the Issuer or the Guarantor becomes subject generally to the taxing jurisdiction of a territory or a taxing authority of or in that territory with power to tax other than or in addition to the United Kingdom or any such authority of or in such territory then the Issuer or, as the case may be, the Guarantor shall (unless the Trustee otherwise agrees) give the Trustee an undertaking satisfactory to the Trustee in terms corresponding to the terms of Condition 8 with the substitution for, or (as the case may require) the addition to, the references in that Condition to the United Kingdom of references to that other or additional territory or authority to whose taxing jurisdiction the Issuer has become so subject. In such event this Trust Deed and the Notes, Certificates, Receipts, Coupons and Talons shall be read accordingly.

5 GUARANTEE

5.1 The Guarantor hereby irrevocably and unconditionally, and notwithstanding the release of any other guarantor or any other person under the terms of any composition or arrangement with any creditors of the Issuer, guarantees to the Trustee:

(1) the due and punctual payment in accordance with the provisions of this Trust Deed of the principal of and premium (if any) and interest on the Notes and of any other amounts payable by the Issuer under this Trust Deed; and

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(2) the due and punctual performance and observance by the Issuer of each of the other provisions of this Trust Deed on the Issuer’s part to be performed or observed.

5.2 If the Issuer fails for any reason whatsoever punctually to pay any such principal, premium, interest or other amount, the Guarantor shall cause each and every such payment to be made as if the Guarantor instead of the Issuer were expressed to be the primary obligor under this Trust Deed and not merely as surety (but without affecting the nature of the Issuer’s obligations) to the intent that the holder of the relevant Note, Receipt or Coupon or the Trustee (as the case may be) shall receive the same amounts in respect of principal, premium, interest or such other amount as would have been receivable had such payments been made by the Issuer.

5.3 If any payment received by the Trustee or any Noteholder or Couponholder under the provisions of this Trust Deed shall (whether on the subsequent bankruptcy, insolvency or corporate reorganisation of the Issuer or, without limitation, on any other event) be avoided or set aside for any reason, such payment shall not be considered as discharging or diminishing the liability of the Guarantor and this guarantee shall continue to apply as if such payment had at all times remained owing by the Issuer and the Guarantor shall indemnify the Trustee and the Noteholders and/or Couponholders (as the case may be) in respect thereof PROVIDED THAT the obligations of the Issuer and/or the Guarantor under this sub-clause shall, as regards each payment made to the Trustee or any Noteholder or Couponholder which is avoided or set aside, be contingent upon such payment being reimbursed to the Issuer or other persons entitled through the Issuer.

5.4 The Guarantor hereby agrees that its obligations under this Clause shall be unconditional and that the Guarantor shall be fully liable irrespective of the validity, regularity, legality or enforceability against the Issuer of, or of any defence or counter-claim whatsoever available to the Issuer in relation to, its obligations under this Trust Deed, whether or not any action has been taken to enforce the same or any judgment obtained against the Issuer, whether or not any of the other provisions of this Trust Deed have been modified, whether or not any time, indulgence, waiver, authorisation or consent has been granted to the Issuer by or on behalf of the Noteholders or the Couponholders or the Trustee, whether or not any determination has been made by the Trustee pursuant to Clause 11.1 whether or not there have been any dealings or transactions between the Issuer, any of the Noteholders or Couponholders or the Trustee, whether or not the Issuer has been dissolved, liquidated, merged, consolidated, bankrupted or has changed its status, functions, control or ownership, whether or not the Issuer has been prevented from making payment by foreign exchange provisions applicable at its place of registration or incorporation and whether or not any other circumstances have occurred which might otherwise constitute a legal or equitable discharge of or defence to a guarantor. Accordingly the validity of this guarantee shall not be affected by reason of any invalidity, irregularity, illegality or unenforceability of all or any of the obligations of the Issuer under this Trust Deed and this guarantee shall not be discharged nor shall the liability of the Guarantor under this Trust Deed be affected by any act, thing or omission or means whatever whereby its liability would not have been discharged if it had been the principal debtor.

5.5 Without prejudice to the provisions of Clause 17 the Trustee may determine from time to time whether or not it will enforce this guarantee which it may do without making any demand of or taking any proceedings against the Issuer and may from time to time make any arrangement or compromise with the Guarantor in relation to this guarantee which the Trustee may consider expedient in the interests of the Noteholders.

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5.6 The Guarantor waives diligence, presentment, demand of payment, filing of claims with a court in the event of dissolution, liquidation, merger or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest or notice with respect to this Trust Deed or the indebtedness evidenced thereby and all demands whatsoever and covenants that this guarantee shall be a continuing guarantee, shall extend to the ultimate balance of all sums payable and obligations owed by the Issuer under this Trust Deed, shall not be discharged except by complete performance of the obligations in this Trust Deed and is additional to, and not instead of, any security or other guarantee or indemnity at any time existing in favour of any person, whether from the Guarantor or otherwise.

5.7 If any moneys shall become payable by the Guarantor under this guarantee the Guarantor shall not, so long as the same remain unpaid, without the prior written consent of the Trustee:

(i) in respect of any amounts paid by it under this guarantee, exercise any rights of subrogation or contribution or, without limitation, any other right or remedy which may accrue to it in respect of or as a result of any such payment; or

(ii) in respect of any other moneys for the time being due to the Guarantor by the Issuer, claim payment thereof or exercise any other right or remedy;

(including in either case claiming the benefit of any security or right of set-off or, on the liquidation of the Issuer, proving in competition with the Trustee). If, notwithstanding the foregoing, upon the bankruptcy, insolvency or liquidation of the Issuer, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, shall be received by the Guarantor before payment in full of all amounts payable under this Trust Deed shall have been made to the Noteholders’ the Couponholders and the Trustee, such payment or distribution shall be received by the Guarantor on trust to pay the same over immediately to the Trustee for application in or towards the payment of all sums due and unpaid under this Trust Deed in accordance with Clause 6

5.8 Until all amounts which may be or become payable by the Issuer under this Trust Deed have been irrevocably paid in full, the Trustee may:

(i) refrain from applying or enforcing any other moneys, security or rights held or received by the Trustee in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise), and the Guarantor shall not be entitled to the benefit of the same; and

(ii) hold in a suspense account any moneys received from the Guarantor or on account of the Guarantor’s liability under this guarantee, without liability to pay interest on those moneys.

6 APPLICATION OF MONEYS RECEIVED BY THE TRUSTEE

6.1 Declaration of Trust     All moneys received by the Trustee in respect of the Notes or amounts payable under this Trust Deed shall, despite any appropriation of all or part of them by the Issuer be held by the Trustee on trust to apply them (subject to Clause 6.2 (Accumulation)):

first, in payment of all costs, charges, expenses and liabilities incurred by the Trustee (including remuneration payable to it) in carrying out its functions under this Trust Deed

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secondly, in payment of any amounts owing in respect of the Notes, Receipts or Coupons pari passu and rateably and

thirdly, in payment of any balance to the Issuer for itself.

If the Trustee holds any moneys in respect of Notes, Receipts or Coupons that have become void or in respect of which claims have become prescribed, the Trustee shall hold them on these trusts.

6.2 Accumulation     If the amount of the moneys at any time available for payment in respect of the Notes under Clause 6.1 (Declaration of Trust) is less than 10 per cent of the principal amount of the Notes then outstanding, the Trustee may, at its discretion, invest such moneys. The Trustee may retain such investments and accumulate the resulting income until the investments and the accumulations, together with any other funds for the time being under its control and available for such payment, amount to at least 10 per cent of the principal amount of the Notes then outstanding and then such investments, accumulations and funds (after deduction of, or provision for, any applicable taxes) shall be applied as specified in Clause 6.1 (Declaration of Trust).

6.3 Investment     Moneys held by the Trustee may be invested in its name or under its control in any investments or other assets anywhere, whether or not they produce income, or deposited in its name or under its control at such bank or other financial institution in such currency as the Trustee may, in its absolute discretion, think fit, provided that (i) all such investments shall, at the time of investment, be rated at least A by Standard & Poor’s and/or A2 by Moody’s (in the case of long-term investments of more than one year), at least Al by Standard & Poor’s and/or P-1 by Moody’s (in the case of short-term investments of one year or less) or (ii) in the case of a deposit at a bank or other financial institution, such bank or financial institution shall, at the time of investment, be rated at least Al by Standard & Poor’s and/or P-1 by Moody’s. If that bank or institution is the Trustee or a subsidiary, holding or associated company of the Trustee, it need only account for an amount of interest equal to the largest amount of interest payable by it on such a deposit to an independent customer. The Trustee may at any time vary or transpose any such investments or assets or convert any moneys so deposited into any other currency, and shall not be responsible for any resulting loss, whether by depreciation in value, change in exchange rates or otherwise.

7 COVENANTS

So long as any Note is outstanding, each of the Issuer and the Guarantor shall:

7.1 Books of Account     keep, and use reasonable endeavours to procure that its Subsidiaries keep, proper books of account and, at any time after an Event of Default or Potential Event of Default has occurred or if the Trustee believes that such an event has occurred, so far as permitted by applicable law, allow, and procure that each such subsidiary shall allow, the Trustee and anyone appointed by it to whom the Issuer, the Guarantor and/or the relevant subsidiary (as the case may be) has no reasonable objection, access to its books of account at all times during normal business hours.

7.2 Notice of Events of Default     notify the Trustee in writing immediately on becoming aware of the occurrence of any Event of Default or Potential Event of Default.

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7.3 Information so far as permitted by applicable law, give the Trustee such information as it requires to perform its functions under this Trust Deed and the Notes.

7.4 Financial Statements etc. send to the Trustee within 14 days of the time of their issue and in the case of annual financial statements in any event within 180 days of the end of each financial year three copies in English of every balance sheet, profit and loss account, report or other notice, statement or circular issued to the members or creditors (or any class of them) of the Issuer thereof generally in their capacity as such.

7.5 Certificate send to the Trustee, within 21 days of its annual audited financial statements being made available to its members, and also within 21 days of any request by the Trustee, a certificate of each the Issuer and the Guarantor signed by one of its directors stating that, having made all relevant enquiries, to the best of the knowledge, information and belief of the Issuer and the Guarantor as at a date (the Certification Date) not more than five days before the date of the certificate, no Event of Default or Potential Event of Default had occurred since the Certification Date of the last such certificate or (if none) the date of this Trust Deed or, if such an event had occurred, giving details of it.

7.6 Notices to Noteholders send to the Trustee prior to publication the form of each notice to be given to Noteholders and, once given, four copies of each such notice, such notice to be in a form approved in writing by the Trustee (such approval, unless so expressed, not to constitute approval for the purposes of Section 21 of the Financial Services and Markets Act 2000 (“FSMA”) of Great Britain of any such notice which is a communication within the meaning of Section 21 of the FSMA).

7.7 Further Acts so far as permitted by applicable law, do such further things as may be necessary in the opinion of the Trustee to give effect to this Trust Deed.

7.8 Notice of Late Payment forthwith upon request by the Trustee give notice to the Noteholders of any unconditional payment to the Issuing and Paying Agent or the Trustee of any sum due in respect of the Notes, the Receipts or Coupons made after the due date for such payment.

7.9 Listing if the Notes are so listed, use all reasonable endeavours to maintain the listing of the Notes on the London Stock Exchange plc or any other or further stock exchange, but if it is unable to do so, having used such endeavours, or if the maintenance of such listing is agreed by the Trustee to be unduly onerous and the Trustee is satisfied that the interests of the Noteholders would not be thereby materially prejudiced, instead use all reasonable endeavours to obtain and maintain a listing of the Notes on another stock exchange approved in writing by the Trustee.

7.10 Change in Agents give at least 14 days’ prior notice in accordance with the Conditions to the Noteholders of any future appointment, resignation or removal of an Agent or of any change by an Agent of its specified office and not make any such appointment or removal without the Trustee’s written approval.

7.11 Provision of Legal Opinions procure the delivery of legal opinions addressed to the Trustee dated the date of such delivery, in form and content acceptable to the Trustee:

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(a) from Allen & Overy or such other firm of legal advisers as may be agreed between the Issuer and the Trustee as to the law of England on each update of the Programme and on the date of any amendment to this Trust Deed;

(b) from legal advisers, reasonably acceptable to the Trustee as to such law of such jurisdictions as may reasonably be requested by the Trustee, on the issue date for the Notes in the event of a proposed issue of Notes of such a nature and having such features as might lead the Trustee to conclude that it would be prudent, having regard to such nature and features, to obtain such legal opinion(s) or in the event that the Trustee considers it prudent in view of a change (or proposed change) in (or in the interpretation or application of) any applicable law, regulation or circumstance affecting the Issuer, the Guarantor, the Trustee, the Notes, the Certificates, the Receipts, the Coupons, the Talons, this Trust Deed or the Agency Agreement; and

(c) on each occasion on which a legal opinion is given to any Dealer in relation to any Notes pursuant to the Programme Agreement from the legal adviser giving such opinion.

7.12 Notes Held by the Issuer etc. send to the Trustee as soon as practicable after being so requested by the Trustee a certificate of the Issuer signed by any one of its directors stating the number of Notes held at the date of such certificate by or on behalf of the Issuer, the Guarantor or their respective Subsidiaries.

7.13 Obligations of Agents comply with and perform all its obligations under the Agency Agreement and use all reasonable endeavours to procure that the Agents comply with and perform all their respective obligations thereunder and not make any amendment or modification to the Agency Agreement without the prior written approval of the Trustee.

7.14 Accounts cause to be prepared and certified by its Auditors in respect of each financial year, accounts in such form as will comply with the requirements for the time being of the UK Listing Authority and any other relevant regulatory authority and/or Stock Exchange from time to time.

7.15 Programme Agreement not amend the Programme Agreement in any way which would affect the information available to the Trustee or the legal opinions to be provided thereunder without the prior consent of the Trustee (not to be unreasonably withheld) and provide the Trustee promptly with copies of all supplements and/or amendments to, and/or restatements of, the Programme Agreement.

7.16 Procedures Memorandum use its best endeavours to comply with the procedures and administrative arrangements set out in the Procedures Memorandum and not agree to any amendment of the Procedures Memorandum which would (in the opinion of the Trustee) adversely affect the Trustee without the prior consent of the Trustee (not to be unreasonably withheld).

7.17 Consents take any action or do any thing (including obtain or effect any necessary consent, approval, authorisation, exemption, filing licence, order, recording or registration) at any time required to be taken or done (i) to enable the Issuer or, as the case may be, the Guarantor lawfully to enter into, exercise its rights and perform and comply with its obligations under the Programme Agreement, any Subscription Agreement, the Pricing Supplement, the Trust Deed, the Agency Agreement and the Notes and to issue and distribute the Notes, (ii) to ensure that those obligations are legally binding and enforceable and (iii) to make the Programme Agreement, any Subscription Agreement, any Pricing Supplement, the Trust Deed, the Agency Agreement and the Notes admissible in evidence in the courts of the United Kingdom.

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7.18 Monitoring deliver, register and furnish to any relevant agency, authority, central bank, court, department, government, minister, official, public or statutory corporation, selfregulating organisation or stock exchange from time to time such documents, information and undertakings as may be necessary from it to comply with all laws, regulations and directives which are relevant to any Notes.

8 REMUNERATION AND INDEMNIFICATION OF THE TRUSTEE

8.1 Normal Remuneration So long as any Note is outstanding the Issuer shall pay the Trustee as remuneration for its services as Trustee such sum on such dates in each case as they may from time to time agree. Such remuneration shall accrue from day to day from the date of this Trust Deed. However, if any payment to a Noteholder or Couponholder of moneys due in respect of any Note, Receipt or Coupon is improperly withheld or refused, such remuneration shall again accrue as from the date of such withholding or refusal until payment to such Noteholder or Couponholder is duly made.

8.2 Extra Remuneration If an Event of Default or Potential Event of Default shall have occurred or if the Trustee finds it expedient or necessary or is requested by the Issuer or the Guarantor to undertake duties that they both agree to be of an exceptional nature or otherwise outside the scope of the Trustee’s normal duties under this Trust Deed, the Issuer shall pay such additional remuneration as they may agree or, failing agreement as to any of the matters in this Clause (or as to such sums referred to in Clause 8.1 (Normal Remuneration)), as determined by a merchant bank or investment bank (acting as an expert) selected by the Trustee and approved by the Issuer or, failing such approval, nominated by the President for the time being of The Law Society of England and Wales. The reasonable expenses involved in such nomination and such bank’s fee shall be paid by the Issuer. The determination of such merchant bank shall be conclusive and binding on the Issuer, the Trustee, the Noteholders and the Couponholders.

8.3 Expenses The Issuer shall also on demand by the Trustee pay or discharge all costs, charges, liabilities and expenses properly incurred by the Trustee in the preparation and execution of this Trust Deed and the performance of its functions under this Trust Deed including, but not limited to, legal and travelling expenses and any stamp, documentary or other taxes or duties paid by the Trustee in connection with any legal proceedings properly brought or contemplated by the Trustee against the Issuer or the Guarantor to enforce any provision of this Trust Deed, the Notes, the Receipts, the Coupons or the Talons. Such costs, charges, liabilities and expenses shall:

(a) in the case of payments made by the Trustee before such demand, carry interest from the date of the demand at a rate equal to the Trustee’s cost of funds on the date on which the Trustee made such payments; and

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(b) in other cases, carry interest at such rate from 30 days after the date of the demand or (where the demand specifies that payment is to be made on an earlier date) from such earlier date.

8.4 Indemnity Subject to the provisions of Clause 10 (Trustee liable for negligence), the Issuer shall indemnify the Trustee in respect of all liabilities and expenses properly incurred by it or by anyone appointed by it or to whom any of its functions may be delegated by it in the carrying out of its functions under this Trust Deed and against any loss, liability, cost, claim, action, demand or expense (including, but not limited to, all costs, charges and expenses paid or incurred by it in disputing or defending any of the foregoing) that any of them may incur or that may be made against any of them arising out of or in relation to or in connection with, its appointment or the exercise of its functions.

8.5	Continuing Effect Clauses 8.3 (Expenses) and 8.4 (Indemnity) shall continue in full force and effect as regards the Trustee even if it no longer is Trustee.
8.6	Cost Allocation The Trustee shall be entitled in its absolute discretion to determine in respect of which Series of Notes any costs, charges, liabilities and expenses incurred under this Trust Deed have been incurred or to allocate any such costs, charges, liabilities and expenses between the Notes of any two or more Series.

9 PROVISIONS SUPPLEMENTAL TO THE TRUSTEE ACTS

9.1 Advice The Trustee may act on the opinion or advice of, or information obtained from, any relevant expert and shall not be responsible to anyone for any loss howsoever caused occasioned by so acting. Any such opinion, advice or information may be sent or obtained by letter, telex or fax and the Trustee shall not be liable to anyone for acting in good faith on any opinion, advice or information purporting to be conveyed by such means even if it contains some error or is not authentic.

9.2 Trustee to Assume Performance The Trustee need not notify anyone of the execution of this Trust Deed or do anything to find out if an Event of Default or a Potential Event of Default has occurred. Until it has actual knowledge or express notice to the contrary, the Trustee may assume that no such event has occurred and that each of the Issuer and the Guarantor is performing all its obligations under this Trust Deed, the Notes, the Receipts, the Coupons and the Talons.

9.3 Resolutions of Noteholders The Trustee shall not be responsible for having acted in good faith on a resolution purporting to have been passed at a meeting of Noteholders in respect of which minutes have been made and signed even if it is later found that there was a defect in the constitution of the meeting or the passing of the resolution or that the resolution was not valid or binding on the Noteholders or Couponholders.

9.4 Certificate Signed by Directors If the Trustee, in the exercise of its functions, requires to be satisfied or to have information as to any fact or the expediency of any act, it may call for and accept as sufficient evidence of that fact or the expediency of that act a certificate signed by any one of the directors of the Issuer or by any one of the directors of the Guarantor as to that fact or to the effect that, in their opinion, that act is expedient and the Trustee need not call for further evidence and shall not be responsible for any loss occasioned by acting on such a certificate.

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9.5 Deposit of Documents The Trustee may deposit this Trust Deed and any other documents with any bank or entity whose business includes the safe custody of documents or with any lawyer or firm of lawyers believed by it to be of good repute and may pay all sums due in respect thereof.

9.6 Discretion The Trustee shall have absolute and uncontrolled discretion as to the exercise of its functions under this Trust Deed and, save as otherwise provided in this Trust Deed, shall not be responsible for any loss, liability, cost, claim, action, demand, expense or inconvenience that may result from their exercise or non-exercise.

9.7 Agents Whenever it considers it expedient in the interests of the Noteholders, the Trustee may, in the conduct of its trust business, instead of acting personally, employ and pay an agent selected by it, whether or not a lawyer or other professional person, to transact or conduct, or concur in transacting or conducting, any business and to do or concur in doing all acts required to be done by the Trustee (including the receipt and payment of money). Any such appointment shall be notified to the Issuer as soon as reasonably practicable. The Trustee shall not be responsible to anyone for any misconduct or omission by any such agent so employed by it or be bound to supervise the proceedings or acts of any such agent.

9.8 Delegation Whenever it considers it expedient in the interests of the Noteholders, the Trustee may delegate to any person on any terms (including power to sub-delegate): all or any of its functions. If the Trustee exercises reasonable care in selecting such delegate, it shall not have any obligation to supervise such delegate or be responsible for any loss, liability, cost, claim, action, demand or expense incurred by reason of any misconduct or default by any such delegate or sub-delegate. The Trustee shall, within a reasonable time of any such delegation or any renewal, extension or termination thereof, give notice thereof to the Issuer.

9.9 Forged Notes The Trustee shall not be liable to the Issuer, the Guarantor or any Noteholder or Couponholder by reason of having accepted as valid or not having rejected any Note, Certificate, Receipt, Coupon or Talon purporting to be such and later found to be forged or not authentic.

9.10 Confidentiality Unless ordered to do so by a court of competent jurisdiction, the Trustee shall not be required to disclose to any Noteholder or Couponholder any confidential financial or other information made available to the Trustee by the Issuer, the Guarantor or any other person.

9.11 Determinations Conclusive As between itself and the Noteholders and Couponholders, the Trustee may determine all questions and doubts arising in relation to any of the provisions of this Trust Deed, any Notes, Receipts or Coupons. Such determinations, whether made upon such a question actually raised or implied in the acts or proceedings of the Trustee shall be conclusive and shall bind the Trustee, the Noteholders and the Couponholders.

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9.12 Currency Conversion Where it is necessary or desirable to convert any sum from one currency to another, it shall (unless otherwise provided hereby or required by law) be converted at such rate or rates, in accordance with such method and as at such date as may reasonably be specified by the Trustee but having regard to current rates of exchange, if available. Any rate, method and date so specified shall be binding on the Issuer, the Guarantor, the Noteholders and the Couponholders. For the purpose of determining the rate of exchange for the required currency, the Trustee will, to the extent practicable in the circumstances, use such rates as are published or quoted by leading commercial banks.

9.13 Events of Default The Trustee may determine whether or not an Event of Default or Potential Event of Default is in its opinion capable of remedy and/or materially prejudicial to the interests of the Noteholders. Any such determination shall be conclusive and binding on the Issuer, the Noteholders, the Couponholders and the Trustee.

9.14 Payment for and Delivery of Notes The Trustee shall not be responsible for the receipt or application by the Issuer of the proceeds of the issue of the Notes, any exchange of Notes or the delivery of Notes to the persons entitled to them.

9.15 Legal Opinions The Trustee shall not be responsible to any person for failing to request, require or receive any legal opinion relating to any Notes or for checking or commenting upon the content of any such legal opinion.

9.16 Notes Held by the Issuer etc. In the absence of knowledge or express notice to the contrary, the Trustee may assume without enquiry (other than requesting a certificate under Clause 7.12 (Notes Held by the Issuer etc.) that no Notes are for the time being held by or on behalf of any of the Issuer, the Guarantor or any of their respective Subsidiaries.

9.17 Programme Limit The Trustee shall not be concerned, and need not enquire, as to whether or not any Notes are issued in breach of the Programme Limit.

9.18 Consent or Approval Any consent or approval given by the Trustee for the purposes of this Trust Deed may be given on such terms and subject to such conditions (if any) as the Trustee thinks fit.

9.19 Trustee not Responsible The Trustee shall not be responsible for the execution, delivery, legality, effectiveness, adequacy, genuineness, validity, enforceability or admissibility in evidence of this Trust Deed or any other document relating thereto and shall not be liable for any failure to obtain any rating of Notes (where required) any licence, consent or other authority for the execution, delivery, legality, effectiveness, adequacy, genuineness, validity, performance, enforceability or admissibility in evidence of this Trust Deed or any other document relating thereto. In addition the Trustee shall not be responsible for the effect of the exercise of any of its powers, duties and discretions hereunder.

9.20 Apportionment The Trustee may apportion amounts due to it under Clause 6.1 (Declaration of Trust) of this Trust Deed between Notes of different Series as it thinks fit.

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9.21 Merger of Trustee Subject to the requirements, if any, of any relevant Stock Exchange, any corporation into which the Trustee shall be merged or with which it shall be consolidated or any company resulting from any such merger or consolidation shall be a party hereto and shall be the Trustee under this Trust Deed without executing or filing any paper or document or any further act on the part of the parties thereto.

10 TRUSTEE LIABLE FOR NEGLIGENCE

Section 1 of the Trustee Act 2000 shall not apply to the duties of the trustee set out in this Trust Deed. However, if the Trustee fails to show the degree of care and diligence required of it as trustee having regard to the provisions of the Trust Deed conferring on it powers, duties, authorities and discretions, nothing in this Trust Deed shall relieve or indemnify it from or against any liability that would otherwise attach to it in respect of any fraud, negligence, default, breach of duty or breach of trust of which it may be guilty.

11 WAIVER AND PROOF OF DEFAULT

11.1 Waiver The Trustee may, without the consent of the Noteholders or Couponholders and without prejudice to its rights in respect of any subsequent breach, from time to time and at any time, if in its opinion the interests of the Noteholders will not be materially prejudiced thereby, waive or authorise, on such terms as seem expedient to it, any breach, continuing breach or proposed breach by the Issuer, or the Guarantor of this Trust Deed or the Conditions or determine that an Event of Default or Potential Event of Default shall not be treated as such provided that the Trustee shall not do so in contravention of an express direction given by an Extraordinary Resolution or a request made pursuant to Condition 10. No such direction or request shall affect a previous waiver, authorisation or determination. Any such waiver, authorisation or determination shall be binding on the Noteholders and the Couponholders and, if the Trustee so requires, shall be notified to the Noteholders as soon as practicable.

11.2 Proof of Default Proof that the Issuer or, as the case may be, the Guarantor has failed to pay a sum due to the holder of any one Note, Receipt or Coupon shall (unless the contrary be proved) be sufficient evidence that it has made the same default as regards all other Notes, Receipts or Coupons that are then payable.

12 TRUSTEE NOT PRECLUDED FROM ENTERING INTO CONTRACTS

The Trustee and any other person, whether or not acting for itself, may acquire, hold or dispose of any Note, Receipt, Coupon, Talon or other security (or any interest therein) of the Issuer, the Guarantor or any other person, may enter into or be interested in any contract or transaction with any such person and may act on, or as depository or agent for, any committee or body of holders of any securities of any such person in each case with the same rights as it would have had if the Trustee were not acting as Trustee and need not account for any profit.

13 MODIFICATION

The Trustee may agree without the consent of the Noteholders or Couponholders to any modification to this Trust Deed, the Notes, the Coupons or the Pricing Supplement which is in its opinion of a formal, minor or technical nature or to correct a manifest error or to comply with a mandatory provision of the laws of England. The Trustee may also so agree to any modification to this Trust Deed that is in its opinion not materially prejudicial to the interests of the Noteholders, but such power does not extend to any such modification as is mentioned in the proviso to paragraph 19 of Schedule 10 (Provisions for Meetings of Noteholders). Any such modification shall be binding upon the Noteholders and the Couponholders.

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14 APPOINTMENT, RETIREMENT AND REMOVAL OF THE TRUSTEE

14.1 Appointment The Issuer has the power to appoint new trustees but no-one may be so appointed unless previously approved by an Extraordinary Resolution. A trust corporation shall at all times be a Trustee and may be the sole Trustee. Any appointment of a new Trustee shall be notified by the Issuer to the Noteholders as soon as practicable.

14.2 Retirement and Removal Any Trustee may retire at any time on giving at least 3 months’ written notice to the Issuer without giving any reason or being responsible for any costs occasioned by such retirement and the Noteholders may by Extraordinary Resolution remove any Trustee provided that the retirement or removal of a sole trust corporation shall not be effective until a trust corporation is appointed as successor Trustee. If a sole trust corporation gives notice of retirement or an Extraordinary Resolution is passed for its removal, the Issuer shall use all reasonable endeavours to procure that another trust corporation be appointed as Trustee.

14.3 Retirement of Trustee If a sole trustee or trust corporation has given notice of retirement or has received notice of removal in accordance with 14.2 (Retirement and Removal) and a successor trustee is not duly appointed by the sixtieth day from the date of such notice, such outgoing Trustee may itself appoint as its successor any reputable and experienced professional trust corporation. Immediately following such appointment, such outgoing trustee shall give notice of such appointment to the Issuer and the Guarantor (whereupon the Issuer shall as soon as practicable thereafter notify the Noteholders) whereupon the Issuer, the Guarantor and the successor Trustee will acquire and become subject to the same rights and obligations between themselves as if they entered into a trust deed in the form mutatis mutandis of this Trust Deed.

14.4 Co-Trustee The Trustee may, despite Clause 14.1 (Appointment), by written notice to the Issuer appoint anyone to act as an additional Trustee jointly with the Trustee:

(a) if the Trustee considers the appointment to be in the interests of the Noteholders and/or the Couponholders

(b) to conform with a legal requirement, restriction or condition in a jurisdiction in which a particular act is to be performed or

(c) to obtain a judgment or to enforce a judgment or any provision of this Trust Deed in any jurisdiction.

Subject to the provisions of this Trust Deed the Trustee may confer on any person so appointed such functions as it thinks fit. The Trustee may by written notice to the Issuer and that person remove that person. At the Trustee’s request, the Issuer shall forthwith do all things as may be required to perfect such appointment or removal and each of them irrevocably appoints the Trustee as its attorney in its name and on its behalf to do so.

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14.5 Competence of a Majority of Trustees     If there are more than two Trustees the majority of them shall be competent to perform the Trustee’s functions provided the majority includes a trust corporation.

15 NOTES HELD IN CLEARING SYSTEMS AND COUPONHOLDERS

15.1 Notes Held in Clearing Systems     So long as any Global Note is, or any Notes represented by a Global Certificate are, held on behalf of a clearing system, in considering the interests of Noteholders, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders or participants with entitlements to any such Global Note or the Registered Notes and may consider such interests on the basis that such accountholders or participants were the holder(s) thereof.

15.1 Couponholders     No notices need be given to Couponholders. They shall be deemed to have notice of the contents of any notice given to Noteholders. Even if it has express notice to the contrary, in exercising any of its functions by reference to the interests of the Noteholders, the Trustee shall assume that the holder of each Note is the holder of all Receipts, Coupons and Talons relating to it.

16 CURRENCY INDEMNITY

16.1 Currency of Account and Payment     The Contractual Currency is the sole currency of account and payment for all sums payable by the Issuer and the Guarantor under or in connection with this Trust Deed, the Notes, the Receipts and the Coupons, including damages.

16.2 Extent of Discharge     An amount received or recovered in a currency other than the Contractual Currency (whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the winding-up or dissolution of the Issuer or the Guarantor or otherwise), by the Trustee or any Noteholder or Couponholder in respect of any sum expressed to be due to it from the Issuer or the Guarantor shall only discharge the Issuer or, as the case may be, the Guarantor to the extent of the Contractual Currency amount that the recipient is able to purchase with the amount so received or recovered in that other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is practicable to do so).

16.3 Indemnity     If that Contractual Currency amount is less than the Contractual Currency amount expressed to be due to the recipient under this Trust Deed, the Notes, the Receipts or the Coupons, the Issuer and the Guarantor shall pay on demand an amount in the Contractual Currency equal to the deficit, together with the costs incurred by the recipient in making any such purchase.

16.4 Indemnity Separate     The indemnities in this Clause 15 (Currency Indemnity) constitute separate and independent obligations from the other obligations in this Trust Deed, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by the Trustee and/or any Noteholder or Couponholder and shall continue in full force and effect despite any judgment, order, claim or proof for a liquidated amount in respect of any sum due under this Trust Deed, the Notes, the Receipts and/or the Coupons or any other judgment or order.

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17 ENFORCEMENT

At any time after the Notes become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer and/or the Guarantor as it may think fit to enforce the terms of this Trust Deed, but it need not take any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by holders of at least one-quarter in principal amount of the Notes outstanding and (b) it shall have been indemnified to its satisfaction. No Noteholder, Receiptholder or Couponholder may proceed directly against the Issuer and/or the Guarantor unless the Trustee, having become bound so to proceed fails to do so within a reasonable time and such failure is continuing.

18 SUBSTITUTION

(A) The Issuer and the Guarantor may at any time require the substitution in place of the Issuer (or of any previous substitute under this Clause) or the Guarantor (or of any previous substitute under this Clause) as the principal debtor or, as the case may be, guarantor under this Trust Deed, the Notes, the Receipts and the Coupons of the Issuer or its Successor in Business or any Subsidiary of the Issuer or its Successor in Business or the Guarantor or its Successor in Business or any other Subsidiary of the Guarantor or its Successor in Business (any such substitute company being hereinafter called the New Company) provided that:

(i) a trust deed is executed or some other form of undertaking is given by the New Company, in form and manner satisfactory to the Trustee, agreeing to be bound by the provisions of this Trust Deed, the Notes, the Receipts and the Coupons with any consequential amendments which the Trustee may deem appropriate as fully as if the New Company had been named in this Trust Deed, the Notes, the Receipts and the Coupons as the principal debtor in place of the Issuer (or of any previous substitute under this Clause) or, as the case may be, as guarantor in place of the Guarantor (or of any previous substitute under this Clause);

(ii) (except where the Guarantor or its Successor in Business is replacing the Issuer as principal debtor) the Guarantor or its Successor in Business unconditionally and irrevocably guarantees to the satisfaction of the Trustee all amounts payable by the New Company under this Trust Deed, the Notes, the Receipts and the Coupons;

(iii) the Trustee shall have received legal opinions in form and content satisfactory to it from independent legal advisers approved by it to the effect, inter alia, that (a) the New Company has obtained all governmental and regulatory approvals and consents necessary for its assumption of the obligations and liabilities as principal debtor or, as the case may be, as guarantor under this Trust Deed, the Notes, the Receipts and the Coupons, the holders of the Notes, Receipts, Coupons and Talons have rights against the New Company at least equivalent to the rights they have immediately prior to the substitution, such assumption is fully effective and such obligations and liabilities are legally valid and binding on, and enforceable against, the New Company; (b) except where the Guarantor or its successor in business is becoming the principal debtor, the Guarantor has obtained all governmental and regulatory approvals and consents necessary for the guarantee referred to in (ii) above to be fully effective and such guarantee is legally valid and binding on, and enforceable against, the Guarantor and (c) such approvals and consents are in full force and effect at the time of substitution;

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(iv) Standard & Poor’s Agency, a Division of the McGraw-Hill Companies and Moody’s Investors Service and any other rating agency which, at the request of the Issuer and the Guarantor, shall have assigned a credit rating to the Notes shall have confirmed in writing to the Trustee that the substitution by itself and the circumstances pertaining to the substitution will not result in a downgrading of the then current credit rating of such rating agency assigned to the Notes;

(v) where the New Company is incorporated, domiciled or resident in, or subject generally to the taxing jurisdiction of, a territory other than or in addition to the United Kingdom or any political sub-division or any authority therein or thereof having power to tax, undertakings or covenants shall be given to the Trustee by the New Company in terms corresponding to the provisions of Condition 8 with the substitution for (or, as the case may be, the addition to) the references to the United Kingdom of references to that other or additional territory in which the New Company is incorporated, domiciled or resident or to whose taxing jurisdiction it is subject this Trust Deed, the Notes, the Receipts and the Coupons shall be read and construed accordingly;

(vi) Condition 6(c) shall only apply if the change in, or amendment to, the laws of the jurisdiction of the New Company or any political sub-division or any authority thereof or therein having power to tax, or the change in the application or official interpretation of such laws or regulations referred to in such Condition becomes effective after the date of the substitution and, at the date of the substitution, no such change or amendment has been proposed; and

(vii) two Directors of the New Company (or other officers acceptable to the Trustee) shall have certified to the Trustee that the New Company is solvent at the time at which the substitution is proposed to be effected.

(B) Any such trust deed or undertaking shall, if so expressed, operate to release the Issuer or the previous substitute as aforesaid or, as the case may be, the Guarantor or the previous substitute as aforesaid from all of its obligations as principal debtor or, as the case may be, guarantor under this Trust Deed, the Notes, the Receipts and the Coupons. As soon as reasonably practicable but in any event not later than 21 days after the execution of such documents and compliance with such requirements, the New Company shall give notice thereof in a form previously approved by the Trustee to the Noteholders in the manner provided in Condition 16. Upon the execution of such documents and compliance with such requirements, the New Company shall be deemed to be named in this Trust Deed, the Notes, the Receipts and the Coupons as the principal debtor in place of the Issuer (or in place of the previous substitute under this Clause) or, as the case may be, as guarantor in place of the Guarantor (or in place of the previous substitute under this Clause) under this Trust Deed, the Notes, the Receipts and the Coupons and this Trust Deed, the Notes, the Receipts and the Coupons shall be deemed to be modified in such manner as shall be necessary to give effect to the above provisions and, without limitation, references in this Trust Deed, the Notes, the Receipts and the Coupons to the Issuer or, as the case may be, the Guarantor shall, unless the context otherwise requires, be deemed to be or include references to the New Company.

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19 COMMUNICATIONS

19.1 Method     Each communication under this Trust Deed shall be made by fax or otherwise in writing. Each communication or document to be delivered to any party under this Trust Deed shall be sent to that party at the fax number or address, and marked for the attention of the person (if any), from time to time designated by that party to each other party for the purpose of this Trust Deed. The initial telephone number, fax number, address and person so designated by the parties under this Trust Deed are set out in the Procedures Memorandum.

19.2 Deemed Receipt     Any communication from any party to any other under this Trust Deed shall be effective (if by fax) when good receipt is confirmed by the recipient following enquiry by the sender and (if in writing) when delivered, except that a communication received outside normal business hours shall be deemed to be received on the next business day in the city in which the recipient is located.

20 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

A person who is not a party to this Trust Deed has no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Trust Deed, but this does not affect any right or remedy of a third party which exists or is available apart from that Act.

21. GENERAL

21.1 Counterparts     This Deed may be executed in any number of counterparts and by the parties hereto on different counterparts, each of which when so executed and delivered shall be an original, but all the counterparts together shall constitute one and the same instrument.

21.2 Governing Law     This Trust Deed shall be governed by and construed in accordance with the laws of England.

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SCHEDULE 1

FORM OF TEMPORARY GLOBAL NOTE

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]¹

INTERCONTINENTAL HOTELS GROUP PLC

(Incorporated with limited liability in England and Wales
under the Companies Acts 1985 to 1989 with registered number 4551528)

Unconditionally and irrevocably guaranteed by

SIX CONTINENTS PLC

(Incorporated with limited liability in England and Wales
under the Companies Act 1948 with registered number 913450)

DEBT ISSUANCE PROGRAMME

TEMPORARY GLOBAL NOTE

Temporary Global Note No. [ ]

This temporary Global Note is issued in respect of the Notes (the Notes) of the Tranche and Series specified in the Second Schedule hereto of InterContinental Hotels Group PLC - (the Issuer) and guaranteed by Six Continents PLC.

Interpretation and Definitions

References in this temporary Global Note to the Conditions are to the Terms and Conditions applicable to the Notes (which are in the form set out in Schedule 6 to the Trust Deed dated 24th September, 2003 (as amended or supplemented as at the Issue Date, the Trust Deed) between the Issuer, Six Continents PLC as guarantor and HSBC Trustee (C.I.) Limited as trustee, as supplemented and/or modified and/or superseded by the provisions of this temporary Global Note (including the supplemental definitions and any modifications or additions set out in the Second Schedule hereto), which in the event of any conflict shall prevail). Other capitalised terms used in this temporary Global Note shall have the meanings given to them in the Conditions or the Trust Deed. If the Second Schedule hereto specifies that the applicable TEFRA exemption is either “C Rules” or “not applicable”, this temporary Global Note is a “C Rules Note”, otherwise this temporary Global Note is a “D Rules Note”.

1 Only for Notes with a maturity of 365 days or more.

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Aggregate Principal Amount

The aggregate principal amount from time to time of this temporary Global Note shall be an amount equal to the aggregate principal amount of the Notes as shall be shown by the latest entry in the fourth column of the First Schedule hereto, which shall be completed by or on behalf of the Issuing and Paying Agent upon (i) the issue of Notes represented hereby, (ii) the exchange of the whole or a part of this temporary Global Note for a corresponding interest in a permanent Global Note or, as the case may be, for Definitive Notes or Registered Notes, (iii) the redemption or purchase and cancellation of Notes represented hereby and/or (iv) in the case of Partly-paid Notes, the forfeiture of Notes represented hereby in accordance with the Conditions relating to such Partly-paid Notes, all as described below.

Promise to Pay

Subject as provided herein, the Issuer, for value received, promises to pay to the bearer of this temporary Global Note, upon presentation and (when no further payment is due in respect of this temporary Global Note) surrender of this temporary Global Note at the specified office of the Issuing and Paying Agent or of any other Paying Agent provided for in the Conditions, on the Maturity Date (or on such earlier date as the Redemption Amount may become repayable in accordance with the Conditions and the Trust Deed) the Redemption Amount in respect of the aggregate principal amount of Notes represented by this temporary Global Note and (unless this temporary Global Note does not bear interest) to pay interest in respect of such aggregate principal amount of Notes from the Interest Commencement Date in arrear at the rates in the amounts and on the dates for payment provided for in the Conditions together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions.

Exchange

If this temporary Global Note is an Exchangeable Bearer Note, this temporary Global Note may be exchanged in whole or from time to time in part for one or more Registered Notes in accordance with the Conditions on or after the Issue Date but before the Exchange Date referred to below by its presentation to the Issuing and Paying Agent. On or after the Exchange Date, the outstanding principal amount of this temporary Global Note may be exchanged for Definitive Notes and Registered Notes in accordance with the next paragraph.

Subject as provided in the Conditions applicable to Partly-paid Notes, on or after the first day following the expiry of 40 days after the Issue Date (the Exchange Date), this temporary Global Note may be exchanged (free of charge to the holder) in whole or (in the case of a D Rules Note only) from time to time in part by its presentation and, on exchange in full, surrender to or to the order of the Issuing and Paying Agent for interests in a permanent Global Note or, if so specified in the Second Schedule hereto, for Definitive Notes and (if this temporary Global Note is an Exchangeable Bearer Note), in each case, for Registered Notes in an aggregate principal amount equal to the principal amount of this temporary Global Note submitted for exchange provided that, in the case of any part of a D Rules Note submitted for exchange for a permanent Global Note or Definitive Notes, there shall have been Certification with respect to such principal amount submitted for such exchange dated no earlier than the Exchange Date.

Certification means the presentation to the Issuing and Paying Agent of a certificate or certificates with respect to one or more interests in this temporary Global Note, signed by Euroclear or Clearstream, Luxembourg, substantially in the form set out in Schedule 5 to the Agency Agreement to the effect that it has received a certificate or certificates substantially in the form set out in Schedule 4 to the Agency Agreement with respect thereto and that no contrary advice as to the contents thereof has been received by Euroclear or Clearstream, Luxembourg, as the case may be.

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Upon the whole or a part of this temporary Global Note being exchanged for a permanent Global Note, such permanent Global Note shall be exchangeable in accordance with its terms for Definitive Notes or Registered Notes.

The Definitive Notes or the Certificates representing the Registered Notes for which this temporary Global Note or a permanent Global Note may be exchangeable shall be duly executed and authenticated, shall, in the case of Definitive Notes, have attached to them all Coupons (and, where appropriate, Talons) in respect of interest, and all Receipts in respect of Instalment Amounts, that have not already been paid on this temporary Global Note or the permanent Global Note, as the case may be, shall be security printed or, in the case of Certificates, printed in accordance with applicable legal and stock exchange requirements and shall be substantially in the form set out in the Schedules to the Trust Deed as supplemented and/or modified and/or superseded by the terms of the Second Schedule hereto. Certificates issued upon exchange for Registered Notes shall not be Global Certificates unless the holder so requests and certifies to the Issuing and Paying Agent that it is, or is acting as a nominee for, Clearstream, Luxembourg, Euroclear and/or any other clearing system.

On any exchange of a part of this temporary Global Note for an equivalent interest in a permanent Global Note, for Definitive Notes or for Registered Notes, as the case may be, the portion of the principal amount hereof so exchanged shall be endorsed by or on behalf of the Issuing and Paying Agent in Part I of the First Schedule hereto, whereupon the principal amount hereof shall be reduced for all purposes by the amount so exchanged and endorsed.

Benefit of Conditions

Except as otherwise specified herein, this temporary Global Note is subject to the Conditions and the Trust Deed and, until the whole of this temporary Global Note is exchanged for equivalent interests in a permanent Global Note, for Definitive Notes or for Registered Notes, as the case may be, the holder of this temporary Global Note shall in all respects be entitled to the same benefits as if it were the holder of the permanent Global Note (or the relevant part of it) or the Definitive Notes, as the case may be, for which it may be exchanged as if such permanent Global Note or Definitive Notes had been issued on the Issue Date.

Payments

No person shall be entitled to receive any payment in respect of the Notes represented by this temporary Global Note that falls due on or after the Exchange Date unless, upon due presentation of this temporary Global Note for exchange, delivery of (or, in the case of a subsequent exchange, due endorsement of) a permanent Global Note or delivery of Definitive Notes or Certificates, as the case may be, is improperly withheld or refused by or on behalf of the Issuer.

Payments due in respect of a D Rules Note before the Exchange Date shall only be made in relation to such principal amount of this temporary Global Note with respect to which there shall have been Certification dated no earlier than such due date for payment.

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Any payments that are made in respect of this temporary Global Note shall be made to its holder against presentation and (if no further payment falls to be made on it) surrender of it at the specified office of the Issuing and Paying Agent or of any other Paying Agent provided for in the Conditions. If any payment in full of principal is made in respect of any Note represented by this temporary Global Note, the portion of this temporary Global Note representing such Note shall be cancelled and the amount so cancelled shall be endorsed by or on behalf of the Issuing and Paying Agent in the First Schedule hereto (such endorsement being prima facie evidence that the payment in question has been made) whereupon the principal amount hereof shall be reduced for all purposes by the amount so cancelled and endorsed. If any other payments are made in respect of the Notes represented by this temporary Global Note, a record of each such payment shall be endorsed by or on behalf of the Issuing and Paying Agent on an additional schedule hereto (such endorsement being prima facie evidence that the payment in question has been made).

Cancellation

Cancellation of any Note represented by this temporary Global Note that is required by the Conditions to be cancelled (other than upon its redemption) shall be effected by reduction in the principal amount of this temporary Global Note representing such Note on its presentation to or to the order of the Issuing and Paying Agent for endorsement in the First Schedule hereto, whereupon the principal amount hereof shall be reduced for all purposes by the amount so cancelled and endorsed.

Notices

Notices required to be given in respect of the Notes represented by this temporary Global Note may be given by their being delivered (so long as this temporary Global Note is held on behalf of Euroclear and Clearstream, Luxembourg or any other clearing system) to Euroclear, Clearstream, Luxembourg or such other clearing system, as the case may be, or otherwise to the holder of this temporary Global Note, rather than by publication as required by the Conditions.

No provision of this temporary Global Note shall alter or impair the obligation of the Issuer to pay the principal and premium of and interest on the Notes when due in accordance with the Conditions.

The Issuer and the Guarantor may deem and treat the bearer hereof as the absolute owner of this temporary Global Note for all purposes (whether or not this temporary Global Note shall be overdue and notwithstanding any notice of ownership or writing hereon or notice of any previous loss or theft or twist or other interest herein).

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this temporary Global Note, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

This temporary Global Note shall not be valid or become obligatory for any purpose until authenticated by or on behalf of the Issuing and Paying Agent.

This temporary Global Note shall be governed by and construed in accordance with English law.

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In witness whereof the Issuer has caused this temporary Global Note to be duly signed on its behalf.

Dated as of the Issue Date.

INTERCONTINENTAL HOTELS GROUP PLC

By:

CERTIFICATE OF AUTHENTICATION

This temporary Global Note is authenticated by or on behalf of the Issuing and Paying Agent without recourse, warranty or liability.

HSBC Bank plc

as Issuing and Paying Agent

By:

Authorised Signatory
For the purposes of authentication only.

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THE FIRST SCHEDULE
Principal amount of Notes represented by this temporary Global Note

The following (i) issue of Notes initially represented by this temporary Global Note, (ii) exchanges of the whole or a part of this temporary Global Note for interests in a permanent Global Note, for Definitive Notes or for Registered Notes and/or (iii) cancellations or forfeitures of interests in this temporary Global Note have been made, resulting in the principal amount of this temporary Global Note specified in the latest entry in the fourth column below:

Date	Amount of decrease in principal amount of this temporary Global Note	Reason for decrease in principal amount of this temporary Global Note (exchange, cancellation or forfeiture)	Principal amount of this temporary Global Note on issue or following such decrease	Notation made by or on behalf of the Issuing and Paying Agent
Issue Date	not applicable	not applicable

[Insert the provisions of the relevant Pricing Supplement that relate to the Conditions or the Global Notes as the Second Schedule]

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SCHEDULE 2

FORM OF PERMANENT GLOBAL NOTE

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]¹

INTERCONTINENTAL HOTELS GROUP PLC

(Incorporated with limited liability in England and Wales
under the Companies Acts 1985 to 1989 with registered number 4551528)

Unconditionally and irrevocably guaranteed by

SIX CONTINENTS PLC

(Incorporated with limited liability in England and Wales
under the Companies Act 1948 with registered number 913450)

DEBT ISSUANCE PROGRAMME

Permanent Global Note No. [ ]

This permanent Global Note is issued in respect of the Notes (the Notes) of the Tranche and Series specified in the Second Schedule hereto of InterContinental Hotels Group PLC (the Issuer) and guaranteed by Six Continents PLC.

Interpretation and Definitions

References in this permanent Global Note to the “Conditions” are to the Terms and Conditions applicable to the Notes (which are in the form set out in Schedule 6 to the Trust Deed dated 24th September, 2003 (as amended or supplemented as at the Issue Date, the Trust Deed) between the Issuer, Six Continents PLC as Guarantor and HSBC Trustee (C.I.) Limited as trustee, as supplemented and/or modified and/or superseded by the provisions of this permanent Global Note (including the supplemental definitions and any modifications or additions set out in the Third Schedule hereto), which in the event of any conflict shall prevail). Other capitalised terms used in this permanent Global Note shall have the meanings given to them in the Conditions or the Trust Deed.

Aggregate Principal Amount

The aggregate principal amount from time to time of this permanent Global Note shall be an amount equal to the aggregate principal amount of the Notes as shall be shown by the latest entry in the fourth column of the First Schedule hereto, which shall be completed by or on behalf of the Issuing and Paying Agent upon (i) the exchange of the whole or a part of the temporary Global Note initially representing the Notes for a corresponding interest herein (in the case of Notes represented by a temporary Global Note upon issue), (ii) the issue of the Notes represented hereby (in the case of Notes represented by this permanent Global Note upon issue), (iii) the exchange of the whole or, where the limited circumstances so permit, a part of this permanent Global Note for Definitive Notes or Registered Notes, (iv) the redemption or purchase and cancellation of Notes represented hereby and/or (v) in the case of Partly-paid Notes, the forfeiture of Notes represented hereby in accordance with the Conditions relating to such Partly-paid Notes, all as described below.

1 Only for Notes with a maturity of 365 days or more.

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Promise to Pay

Subject as provided herein, the Issuer, for value received, hereby promises to pay to the bearer of this permanent Global Note, upon presentation and (when no further payment is due in respect of this permanent Global Note) surrender of this permanent Global Note at the specified office of the Issuing and Paying Agent or of any other Paying Agent provided for in the Conditions, on the Maturity Date (or on such earlier date as the Redemption Amount may become repayable in accordance with the Conditions) the Redemption Amount in respect of the aggregate principal amount of Notes represented by this permanent Global Note and (unless this permanent Global Note does not bear interest) to pay interest in respect of such aggregate principal amount of Notes from the Interest Commencement Date in arrear at the rates, in the amounts and on the dates for payment provided for in the Conditions together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions.

Exchange

This permanent Global Note is exchangeable (free of charge to the holder) on or after the Exchange Date in whole but not, except as provided in the next paragraph, in part for the Definitive Notes or (if this permanent Global Note is an Exchangeable Bearer Note) Registered Notes represented by the Certificates described below:

(i) by the Issuer giving notice to the Issuing and Paying Agent and the Noteholders of its intention to effect such exchange

(ii) if the Third Schedule hereto provides that this permanent Global Note is exchangeable for Definitive Notes at the request of the holder, by such holder giving notice to the Issuing and Paying Agent of its election for such exchange

(iii) if this permanent Global Note is an Exchangeable Bearer Note, by the holder hereof giving notice to the Issuing and Paying Agent of its election to exchange the whole or a part of this permanent Global Note for Registered Notes or

(iv) otherwise, if this permanent Global Note is held on behalf of Euroclear or Clearstream, Luxembourg or any other clearing system (an Alternative Clearing System) and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so.

This permanent Global Note is exchangeable in part (provided, however, that if this permanent Global Note is held by or on behalf of Euroclear and/or Clearstream, Luxembourg, the rules of Euroclear and/or Clearstream, Luxembourg, as the case may be, so permit) (i) if this permanent Global Note is an Exchangeable Bearer Note and the part hereof submitted for exchange is to be exchanged for Registered Notes or (ii) if so provided, and in accordance with, the Conditions relating to Partly-paid Notes.

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Exchange Date means a day falling not less than 60 days, or in the case of an exchange for Registered Notes 5 days, after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Issuing and Paying Agent is located and, except in the case of exchange pursuant to (iv) above, in the cities in which Euroclear and Clearstream, Luxembourg or, if relevant, the Alternative Clearing System, are located.

Subject as provided in the Conditions applicable to Partly-paid Notes any such exchange may be effected on or after an Exchange Date by the holder of this permanent Global Note surrendering this permanent Global Note or, in the case of a partial exchange, presenting it for endorsement to or to the order of the Issuing and Paying Agent. In exchange for this permanent Global Note, or part thereof to be exchanged, the Issuer shall deliver, or procure the delivery of, duly executed and authenticated Definitive Notes and/or (if this permanent Global Note is an Exchangeable Bearer Note) Certificates in an aggregate principal amount equal to the principal amount of this permanent Global Note submitted for exchange (if appropriate, having attached to them all Coupons (and, where appropriate, Talons) in respect of interest, and all Receipts in respect of Instalment Amounts, that have not already been paid on this permanent Global Note), security printed or, in the case of Certificates, printed in accordance with any applicable legal and stock exchange requirements and substantially in the form set out in Schedule 4 and 5, respectively, to the Trust Deed as supplemented and/or modified and/or superseded by the terms of the Third Schedule hereto. Certificates issued upon exchange for Registered Notes shall not be Global Certificates unless the holder so requests and certifies to the Issuing and Paying Agent that it is, or is acting as a nominee for, Clearstream, Luxembourg, Euroclear and/or an Alternative Clearing System.

On any exchange of a part of this permanent Global Note the portion of the principal amount hereof so exchanged shall be endorsed by or on behalf of the Issuing and Paying Agent in the First Schedule hereto, whereupon the principal amount hereof shall be reduced for all purposes by the amount so exchanged and endorsed.

Benefit of Conditions

Except as otherwise specified herein, this permanent Global Note is subject to the Conditions and the Trust Deed and, until the whole of this permanent Global Note is exchanged for Definitive Notes or Registered Notes, the holder of this permanent Global Note shall in all respects be entitled to the same benefits as if it were the holder of the Definitive Notes for which it may be exchanged and as if such Definitive Notes had been issued on the Issue Date.

Payments

No person shall be entitled to receive any payment in respect of the Notes represented by this permanent Global Note that falls due after an Exchange Date for such Notes, unless upon due presentation of this permanent Global Note for exchange, delivery of Definitive Notes or Certificates is improperly withheld or refused by or on behalf of the Issuer or the Issuer does not perform or comply with any one or more of what are expressed to be its obligations under any Definitive Notes, nor shall any person be entitled to payment within the United States, but without prejudice to the provisions of Condition 6(c).

33

Payments in respect of this permanent Global Note shall be made to its holder against presentation and (if no further payment falls to be made on it) surrender of it at the specified office of the Issuing and Paying Agent or of any other Paying Agent provided for in the Conditions. A record of each such payment shall be endorsed on the First or Second Schedule hereto, as appropriate, by the Issuing and Paying Agent or by the relevant Paying Agent, for and on behalf of the Issuing and Paying Agent, which endorsement shall (until the contrary is proved) be prima facie evidence that the payment in question has been made.

Prescription

Claims in respect of principal and interest (as each is defined in the Conditions) in respect of this permanent Global Note shall become void unless it is presented for payment within a period of 10 years (in the case of principal) and 5 years (in the case of interest) from the appropriate Relevant Date.

Meetings

The holder of this permanent Global Note shall (unless this permanent Global Note represents only one Note) be treated as two persons for the purposes of any quorum requirements of a meeting of Noteholders and, at any such meeting, as having one vote in respect of each principal amount of Notes equal to the minimum Denomination of the Notes for which this permanent Global Note may be exchanged.

Cancellation

Cancellation of any Note represented by this permanent Global Note that is required by the Conditions to be cancelled (other than upon its redemption) shall be effected by reduction in the principal amount of this permanent Global Note representing such Note on its presentation to or to the order of the Issuing and Paying Agent for endorsement in the First. Schedule hereto, whereupon the principal amount hereof shall be reduced for all purposes by the amount so cancelled and endorsed.

Purchase

Notes may only be purchased by the Issuer or any of its Subsidiaries if they are purchased together with the right to receive all future payments of interest and Instalment Amounts (if any) thereon.

Issuer’s Options

Any option of the Issuer provided for in the Conditions shall be exercised by the Issuer giving notice to the Noteholders within the time limits set out in and containing the information required by the Conditions, except that the notice shall not be required to contain the serial numbers of Notes drawn in the case of a partial exercise of an option and accordingly no drawing of Notes shall be required.

Noteholders’ Options

Any option of the Noteholders provided for in the Conditions may be exercised by the holder of this permanent Global Note giving notice to the Issuing and Paying Agent within the time limits relating to the deposit of Notes with a Paying Agent set out in the Conditions substantially in the form of the notice available from any Paying Agent, except that the notice shall not be required to contain the certificate numbers of the Notes in respect of which the option has been exercised, and stating the principal amount of Notes in respect of which the option is exercised and at the same time presenting this permanent Global Note to the Issuing and Paying Agent, or to a Paying Agent acting on behalf of the Issuing and Paying Agent for notation accordingly in the Fourth Schedule hereto.

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Notices

Notices required to be given in respect of the Notes represented by this permanent Global Note may be given by their being delivered (so long as this permanent Global Note is held on behalf of Euroclear, Clearstream, Luxembourg or any other clearing system) to Euroclear, Clearstream, Luxembourg or such other clearing system, as the case may be, or otherwise to the holder of this permanent Global Note, rather than by publication as required by the Conditions.

Negotiability

This permanent Global Note is a bearer document and negotiable and accordingly:

is freely transferable by delivery and such transfer shall operate to confer upon the transferee all rights and benefits appertaining hereto and to bind the transferee with all obligations appertaining hereto pursuant to the Conditions

the holder of this permanent Global Note is and shall be absolutely entitled as against all previous holders to receive all amounts by way of Redemption Amount, interest or otherwise payable in respect of this permanent Global Note and the Issuer has waived against such holder and any previous holder of this permanent Global Note all rights of set-off or counterclaim that would or might otherwise be available to it in respect of the obligations evidenced by this Global Note and

payment upon due presentation of this permanent Global Note as provided herein shall operate as a good discharge against such holder and all previous holders of this permanent Global Note.

Trustee’s Powers

In considering the interests of Noteholders while this permanent Global Note is held on behalf of a clearing system, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders or participants with entitlements to this permanent Global Note and may consider such interests as if such accountholders or participants were the holder(s) of the Notes represented by this permanent Global Note.

No provisions of this permanent Global Note shall alter or impair the obligation of the Issuer to pay the principal and premium of and interest on the Notes when due in accordance with the Conditions.

The Issuer and the Guarantor may deem and treat the bearer hereof as the absolute owner of this permanent Global Note for all purposes (whether or not this permanent Global Note shall be overdue and notwithstanding any notice of ownership or writing hereon or notice of any previous loss or theft or trust or other interest herein).

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No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this permanent Global Note, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

This permanent Global Note shall not be valid or become obligatory for any purpose until authenticated by or on behalf of the Issuing and Paying Agent.

This permanent Global Note shall be governed by and construed in accordance with English law.

In witness whereof the Issuer has caused this permanent Global Note to be duly signed on its behalf.

Dated as of the Issue Date.

INTERCONTINENTAL HOTELS GROUP PLC

By:

CERTIFICATE OF AUTHENTICATION

This permanent Global Note is authenticated
by or on behalf of the Issuing and Paying Agent
without recourse, warranty and liability.

HSBC Bank plc
as Issuing and Paying Agent

By:

Authorised Signatory
For the purposes of authentication only.

36

THE FIRST SCHEDULE
Principal amount of Notes represented by this permanent Global Note

The following (i) issues of Notes initially represented by this permanent Global Note, (ii) exchanges of interests in a temporary Global Note for interests in this permanent Global Note, (iii) exchanges of the whole or a part of this permanent Global Note for Definitive Notes or for Registered Notes, (iv) cancellations or forfeitures of interests in this permanent Global Note and or (v) payments of Redemption Amount in respect of this permanent Global Note have been made, resulting in the principal amount of this permanent Global Note specified in the latest entry in the fourth column:

Date Amount of
increase/decrease
in principal
amount of this
permanent Global
Note Reason for
increase/decrease
in principal
amount of this
permanent Global
Note (initial issue,
exchange,
cancellation,
forfeiture or
payment, stating
amount of
payment made) Principal amount
of this
permanent
Global Note
following such
increase/decrease Notation made
by or on behalf
of the Issuing
and Paying Agent

37

THE SECOND SCHEDULE
Payments of Interest

The following payments of interest or Interest Amount in respect of this Permanent Global Note have been made:

Due date of payment Date of payment Amount of interest Notation made by or on behalf of the Issuing and Paying Agent

[Insert the provisions of the relevant Pricing Supplement that relate to the Conditions or the Global Notes as the Third Schedule.]

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THE FOURTH SCHEDULE
Exercise of Noteholders’ Option

The following exercises of the option of the Noteholders provided for in the Conditions have been made in respect of the stated principal amount of this permanent Global Note:

	Principal amount of
	this permanent Global	Date of which	Notation made by or on
Date of	Note in respect of	exercise of such	behalf of the Issuing and
exercise	which exercise is made	option is effective	Paying Agent

39

SCHEDULE 3

FORM OF GLOBAL CERTIFICATE

INTERCONTINENTAL HOTELS GROUP PLC

(Incorporated with limited liability in England and Wales
under the Companies Acts 1985 to 1989 with registered number 4551528)

Unconditionally and irrevocably guaranteed by

SIX CONTINENTS PLC

(Incorporated with limited liability in England and Wales
under the Companies Act 1948 with registered number 913450)

DEBT ISSUANCE PROGRAMME

GLOBAL CERTIFICATE

Global Certificate No. [ ]

Registered Holder:

Address of Registered Holder:

Principal amount of Notes represented by this Global Certificate:

This Global Certificate is issued in respect of the principal amount specified above of the Notes (the Notes) of the Tranche and Series specified in the Schedule hereto of InterContinental Hotels Group PLC (the Issuer) and guaranteed by Six Continents PLC. This Global Certificate certifies that the Registered Holder (as defined above) is registered as the holder of such principal amount of the Notes at the date hereof.

Interpretation and Definitions

References in this Global Certificate to the “Conditions” are to the Terms and Conditions applicable to the Notes (which are in the form set out in Schedule 6 to the Trust Deed dated 24th September, 2003 (as amended or supplemented as at the Issue Date, the Trust Deed) between the Issuer, Six Continents PLC as guarantor and HSBC Trustee (C.I.) Limited as trustee, as supplemented and/or modified and/or superseded by the provisions of this Global Certificate (including the supplemental definitions and any modifications or additions set out in the Schedule hereto), which in the event of any conflict shall prevail). Other capitalised terms used in this Global Certificate shall have the meanings given to them in the Conditions or the Trust Deed.

Promise to Pay

The Issuer, for value received, promises to pay to the holder of the Notes represented by this Global Certificate upon presentation and (when no further payment is due in respect of the Notes represented by this Global Certificate) surrender of this Global Certificate on the Maturity Date (or on such earlier date as the Redemption Amount may become repayable in accordance with the Conditions) the Redemption Amount in respect of the Notes represented by this Global Certificate and (unless the Notes represented by this Certificate do not bear interest) to pay interest in respect of such Notes from the Interest Commencement Date in arrear at the rates, in the amounts and on the dates for payment provided for in the Conditions together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions.

40

For the purposes of this Global Certificate, (a) the holder of the Notes represented by this Global Certificate is bound by the provisions of the Agency Agreement, (b) the Issuer certifies that the Registered Holder is, at the date hereof, entered in the Register as the holder of the Notes represented by this Global Certificate, (c) this Global Certificate is evidence of entitlement only, (d) title to the Notes represented by this Global Certificate passes only on due registration on the Register, and (e) only the holder of the Notes represented by this Global Certificate is entitled to payments in respect of the Notes represented by this Global Certificate.

Transfer of Notes represented by permanent Global Certificates

If the Schedule hereto states that the Notes are to be represented by a permanent Global Certificate on issue, transfers of the holding of Notes represented by this Global Certificate pursuant to Condition 2(b) may only be made in part:

(i) if the Notes represented by this Global Certificate are held on behalf of Euroclear or Clearstream, Luxembourg or any other clearing system (an Alternative Clearing System) and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so; or

(ii) with the consent of the Issuer

provided that, in the case of the first transfer of part of a holding pursuant to (i) above, the holder of the Notes represented by this Global Certificate has given the Registrar not less than 30 days’ notice at its specified office of such holder’s intention to effect such transfer. Where the holding of Notes represented by this Global Certificate is only transferable in its entirety, the Certificate issued to the transferee upon transfer of such holding shall be a Global Certificate. Where transfers are permitted in part, Certificates issued to transferees shall not be Global Certificates unless the transferee so requests and certifies to the Registrar that it is, or is acting as a nominee for, Clearstream, Luxembourg, Euroclear and/or an Alternative Clearing System.

Meetings

The holder of the Notes represented by this Global Certificate shall (unless this Global Certificate represents only one Note) be treated as two persons for the purposes of any quorum requirements of a meeting of Noteholders.

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Global Certificate, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

41

This Global Certificate shall not become valid for any purpose until authenticated by or on behalf of the Registrar.

In witness whereof the Issuer has caused this Global Certificate to be signed on its behalf.

Dated as of the Issue Date.

INTERCONTINENTAL HOTELS GROUP PLC

By:

CERTIFICATE OF AUTHENTICATION

This Global Certificate is authenticated
by or on behalf of the Registrar
without recourse, warranty or liability.

HSBC Bank plc
as Issuing and Paying Agent

By:

Authorised Signatory
For the purposes of authentication only.

42

Form of Transfer

For value received the undersigned transfers to

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE)

[               ] principal amount of the Notes represented by this Global Certificate, and all rights under them.

Date
Signed1	Certifying Signature

[Insert the provisions of the relevant Pricing Supplement that relate to the Conditions or the Global Certificate as the Schedule.]

1 The signature of the person effecting a transfer shall conform to a list of duly authorised specimen signatures supplied by the holder of the Notes represented by this Global Certificate or (if such signature corresponds with the name as it appears on the face of this Global Certificate) be certified by a notary public or a recognised bank or be supported by such other evidence as a Transfer Agent or the Registrar may reasonably require. A representative of the Noteholder should state the capacity in which he signs e.g. executor.

43

SCHEDULE 4

FORM OF BEARER NOTE

On the front:

[Denomination] [ISIN] [Series] [Certif. No.]

[Currency end denomination]

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]¹

INTERCONTINENTAL HOTELS GROUP PLC

(Incorporated with limited liability in England and Wales
under the Companies Acts 1985 to 1989 with registered number 4551528)

Unconditionally and irrevocably guaranteed by

SIX CONTINENTS PLC

(Incorporated with limited liability in England and Wales
under the Companies Act 1948 with registered number 913450)

DEBT ISSUANCE PROGRAMME

Series No. [     ]

[Title of Issue]

This Note forms one of the Series of Notes referred to above (the Notes) of InterContinental Hotels Group PLC (the Issuer) designated as specified in the title hereof and guaranteed by Six Continents PLC. The Notes are subject to the Terms and Conditions (the Conditions) endorsed hereon and are issued subject to, and with the benefit of, the Trust Deed referred to in the Conditions. Expressions defined in the Conditions have the same meanings in this Note.

The Issuer for value received promises to pay to the bearer of this Note, on presentation and (when no further payment is due in respect of this Note) surrender of this Note on the Maturity Date (or on such earlier date as the Redemption Amount may become repayable in accordance with the Conditions) the Redemption Amount and (unless this Note does not bear interest) to pay interest from the Interest Commencement Date in arrear at the rates, in the amounts and on the dates for payment provided for in the Conditions together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions.

1 Only for Notes with a maturity of 365 days or more.

44

This Note shall not become valid or obligatory for any purpose until authenticated by or on behalf of the Issuing and Paying Agent.

In witness whereof the Issuer has caused this Note to be signed on its behalf.

Dated as of the Issue Date.

INTERCONTINENTAL HOTELS GROUP PLC

By:

CERTIFICATE OF AUTHENTICATION

This Note is authenticated
by or on behalf of the Issuing and Paying Agent
without recourse, warranty or liability.

HSBC Bank plc
as Issuing and Paying Agent

By:

Authorised Signatory
For the purposes of authentication only.

45

On the back:

Terms and Conditions of the Notes

[The Terms and Conditions that are set out in Schedule 6 to the Trust Deed as amended by and incorporating any additional provisions forming part of such Terms and Conditions and set out in the relevant Pricing Supplement shall be set out here.]

ISSUING AND PAYING AGENT

HSBC Bank plc
Mariner House
Pepys Street
London EC3N 4DA

PAYING AGENT

HSBC Republic Bank (Jersey) Limited
1 Grenville Street
St. Helier
Jersey JE4 9PF

46

SCHEDULE 5

FORM OF CERTIFICATE

On the front:

INTERCONTINENTAL HOTELS GROUP PLC

(Incorporated with limited liability in England and Wales
under the Companies Acts 1985 to 1989 with registered number 4551528)

Unconditionally and irrevocably guaranteed by

SIX CONTINENTS PLC

(Incorporated with limited liability in England and Wales
under the Companies Act 1948 with registered number 913450)

DEBT ISSUANCE PROGRAMME

Series No. [ ]

[Title of issue]

This Certificate certifies that [ ] of [ ] (the Registered Holder) is, as at the date hereof, registered as the holder of [principal amount] of Notes of the Series of Notes referred to above (the Notes) of InterContinental Hotels Group PLC, designated as specified in the title hereof and guaranteed by Six Continents PLC. The Notes are subject to the Terms and Conditions (the Conditions) endorsed hereon and are issued subject to, and with the benefit of, the Trust Deed referred to in the Conditions. Expressions defined in the Conditions have the same meanings in this Certificate.

The Issuer, for value received, promises to pay to the holder of the Notes represented by this Certificate upon presentation and (when no further payment is due in respect of the Notes represented by this Certificate) surrender of this Certificate on the Maturity Date (or on such earlier date as the Redemption Amount may become repayable in accordance with the Conditions) the Redemption Amount in respect of the Notes represented by this Certificate and (unless the Notes represented by this Certificate do not bear interest) to pay interest in respect of such Notes from the Interest Commencement Date in arrear at the rates, in the amounts and on the dates for payment provided for in the Conditions together with such other sums and additional amounts (if any) as may be payable under the Conditions, in accordance with the Conditions.

For the purposes of this Certificate, (a) the holder of the Note(s) represented by this Certificate is bound by the provisions of the Agency Agreement, (b) the Issuer certifies that the Registered Holder is, at the date hereof, entered in the Register as the holder of the Note(s) represented by this Certificate, (c) this Certificate is evidence of entitlement only, (d) title to the Note(s) represented by this Certificate passes only on due registration on the Register, and (e) only the holder of the Note(s) represented by this Certificate is entitled to payments in respect of the Note(s) represented by this Certificate.

This Certificate shall not become valid for any purpose until authenticated by or on behalf of the Registrar.

47

In witness whereof the Issuer has caused this Certificate to be signed on its behalf.

Dated as of the Issue Date.

INTERCONTINENTAL HOTELS GROUP PLC

By:

CERTIFICATE OF AUTHENTICATION

This Certificate is authenticated
by or on behalf of the Registrar
without recourse, warranty or liability.

HSBC Bank plc
as Issuing and Paying Agent

By:

Authorised Signatory
For the purposes of authentication only.

48

On the back:

Terms and Conditions of the Notes

[The Terms and Conditions that are set out in Schedule 6 to the Trust Deed as amended by and incorporating any additional provisions forming part of such Terms and Conditions and set out in the relevant Pricing Supplement shall be set out here.]

Form of Transfer

For value received the undersigned transfers to

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE)

[ ] principal amount of the Notes represented by this Certificate, and all rights under them.

Date
Signed1	Certifying Signature

1 The signature of the person effecting a transfer shall conform to a list of duly authorised specimen signatures supplied by the holder of the Notes represented by this Certificate or (if such signature corresponds with the name as it appears on the face of this Certificate) be certified by a notary public or a recognised bank or be supported by such other evidence as a Transfer Agent or the Registrar may reasonably require. A representative of the Noteholder should state the capacity in which he signs.

49

ISSUING AND PAYING AGENT AND TRANSFER AGENT

HSBC Bank plc
Mariner House
Pepys Street
London EC3N 4DA

REGISTRAR, PAYING AGENT AND TRANSFER AGENT

HSBC Republic Bank (Jersey) Limited
1 Grenville Street
St. Helier
Jersey JE4 9PF

50

SCHEDULE 6

TERMS AND CONDITIONS OF THE NOTES

The Notes are constituted by a Trust Deed (as further amended or supplemented as at the date of issue of the Notes (the “Issue Date”), the “Trust Deed”) dated 24th September 2003 between InterContinental Hotels Group PLC (the “Issuer”), Six Continents PLC (the “Guarantor”) and HSBC Trustee (C.I.) Limited (the “Trustee”, which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the Noteholders (as defined below). These terms and conditions (the “Conditions”) include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Bearer Notes, Certificates, Receipts, Coupons and Talons referred to below. An Agency Agreement (as further amended or supplemented as at the Issue Date, the “Agency Agreement”) dated 24th September 2003 has been entered into in relation to the Notes between the Issuer, the Guarantor, the Trustee, HSBC Bank plc as initial issuing and paying agent and the other agents named in it. The issuing and paying agent, the paying agents, the registrar, the transfer agents and the calculation agent(s) for the time being (if any) are referred to below, respectively, as the “Issuing and Paying Agent”, the “Paying Agents” (which expression shall include the Issuing and Paying Agent), the “Registrar”, the “Transfer Agents” (which expression shall include the Registrar) and the “Calculation Agent(s)”. Copies of the Trust Deed and the Agency Agreement and, in respect of listed Notes, the relevant Pricing Supplement, are available for inspection during usual business hours at the specified offices of the Paying Agents and the Transfer Agents.

The Noteholders, the holders of the interest coupons (the “Coupons”) appertaining to interest bearing Notes in bearer form and, where applicable in the case of such Notes, talons for further Coupons (the “Talons”) (the “Couponholders”) and the holders (the “Receiptholders”) of the receipts for the payment of instalments of principal (the “Receipts”) relating to Notes in bearer form of which the principal is payable in instalments are entitled to the benefit of, are bound by, and are deemed to have notice of, all of the provisions of the Trust Deed and the relevant Pricing Supplement and are deemed to have notice of those provisions applicable to them of the Agency Agreement.

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of the Notes, but this does not affect any right of any person which exists or is available apart from that Act.

1. Form, Denomination and Title

The Notes are issued in bearer form (“Bearer Notes”, which expression includes Notes that are specified to be Exchangeable Bearer Notes), in registered form (“Registered Notes”) or in bearer form exchangeable for Registered Notes (“Exchangeable Bearer Notes”) in each case in the Denomination(s) specified in the Pricing Supplement.

All Registered Notes shall have the same Denomination. Where Exchangeable Bearer Notes are issued, the Registered Notes for which they are exchangeable shall have the same Denomination as the lowest denomination of Exchangeable Bearer Notes.

Bearer Notes are serially numbered and are issued with Coupons (and, where appropriate, a Talon) attached, save in the case of Notes that do not bear interest in which case references to interest (other than in relation to interest due after the Maturity Date), Coupons and Talons in these Conditions are not applicable. Any Bearer Note the principal amount of which is redeemable in instalments is issued with one or more Receipts attached.

Registered Notes are represented by registered certificates (“Certificates”) and, save as provided in Condition 2(c), each Certificate shall represent the entire holding of Registered Notes by the same holder.

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Title to the Bearer Notes and the Receipts, Coupons and Talons shall pass by delivery outside the United States. Title to the Registered Notes shall, subject to mandatory rules of law, pass by registration in the register that the Issuer shall procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement (the “Register”). Except as ordered by a court of competent jurisdiction or as-required by law, the holder (as defined below) of any Certificate, Note, Receipt, Coupon or Talon shall be deemed to be and may be treated as its absolute owner for all purposes, whether or not it is overdue and regardless of any notice of ownership, trust or interest in it, any writing on it (or on the Certificate representing it) or its theft or loss (or that of the related Certificate) and no person shall be liable for so treating the holder.

In these Conditions, “Noteholder” means the bearer of any Bearer Note and the Receipts relating to it or the person in whose name a Registered Note is registered (as the case may be), “holder” (in relation to a Note, Receipt, Coupon or Talon) means the bearer of any Bearer Note, Receipt, Coupon or Talon or the person in whose name a Registered Note is registered (as the case may be) and capitalised terms have the meanings given to them in the Pricing Supplement, the absence of any such meaning indicating that such term is not applicable to the Notes.

2.	Exchange of Exchangeable Bearer Notes and Transfers of Registered Notes
(a)	Exchange of Exchangeable Bearer Notes

Subject as provided in Condition 2(f), Exchangeable Bearer Notes may be exchanged for the same aggregate principal amount of Registered Notes at the request in writing of the relevant Noteholder and upon surrender of each Exchangeable Bearer Note to be exchanged, together with all unmatured Receipts, Coupons and Talons relating to it, at the specified office of any Transfer Agent; provided, however, that where an Exchangeable Bearer Note is surrendered for exchange after the Record Date (as defined in Condition 7(b)) for any payment of interest, the Coupon in respect of that payment of interest need not be surrendered with it. Registered Notes may not be exchanged for Bearer Notes. Bearer Notes of one Denomination may not be exchanged for Bearer Notes of another Denomination. Bearer Notes that are not Exchangeable Bearer Notes may not be exchanged for Registered Notes.

(b) Transfer of Registered Notes

One or more Registered Notes may be transferred upon the surrender (at the specified office of the Registrar or any Transfer Agent) of the Certificate representing such Registered Notes to be transferred, together with the form of transfer endorsed on such Certificate duly completed and executed and any other evidence as the Registrar or Transfer Agent may reasonably require. In the case of a transfer of part only of a holding of Registered Notes represented by one Certificate, a new Certificate shalI be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor.

(c) Exercise of Options or Partial Redemption in Respect of Registered Notes

In the case of an exercise of an Issuer’s or Noteholders’ option in respect of, or a partial redemption of, a holding _.of Registered Notes represented by a single Certificate, a new Certificate shall be issued to the holder to reflect the exercise of such option or in respect of the balance of the holding not redeemed. In the case of a partial exercise of an option resulting in Registered Notes of the same holding having different terms, separate Certificates shall be issued in respect of those Notes of that holding that have the same terms. New Certificates shall only be issued against surrender of the existing Certificates to the Registrar or any Transfer Agent. In the case of a transfer of Registered Notes to a person who is already a holder of Registered Notes, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding.

(d) Delivery of New Certificates

Each new Certificate to be issued pursuant to Conditions 2(a), (b) or (c) shall be available for delivery five business days after receipt of the request for exchange, form of transfer or Exercise Notice (as defined in Condition 6(e)) or surrender of the Certificate for exchange. Delivery of the new Certificate(s) shall be made at the specified office of the Transfer Agent or of the Registrar (as the case may be) to whom delivery or surrender of such request for exchange, form of transfer, Exercise Notice or Certificate shall have been made or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant request for exchange, form of transfer, Exercise Notice or otherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate to such address as may be so specified, unless such holder requests otherwise and pays in advance to the relevant Agent (as defined in the Agency Agreement) the costs of such other method of delivery and/or such insurance as it may specify. In this Condition 2(d), “business day” means a day, other than a Saturday or Sunday, on which banks are open for business in the place of the specified office of the relevant Transfer Agent or the Registrar (as the case may be).

(e) Exchange Free of Charge

Exchange and transfer of Notes and Certificates on registration, transfer, partial redemption or exercise of an option shall be effected without charge by or on behalf of the Issuer, the Registrar or the Transfer Agents, but upon payment of any tax, duty or other governmental charges that may be imposed in relation to it (or the giving of such indemnity as the Registrar or the relevant Transfer Agent may reasonably require).

(f) Closed Period

No Noteholder may require the transfer of a Registered Note to be registered or an Exchangeable Bearer Note to be exchanged for one or more Registered Note(s) (i) during the period of 15 days ending on the due date for redemption of, or payment of any Instalment Amount in respect of, that Note, (ii) during the period of 15 days before any date on which Notes may be called for redemption by the Issuer at its option pursuant to Condition 6(d), (iii) after any such Note has been called for redemption or (iv) during the period of seven days ending on (and including) any Record Date. An Exchangeable Bearer Note called for redemption may, however, be exchanged for one or more Registered Note(s) in respect of which the Certificate is simultaneously surrendered not later than the relevant Record Date.

3. Guarantee and Status

(a) Guarantee

The Guarantor has unconditionally and irrevocably guaranteed the due payment of all sums expressed to be payable by the Issuer under the Trust Deed, the Notes, and the relevant Receipts and Coupons. Its obligations in that respect (the “Guarantee”) are contained in the Trust Deed.

(b) Status of the Notes and Guarantee

The Notes and the Receipts and Coupons constitute (subject to Condition 4) unsecured and unsubordinated obligations of the Issuer and shall at all times rank parri passu and without any preference among themselves. The payment obligations of the Issuer under the Notes and the Receipts and Coupons and of the Guarantor under the Guarantee shall, save for such exceptions as may be provided by applicable laws, at all times rank at least equally with all other unsecured and unsubordinated indebtedness of the Issuer and the Guarantor, respectively, present and future.

4. Negative Pledge

So long as any of the Notes, Receipts or Coupons remains outstanding (as defined in the Trust Deed), neither the Issuer nor the Guarantor shall create or permit to subsist any Security upon the whole or any part of its undertaking, assets or revenues present or future to secure any Relevant Debt, or any guarantee of or indemnity in respect of any Relevant Debt unless, at the same time or prior thereto, the Issuer’s obligations under the Trust Deed and such Notes, Receipts or Coupons or, as the case may be, the Guarantor’s obligations under the Guarantee (A) are secured equally and rateably therewith to the satisfaction of the Trustee or (B) have the benefit of such other security, guarantee, indemnity or other arrangement as the Trustee in its absolute discretion shall deem to be not materially less beneficial to the Noteholders or as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders.

For the purposes of these Conditions:

“Group” means the Issuer and its Subsidiaries for the time being;

“Project Finance Indebtedness” means Relevant Debt (in respect of which Security has been given) incurred by a member of the Group (a “Project Group Member”) for the purposes of financing the acquisition, construction, development and/or operation of an asset (a “Project Asset”) where the provider of the Relevant Debt has no recourse against any member of the Group, except for recourse to:

(a) the Project Asset of the Project Group Member or receivables arising from the Project Asset;

(b) a Project Group Member for the purpose of enforcing Security given by it so long as:

(i) the recourse is limited to recoveries in respect of the Project Asset; and

(ii) if the Project Asset does not comprise all or substantially all of the business of that Project Group Member, the provider of the Relevant Debt does not have the right to take any steps towards its winding up or dissolution or the appointment of a liquidator, administrator, receiver or similar officer or person, other than in respect of the Project Asset or receivables arising therefrom; or

(c) a member of the Group to the extent only of its shareholding in a Project Group Member.

“Relevant Debt” means any present or future indebtedness in the form of, or represented by, bonds, notes, debentures, loan stock or other securities that are for the time being, with the agreement of the person issuing the same, quoted, listed or ordinarily dealt in on any stock exchange, automated trading system, over-the-counter or other securities market but excluding Project Finance Indebtedness; and

“Security” means any mortgage, charge, pledge, lien or other form of encumbrance or security interest.

5. Interest and other Calculations

(a) Interest Rate and Accrual

Each Note bears interest on its outstanding principal amount from, and including, the Interest Commencement Date at the rate per annum (expressed as a percentage) equal to the Interest Rate, such interest being payable in arrear on each interest Payment Date.

Interest shall cease to accrue on each Note on, but excluding, the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused, in which event interest shall continue to accrue (as well after as before judgment) at the Interest Rate in the manner provided in this Condition 5 to the Relevant Date (as defined in Condition 8).

(b) Business Day Convention

If any date referred to in these Conditions that is specified to be subject to adjustment in accordance with a Business Day Convention would otherwise fall on a day that is not a Business Day, then, if the Business Day Convention specified is (i) the Floating Rate Business Day Convention, such date shall be postponed to the next day that is a Business Day unless it would thereby fall into the next calendar month, in which event (x) such date shall be brought forward to the immediately preceding Business Day and (y) each subsequent such date shall be the last Business Day of the month in which such date would have fallen had it not been subject to adjustment, (ii) the Following Business Day Convention, such date shall be postponed to the next day that is a Business Day, (iii) the Modified Following Business Day Convention, such date shall be postponed to the next day that is a Business Day unless it would thereby fall into the next calendar month, in which event such date shall be brought forward to the immediately preceding Business Day or (iv) the Preceding Business Day Convention, such date shall be brought forward to the immediately preceding Business Day.

(c) Interest Rate on Floating Rate Notes

If the Interest Rate is specified as being Floating Rate, the Interest Rate for each Interest Accrual Period shall be determined by the Calculation Agent at or about the Relevant Time on the Interest Determination Date in respect of such Interest Accrual Period in accordance with the following:

(i) if the Primary Source for the Floating Rate is a Page, subject as provided below, the Interest Rate shall be:

(x) the Relevant Rate (where such Relevant Rate on such Page is a composite quotation or is customarily supplied by one entity); or

(y) the arithmetic mean of the Relevant Rates of the persons whose Relevant Rates appear on that Page, in each case appearing on such Page at the Relevant Time on the Interest Determination Date;

(ii) if the Page specified in the relevant Pricing Supplement as a Primary Source permanently ceases to quote the Relevant Rate(s) but such quotation(s) is/are available from another page, section or other part of such information service selected by the Calculation Agent (the “Replacement Page”), the Replacement Page shall be substituted as the Primary Source for Interest Rate quotations and if no Replacement Page exists but such quotation(s) is/are available from a page, section or other part of a different information service selected by the Calculation Agent and approved by the Issuer (the “Secondary Replacement Page”), the Secondary Replacement Page shall be substituted as the Primary Source for Interest Rate quotations;

(iii) if the Primary Source for the Floating Rate is Reference Banks or if sub-paragraph (i)(x) applies and no Relevant Rate appears on the Page at the Relevant Time on the Interest Determination Date or if sub-paragraph (i)(y) applies and fewer than two Relevant Rates appear on the Page at the Relevant Time on the Interest Determination Date, subject as provided below, the Interest Rate shall be the arithmetic mean of the Relevant Rates that each of the Reference Banks is quoting (or such of them, being at least two, as are so quoting) to leading banks in the Relevant Financial Centre at the Relevant Time on the Interest Determination Date, as determined by the Calculation Agent; and

(iv)    if paragraph (iii) above applies and the Calculation Agent determines that fewer than two Reference Banks are so quoting Relevant Rates, subject as provided below, the Interest Rate shall be the arithmetic mean of the rates per annum (expressed as a percentage) that the Calculation Agent determines to be the rates (being the nearest equivalent to the Benchmark) in respect of a Representative Amount of the Relevant Currency that at least two out of five leading banks selected by the Calculation Agent in the principal financial centre of the country of the Relevant Currency or, if the Relevant Currency is euro, in such financial centres as are specified in the Pricing Supplement, in each case as selected by the Calculation Agent (the “Principal Financial Centre”) are quoting at or about the time on which such banks would customarily quote such rates for a period commencing on the Effective Date equivalent to the Specified Duration (x) to leading banks carrying on business in Europe or, if the Calculation Agent determines that fewer than two of such banks are so quoting to leading banks in Europe, (y) to leading banks carrying on business in the Principal Financial Centre; except that, if fewer than two of such banks are so quoting to such leading banks, the Interest Rate shall be the Interest Rate determined on the previous Interest Determination Date (after readjustment for any difference between any Margin, Rate Multiplier or Maximum or Minimum Interest Rate applicable to the preceding Interest Accrual Period and to the relevant Interest Accrual Period).

(d) Interest Rate on Zero Coupon Notes

Where a Note the Interest Rate of which is specified in the Pricing Supplement to be Zero Coupon is repayable prior to the Maturity Date and is not paid when due, the amount due and payable prior to the Maturity Date shall be the Redemption Amount of such Note. As from the Maturity Date, the Interest Rate for any overdue principal of such a Note shall be a rate per annum (expressed as a percentage) equal to the Amortisation Yield (as defined in Condition 6(b)).

(e) Margin, Maximum/Minimum Interest Rates, Instalment Amounts and Redemption Amounts, Rate Multipliers and Rounding

(i)     If any Margin or Rate Multiplier is specified in the Pricing Supplement (either (x) generally, or (y) in relation to one or more Interest Accrual Periods), an adjustment shall be made to all Interest Rates, in the case of (x), or the Interest Rates for the specified interest Accrual Periods, in the case of (y), calculated in accordance with (c) above by adding (if a positive number) or subtracting (if a negative number) the absolute value of such Margin or multiplying such Rate Multiplier, subject always to the next paragraph.

(ii)    If any Maximum or Minimum Interest Rate, Instalment Amount or Redemption Amount is specified in the Pricing Supplement, then any Interest Rate, Instalment Amount or Redemption Amount shall be subject to such maximum or minimum, as the case may be.

(iii)    Subject to the requirements of applicable law, for the purposes of any calculations required pursuant to these Conditions (unless otherwise specified), (x) all percentages resulting from such calculations shall be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point (with halves being rounded up), (y) all figures shall be rounded to seven significant figures (with halves being rounded up) and (z) all currency amounts that fall due and payable shall be rounded to the nearest unit of such currency (with halves being rounded up), save in the case of yen, which shall be rounded down to the nearest yen. For these purposes “unit” means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, means 0.01 euro.

(f) Calculations

The amount of interest payable in respect of any Note for any period shall be calculated by multiplying the product of the Interest Rate and the outstanding principal amount of such Note by the Day Count Fraction, unless an Interest Amount (or a formula for its calculation) is specified in respect of such period, in which case the amount of interest payable in respect of such Note for such period shall equal such Interest Amount (or be calculated in accordance with such formula). Where any Interest Period comprises two or more Interest Accrual Periods, the amount of interest payable in respect of such Interest Period shall be the sum of the amounts of interest payable in respect of each of those Interest Accrual Periods.

(g) Determination and Publication of Interest Rates, interest Amounts, Redemption Amounts and Instalment Amounts

As soon as practicable after the Relevant Time on each Interest Determination Date or such other time on such date as the Calculation Agent may be required to calculate any Redemption Amount or Instalment Amount, obtain any quote or make any determination or calculation, it shall determine the Interest Rate and calculate the amount of interest payable (the “Interest Amounts”) in respect of each Denomination of the Notes for the relevant Interest Accrual Period, calculate the Redemption Amount or Instalment Amount, obtain such quote or make such determination or calculation, as the case may be, and cause the Interest Rate and the Interest Amounts for each Interest Period and the relevant Interest Payment Date and, if required to be calculated, the Redemption Amount or any Instalment Amount to be notified to the Trustee, the Issuer, each of the Paying Agents, the Noteholders, any other Calculation Agent appointed in respect of the Notes that is to make a further calculation upon receipt of such information and, if the Notes are listed on a stock exchange and the rules of such exchange so require, such exchange as soon as possible after their determination but in no event later than (x) the commencement of the relevant Interest Period, if determined prior to such time in the case of notification to such exchange of an Interest Rate and Interest Amount, or (y) in all other cases, the fourth Business Day after such determination. Where any Interest Payment Date or Interest Period is subject to adjustment pursuant to Condition 5(b), the Interest Amounts and the Interest Payment Date so published may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without notice in the event of an extension or shortening of the Interest Period. If the Notes become due and payable under Condition 10, the accrued interest and the Interest Rate payable in respect of the Notes shall nevertheless continue to be calculated as previously in accordance with this Condition but no publication of the Interest Rate or the Interest Amount so calculated need be made unless the Trustee otherwise requires. The determination of each Interest Rate, Interest Amount, Redemption Amount and Instalment Amount, the obtaining of each quote and the making of each determination or calculation by the Calculation Agent(s) shall (in the absence of manifest error) be final and binding upon all parties.

(h) Determination or Calculation by Trustee

If the Calculation Agent does not at any time for any reason determine or calculate the Interest Rate for an Interest Period or any Interest Amount, Instalment Amount or Redemption Amount, the Trustee shall do so (or shall appoint an agent on its behalf to do so) and such determination or calculation shall be deemed to have been made by the Calculation Agent. In doing so, the Trustee shall apply the foregoing provisions of this Condition, with any necessary consequential amendments, to the extent that, in its opinion, it can do so, and, in all other respects it shall do so in such manner as it shall deem fair and reasonable in all the circumstances.

(i) Definitions

In these Conditions, unless the context otherwise requires, the following defined terms shall have the meanings set out below:

“Business Day” means:

(i)     in the case of a specified currency other than euro, a day (other than a Saturday or Sunday) on which commercial banks and foreign exchange markets settle payments in the Principal Financial Centre and in London; and/or

(ii)    in the case of euro, a day on which the TARGET system (as defined below) is open; and/or

(iii)    in the case of a specified currency and/or one or more specified financial centres, a day (other than a Saturday or a Sunday) on which commercial banks and foreign exchange markets settle payments in the specified currency or, if none is specified, generally in each of the financial centres so specified.

“Day Count Fraction” means, in respect of the calculation of an amount of interest on any Note for any period of time (whether or not constituting an Interest Period, the “Calculation Period”):

(i)    if “Actual/365” or “Actual/Actual—ISDA” is specified in the Pricing Supplement, the actual number of days in the Calculation Period divided by 365 (or, if any portion of that Calculation Period falls in a leap year, the sum of (x) the actual number of days in that portion of the Calculation Period falling in a leap year divided by 366 and (y) the actual number of days in that portion of the Calculation Period falling in a non-leap year divided by 365);

(ii)    If “Actual/365 (Sterling)” is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;

(iii)    if “Actual/365 (Fixed)” is specified in the Pricing Supplement, the actual number of days in the Calculation Period divided by 365;

(iv)    if “Actual/360” is specified in the Pricing Supplement, the actual number of days in the Calculation Period divided by 360;

(v) if “30/360”, “360/360” or “Bond Basis” is specified in the Pricing Supplement, the number of days in the Calculation Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months (unless (a) the last day of the Calculation Period is the 31st day of a month but the first day of the Calculation Period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (b) the last day of the Calculation Period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month));

(vi) if “30E/360” or “Eurobond Basis” is specified in the Pricing Supplement, the number of days in the Calculation Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months, without regard to the date of the first day or last day of the Calculation Period unless, in the case of a Calculation Period ending on the Maturity Date, the Maturity Date is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month); and

(vii) if “Actual/Actual—ISMA” is specified in the Pricing Supplement (a) if the Calculation Period is equal to or shorter than the Determination Period during which it falls, the number of days in such Calculation Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Periods normally ending in any year; or (b) if the Calculation Period is longer than one Determination Period, the sum of:

(1) the number of days in such Calculation Period falling in the Determination Period in which it begins divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Periods normally ending in any year; and

(2) the number of days in such Calculation Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Periods normally ending in any year;

where:

“Determination Period” means the period from, and including, a Determination Date (as specified in the relevant Pricing Supplement) in any year to, but excluding, the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and

“Determination Date” means the date specified as such in the relevant Pricing Supplement or, if none is so specified, the Interest Payment Date.

“Effective Date” means, with respect to any Floating Rate to be determined on an Interest Determination Date, the date specified as such in the Pricing Supplement or, if none is so specifed, the first day of the Interest Accrual Period to which such Interest Determination Date relates.

“Interest Accrual Period” means the period beginning on (and including) the Interest Commencement Date and ending on (but excluding) the first Interest Period Date and each successive period beginning on (and including) an Interest Period Date and ending on (but excluding) the next succeeding Interest Period Date.

“Interest Commencement Date” means the Issue Date or such other date as may be specified in the Pricing Supplement.

“Interest Determination Date” means, with respect to an Interest Rate and Interest Accrual Period, the date specified as such in the Pricing Supplement or, if none is so specified, the first day of such Interest Accrual Period if the Relevant Currency is Sterling or the day falling two Business Days in London for the Relevant Currency prior to the first day of such Interest Accrual Period if the Relevant Currency is not Sterling.

“Interest Period” means the period beginning on (and including) the Interest Commencement Date and ending on (but excluding) the first Interest Payment Date and each successive period beginning on (and including) an Interest Payment Date and ending on (but excluding) the next succeeding Interest Payment Date in any year.

“Interest Period Date” means each Interest Payment Date unless otherwise specified in the Pricing Supplement.

“Interest Rate” means the rate of interest payable from time to time in respect of this Note and that is either specified or calculated in accordance with the provisions contained in the Pricing Supplement.

“Number of Calculation Periods” means the number of Calculation Periods normally ending in any year.

“Page” means such page, section, caption, column or other part of a particular information service (including, but not limited to, Reuters Markets 3000 (“Reuters”) and the Moneyline Telerate (“Telerate”)) as may be specified for the purpose of providing a Relevant Rate, or such other page, section, caption, column or other part as may replace it on that information service or on such other information service, in each case as may be nominated by the person or organisation providing or sponsoring the information appearing there for the purpose of displaying rates or prices comparable to that Relevant Rate.

“Primary Source” means the source for the calculation of interest payable in respect of Floating Rate Notes.

“Reference Banks” means the institutions specified as such in the Pricing Supplement or, if none, four (or, if the Relevant Financial Centre is Helsinki, five) major banks selected by the Calculation Agent in the interbank market (or, if appropriate, money, swap or over-the-counter index options market) that is most closely connected with the Benchmark specified in the Pricing Supplement.

“Relevant Currency” means the currency specified as such in the Pricing Supplement or, if none is specified, the currency in which the Notes are denominated.

“Relevant Financial Centre” means, with respect to any Floating Rate to be determined on an Interest Determination Date, the financial centre as may be specified as such in the Pricing Supplement or, if none is so specified, the financial centre with which the relevant Benchmark (which, in the case of euro, shall be as specified in the relevant Pricing Supplement) is most closely connected or, if none is so connected, London.

“Relevant Rate” means the Benchmark for a Representative Amount of the Relevant Currency for a period (if applicable or appropriate to the Benchmark) equal to the Specified Duration commencing on the Effective Date.

“Relevant Time” means, with respect to any Interest Determination Date, if the Relevant Currency is not euro the local time in the Relevant Financial Centre specified in the Pricing Supplement or, if no time is specified, the local time in the Relevant Financial Centre at which it is customary to determine bid and offered rates in respect of deposits in the Relevant Currency in the interbank market in the Relevant Financial Centre and, if the Relevant Currency is euro, the time specified in the relevant Pricing Supplement.

“Representative Amount” means, with respect to any Floating Rate to be determined on an Interest Determination Date, the amount specified as such in the Pricing Supplement or, if none is specified, an amount that is representative for a single transaction in the relevant market at the time.

“Specified Duration” means, with respect to any Floating Rate to be determined on an Interest Determination Date, the duration specified in the Pricing Supplement or, if none is specified, a period of time equal to the relative Interest Accrual Period, ignoring any adjustment pursuant to Condition 5(b).

“TARGET System” means the Trans-European Automated Real-time Gross-Settlement Express Transfer (TARGET) System.

(j) Calculation Agent and Reference Banks

The Issuer shall procure that there shall at all times be four Reference Banks (or such other number as may be required) with offices in the Relevant Financial Centre and one or more Calculation Agents if provision is made for them in the Pricing Supplement and for so long as any Note is outstanding (as defined in the Trust Deed). If any Reference Bank (acting through its relevant offices) is unable or unwilling to continue to act as a Reference Bank, then the Issuer shall (with the prior approval of the Trustee) appoint another Reference Bank with an office in the Relevant Financial Centre to act as such in its place. Where more than one Calculation Agent is appointed in respect of the Notes, references in these Conditions to the Calculation Agent shall be construed as each Calculation Agent performing its respective duties under the Conditions. If the Calculation Agent is unable or unwilling to act as such or if the Calculation Agent fails duly to establish the Interest Rate for an Interest Period or to calculate any Interest Amount, Instalment Amount or Redemption Amount or to comply with any other requirement, the Issuer shall (with the prior written approval of the Trustee) appoint a leading bank or investment banking firm engaged in the interbank market (or, if appropriate, money, swap or over-the-counter index options market) that is most closely connected with the calculation or determination to be made by the Calculation Agent (acting through its principal London office or any other office actively involved in such market) to act as such in its place. The Calculation Agent may not resign its duties without a successor having been appointed as aforesaid.

(k) Certificates to be Final

All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 5, whether by the Calculation Agent or the Trustee, shall (in the absence of wilful default, bad faith or manifest error) be binding on the Issuer, the Guarantor, the Calculation Agent, the Trustee, the other Paying Agents and all Noteholders, Receiptholders and Couponholders and (in the absence as aforesaid) no liability to the Issuer, the Guarantor, the Noteholders, the Receiptholders or the Couponholders shall attach to the Calculation Agent or, as the case may be, the Trustee in connection with the exercise or non-exercise by them of their powers, duties and discretions pursuant to such provisions.

6. Redemption, Purchase and Options

(a) Redemption by Instalments and Final Redemption

(i)    Unless previously redeemed, purchased and cancelled as provided in this Condition 6 or the relevant Instalment Date (being one of the dates so specified in the Pricing Supplement) is extended pursuant to any Issuer’s or Noteholders’ option in accordance with Condition 6(d) or 6(e), each Note that provides for Instalment Dates and Instalment Amounts shall be partially redeemed on each Instalment Date at the related Instalment Amount specified in the Pricing Supplement. The outstanding principal amount of each such Note shall be reduced by the Instalment Amount (or, if such Instalment Amount is calculated by reference to a proportion of the principal amount of such Note, such proportion) for all purposes with effect from the related Instalment Date, unless payment of the Instalment Amount is improperly withheld or refused on presentation of the related Receipt, in which case, such amount shall remain outstanding until the Relevant Date relating to such Instalment Amount.

(ii)    Unless previously redeemed, purchased and cancelled as provided below or its maturity is extended pursuant to any Issuer’s or Noteholders’ option in accordance with Condition 6(d) or 6(e), each Note shall be finally redeemed on the Maturity Date specified in the Pricing Supplement at its Redemption Amount (which, unless otherwise provided in the Pricing Supplement, is its principal amount) or, in the case of a Note falling within paragraph (i) above, its final Instalment Amount.

(b) Early Redemption of Zero Coupon Notes

(i)    The Redemption Amount payable in respect of any Note that does not bear interest prior to the Maturity Date, the Redemption Amount of which is not linked to an index and/or a formula, upon redemption of such Note pursuant to Condition 6(c), (d) or (e) or upon it becoming due and payable as provided in Condition 10 shall be the Amortised Face Amount (calculated as provided below) of such Note.

(ii)    Subject to the provisions of sub-paragraph (iii) below, the Amortised Face Amount of any such Note shall be the scheduled Redemption Amount of such Note on the Maturity Date discounted at a rate per annum (expressed as a percentage) equal to the Amortisation Yield (which, if none is specified in the Pricing Supplement, shall be such rate as would produce an Amortised Face Amount equal to the issue price of the Notes if they were discounted back to their issue price on the Issue Date) compounded annually. Where such calculation is to be made for a period of less than one year, it shall be made on the basis of the Day Count Fraction specified in the Pricing Supplement.

(iii)    If the Redemption Amount payable in respect of any such Note upon its redemption pursuant to Condition 6(c), (d) or (e), or upon it becoming due and payable as provided in Condition 10, is not paid when due, the Redemption Amount due and payable in respect of such Note shall be the Amortised Face Amount of such Note as defined in sub-paragraph (ii) above, except that such sub-paragraph shall have effect as though the reference therein to the date on which the Note becomes due and payable were replaced by a reference to the Relevant Date. The calculation of the Amortised Face Amount in accordance with this sub-paragraph shall continue to be made (as well after as before judgment) until the Relevant Date, unless the Relevant Date falls on or after the Maturity Date, in which case the amount due and payable shall be the scheduled Redemption Amount of such Note on the Maturity Date together with any interest that may accrue in accordance with Condition 5(d).

(c) Redemption for Taxation Reasons

If, as a result of any amendment to or change in the laws or regulations of the United Kingdom or of any political subdivision thereof or any authority therein or thereof having power to tax or any change in the official or generally accepted interpretation or application of such laws or regulations which becomes effective on or after the Issue Date, either the Issuer has or will become obliged to pay any additional amounts as described in Condition 8 or the Guarantor would be unable for reasons outside its control to procure payment by the Issuer and in making payment itself would be required to pay such additional amounts (and such amendment or change has been evidenced by the delivery by the Issuer or the Guarantor, as the case may be, to the Trustee (who shall accept such certificate and opinion as sufficient evidence thereof) of (i) a certificate signed by a director of the Issuer or a director of the Guarantor, as the case may be, on behalf of the Issuer or the Guarantor, as the case may be, stating that such amendment or change has occurred (irrespective of whether such amendment or change is then effective), the issuer may (having given not less than 30 nor more than 90 days’ irrevocable notice to the Trustee and to the holders in accordance with Condition 16) redeem all, but not some only, of the Notes (other than Notes in respect of which the Issuer shall have given a notice of redemption pursuant to Condition 6(d) or an Exercise Notice in accordance with Condition 6(e), prior to any notice being given under this Condition 6(c)) at their Redemption Amount, together with accrued interest to the date fixed for such redemption, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or the Guarantor, as the case may be, would be required to pay such additional amounts were a payment in respect of the Note then due.

(d) Redemption at the Option of the Issuer and Exercise of Issuer’s Options

If so provided in the Pricing Supplement, the Issuer may, on giving irrevocable notice to the Noteholders falling within the Issuer’s Option Period redeem, or exercise any Issuer’s option in relation to all or, if so provided, some of the Notes (other than Notes in respect of which the Issuer shall have given a notice of redemption pursuant to Condition 6(c), prior to any notice being given under this Condition 6(d)) in the principal amount or integral multiples thereof and on the date or dates so provided. Any such redemption of Notes shall be at their Redemption Amount together with interest accrued to the date fixed for redemption.

All Notes in respect of which any such notice is given shall be redeemed, or the Issuer’s option shall be exercised, on the date specified in such notice in accordance with this Condition.

In the case of a partial redemption or a partial exercise of an Issuer’s option, the notice to Noteholders shall also contain the certificate numbers of the Notes to be redeemed or in respect of which such option has been exercised, which shall have been drawn in such place as the Trustee may approve and in such manner as it deems appropriate, subject to compliance with any applicable laws and stock exchange requirements.

(e) Redemption at the Option of Noteholders and Exercise of Noteholders’ Options

If so provided in the Pricing Supplement, the Issuer shall, at the option of the holder of such Note, redeem such Note on the date or dates so provided at its Redemption Amount together with interest accrued to the date fixed for redemption.

To exercise such option or any other Noteholders’ option that may be set out in the Pricing Supplement the holder must deposit (in the case of Bearer Notes) such Note (together with all unmatured Receipts and Coupons and unexchanged Talons) with any Paying Agent or (in the case of Registered Notes) the Certificate representing such Note(s) with the Registrar or any Transfer Agent at its specified office, together with a duly completed option exercise notice (“Exercise Notice”) in the form obtainable from any Paying Agent, the Registrar or any Transfer Agent (as applicable) within the Noteholders’ Option Period. No Note or Certificate so deposited and option exercised may be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer, except that such Note or Certificate will be returned to the relevant Noteholder by the Paying Agent, the Registrar or Transfer Agent with which it has been deposited if, prior to the due date for its redemption or the exercise of the option, the Note becomes immediately due and payable or if upon due presentation payment of the redemption moneys is not made or exercise of the option is denied.

(f) Purchases

The Issuer, the Guarantor and any of their respective Subsidiaries may, to the extent permitted by applicable law, at any time purchase Notes in the ordinary course of their respective treasury business (provided that all unmatured Receipts and Coupons and unexchanged Talons relating thereto are attached thereto or surrendered therewith) in the open market or otherwise at any price.

(g) Cancellation

All Notes purchased by or on behalf of the Issuer, the Guarantor or any of their respective Subsidiaries shall be surrendered for cancellation, in the case of Bearer Notes, by surrendering each such Note together with all unmatured Receipts and Coupons and all unexchanged Talons to the Issuing and Paying Agent and, in the case of Registered Notes, by surrendering the Certificate representing such Notes to the Registrar and, in each case, if so surrendered, shall, together with all Notes redeemed by the issuer, be cancelled forthwith (together with all unmatured Receipts and Coupons and unexchanged Talons attached thereto or surrendered therewith). Any Notes so surrendered for cancellation may not be reissued or resold and the obligations of the Issuer in respect of any such Notes shall be discharged.

7. Payments and Talons

(a) Bearer Notes

Payments of principal and interest in respect of Bearer Notes shall, subject as mentioned below, be made against presentation and surrender of the relevant Receipts (in the case of payments of Instalment Amounts other than on the due date for redemption and provided that the Receipt is presented for payment together with its relative Note), Notes (in the case of all other payments of principal and, in the case of interest, as specified in Condition 7(f)(vi)) or Coupons (in the case of interest, save as specified in Condition 7(f)(ii)), as the case may be, at the specified office of any Paying Agent outside the United States by a cheque payable in the currency in which such payment is due drawn on, or, at the option of the holder, by transfer to an account denominated in that currency with, a bank in the principal financial centre for that currency; provided, however, that (i) in the case of euro, the transfer may be to an account with a bank in any city that has access to the TARGET System.

(b) Registered Notes

(i)    Payments of principal (which for the purposes of this Condition 7(b) shall include final Instalment Amounts but not other Instalment Amounts) in respect of Registered Notes shall be made against presentation and surrender of the relevant Certificates at the specified office of any of the Transfer Agents or of the Registrar and in the manner provided in sub-paragraph (ii) below.

(ii)    Interest (which for the purpose of this Condition 7(b) shall include all Instalment Amounts other than final Instalment Amounts) on Registered Notes shall be paid to the person shown on the Register at the close of business on the fifteenth day before the due date for payment thereof (the “Record Date”). Payments of interest on each Registered Note shall be made in the currency in which such payments are due by cheque drawn on a bank in the principal financial centre of the country of the currency concerned and mailed to the holder (or the first named of joint holders) of such Note at its address appearing in the Register. Upon application by the holder to the specified office of the Registrar or any Transfer Agent before the Record Date and subject as provided in paragraph (a) above, such payment of interest may be made by transfer to an account in the relevant currency maintained by the payee with a bank in the principal financial centre of the country of that currency.

(c) Payments in the United States

Notwithstanding the foregoing, if any Bearer Notes are denominated in US dollars, payments in respect thereof may be made at the specified office of any Paying Agent in New York City in the same manner as aforesaid if (i) the Issuer and the Guarantor shall have appointed Paying Agents with specified offices outside the United^-States with the reasonable expectation that such Paying Agents would be able to make payment of the amounts on the Notes in the manner provided above when due, (ii) payment in full of such amounts at all such offices is illegal or effectively precluded by exchange controls or other similar restrictions on payment or receipt of such amounts and (iii) such payment is then permitted by United States law, without involving, in the opinion of the Issuer and the Guarantor, any adverse tax consequence to the Issuer or the Guarantor.

(d) Payments Subject to Fiscal Laws

All payments are subject in all cases to any applicable fiscal or other laws, regulations and directives, but without prejudice to the provisions of Condition 8. No commission or expenses shall be charged to the Noteholders or Couponholders in respect of such payments.

(e) Appointment of Agents

The Issuing and Paying Agent, the Paying Agents, the Registrar, the Transfer Agents and the Calculation Agent initially appointed by the Issuer and the Guarantor and their respective specified offices are listed below. The Issuing and Paying Agent, the Paying Agents, the Registrar, Transfer Agents and the Calculation Agent act solely as agents of the Issuer and the Guarantor and do not assume any obligation or relationship of agency or trust for or with any Noteholder or Couponholder. The Issuer and the Guarantor reserve the right at any time to vary or terminate the appointment of the Issuing and Paying Agent, any other Paying Agent, the Registrar, any Transfer Agent or the Calculation Agent and to appoint additional or other Paying Agents or Transfer Agents, provided that the Issuer shall at all times maintain (i) an Issuing and Paying Agent, (ii) a Registrar in relation to Registered Notes, (iii) a Transfer Agent in relation to Registered Notes, (iv) one or more Calculation Agent(s) where the Conditions so require, (v) Paying Agents having specified offices in at least two major European cities (including London so long as the Notes are listed on the official list of the UK Listing Authority and admitted to trading on the London Stock Exchange’s market for listed securities), (vi) such other agents as may be required by any other stock exchange on which the Notes may be listed and (vii) if any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26th to 27th November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive is introduced, a Paying Agent in a Member State of the European Union that will not be obliged to withhold or deduct tax pursuant to any such Directive or law in each case as approved by the Trustee.

In addition, the Issuer and the Guarantor shall forthwith appoint a Paying Agent in New York City in respect of any Bearer Notes denominated in US dollars in the circumstances described in paragraph (c) above.

Notice of any such change or any change of any specified office shall promptly be given to the Noteholders in accordance with Condition 16.

(f) Unmatured Coupons and Receipts and Unexchanged Talons

(i)    Unless the Notes provide that the Coupons related thereto are to become void upon the due date for redemption of those Notes, Bearer Notes should be surrendered for payment together with all unmatured Coupons (if any) appertaining thereto, failing which an amount equal to the face value of each missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the amount of such missing unmatured Coupon that the sum of principal so paid bears to the total principal due) shall be deducted from the Redemption Amount due for payment. Any amount so deducted shall be paid in the manner mentioned above against surrender of such missing Coupon within a period of 10 years from the Relevant Date for the payment of such principal (whether or not such Coupon has become void pursuant to Condition 9).

(ii)    If the Notes so provide, upon the due date for redemption of any Bearer Note, unmatured Coupons relating to such Note (whether or not attached) shall become void and no payment shall be made in respect of them.

(iii)    Upon the due date for redemption of any Bearer Note, any unexchanged Talon relating to such Note (whether or not attached) shall become void and no Coupon shall be delivered in respect of such Talon.

(iv)    Upon the due date for redemption of any Bearer Note that is redeemable in instalments, all Receipts relating to such Note having an Instalment Date falling on or after such due date (whether or not attached) shall become void and no payment shall be made in respect of them.

(v)    Where any Bearer Note that provides that the relative unmatured Coupons related thereto are to become void upon the due date for redemption of those Notes is presented for redemption without all unmatured Coupons and any unexchanged Talon relating to it, and where any Bearer Note is presented for redemption without any unexchanged Talon relating to it, redemption shall be made only against the provision of such indemnity as the Issuer may reasonably require.

(vi)    If the due date for redemption of any Note is not a due date for payment of interest, interest accrued from the preceding due date for payment of interest or the Interest Commencement Date, as the case may be, shall only be payable against presentation (and surrender if appropriate) of the relevant Bearer Note or Certificate representing it, as the case may be. Interest accrued on a Note that only bears interest after its Maturity Date shall be payable on redemption of such Note against presentation of the relevant Note or Certificate representing it, as the case may be.

(g) Talons

On or after the Interest Payment Date for the final Coupon forming part of a Coupon sheet issued in respect of any Bearer Note, the Talon forming part of such Coupon sheet may be surrendered at the specified office of the Issuing and Paying Agent in exchange for a further Coupon sheet (and if necessary another Talon for a further Coupon sheet) (but excluding any Coupons that may have become void pursuant to Condition 9).

(h) Non-Business Days

If any date for payment in respect of any Note, Receipt or Coupon is not a business day, the holder shall not be entitled to payment until the next following business day nor to any interest or other sum in respect of such postponed payment. In this paragraph, “business day” means a day (other than a Saturday or a Sunday) on which:

(i)    banks and foreign exchange markets are open for business in such jurisdictions as shall be specified as “Business Day Jurisdictions” in the Pricing Supplement and in the relevant place of presentation; and

(ii)    (in the case of a payment in a currency other than euro where payment is to be made by a transfer in the relevant currency to an account maintained with a bank) foreign exchange transactions may be carried on in the relevant currency in the principal financial centre of the country of such currency; or

(iii)     (in the case of a payment in euro) banks are open for business and carrying out transactions in euro in the jurisdiction in which the account specified by the payee is located.

(i) Definition of the euro

References in these Conditions to the euro are to the currency which was introduced on 1st January 1999 at the start of the third stage of European Economic and Monetary Union pursuant to Article 109(4) of the Treaty establishing the European Communities as amended (the “Treaty”).

Notes denominated in a currency that may be converted into euro, may be subject to redenomination, renominalisation, reconventioning and/or consolidation with other Notes then denominated in euro as specified in the relevant Pricing Supplement.

8. Taxation

All payments of principal and interest by or on behalf of the Issuer or the Guarantor in respect of the Notes, the Receipts and the Coupons shall be made free and clear of, and without withholding or deduction for, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within the United Kingdom or by any authority therein or thereof having power to tax, unless such withholding or deduction is required by law. In that event, the Issuer or, as the case may be, the Guarantor shall pay such additional amounts to the Noteholder or Couponholder as shall result in receipt by that Noteholder or Couponholder of such amounts as would have been received by it had no such withholding or deduction been required, except that no such additional amounts shall be payable with respect to any Note, Receipt or Coupon:

(a)     to, or to a third party on behalf of, a holder who is liable to such taxes, duties, assessments or governmental charges in respect of such Note, Receipt or Coupon by reason of his having some connection with the United Kingdom other than the mere holding of the Note, Receipt or Coupon;

(b)     presented (or in respect of which the Certificate representing it is presented) for payment more than 30 days after the Relevant Date except to the extent that the holder of it would have been entitled to such additional amounts on presenting it for payment on the thirtieth day;

(c)     presented for payment by or on behalf of a holder who would be able to avoid such withholding or deduction by making a declaration of non-residence or other similar claim for exemption to the tax authority in the jurisdiction where the relevant Note (or the Certificate representing it), Receipt or Coupon is presented for payment (but who fails to do so);

(d)     where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26th to 27th November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive; or

(e)     presented for payment by or on behalf of a holder who would be able to avoid such withholding or deduction by presenting the relevant Note, Receipt or Coupon to another Paying Agent in a Member State of the European Union.

As used in these Conditions, “Relevant Date” in respect of any Note, Receipt or Coupon means the date on which payment in respect of it first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which payment in full of the amount outstanding is made or (if earlier) the date seven days after that on which notice is duly given to the Noteholders that, upon further presentation of the Note (or relative Certificate), Receipt or Coupon being made in accordance with the Conditions, such payment will be made, provided that payment is in fact made upon such presentation. References in these Conditions to (i) “principal” shall be deemed to include any premium payable in respect of the Notes, all Instalment Amounts, Redemption Amounts, Amortised Face Amounts and all other amounts in the nature of principal payable pursuant to Condition 6 or any amendment or supplement to it, (ii) “interest” shall be deemed to include all Interest Amounts and all other amounts payable pursuant to Condition 5 or any amendment or supplement to it and (iii) “principal” and/or “interest” shall be deemed to include any additional amounts that may be payable under this Condition or any undertaking given in addition to or the substitution for it under the Trust Deed.

9. Prescription

Claims against the Issuer and/or the Guarantor for payment in respect of the Notes, Receipts and Coupons (which, for this purpose, shall not include Talons) shall be prescribed and become void unless made within ten years (in the case of principal) or five years (in the case of interest) from the appropriate Relevant Date in respect of them.

10. Events of Default

If any of the following events (each an “Event of Default”) occurs and is continuing, the Trustee at its discretion may, and if so requested by holders of at least one quarter in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution (as defined in the Trust Deed) shall (in any case provided that the Trustee has been indemnified to its satisfaction), give written notice to the Issuer and the Guarantor that the Notes are, and they shall immediately become, due and payable at their Redemption Amount together with accrued interest:

(a)     Non-Payment: default is made for more than 10 business days (in the case of interest) or five business days (in the case of principal) in the payment on the due date of interest or principal in respect of any of the Notes; or

(b)     Breach of Other Obligations: the Issuer or the Guarantor does not perform or comply with any one or more of its other obligations in the Notes or the Trust Deed which default is incapable of remedy or, if in the opinion of the Trustee capable of remedy, is not in the opinion of the Trustee remedied within 45 days after written notice of such default shall have been given to the Issuer and the Guarantor by the Trustee; or

(c) Cross Acceleration:

(i)     any indebtedness for Borrowed Money of the Issuer, the Guarantor or any Principal Subsidiary becomes due and repayable prematurely by reason of an event of default (however described);

(ii)     the Issuer, the Guarantor or any Principal Subsidiary fails to make any payment in respect of any Indebtedness for Borrowed Money on the due date for payment or, as the case may be, within any applicable grace period as originally provided;

(iii)     any security given by the Issuer, the Guarantor or any Principal Subsidiary for any indebtedness for Borrowed Money is enforced; or

(iv)     default is made by the Issuer, the Guarantor or any Principal Subsidiary in making any payment due under any guarantee and/or indemnity given by it in relation to any Indebtedness for Borrowed Money of any other person,

provided that (i) no event described in this Condition 10(c) shall constitute an Event of Default where the Issuer, the Guarantor or any Principal Subsidiary, as the case may be, satisfies the Trustee that it is contesting such Event of Default in good faith and by appropriate action and (ii) no event described in this Condition 10(c) shall constitute an Event of Default unless the Indebtedness for Borrowed Money or other relative liability, either alone or when aggregated with other Indebtedness for Borrowed Money and/or other liabilities relative to all (if any) other events described in this Condition 10(c) which have occurred and are continuing (excluding where the Issuer, the Guarantor or any Principal Subsidiary, as the case may be, has satisfied the Trustee that it is contesting such event in good faith and by appropriate action), amounts to £25,000,000 or, if greater, an amount equal to 1% of Consolidated Net Worth of the Group (or its equivalent in any other currency); or

(d)     Insolvency: the Issuer, the Guarantor or any Principal Subsidiary is (or is deemed by law or a court to be) insolvent or bankrupt or unable to pay its debts, stops, suspends or threatens to stop or suspend payment of all or a material part of (or of a particular type of) its debts, proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared or comes into effect in respect of or affecting all or any part of (or of a particular type of) the debts of the Issuer, the Guarantor or any Principal Subsidiary; or

(e)     Winding-up: an administrator is appointed, an order is made or an effective resolution passed for the winding-up or dissolution or administration of the Issuer, the Guarantor or any Principal Subsidiary, or the Issuer, the Guarantor or any Principal Subsidiary shall apply or petition for a winding-up or administration order in respect of itself or cease to carry on all or substantially all of its business or operations, in each case except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation on terms approved by the Trustee or by an Extraordinary Resolution of the Noteholders; or

(f)     Enforcement Proceedings: a distress, attachment, execution or other legal process is levied, enforced, sued out on or against any material part of the property, assets or revenues of the Issuer and is not discharged or stayed within 45 days; or

(g)     Guarantee: the Guarantee ceases to be, or is claimed by the Guarantor not to be, in full force and effect; or

(h)    Guarantor: the Guarantor ceases to be a Subsidiary controlled, directly or indirectly, by the Issuer,

provided that, in the case of Conditions 10(b), (c), (f) and, in the case of Conditions 10(d) and (e) in relation to the Guarantor and any Principal Subsidiary only, the Trustee shall have certified in writing that such event is in its opinion materially prejudicial to the interests of the Noteholders.

In these Conditions:

“Britvic Group” means Britannia Soft Drinks Limited and its Subsidiaries for the time being.

“Consolidated Gross Assets” means the consolidated fixed assets plus consolidated current assets of the Group.

“Consolidated Net Worth” means, as at any particular time, the aggregate of:

(a)     the amount paid up or credited as paid up on the issued share capital and share premium of the issuer; and

(b)     the amount standing to the credit of the consolidated reserves of the Group, less (but without double counting) any amount included in the above which is attributable to minority interests;

“EBITDA” means, in relation to any financial year, the total consolidated operating profit of the Group for that financial year:

(a)     before taking into account:

(i)     interest, tax, depreciation and amortisation; and

(ii)     all extraordinary and exceptional items; and

(b)     after deducting, to the extent included, amounts attributable to interests of third parties in members of the Group.

“Indebtedness for Borrowed Money” means any indebtedness (whether being principal, premium, interest or other amounts) for or in respect of any notes, bonds, debentures, debenture stock, loan stock or other securities or any borrowed money or any liability under or in respect of any acceptance or acceptance credit but excluding Project Finance Indebtedness;

“Principal Subsidiary” means, at anytime, any Subsidiary of the Issuer:

(a)     whose gross assets represent 5% or more of Consolidated Gross Assets or whose EBITDA represents 5% or more of consolidated EBITDA of the Group, in each case, as calculated by reference to the latest financial statements of such Subsidiary (which shall be audited if such statements are prepared by that Subsidiary) and the latest audited consolidated financial statements of the Group adjusted in such manner as two directors of the Issuer may determine (which determination shall be conclusive in the absence of manifest or proven error) (i) to reflect the gross assets and EBITDA of any person which has become or ceased to be a member of the Group since the end of the financial year to which the latest audited consolidated financial statements of the Group relate and (ii) so that for the purposes of this definition, the gross assets of the relevant Subsidiary shall be calculated on the same basis as Consolidated Gross Assets are calculated and/or, as the case may be, EBITDA of the relevant Subsidiary shall be calculated on the same basis as consolidated EBITDA for the Group and making such adjustments and eliminations as are required to show the same as the contribution of the relevant Subsidiary to Consolidated Gross Assets and/or, as the case may be, consolidated EBITDA of the Group; or

(b)     to which is transferred all or substantially all of the business, undertaking or assets of a Subsidiary which immediately prior to such transfer is a Principal Subsidiary, whereupon the transferor Subsidiary shall cease to be a Principal Subsidiary and the transferee Subsidiary shall become a Principal Subsidiary under this sub-paragraph (b) upon the completion of such transfer, except that “Principal Subsidiary” shall for all purposes exclude any Subsidiary that is part of the Britvic Group.

A certificate addressed to the Trustee by two directors of the Issuer as to whether a Subsidiary of the Issuer is or is not or was or was not at any particular time or throughout any specified period a Principal Subsidiary at any time shall be conclusive in the absence of manifest error; and

“Subsidiary” means a subsidiary within the meaning of Section 736 of the Companies Act 1985.

For the purpose of Condition 10(a) only, “business day” means a day on which commercial banks are open for general business in London.

11. Meetings of Noteholders, Modifications and Waiver

(a) Meetings of Noteholders

The Trust Deed contains provisions for convening meetings of Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of any of these Conditions or any provisions of the Trust Deed. The quorum for any meeting convened to consider a resolution other than an Extraordinary Resolution shall be two or more persons holding or representing in the aggregate not less than one-tenth in principal amount of the Notes for the time being outstanding, and the quorum for any meeting convened to consider an Extraordinary Resolution shall be two or more persons holding or representing a clear majority in principal amount of the Notes for the time being outstanding, or at any adjourned meeting two or more persons being or representing Noteholders whatever the principal amount of the Notes held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to amend the dates of maturity or redemption of the Notes, any Instalment Date or any date for payment of interest or Interest Amounts on the Notes, (ii) to reduce or cancel the principal amount of, or any Instalment Amount of, or any premium payable on redemption of, the Notes, (iii) to reduce the rate or rates of interest in respect of the Notes or to vary the method or basis of calculating the rate or rates or amount of interest or the basis for calculating any Interest Amount in respect of the Notes, (iv) if a Minimum and/or a Maximum Interest Rate, Instalment Amount or Redemption Amount is specified in the Pricing Supplement, to reduce any such Minimum and/or Maximum, (v) to vary any method of, or basis for, calculating the Redemption Amount, including the method of calculating the Amortised Face Amount, (vi) to vary the currency or currencies of payment or denomination of the Notes, (vii) to take any steps that as specified in the Pricing Supplement may only be taken following approval by an Extraordinary Resolution to which the special quorum provisions apply, or (viii) to modify the provisions concerning the quorum required at any meeting of Noteholders or the majority required to pass the Extraordinary Resolution, in which case the necessary quorum shall be two or more persons holding or representing not less than two-thirds or at any adjourned meeting not less than one third in principal amount of the Notes for the time being outstanding. Any resolution duly passed shall be binding on Noteholders (whether or not they were present at the meeting at which such resolution was passed) and on all Couponholders. The expression “Extraordinary Resolution” means a resolution passed at a meeting of Noteholders duly convened by a majority consisting of not less than three-quarters of the votes cast. All other resolutions shall be passed at a meeting of Noteholders duly convened by a clear majority of the votes cast.

The Trust Deed provides that a resolution in writing signed by, or on behalf of, the holders of not less than 90% in principal amount of Notes who for the time being are entitled to receive notice of a meeting shall for all purposes be as valid and effective as an Extraordinary Resolution passed at a meeting of such Noteholders duly convened and held.

These Conditions may be amended, modified or varied in relation to any Series of Notes by the terms of the relevant Pricing Supplement in relation to such Series.

(b) Modification of the Trust Deed

The Trustee may, without the consent of the Noteholders or Couponholders, (i) agree to any modification of any of the provisions of the Trust Deed or these Conditions, the Notes or the Coupons that is, in the opinion of the Trustee, of a formal, minor or technical nature or is made to correct a manifest error or to comply with a mandatory provision of the laws of England, and (ii) agree to any other modification (except as mentioned in the Trust Deed), and waive or authorise any breach, continuing breach or proposed breach, of any of the provisions of the Trust Deed or these Conditions that is in the opinion of the Trustee not materially prejudicial to the interests of the Noteholders. Any such modification, authorisation or waiver shall be binding on the Noteholders and the Couponholders and, if the Trustee so requires, such modification shall be notified to the Noteholders as soon as practicable.

(c) Substitution

The Issuer and the Guarantor may at any time require the substitution of (i) the Issuer’s Successor in Business (as defined in the Trust Deed), or (ii) any Subsidiary of the Issuer or its Successor in Business, or (iii) the Guarantor or its Successor in Business, or (iv) any Subsidiary of the Guarantor or its Successor in Business in place of the Issuer as principal debtor under the Notes, Coupons and Receipts or the Guarantor under the Trust Deed, or of any previously substituted company. Such substitution shall be subject to the provisions of the Trust Deed, including a provision that such substitution shall not be effected unless the Trustee shall have received confirmation in writing from Standard & Poor’s Agency, a Division of the McGraw-Hill Companies, Inc. and Moody’s Investors Service, Inc and any other rating agency which, at the request of the Issuer or Guarantor, shall have assigned a credit rating to the Notes that such substitution and the circumstances pertaining to the substitution will not result in a downgrading of the then current credit rating assigned to the Notes by such rating agency.

(d) Entitlement of the Trustee

In connection with the exercise of its functions (including but not limited to those referred to in this Condition) the Trustee shall have regard to the interests of the Noteholders as a class and shall not have regard to the consequences of such exercise for individual Noteholders or Couponholders and the Trustee shall not be entitled to require, nor shall any Noteholder or Couponholder be entitled to claim, from the Issuer or the Guarantor any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders or Couponholders.

12. Replacement of Notes, Certificates, Receipts, Coupons and Talons

If a Note, Certificate, Receipt, Coupon or Talon is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject to applicable laws, regulations and stock exchange regulations, at the specified office of the Issuing and Paying Agent (in case of Bearer Notes, Receipts, Coupons or Talons) and of the Registrar (in the case of Certificates) or such other Paying Agent or Transfer Agent, as the case may be, as may from time to time be designated by the Issuer for the purpose and notice of whose designation is given to Noteholders, in each case on payment by the claimant of the fees and costs incurred in connection therewith and on such terms as to evidence, security and indemnity (which may provide, inter alia, that if the allegedly lost, stolen or destroyed Note, Certificate, Receipt, Coupon or Talon is subsequently presented for payment or, as the case may be, for exchange for further Coupons, there shall be paid to the Issuer on demand the amount payable by the Issuer in respect of such Notes, Certificates, Receipts, Coupons or further Coupons) and otherwise as the Issuer may reasonably require. Mutilated or defaced Notes, Certificates, Receipts, Coupons or Talons must be surrendered before replacements will be issued.

13. Further Issues

The Issuer may from time to time without the consent of the Noteholders or Couponholders create and issue further securities either having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with the outstanding securities of any series (including the Notes) or upon such terms as the Issuer may determine at the time of their issue. References in these Conditions to the Notes include (unless the context requires otherwise) any other securities issued pursuant to this Condition and forming a single series with the Notes. Any further securities forming a single series with the outstanding securities of any series (including the Notes) constituted by the Trust Deed or any deed supplemental to it shall, and any other securities may (with the consent of the Trustee), be constituted by the Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Noteholders and the holders of securities of other series where the Trustee so decides.

14. Enforcement

At any time after the Notes become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer and/or the Guarantor as it may think fit to enforce the terms of the Trust Deed, but it need not take any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by holders of at least one-quarter in principal amount of the Notes outstanding and (b) it shall have been indemnified to its satisfaction. No Noteholder, Receiptholder or Couponholder may proceed directly against the Issuer or the Guarantor unless the Trustee, having become bound so to proceed fails to do so within a reasonable time and such failure is continuing.

15. Indemnification of Trustee

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee is entitled to enter into business transactions with the Issuer or the Guarantor and any entity related to the Issuer or the Guarantor without accounting for any profits.

16. Notices

Notices to the holders of Registered Notes shall be mailed to them (or, in the case of joint holders, to the first named) at their respective addresses in the Register and deemed to have been given on the fourth weekday (being a day other than a Saturday or a Sunday) after the date of mailing. Notices to the holders of Bearer Notes shall be valid if published in a daily newspaper of general circulation in London (which is expected to be the Financial Times). Any such notice shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, on the date of the first publication as provided above.

Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the holders of Bearer Notes in accordance with this Condition.

17. Governing Law

The Trust Deed, the Notes, the Receipts, the Coupons and the Talons are governed by, and shall be construed in accordance with, English law.

SCHEDULE 7

FORM OF COUPON

On the front:

INTERCONTINENTAL HOTELS GROUP PLC

DEBT ISSUANCE PROGRAMME

Series No. [ ]

[Title of issue]

Coupon for [[set out amount due if known the amount] due on [the Interest Payment Date falling in]¹[ ].[ ].

[Coupon relating to Note in the principal amount of [ ]]²

This Coupon is payable to bearer (subject to the Conditions endorsed on the Note to which this Coupon relates, which shall be binding upon the holder of this Coupon whether or not it is for the time being attached to such Note) at the specified offices of the Issuing and Paying Agent and the Paying Agents set out on the reverse hereof (or any other Issuing and Paying Agent or further or other Paying Agents or specified offices duly appointed or nominated and notified to the Noteholders); provided, however that such payment must be made outside the United States, but without prejudice to the provisions of Condition 6(c).

[If the Note to which this Coupon relates shall have become due and payable before the maturity date of this Coupon, this Coupon shall become void and no payment shall be made in respect of it.]³

1 Only necessary where Interest Payment Dates are subject to adjustment in accordance with a Business Day Convention otherwise the particular Interest Payment Date should be specified.

2 Only required for Coupons relating to Floating Rate or Variable Coupon Amount Notes that are issued in more than one denomination.

3 Delete if Coupons are not to become void upon early redemption of Note.

68

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]⁴

INTERCONTINENTAL HOTELS GROUP PLC

By:

[Cp. No.] [Denomination] [ISIN] [Series] [Certif. No.]

4 Only for coupons relating to Notes with a maturity of 365 days or more.

69

On the back:

ISSUING AND PAYING AGENT

HSBC Bank plc
Mariner House
Pepys Street
London EC3N 4DA

PAYING AGENT

HSBC Republic Bank (Jersey) Limited
1 Grenville Street
St. Helier
Jersey JE4 9PF

70

SCHEDULE 8

FORM OF TALON

On the front:

INTERCONTINENTAL HOTELS GROUP PLC

DEBT ISSUANCE PROGRAMME

Series No. [ ]

[Title of issue]

Talon for further Coupons falling due on [the Interest Payment Dates falling in]¹ [ ][ ].

[Talon relating to Note in the principal amount of [ ]]²

After all the Coupons relating to the Note to which this Talon relates have matured, further Coupons (including if appropriate a Talon for further Coupons) shall be issued at the specified office of the Issuing and Paying Agent set out on the reverse hereof (or any other Issuing and Paying Agent or specified office duly appointed or nominated and notified to the Noteholders) upon production and surrender of this Talon.

If the Note to which this Talon relates shall have become due and payable before the original due date for exchange of this Talon, this Talon shall become void and no exchange shall be made in respect of it.

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]³

INTERCONTINENTAL HOTELS GROUP PLC

By:

[Talon No.] [ISIN] [Series] [Certif. No.]

1 Only necessary where Interest Payment Dates are subject to adjustment in accordance with a Business Day Convention otherwise the particular Interest Payment Date should be specified.

2 Only required where the Series comprises Notes of more than one denomination.

3 Only for Talons relating to Notes with a maturity of 365 days or more.

71

On the back:

ISSUING AND PAYING AGENT

HSBC Bank plc
Mariner House
Pepys Street
London EC3N 4DA

PAYING AGENT

HSBC Republic Bank (Jersey) Limited
1 Grenville Street
St. Helier
Jersey JE4 9PF

72

SCHEDULE 9

FORM OF RECEIPT

INTERCONTINENTAL HOTELS GROUP PLC

DEBT ISSUANCE PROGRAMME

Series No. [ ]

Receipt for the sum of [ ] being the instalment of principal payable in accordance with the Terms and Conditions endorsed on the Note to which this Receipt relates (the “Conditions”) on [ ].

This Receipt is issued subject to and in accordance with the Conditions which shall be binding upon the holder of this Receipt (whether or not it is for the time being attached to such Note) and is payable at the specified office of any of the Paying Agents set out on the reverse of the Note to which this Receipt relates (and/or any other or further Paying Agents and/or specified offices as may from time to time be duly appointed and notified to the Noteholders).

This Receipt must be presented for payment together with the Note to which it relates. If the Note to which this Receipt appertains shall have become due and payable on or before the maturity date of this Receipt, this Receipt shall become void and no payment shall be made in respect of it. The Issuer shall have no obligation in respect of this Receipt if it is presented without the Note to which it relates.

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]¹

INTERCONTINENTAL HOTELS GROUP PLC

By:

1 Only for Receipts relating to Notes with a maturity of 365 days or more.

73

SCHEDULE 10

PROVISIONS FOR MEETINGS OF NOTEHOLDERS

1 The following expressions shall have the following meanings:

1.1 voting certificate means a certificate in the English language issued and dated by a Paying Agent in which it is stated:–

(a) that on that date Notes (not being Notes in respect of which a block voting instruction has been issued and is outstanding in respect of the meeting specified in such voting certificate or any adjournment of such meeting) bearing specified serial numbers were deposited with such Paying Agent (or to its order at a bank or other depositary) and that such Notes will not be released until the earlier of:–

(i) the conclusion of the meeting specified in such certificate or any adjournment of it; and

(ii) the surrender of the certificate to the Paying Agent which issued it; and

(b) that its bearer is entitled to attend and vote at such meeting or any adjournment of it in respect of the Notes represented by such certificate;

1.2 block voting instruction means a document in the English language issued by a Paying Agent and dated in which:–

(a) it is certified that Notes (not being Notes in respect of which a voting certificate has been issued and is outstanding in respect of the meeting specified in such block voting instruction or any adjournment of it) have been deposited with such Paying Agent (or to its order at a bank or other depositary) and that such Notes will not be released until the earlier of:–

(i) the conclusion of the meeting specified in such document or any adjournment of it; and

(ii) the surrender, not less than 48 hours before the time fixed for such meeting or adjournment, of the receipt for each such deposited Note which is to be released to the Paying Agent which issued it and the notification of such surrender by such Paying Agent to the Issuer;

(b) it is certified that each depositor of such Notes or a duly authorised agent on his behalf has instructed such Paying Agent that the votes attributable to his Notes so deposited should be cast in a particular way in relation to the resolution(s) to be put to such meeting or any adjournment of it and that all such instructions are, during the period of 48 hours before the time fixed for such meeting or adjourned meeting, neither revocable nor subject to amendment;

(c) the total number and the serial numbers of the Notes so deposited are listed, distinguishing with regard to each such resolution between those in respect of which instructions have been so given (i) to vote for, and (ii) to vote against, the resolution; and

74

(d) any person named in such document (a proxy) is authorised and instructed by such Paying Agent to vote in respect of the Notes so listed in accordance with the instructions referred to in (c) above as set out in such document.

2

2.1 A holder of a Bearer Note may obtain a voting certificate from a Paying Agent or require a Paying Agent to issue a block voting instruction by depositing his Note with such Paying Agent not later than 48 hours before the time fixed for any meeting. Voting certificates and block voting instructions shall be valid until the relevant Notes are released pursuant to paragraph 1 and until then the holder of any such voting certificate or, as the case may be, the proxy named in any such block voting instruction shall, for all purposes in connection with any meeting or proposed meeting or adjourned meeting or proposed adjourned meeting of Noteholders, be deemed to be the holder of the Notes to which such voting certificate or block voting instruction relates and the Paying Agent with which (or to the order of which) such Notes have been deposited shall be deemed for such purposes not to be the holder of those Notes.

2.2 A holder of a Registered Note may by an instrument in writing (a form of proxy) in the form available from the specified office of any Transfer Agent in the English language signed by the holder or, in the case of a corporation, executed under its common seal or signed on its behalf by an attorney or a duly authorised officer of the corporation and delivered to the Transfer Agent not later than 24 hours before the time fixed for any meeting, appoint any person (a proxy) to act on his or its behalf in connection with any meeting or proposed meeting of Noteholders.

2.3 Any holder of a Registered Note which is a corporation may by delivering to any Transfer Agent not later than 24 hours before the time fixed for any meeting a resolution of its directors or other governing body in the English language authorise any person to act as its representative (a representative) in connection with any meeting or proposed meeting of Noteholders.

2.4 Any proxy or representative appointed pursuant to 2.1 above or representative appointed pursuant to 2.2 above shall so long as such appointment remains in force be deemed, for all purposes in connection with any meeting or proposed meeting of Noteholders specified in such appointment, to be the holder of the Registered Notes to which such appointment relates and the holder of the Registered Notes shall be deemed for such purposes not to be the holder.

3 The Issuer and the Trustee at any time may, and the Trustee (subject to its being indemnified to its satisfaction against all costs and expenses thereby occasioned) upon a request in writing of Noteholders holding not less than one-tenth in principal amount of the Notes of any Series for the time being outstanding shall, convene a meeting of Noteholders of that Series. Whenever any such party is about to convene any such meeting it shall forthwith give notice in writing to the other parties of the day, time and place of the meeting and of the nature of the business to be transacted at it. Every such meeting shall be held at such time and place as the Trustee may approve (such approval not to be unreasonably withheld or delayed).

75

4 At least 21 days’ notice (exclusive of the day on which the notice is given and of the day on which the meeting is held) specifying the day, time and place of meeting shall be given to the Noteholders. A copy of the notice shall in all cases be given by the party convening the meeting to the other parties. Such notice shall also specify, unless in any particular case the Trustee otherwise agrees, the nature of the resolutions to be proposed and shall include a statement to the effect that Bearer Notes may be deposited with (or to the order of) any Paying Agent for the purpose of obtaining voting certificates or appointing proxies or representatives not later than 48 hours before the time fixed for the meeting and that the holders of Registered Notes may appoint proxies or representatives by executing and delivering a form of proxy or representative in the English language to the specified office of a Transfer Agent not later than 24 hours before the time fixed for the meeting or, in the case of corporations, may appoint representatives by resolution in the English language of their directors or other governing body and by delivering a certified copy of such resolution to the Transfer Agent not later than 24 hours before the time fixed for the meeting.

5 A person (who may, but need not, be a Noteholder) nominated in writing by the Trustee may take the chair at every such meeting but if no such nomination is made or if at any meeting the person nominated shall not be present within 15 minutes after the time fixed for the meeting the Noteholders present shall choose one of their number to be chairman, failing which the Issuer may appoint a chairman. The chairman of an adjourned meeting need not be the same person as was chairman of the original meeting.

6 At such meeting any two or more persons present in person holding Notes or voting certificates or being proxies or representatives and holding or representing in the aggregate not less than one-tenth in principal amount of the Notes for the time being outstanding shall (except for the purpose of passing an Extraordinary Resolution) form a quorum for the transaction of business and no business (other than the choosing of a chairman) shall be transacted at a meeting unless the requisite quorum be present at the commencement of business. The quorum at any such meeting for passing an Extraordinary Resolution shall (subject as provided below) be two or more persons present in person holding Notes or voting certificates or being proxies or representatives and holding Notes or representing in the aggregate a clear majority in principal amount of the Notes for the time being outstanding provided that at any meeting the business of which includes any of the matters specified in the proviso to paragraph 19 the quorum shall be one or more persons present in person holding Notes or voting certificates or being proxies or representatives and holding or representing in the aggregate not less than two-thirds in principal amount of the Notes for the time being outstanding.

7 If within 15 minutes from the time fixed for any such meeting a quorum is not present the meeting shall, if convened upon the requisition of Noteholders, be dissolved. In any other cases it shall stand adjourned (unless the Issuer and the Trustee agree that it be dissolved) for such period, not being less than 14 days nor more than 42 days, and to such place, as may be decided by the chairman. At such adjourned meeting one or more persons present in person holding Notes or voting certificates or being proxies or representatives (whatever the principal amount of the Notes so held or represented) shall form a quorum and may pass any resolution and decide upon all matters which could properly have been dealt with at the meeting from which the adjournment took place had a quorum been present at such meeting provided that any adjourned meeting at which is to be proposed an Extraordinary Resolution for the purpose of effecting any of the modifications specified in the proviso to paragraph 19 the quorum shall be one or more persons so present holding Notes or voting certificates or being proxies or representatives and holding or representing in the aggregate not less than one-third in principal amount of the Notes for the time being outstanding.

76

8 The chairman may with the consent of (and shall if directed by) any meeting adjourn such meeting from time to time and from place to place but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place.

9 At least 10 days’ notice of any meeting adjourned through want of a quorum shall be given in the same manner as for an original meeting and such notice shall state the quorum required at such adjourned meeting. It shall not, however, otherwise be necessary to give any notice of an adjourned meeting.

10 Every question submitted to a meeting shall be decided in the first instance by a show of hands and in case of equality of votes the chairman shall both on a show of hands and on a poll have a casting vote in addition to the vote or votes (if any) which he may have as a Noteholder or as a holder of a voting certificate or as a proxy or representative.

11 At any meeting, unless a poll is (before or on the declaration of the result of the show of hands) demanded by the chairman, the Issuer, the Trustee or by one or more persons holding one or more Notes or voting certificates or being proxies or representatives and holding or representing in the aggregate not less than one-fiftieth in principal amount of the Notes for the time being outstanding, a declaration by the chairman that a resolution has been carried or carried by a particular majority or lost or not carried by any particular majority shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.

12 If at any meeting a poll is so demanded, it shall be taken in such manner and (subject as provided below) either at once or after such an adjournment as the chairman directs and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded as at the date of the taking of the poll. The demand for a poll shall not prevent the continuation of the meeting for the transaction of any business other than the question on which the poll has been demanded.

13 Any poll demanded at any meeting on the election of a chairman or on any question of adjournment shall be taken at the meeting without adjournment.

14 The Issuer, the Guarantor and the Trustee (through their respective representatives) and their respective financial and legal advisers may attend and speak at any meeting of Noteholders. No one else may attend at any meeting of Noteholders or join with others in requesting the convening of such a meeting unless he is the holder of a Note or a voting certificate or is a proxy or representative.

15 At any meeting on a show of hands every person who is present in person and who produces a Note or voting certificate or is a proxy or representative shall have one vote and on a poll every person who is so present shall have one vote in respect of each principal amount equal to the minimum denomination of such Series of Notes so produced or represented by the voting certificate so produced or in respect of which he is a proxy or representative. Without prejudice to the obligations of proxies or representatives named in any block voting instruction, any person entitled to more than one vote need not use all his votes or cast all the votes to which he is entitled in the same way.

77

16 The proxy or representative named in any block voting instruction need not be a Noteholder.

17 Each block voting instruction shall be deposited at the registered office of the Issuer, or at such other place as the Trustee shall designate or approve, not less than 24 hours before the time appointed for holding the meeting or adjourned meeting at which the proxy or representative named in the block voting instruction proposes to vote and in default the block voting instruction shall not be treated as valid unless the chairman of the meeting decides otherwise before such meeting or adjourned meeting proceeds to business. A notarially certified copy of each such block voting instruction and satisfactory proof (if applicable) shall be produced by the proxy or representative at the meeting if required by the Trustee but the Trustee shall not thereby be obliged to investigate or be concerned with the validity of, or the authority of, the proxy or representative named in any such block voting instruction.

18 Any vote given in accordance with the terms of a block voting instruction shall be valid even if the block voting instruction or any of the Noteholders’ instructions pursuant to which it was executed has been previously revoked or amended, provided that no intimation in writing of such revocation or amendment shall have been received from the relevant Paying Agent by the Issuer or the, Trustee at its registered office or by the chairman of the meeting in each case not less than 24 hours before the time fixed for the meeting or adjourned meeting at which the block voting instruction is used.

19 A meeting of Noteholders shall, subject to the Conditions, in addition to the powers given above, but without prejudice to any powers conferred on other persons by this Trust Deed, have power exercisable by Extraordinary Resolution:–

19.1 to sanction any proposal by the Issuer for any modification, abrogation, variation or compromise of, or arrangement in respect of, the rights of the Noteholders and/or the Couponholders against the Issuer or the Guarantor whether such rights shall arise under this Trust Deed or otherwise;

19.2 to sanction any proposal by the Issuer for the exchange or sale of the Notes for, or substitution for the Notes of, or the conversion of the Notes into, or the cancellation of the Notes in consideration of, shares, bonds, or other obligations or securities of the Issuer or any other body corporate formed or to be formed;

19.3 to assent to any modification of this Trust Deed, the Notes, Receipts, Coupons or Talons which shall be proposed by the Issuer or the Trustee;

19.4 to authorise anyone to concur in and do all such things as may be necessary to carry out and give effect to any Extraordinary Resolution;

19.5 to give any authority, direction or sanction which under this Trust Deed or the Notes is required to be given by Extraordinary Resolution;

78

19.6 to appoint any persons (whether Noteholders or not) as a committee or committees to represent the interests of the Noteholders and to confer upon such committee or committees any powers or discretions which the Noteholders could themselves exercise by Extraordinary Resolution;

19.7 to approve a person proposed to be appointed as a new Trustee and to remove any Trustee; and

19.8 to discharge or exonerate the Trustee from any liability in respect of any act or omission for which it may become responsible under this Trust Deed, the Notes or the Coupons;

provided that the special quorum provisions contained in the proviso to paragraph 6 and, in the case of an adjourned meeting, in the proviso to paragraph 7 shall apply in relation to any Extraordinary Resolution for the purpose of paragraph 19.2 or 19.8, any of the proposals listed in Condition 10(a) or any amendment to this proviso.

20 A resolution passed at a meeting of Noteholders duly convened and held in accordance with this Trust Deed shall be binding upon all the Noteholders, whether or not present at such meeting, and upon all the Couponholders and each of the Noteholders and Couponholders shall be bound to give effect to it accordingly. The passing of any such resolution shall be conclusive evidence that the circumstances of such resolution justify the passing of it.

21 The expression Extraordinary Resolution means a resolution passed at a meeting of Noteholders duly convened and held in accordance with these provisions by a majority consisting of not less than three-quarters of the votes cast.

22 Minutes of all resolutions and proceedings at every such meeting shall be made and entered in the books to be from time to time provided for that purpose by the Issuer or the Trustee and any such minutes, if purporting to be signed by the chairman of the meeting at which such resolutions were passed or proceedings transacted or by the chairman of the next succeeding meeting of Noteholders, shall be conclusive evidence of the matters contained in them and until the contrary is proved every such meeting in respect of the proceedings of which minutes have been so made and signed shall be deemed to have been duly convened and held and all resolutions passed or proceedings transacted at it to have been duly passed and transacted.

23 Subject to all other provisions contained in this Trust Deed, the Trustee may without the consent of the Noteholders (but after consultation with the Issuer) prescribe such further regulations regarding the holding of meetings of Noteholders and attendance and voting at them as the Trustee may in its sole discretion determine including particularly (but without prejudice to the generality of the foregoing) such regulations and requirements as the Trustee thinks reasonable:–

23.1 so as to satisfy itself that persons who purport to requisition a meeting in accordance with paragraph 3 or who purport to make any requisition to the Trustee in accordance with this Trust Deed are in fact Noteholders; and

23.2 as to the form of voting certificates or block voting instructions to be issued pursuant to paragraph 1 so as to satisfy itself that persons who purport to attend or vote at any meeting of Noteholders are entitled to do so in accordance with this Trust Deed.

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24 If and whenever the Issuer shall have issued and have outstanding any Notes which are not identical and do not form one single Series with the other Notes then in issue, then those Notes which are in all respects identical (including as to listing) shall be deemed to constitute a separate Series of the Notes and the foregoing provisions of this Schedule shall have effect subject to the following modifications:–

24.1 a resolution which in the opinion of the Trustee affects one Series only of the Notes shall be deemed to have been duly passed if passed at a separate meeting of the holders of the Notes of that Series;

24.2 a resolution which in the opinion of the Trustee affects more than one Series of the Notes but does not give rise to a conflict of interest between the holders of Notes of any of the Series so affected shall be deemed to have been duly passed if passed at a single meeting of the holders of the Notes of all the Series so affected;

24.3 a resolution which in the opinion of the Trustee affects more than one Series of the Notes and gives or may give rise to a conflict of interest between the holders or the Notes of any of the Series so affected shall be deemed to have been duly passed only if it shall be duly passed at separate meetings of the holders of the Notes of each Series so affected provided that for the purposes of determining the votes a Noteholder is entitled to cast pursuant to paragraph 15, each Noteholder shall have one vote in respect of each euro l ,000 principal amount of Notes held, converted, if such Notes are not denominated in euro, in accordance with Clause 15.2 (Extent of Discharge).

24.4 to all such meetings as aforesaid all the preceding provisions of this Schedule shall apply mutatis mutandis as though references therein to “Notes” and “Noteholders” were references to the Notes and Noteholders of the Series concerned.

25 A resolution in writing signed by or on behalf of the holders of not less than 90 per cent. in principal amount of the Notes who for the time being are entitled to receive notice of a meeting shall for all purposes be as valid and effective as an Extraordinary Resolution passed at a meeting of such Noteholders duly convened and held. Such resolution in writing may be contained in one document or in several documents in like form each signed by or on behalf of one or more of the relevant Noteholders and the date of such resolution shall be the date of the latest such document.

26 “24 hours” shall mean a period of 24 hours including all or part of a day upon which banks are open for business in both the place where the relevant meeting is to be held and in each of the places where the Paying Agents have their specified offices (disregarding for this purpose the day upon which such meeting is to be held) and such period shall be extended by one period or, to the extent necessary, more periods of 24 hours until there is included as aforesaid all or part of a day upon which banks are open for business in all of the places as aforesaid; and

27 “48 hours” shall mean a period of 48 hours including all or part of two days upon which banks are open for business both in the place where the relevant meeting is to be held and in each of the places where the Paying Agents have their specified offices (disregarding for this purpose the day upon which such meeting is to be held) and such period shall be extended by one period or, to the extent necessary, more periods of 24 hours until there is included as aforesaid all or part of two days upon which banks are open for business in all of the places as aforesaid.

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IN WITNESS WHEREOF this Trust Deed has been executed as a deed and delivered on the date stated at the beginning.

EXECUTED AS A DEED by )

INTERCONTINENTAL HOTELS GROUP PLC )

acting by )

Director        R. NORTH

Secretary      R. WINTER

EXECUTED AS A DEED by )

SIX CONTINENTS PLC )

acting by )

Director        R. NORTH

Secretary      R. WINTER

The COMMON SEAL of )

HSBC TRUSTEE (C.I) LIMITED )

was hereunto affixed in the )

presence of: )

Authorised Signatory      I. GRAHAM

Authorised Signatory      G. McENERY

81

EX-4

Exhibit 4(a)(ii)

CONFORMED COPY

$2,650,000,000

FACILITY AGREEMENT

dated 13 February 2003

for

INTERCONTINENTAL HOTELS GROUP PLC

arranged by
BARCLAYS CAPITALHSBC BANK plc
J.P. MORGAN plc
SALOMON BROTHERS INTERNATIONAL LIMITED
THE ROYAL BANK OF SCOTLAND plc

with

HSBC BANK plc
acting as Agent

Ref: RJE/PHPS/EHXT

	CONTENTS
CLAUSE		PAGE
	SECTION 1
	INTERPRETATION
1.	Definitions and interpretation	1
	SECTION 2
	THE FACILITIES
2.	The Facilities	16
3.	Purpose	16
4.	Conditions of Utilisation	16
	SECTION 3
	UTILISATION
5.	Utilisation	19
6.	Optional Currencies	20
	SECTION 4
	REPAYMENT, PREPAYMENT AND CANCELLATION
7.	Repayment	23
8.	Prepayment and cancellation	24
	SECTION 5
	COSTS OF UTILISATION
9.	Interest	27
10.	Interest Periods	28
11.	Changes to the calculation of interest	29
12.	Fees	30
	SECTION 6
	ADDITIONAL PAYMENT OBLIGATIONS
13.	Tax gross up and indemnities	31
14.	Increased costs	36
15.	Other indemnities	37
16.	Mitigation by the Lenders	38
17.	Costs and expenses	38
	SECTION 7
	GUARANTEE
18.	Guarantee and indemnity	39
	SECTION 8
	REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT
19.	Representations	42
20.	Information undertakings	44
21.	Financial covenants	47
22.	General undertakings	50
23.	Events of Default	54
	SECTION 9
	CHANGES TO PARTIES
24.	Changes to the Lenders	58
25.	Changes to the Obligors	61

i

	SECTION 10
	THE FINANCE PARTIES
26.	Role of the Agent and the Arranger	63
27.	Conduct of business by the Finance Parties	67
28.	Sharing among the Finance Parties	67
	SECTION 11
	ADMINISTRATION
29.	Payment mechanics	69
30.	Set-off	71
31.	Notices	71
32.	Calculations and certificates	73
33.	Partial invalidity	73
34.	Remedies and waivers	73
35.	Amendments and waivers	73
36.	Counterparts	74
	SECTION 12
	GOVERNING LAW AND ENFORCEMENT
37.	Governing law	75
38.	Enforcement	75

THE SCHEDULES
SCHEDULE	PAGE
SCHEDULE 1 The Original Lenders	76
SCHEDULE 2 Conditions Precedent	77
SCHEDULE 3 Requests	80
SCHEDULE 4 Mandatory Cost formulae	82
SCHEDULE 5 Form of Transfer Certificate	85
SCHEDULE 6 Form of Accession Letter	87
SCHEDULE 7 Form of Resignation Letter	88
SCHEDULE 8 Form of Compliance Certificate	89
SCHEDULE 9 Security	90
SCHEDULE 10 Timetables	91
SCHEDULE 11 Form of LMA Confidentiality Undertaking	93
SCHEDULE 12 Form of Term Out Notice	98

ii

THIS AGREEMENT is dated 13 February 2003 and made between:

(1)	INTERCONTINENTAL HOTELS GROUP PLC (the "Company");
(2)	BARCLAYS CAPITAL (the Investment Banking Division of Barclays Bank PLC), HSBC BANK plc, J.P. MORGAN plc, SALOMON BROTHERS INTERNATIONAL LIMITED and THE ROYAL BANK OF SCOTLAND plc (whether acting individually or together the "Arranger");
(3)	THE FINANCIAL INSTITUTIONS listed in Schedule 1 as lenders (the "Original Lenders"); and
(4)	HSBC BANK plc as agent of the other Finance Parties (the "Agent").

IT IS AGREED as follows:

SECTION 1

INTERPRETATION

1	DEFINITIONS AND INTERPRETATION
1.1	Definitions
	In this Agreement:
	"Accession Letter" means a document substantially in the form set out in Schedule 6 (Form of Accession Letter).
	"Additional Borrower" means a company which becomes an Additional Borrower in accordance with Clause 25 (Changes to the Obligors).
	"Additional Cost Rate" has the meaning given to it in Schedule 4 (Mandatory Cost formulae).
	"Additional Guarantor" means a company which becomes an Additional Guarantor in accordance with Clause 25 (Changes to the Obligors).
	"Additional Obligor" means an Additional Borrower or an Additional Guarantor.
	"Affiliate" means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.
	"Agency Fee Letter" means the letter dated 3 February 2003 between the Agent and Six Continents PLC and signed by the Company on the date of this Agreement setting out any of the fees referred to in Clause 12.3 (Agency fee).
	"Agent's Spot Rate of Exchange" means the spot rate of exchange at which the Agent is able to purchase the relevant currency with the Base Currency in the London foreign exchange market at or about 11:00 a.m. on a particular day.
	"Applicable Accounting Principles" means those accounting principles, standards and practices on which the preparation of the Original Financial Statements was based and those accounting policies which were used in the preparation of those financial statements.
	"Authorisation" means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

1

"Availability Period" means:
(a)	in relation to Facility A, the period from and including the date of this Agreement to and including the date which is the earlier of:
	(i)	the date which falls one month prior to the Termination Date applicable to the Facility A; and
	(ii)	the Term Out Date;
(b)	in relation to Facility B, the period from and including the date of this Agreement to and including the date falling seven days following the Separation Date; and
(c)	in relation to Facility C, the period from and including the date of this Agreement to and including the date falling one month prior to the Termination Date applicable to Facility C.
"Available Commitment" means, in relation to a Facility, a Lender's Commitment under that Facility minus:
(a)	the Base Currency Amount of its participation in any outstanding Loans under that Facility; and
(b)	in relation to any proposed Utilisation, the Base Currency Amount of its participation in any Loans that are due to be made under that Facility on or before the proposed Utilisation Date,
other than, in relation to any proposed Utilisation under Facility A before the Term Out Date or any proposed Utilisation under Facility C only, that Lender's participation in an y Facility A Loans or Facility C Loans that are due to be repaid or prepaid on or before the proposed Utilisation Date.
"Available Facility" means, in relation to a Facility, the aggregate for the time being of each Lender's Available Commitment in respect of that Facility.
"Base Currency" or "$" means US Dollars.
"Base Currency Amount" means, in relation to a Loan, the amount specified in the Utilisation Request delivered by a Borrower for that Loan (or, if the amount requested is not denominated in the Base Currency, that amount converted into the Base Currency at the Agent's Spot Rate of Exchange on the date which is three Business Days before the Utilisation Date or, if later, on the date the Agent receives the Utilisation Request) adjusted to reflect an y repayment (other than, in relation to Facility A after the Term Out Date and Facility B, a repayment arising from a change of currency), prepayment, consolidation or division of the Loan.
"Borrower" means the Company or an Additional Borrower, unless it has ceased to be a Borrower in accordance with Clause 25 (Changes to the Obligors).
"Borrowings" has the meaning given to it in Clause 21 ( Financial covenants).
"Break Costs" means the amount (if any) by which:
(a)	the interest (excluding the Margin and Mandatory Costs) which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan

2

	or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;
exceeds:
(b)	the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.
"Bridge Facility" means the £3,000,000,000 syndicated credit facility for Six Continents PLC dated 3 February 2003.
"Britvic" means Britannia Soft Drinks Limited and its subsidiaries for the time being.
"Business Day" means a day (other than a Saturday or Sunday) on which banks are open for general business in London and:
(a)	(in relation to any date for payment, purchase or sale of a currency other than euro) the principal financial centre of the country of that currency; or
(b)	(in relation to any date for payment, purchase or sale of euro) any TARGET Day.
"Cash" has the meaning given to it in Clause 21 (Financial covenants).
"Cash Equivalent Investments" has the meaning given to it in Clause 21 (Financial covenants).
"Commitment" means a Facility A Commitment, Facility B Commitment or a Facility C Commitment.
"Compliance Certificate" means a certificate substantially in the form set out in Schedule 8 (Form of Compliance Certificate).
"Conditional Utilisation Request" means a Utilisation Request, in relation to the drawings required to be made by the Company towards effecting the repayment of an element of the Bridge Facility which becomes repayable on the Separation Date.
"Confidentiality Undertaking" means a confidentiality undertaking in the form set out in Schedule 11 (Form ofLMA Confidentiality Undertaking) or in any other form agreed between the Company and the Agent.
"Consolidated Gross Assets" means the consolidated fixed assets plus consolidated current assets of the Group but for the purposes of the Initial Financial Statements shall exclude the debtor amount of £831,000,000 due from the Retail Group.
"Consolidated Net Worth" has the meaning given to it in Clause 21 (Financial covenants).
"Default" means an Event of Default or any event or circumstance specified in Clause 23 (Events of Default) which would (with the expiry of a grace period and/or the giving of notice) be an Event of Default.
"Disposal" has the meaning given to it in Clause 22.4(a) (Disposals).
"Disposal Proceeds" means the cash proceeds received by a member of the Group from the Disposal of any asset to any person who is not a mem ber of the Group other than:

3

(a)	any Disposal:
	(i)	referred to in paragraphs (i), (ii), (iii), (v), (vi), (vii), (viii), (x) and (xi) of paragraph (b) of Clause 22.4 (Disposals) (in the case of paragraph (xi) unless, as part of the relevant consent, the Majority Lenders have stipulated otherwise); or
	(ii)	to which the Majority Lenders have agreed shall not be taken into account for the purposes of this definition;
(b)	cash proceeds from any Disposal (excluding those referred to in paragraph (a) above) which do not exceed £125,000,000 in aggregate in any financial year of the Company; and
(c)	cash proceeds from any single Disposal or series of connected Disposals (excluding those referred to in paragraph (a) above) which do not exceed £3,000,000 and provided that such Disposals shall not be taken into account in reaching the aggregate amount specified in paragraph (b) above.
"EBITDA" has the meaning given to it in Clause 21 (Financial covenants).
"EURIBOR" means, in relation to any Loan in euro:
(a)	the applicable Screen Rate; or
(b)	(if no Screen Rate is available for the Interest Period of that Loan) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request quoted by the Reference Banks to leading banks in the European interbank market,
as of the Specified Time on the Quotation Day for the offering of deposits in euro for a period comparable to the Interest Period of the relevant Loan.
"euro" or "€" means the single currency of the Participating Member States.
"Event of Default" means any event or circumstance specified as such in Clause 23 (Events of Default).
"Extended Lodging Asset" means a Lodging Asset and any lodging or related business or asset.
"External Debt" means Financial Indebtedness of any member of the Group (other than Project Finance Indebtedness) raised as a result of issuing any note, bond or other debt security (whether issued to the public or by means of private placement) with a maturity of more than one year and in an amount per transaction in excess of £25,000,000 (or in an aggregate amount from transactions in a calendar year in excess of £50,000,000).
"Facility" means Facility A, Facility B or Facility C.
"Facility A" means the revolving loan facility or, after the Term Out Date, the term loan facility made available under this Agreement as described in Clause 2.1(a) (The Facilities).

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"Facility A Commitment" means:
(a)	in relation to an Original Lender, the amount in the Base Currency set opposite its name under the heading "Facility A Commitment" in Schedule 1 (The Original Lenders) and the amount of any other Facility A Commitment transferred to it under this Agreement; and
(b)	in relation to any other Lender, the amount in the Base Currency of any Facility A Commitment transferred to it under this Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
"Facility A Loan" means a loan made or to be made under Facility A or the principal amount outstanding for the time being of that loan.
"Facility A Repayment Date" means the Termination Date applicable to Facility A.
"Facility B" means the term loan facility made available under this Agreement as described in Clause 2.1(b) (The Facilities).
"Facility B Commitment" means:
(a)	in relation to an Original Lender, the amount in the Base Currency set opposite its name under the heading "Facility B Commitment" in Schedule 1 (The Original Lenders) and the amount of any other Facility B Commitment transferred to i t under this Agreement; and
(b)	in relation to any other Lender, the amount in the Base Currency of any Facility B Commitment transferred to it under this Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
"Facility B Loan" means a loan made or to be made under Facility B or the principal amount outstanding for the time being of that loan.
"Facility B Repayment Date" means the Termination Date applicable to Facility B.
"Facility C" means the revolving loan facility made available under this Agreement as described in Clause 2.1(c) (The Facilities).
"Facility C Commitment" means
(a)	in relation to an Original Lender, the amount in the Base Currency set opposite its name under the heading "Facility C Commitment" in Schedule 1 (The Original Lenders) and the amount of any other Facility C Commitment transferred to it under this Agreement; and
(b)	in relation to any other Lender, the amount in the Base Currency of any Facility C Commitment transferred to it under this Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
"Facility C Loan" means a loan made or to be made under Facility C or the principal amount outstanding for the time being of that loan.
"Facility C Repayment Date" means the Termination Date applicable to Facility C.
"Facility Office" means the office or offices notified by a Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days'

5

written notice) as the office or offices through which it will perform its obligations under this Agreement.
"Final Facility A Termination Date" means the date which is 24 months from the date of this Agreement.
"Finance Document" means this Agreement, the Agency Fee Letter, th e Mandate Letter, any Accession Letter, any Resignation Letter and any other document designated as such by the Agent and the Company.
"Finance Party" means the Agent, the Arranger or a Lender.
"Financial Indebtedness" means any indebtedness (without doubl e counting) for or in respect of:
(a)	moneys borrowed;
(b)	any amount raised by acceptance under any acceptance credit facility;
(c)	any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock, commercial paper or any similar instrument (entered into or issued primarily as a method of raising finance);
(d)	the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with GAAP, be treated as a finance or capital lease;
(e)	receivables sold or discounted (other than any receivables to the extent they are sold or discounted as a non-recourse basis);
(f)	any amount:
	(i)	raised under any other transaction (including any forward sale or purchase agreement) required by GAAP to be shown as a borrowin g in the audited consolidated balance sheet of the Group; or
	(ii)	raised under any other transaction entered into primarily as a method of raising finance not required by GAAP to be shown as a borrowing in the audited consolidated balance sheet of the Group;
(g)	for the purpose of Clause 23.5 (Cross default) only, any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);
(h)	shares which are expressed to be redeemable prior to the Termination Date for Facility C;
(i)	any counter-indemnity obligation in respect of a guarantee, indemnity, bond, letter of credit or any other instrument issued by a bank or financial institution; and
(j)	the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (i) above,
but excluding indebtedness owing by a member of the Group to another member of the Group.
"Fitch" means Fitch Ratings.

6

"GAAP" means generally accepted accounting principles, standards and practices in the United Kingdom.
"Group" means the Company and its Subsidiaries for the time being.
"Guarantor" means the Company or an Additional Guarantor, unless it has ceased to be a Guarantor in accordance with Clause 25 (Changes to the Obligors).
"Holding Company" means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.
"Hotels Group" means the Company, Six Continents PLC and the subsidiary undertakings of Six Continents PLC which will become subsidiary undertakings of the Company on the Separation Date.
"Information Memorandum" means the document in the form approved by the Company concerning the Group which, at the Company's request and on its behalf, is to be prepared in relation to this transaction and shall be distributed after the date of this Agreement by the Arranger to selected financial institutions for the purpose of primary syndication of the Facilities.
"Initial Financial Statements" means the combined financial statements set out in Part VI of the listing particulars of the Company as seen by the Arranger prior to the date of this Agreement and circulated to shareholders within a few days of the date of this Agreement.
"Interest Expense" has the meaning given to it in Clause 21 (Financial covenants).
"Interest Period" means, in relation to a Loan, each period determined in accordance with Clause 10 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 9.3 (Default interest).
"Joint Venture Entity" means any joint venture company, corporation, partnership, trust or other entity in any jurisdiction in which a member of the Group owns 50 per cent. or less of the issued share capital, equity or voting rights.
"Lender" means:
(a)	any Original Lender; and
(b)	any bank, financial institution, trust, fund or other entity which has become a Party in accordance with Clause 24 (Changes to the Lenders),
which in each case has not ceased to be a Party in accordance with the terms of this Agreement.
"LIBOR" means, in relation to any Loan:
(a)	the applicable Screen Rate; or
(b)	(if no Screen Rate is available for the currency or Interest Period of tha t Loan) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request quoted by the Reference Banks to leading banks in the London interbank market,
as of the Specified Time on the Quotation Day for the offering of deposits in the currency of that Loan and for a period comparable to the Interest Period for that Loan.
"LMA" means the Loan Market Association.

7

"Loan" means a Facility A Loan, a Facility B Loan or a Facility C Loan.

"Lodging Asset" means any hotel or lodging property.

"Majority Lenders" means a Lender or Lenders whose Commitments aggregate more than 66 ² / ₃ per cent. of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66 ² / ₃ per cent. of the Total Commitments immediately prior to the reduction).

"Mandate Letter" means the letter dated on 3 February 2003 between the Arranger and Six Continents PLC and acceded to by the Company on the date hereof relating to, amongst other things, the sub-underwriting and primary syndication of the Facilities (as amended by a letter dated the date of this Agreement).

"Mandatory Cost" means the percentage rate per annum calculated by the Agent in accordance with Schedule 4 (Mandatory Cost formulae).

"Margin" means at any time the rate per annum determined by reference to the long-term credit ratings assigned to the Company by either Moody's and/or S&P (each a "long-term credit rating") last published (and not withdrawn) in accordance with the following table:

Rating	Margin (per cent. p.a.)
Moody's/S&P
Baa1/BBB+ or higher	0.70
Baa2/BBB	0.80
Baa3/BBB-	1.00
Ba1/BB+ or lower	1.60
However:

(a)	Following the repayment or prepayment and cancellation of Facility A, each Margin set out in the table above will be reduced by 0.05 per cent. per annum other than where the Company's long-term credit rating is Ba1/BB+ or lower in which case no such reduction shall apply;
(b)	following the repayment or prepayment and cancellation of Facility A and Facility B, each Margin set out in the table above will be reduced, in addition to the reduction specified in paragraph (a) above, by a further 0.10 per cent. per annum other than where the Company's long-term credit rating is Baa3/BBB- or lower in which case no such reduction shall apply;
(c)	if the long-term credit ratings assigned by Moody's and/or S&P differ, the applicable Margin will, subject to paragraphs (a) and (b) above, be determined on the basis of the lowest rating;
(d)	if there is only one long-term credit rating, the Margin will, subject to paragraphs (a) and (b) above, be determined on the basis of that rating;

8

(e)	if there is no current long-term credit rating, the Margin will be the highest applicable Margin set out in the table above as the same may have been reduced pursuant to paragraphs (a) and (b) above;
(f)	if at any time a decrease in the Margin is to take effect a Default is continuing, such decrease shall not take effect at that time but such decrease shall take effect with effect from the date such Default ceases to be continuing;
(g)	any increase or decrease in the applicable Margin as a result of any of the circumstances in paragraphs (a) to (e) above will take effect for all purposes under this Agreement on the first day of the date of publication of a change in the published long term unsecured credit rating or, in the case of paragraph (e) the date on which Moody's and S&P cease to assign a rating to the Company and/or the date on which the relevant event occurred;
(h)	in this definition:
	(i)	"Moody's" means Moody's Investors Service Inc.; and
	(ii)	"S&P" means Standard & Poor's Ratings Service.
"Material Adverse Effect" means a material adverse effect on:
(a)	the ability of the Obligors (taken as a whole) to perform and comply with their payment obligations under any Finance Document; or
(b)	the ability of the Company to perform and comply with its obligations under Clause 21 (Financial covenants).
"Material Subsidiary" means, at any time, any Subsidiary of the Company:
(a)	whose gross assets represent 5 per cent. or more of Consolidated Gross Assets or whose EBITDA represents 5 per cent. or more of consolidated EBITDA of the Group, in each case, as calculated by reference to the latest financial statements of such Subsidiary (which shall be audited if such statements are prepared by that Subsidiary) and the latest audited consolidated financial statements of the Group adjusted in such manner as the auditors of the Company may determine (which determination shall be conclusive in the absence of manifest error) (i) to reflect the gross assets and EBITDA of any person which has become or ceased to be a member of the Group since the end of the financial year to which the latest audited consolidated financial statements of the Group relate where such adjustment is requested by the Company and (ii) so that for the purposes of this definition, the gross assets of the relevant Subsidiary shall be calculated on the same basis as Consolidated Gross Assets are calculated and/or, as the case may be, EBITDA of the relevant Subsidiary shall be calculated on the sam e basis as consolidated EBITDA for the Group (but, in each case, relating only to the relevant Subsidiary) and making such adjustments and eliminations as are required to show the same as the contribution of the relevant Subsidiary to Consolidated Gross As sets and/or, as the case may be, consolidated EBITDA of the Group; or
(b)	to which is transferred all or substantially all of the business, undertaking or assets of a Subsidiary which immediately prior to such transfer is a Material Subsidiary, whereupon

9

	the transferor Subsidiary shall cease to be a Material Subsidiary and the transferee Subsidiary shall become a Material Subsidiary under this sub-paragraph (b) upon the completion of such transfer.
Any determination made by the auditors of the Company as to whe ther a Subsidiary of the Company is or is not a Material Subsidiary at any time shall be conclusive in the absence of manifest error. Prior to the receipt of the first consolidated financial statements of the Group required to be delivered pursuant to Clause 20.1 (Financial statements), Consolidated Gross Assets and consolidated EBITDA shall be calculated by reference to the Initial Financial Statements.
"Month" means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:
(a)	if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day; and
(b)	if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month.
The above rules will only apply to the last Month of any period.
"Net Borrowings" has the meaning given to it in Clause 21 (Financial covenants).
"Net Interest Payable" has the meaning given to it in Clause 21 ( Financial covenants).
"Net Proceeds" means, in relation to External Debt and Disposal Proceeds, the cash proceeds received by the Company or by any member of the Group net of:
(a)	transaction costs (including Taxes, fees and other costs and expenses) incurred or accrued by the Company or any member of the Group in connection with the relevant transaction; and
(b)	in the case of Disposal Proceeds, the amount of any:

	(i)	adjustment which may be required to be made to the proceeds received (and required to be returned to the relevant purchaser by the relevant Group company) pursuant to the agreement relating to that Disposal; or
	(ii)	retention by a purchaser from the purchase price until such time as that amount is received by the relevant Group company.
"Obligor" means the Company, a Borrower or a Guarantor.
"Optional Currency" means a currency (other than the Base Currency) which complies with the conditions set out in Clause 4.3 (Conditions relating to Optional Currencies ).
"Original Financial Statements" means the audited consolidated financial statements of the Six Continents PLC Group for the financial year ended 30 September 2002.
"Participating Member State" means any member state of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.

10

"Party" means a party to this Agreement.
"Project Finance Indebtedness" means Financial Indebtedness (in respect of which Security has been given) incurred by a member of the Group (a "Project Group Member") for the purposes of financing the acquisition, construction, development and/or operation of an asset (a "Project Asset") where the provider of the Financial Indebtedness has no recourse against any member of the Group, except for recourse to:
(a)	the Project Asset of the Project Group Member or receivables arising from the Project Asset;
(b)	a Project Group Member for the purpose of enforcing Security given by it so long as:
	(i)	the recourse is limited to recoveries in respect of the Project Asset; and
	(ii)	if the Project Asset does not comprise all or substantially all of the business of that Project Group Member, the provider of the Financial Indebtedness does not have the right to take any steps towards its winding up or dissolution or the appointment of a liquidator, administrator, receiver or similar officer or per son, other than in respect of the Project Asset or receivables arising therefrom; or
	(iii)	a member of the Group to the extent only of its shareholding in a Project Group Member.
"Project Group Member" has the meaning given to it in paragraph (a) of the definition of Project Finance Indebtedness provided that the principal assets and business of such member of the Group is constituted by Project Assets and it has no other Financial Indebtedness except Project Finance Indebtedness.
"Qualifying Lender" has the meaning given to it in Clause 13 (Tax gross-up and indemnities).
"Quotation Day" means, in relation to any period for which an interest rate is to be determined:
(a)	(if the currency is sterling) the first day of that period;
(b)	(if the currency is euro) two TARGET Days before the first day of that period; or
(c)	(for any other currency) two Business Days before the first day of that period,
unless market practice differs in the Relevant Interbank Market for a currency, in which case the Quotation Day for that currency will be determined by the Agent in accordance with market practice in the Relevant Interbank Market (and if quotations for that currency and period would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).
"Reference Banks" means, in relation to LIBOR, Mandatory Costs and EURIBOR the principal London offices of Citibank N.A., HSBC Bank plc and The Royal Bank of Scotland plc or such other banks as may be appointed by the Agent in agreement with the Company (such agreement not to be unreasonably withheld).
"Relevant Interbank Market" means, in relation to euro, the European interbank market and, in relation to any other currency, the London interbank market.
"Relevant Period" has the meaning given to it in Clause 21 (Financial covenants).

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"Repeating Representations" means each of the representations set out in Clauses 19.1 (Status) to 19.4 (Power and authority), paragraph (a) of Clause 19.6 (No Default) and 19.9 (Pari passu ranking).
"Resignation Letter" means a letter substantially in the form set out in Schedule 7 (Form of Resignation Letter).
"Retail Group" means TopCo PLC and the subsidiary undertakings of Six Continents PLC which will remain as subsidiary undertakings of TopCo PLC on the Separation Date.
"Rollover Loan" means one or more Facility A Loans prior to the Term Out Date or one or more Facility C Loans:
(a)	made or to be made on the same day that one or more maturing Facility A Loans or Facility C Loans, as the cas e may be, is or are due to be repaid;
(b)	the aggregate amount of which is equal to or less than the maturing Facility A Loan(s) or, as the case may be, Facility C Loan(s) (unless it is more than the maturing Facility A Loan(s) or Facility C Loan(s) solely because it arose as a result of the operation of Clause 6.2 (Unavailability of a currency));
(c)	in the same currency as the maturing Facility A or Facility C Loan(s) (unless it arose as a result of the operation of Clause 6.2 ( Unavailability of a currency)); and
(d)	made or to be made to the same Borrower under the same Facility for the purpose of refinancing the maturing Facility A Loan(s) or Facility C Loan(s).
"Screen Rate" means:
(a)	in relation to LIBOR, the British Bankers Association Interest Settlement Rate for the relevant currency and period; and
(b)	in relation to EURIBOR, the percentage rate per annum determined by the Banking Federation of the European Union for the relevant period,
displayed on the appropriate page of the Reuters screen. If the agreed page is re placed or service ceases to be available, the Agent may specify another page or service displaying the appropriate rate after consultation with the Company and the Lenders.
"Security" means a mortgage, pledge, lien, hypothecation, security interest or other charge or encumbrance entered into for the purpose of securing any obligation of any person.
"Selection Notice" means a notice substantially in the form set out in Part II of Schedule 3 (Selection Notice) given in accordance with Clause 10 (Interest Periods) in relation to a Term Loan or Facility B.
"Separation" means the proposal by Six Continents PLC which will result in two separately listed groups; one of which will be the Hotels Group carrying out the hotels and soft drinks businesses and the other which will be the Retail Group carrying out the retail business, and to be effected substantially in the manner contemplated by the Separation Steps Paper.
"Separation Date" means the date on which the shares in the Company and in TopCo PLC are (i) admitted to the Official List of the UK Listing Authority in accordance with paragraph 7.1 of the

12

Listing Rules of the UK Listing Authority and (ii) admitted to trading on the London Stock Exchange plc.
"Separation Steps Paper" means the paper dated 3 February 2003 and entitled 'Separation Steps Paper'.
"Six Continents PLC Group" means Six Continents PLC and its subsidiaries from time to time.
"Specified Time" means a time determined in accordance with Schedule 10 (Timetables).
"Subsidiary" means a subsidiary within the meaning of section 736 of the Companies Act 1985 and, for the purpose of Clause 21 (Financial covenants) and in relation to financial statements of the Group, a subsidiary undertaking within the meaning of section 258 of the Companies Act 1985, but in this Agreement "Subsidiary" shall:
(a)	for all purposes, other than in relation to Clause 21 (Financial covenants), exclude Britvic provided that if at any time after the date of this Agreement the Company obtains or acquires, directly or indirectly, 75 per cent. or more of the ordinary issued share capital of Britvic, Britvic shall become a Subsidiary for all purposes under this Agreement; and
(b)	for all purposes exclude each Project Group Member.
"TARGET" means Trans-European Automated Real-time Gross Settlement Express Transfer payment system.
"TARGET Day" means any day on which TARGET is open for the settlement of payments in euro.
"Tax" means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure by an Obligor to pay or any delay in paying by an Obligor any of the same).
"Taxes Act" means the Income and Corporation Taxes Act 1988.
"Termination Date" means:
(a)	in relation to Facility A, subject to Clause 7.4 (Term Out Option), the date which is 364 days after the date of this Agreement;
(b)	in relation to Facility B, the date which is 3 years after the date of this Agreement; and
(c)	in relation to Facility C, the date which is 5 years after the date of this Agreement.
"Term Loan" means any Facility A Loan converted to a term loan pursuant to the Term Out Option.
"Term Out Date" means the date on which the Company gives a notice exercising the Term Out Option.
"Term Out Notice" has the meaning given to that term in Clause 7.4 (Term Out Option).
"Term Out Option" means the term out option set out in Clause 7.4 (Term Out Option).
"TopCo Facility Agreement" means the facility agreement dated the same date as this Agreement between, among others, TopCo PLC and the same arrangers as the Arranger.
"TopCo PLC" means Mitchells & Butlers PLC.

13

	"Total Commitments" means the aggregate of the Total Facility A Commitments and the Total Facility B Commitments and the Total Facility C Commitments being $2,650,000,000 at the date of this Agreement.
	"Total Facility A Commitments" means the aggregate of the Facility A Commitments, being $1,000,000,000 at the date of this Agreement.
	"Total Facility B Commitments" means the aggregate of the Facility B Commitments, being $900,000,000 at the date of this Agreement.
	"Total Facility C Commitments" means the aggregate of the Facility C Commitments being $750,000,000 at the date of this Agreement.
	"Transfer Certificate" means a certificate substantially in the form set out in Schedule 5 (Form of Transfer Certificate ) or a recommended form of the LMA or any other form agreed between the Agent and the Company.
	"Transfer Date " means, in relation to a transfer, the later of:
	(a)	the proposed Transfer Date specified in the Transfer Certificate; and
	(b)	the date on which the Agent executes the Transfer Certificate.
	"Unpaid Sum" means any sum due and payable but unpaid by an Obligor under the Finance Documents.
	"US Dollars" or "$" means the lawful currency for the time being of the United States of America.
	"Utilisation" means a utilisation of a Facility.
	"Utilisation Date" means the date of a Utilisation, being the date on which the relevant Loan is to be made.
	"Utilisation Request" means a notice substantially in the form set out in Part I of Schedule 3 (Utilisation Request ).
	"VAT" means value added tax as provided for in the Value Added Tax Act 1994 and any other tax of a similar nature.
1.2	Construction
(a)	Unless a contrary indication appears, any reference in this Agreement to:
	(i)	the "Agent", the "Arranger", any "Finance Party", any "Guarantor ", any "Lender", any "Obligor" or any "Party" shall be construed so as to include its successors in title, permitted assigns and permitted transferees;
	(ii)	"assets" includes present and future properties, revenues and rights of every description;
	(iii)	a "Finance Document" or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended or novated;
	(iv)	"indebtedness" includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

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	(v)	a "person" includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) or two or more of the foregoing;
	(vi)	a "regulation" includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but, if not having the force of law, which is generally complied with by those to whom it is addressed) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;
	(vii)	a "subsidiary" has the meaning given to it in section 736 of the Companies Act 1985 and "subsidiary undertaking " has the same meaning given to it in section 258 of the Companies Act 1985;
	(viii)	a provision of law is a reference to that provision as amended or re-enacted; and
	(ix)	a time of day is a reference to London time.
(b)	Section, Clause and Schedule headings are for ease of reference only.
(c)	Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.
(d)	A Default (other than an Event of Default) is "continuing" if it has not been remedied or waived and an Event of Default is "continuing" if it has not been remedied or waived.
1.3	Third Party Rights
	A person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

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SECTION 2

THE FACILITIES

2	THE FACILITIES
2.1	The Facilities
	Subject to the terms of this Agreement, the Lenders make available to the Borrowers:
	(a)	a multicurrency revolving loan facility with a term out option in an aggregate amount equal to the Total Facility A Commitments;
	(b)	a multicurrency term loan facility in an aggregate amount equal to the Total Facility B Commitments; and
	(c)	a multicurrency revolving loan facility in an aggregate amount equal to the Facility C Commitments.
2.2	Finance Parties' rights and obligations
(a)	The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
(b)	The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor shall be a separate and independent debt.
(c)	A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.
3.	PURPOSE
3.1	Purpose
(a)	Each Borrower shall apply all amounts borrowed by it under Facility A towards bridging capital markets issues or other sources of refinancing.
(b)	Each Borrower shall apply all amounts borrowed by it under Facility B and Facility C towards general corporate purposes of the Group, including in connection with, for the purpose of, or as a consequence of, the Separation.
3.2	Monitoring
	No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
4	CONDITIONS OF UTILISATION
4.1	Initial conditions precedent
(b)	No Borrower may deliver a Utilisation Request (other than the Conditional Utilisation Request) unless the Agent has received all of the documents and other evidence listed in Part IA and Part IB of Schedule 2 (Conditions Precedent) which in the case of those documents listed in Part IA of Schedule 2 (Conditions Precedent) shall be in form and substance reasonably

16

	satisfactory to the Agent. The Agent shall notify the Company and the Lenders promptly upon being so satisfied.
(b)	The Company may deliver the Conditional Utilisation Request if the documents and other evidence specified in paragraph (a) above have been received by the Agent (on the basis specified in paragraph (a) above), and the Agent has notified the Company of the same, except that it is not necessary that the certificate specified in paragraphs 2 and 3 of Part IB of Schedule 2 (Conditions Precedent) shall have been received by the Agent prior to the delivery of the Conditional Utilisation Request.
4.2	Further conditions precedent
(a)	The Lenders will only be obliged to comply with Clause 5.4 (Lenders' participation) if on the date of the Utilisation Request and on the proposed Utilisation Date:
	(i)	in the case of a Rollover Loan, no Event of Default is continuing or would result from the proposed Loan and, in the case of any other Loan, no Default is continuing or would result from the proposed Loan; and
	(ii)	the Repeating Representations to be made by each Obligor are true in all material respects.
(b)	The Lenders will only be obliged to comply with Clause 6.3 (Change of currency) if, on the first day of an Interest Period, no Default is continuing or would result from the change of currency and the Repeating Representations to be made by each Obligor are true in all material respects.
4.3	Conditions relating to Optional Currencies
(a)	A currency will constitute an Optional Currency in relation to a Loan if it is euro or sterling or:
	(i)	it is readily available in the amount required and freely convertible into the Base Currency in the Relevant Interbank Market on the Quotation Day and the Utilisation Date for that Loan; and
	(ii)	it has been approved by the Agent (acting on the instructions of all the Lenders) on or prior to receipt by the Agent of the relevant Utilisation Request or Selection Notice for that Loan.
(b)	If by the Specified Time the Agent has received a written request from the Company for a currency to be approved under paragraph (a)(ii) above, the Agent will notify the Lenders of that request by the Specified Time. Based on any responses received by the Agent by the Specified Time, the Agent will confirm to the Company by the Specified Time:
	(i)	whether or not the Lenders have granted their approval; and
	(ii)	if approval has been granted, the minimum amount (and, if required, integral multiples) for any subsequent Utilisation in that currency.
4.4	Maximum number of Loans
(a)	A Borrower may not deliver a Utilisation Request if as a result of the proposed Utilisation:
	(i)	more than 10 Facility A Loans would be outstanding; or
	(ii)	more than 10 Facility B Loans would be outstanding; or
	(iii)	more than 20 Facility C Loans would be outstanding.

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(b)	A Borrower may not request that a Term Loan or a Facility B Loan be divided if, as a result of the proposed division, more than 5 Term Loans or 5 Facility B Loans would be outstanding.
(c)	Any Loan made by a single Lender under Clause 6.2 (Unavailability of a currency) shall not be taken into account in this Clause 4.4.

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SECTION 3

UTILISATION

5.	UTILISATION
5.1	Delivery of a Utilisation Request
	A Borrower may utilise a Facility by delivery to the Agent of a duly completed Utilisation Request not later than the Specified Time except in the case of the Conditional Utilisation Request which must be delivered to the Agent at a time not later than that agreed between the Agent and the Company.
5.2	Completion of a Utilisation Request
(a)	Each Utilisation Request is irrevocable (other than the Conditional Utilisation Request which is conditional as specified therein) and will not be regarded as having been duly completed unless:
	(i)	it identifies the Facility to be utilised;
	(ii)	the proposed Utilisation Date is a Business Day within the Availability Period applicable to that Facility;
	(iii)	the currency and amount of the Utilisation comply with Clause 5.3 (Currency and amount);
	(iv)	the proposed Interest Period complies with Clause 10 (Interest Periods); and
	(v)	it specifies the account and bank (which must be in the principal financial centre of the country of the currency of the Utilisation or, in the case of euro, the principal financial centre of a Participating Member State in which banks are open for general business on that day or London or, such other financial centre as the relevant Borrower, with the consent of the Agent, may select) to which the proceeds of the Utilisation are to be credited.
(b)	Only one Loan may be requested in each Utilisation Request.
5.3	Currency and amount
(a)	The currency specified in a Utilisation Request must be the Base Currency or an Optional Currency
(b)	The amount of the proposed Loan must be:
	(i)	if the currency selected is the Base Currency, a minimum of $40,000,000 and in multiples of $1,000,000, or if less, the Available Facility;
	(ii)	if the currency selected is sterling, a minimum of £25,000,000 and in multiples of £1,000,000, or, if less the Available Facility; or
	(iii)	if the currency selected is euro, a minimum of €40,000,000, and in multiples of €1,000,000, or if less, the Available Facility; or
	(iv)	if the currency selected is an Optional Currency other than sterling or euro, the minimum amount (and, if required, integral multiple) as agreed betweenthe Agent, the Lenders and the Company provided that if no such agreement is reached between the Agent, the

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		Lenders and the Company the minimum amount shall be the equivalent at that time of $40,000,000 and multiples of $1,000,000, such amount to be rounded as reasonably determined by the Agent and notified to the Company; and
	(v)	in any event such that its Base Currency Amount is less than or equal to the Available Facility.
5.4	Lenders' participation
(a)	If the conditions set out in this Agreement have been met, each Lender shall make its participation in each Loan available by the Utilisation Date through its Facility Office subject to paragraph (d) below.
(b)	The amount of each Lender's participation in each Loan will be equal to the proportion borne by its Available Commitment to the Available Facility immediately prior to making the Loan.
(c)	The Agent shall determine the Base Currency Amount of each Loan which is to be made in an Optional Currency and shall notify each Lender of the amount, currency and the Base Currency Amount of each Loan and the amount of its participation in that Loan, in each case by the Specified Time.
(d)	The Utilisation requested under the Conditional Utilisation Request shall not be made (and no Lender shall have an obligation to make available its participation) unless:
	(i)	the certificate specified in paragraph 3 of Part IB of Schedule 2 (Conditions Precedent) has been received by the Agent; and
	(ii)	the Agent has received confirmation that the agent under the TopCo Facility Agreement has received all of the documents and other evidence listed in Part 1A and Part 1B of Schedule 2 (Conditions Precedent) of the TopCo Facility Agreement as specified therein, and, in the case of all documents listed in Part 1A of Schedule 2 of the TopCo Facility Agreement, such documents are in form and substance reasonably satifactory to the agent under the TopCo Facility Agreement,
	in each case by no later than 10.00 a.m. on the Utilisation Date for that requested Utilisation. The Agent shall notify the Lenders promptly on receipt of those items by it and notify the Company and the Lenders accordingly for the purposes of Clause 4.1(a) (Initial conditions precedent).
6.	OPTIONAL CURRENCIES
6.1	Selection of currency
(a)	A Borrower (or the Company on behalf of a Borrower) shall select the currency of a Loan:
	(i)	(in the case of an initial Utilisation) in a Utilisation Request; and
	(ii)	(in relation to a Term Loan or Facility B Loan after the initial Utilisation) in a Selection Notice.
(b)	If a Borrower (or the Company on behalf of a Borrower) fails to issue a Selection Notice in relation to a Term Loan or a Facility B Loan, it shall be deemed to have requested that the Loan will remain denominated for its next Interest Period in the same currency in which it is then outstanding.

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(c)	If a Borrower (or the Company on behalf of a Borrower) issues a Selection Notice requesting a change of currency and the first day of the requested Interest Period is not a Business Day for the new currency, the Agent shall promptly notify the Company, the relevant Borrower and the Lenders and the Loan will remain in the existing currency (with Interest Periods running from one Business Day until the next Business Day) until the next day which is a Business Day for both currencies, on which day the requested Interest Period will begin.
6.2	Unavailability of a currency
	If before the Specified Time on any Quotation Day:
	(a)	a Lender notifies the Agent that the Optional Currency requested is not readily available to it in the amount required; or
	(b)	a Lender notifies the Agent that compliance with its obligation to participate in a Loan in the proposed Optional Currency would contravene a law or regulation applicable to it,
	the Agent will give notice to the relevant Borrower to that effect by the Specified Time on that day. In this event, any Lender that gives notice pursuant to this Clause 6.2 will be required to participate in the Loan in the Base Currency (in an amount equal to that Lender's proportion of the Base Currency Amount or, in respect of a Rollover Loan, an amount equal to that Lender's proportion of the Base Currency Amount of the Rollover Loan that is due to be made) and its participation will be treated as a separate Loan denominated in the Base Currency during that Interest Period.
6.3	Change of currency
(a)	If a Term Loan or a Facility B Loan, as the case may be, is to be denominated in different currencies during two successive Interest Periods:
	(i)	if the currency for the second Interest Period is an Optional Currency, the amount of the Loan in that Optional Currency will be calculated by the Agent as the amount of that Optional Currency equal to the Base Currency Amount of the Loan at the Agent's Spot Rate of Exchange at the Specified Time;
	(ii)	if the currency for the second Interest Period is the Base Currency, the amount of the Loan will be equal to the Base Currency Amount;
	(iii)	(unless the Agent and the Borrower agree otherwise in accordance with paragraph (b) below) the Borrower that has borrowed the Loan shall repay it on the last day of the first Interest Period in the currency in which it was denominated for that Interest Period; and
	(iv)	(subject to Clause 4.2 (Further conditions precedent)) the Lenders shall re-advance the Loan in the new currency in accordance with Clause 6.5 (Agent's calculations).
(b)	If the Agent and the Borrower that has borrowed the Term Loan or the Facility B Loan, as the case may be, agree, the Agent shall:
	(i)	apply the amount paid to it by the Lenders pursuant to paragraph (a)(iv) above (or so much of that amount as is necessary) in or towards purchase of an amount in the currency in which the Term Loan or the Facility B Loan, as the case may be, is outstanding for the first Interest Period; and

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	(ii)	use the amount it purchases in or towards satisfaction of the relevant Borrower's obligations under paragraph (a)(iii) above.
(c)	If the amount purchased by the Agent pursuant to paragraph (b)(i) above is less than the amount required to be repaid by the relevant Borrower, the Agent shall promptly notify that Borrower and that Borrower shall, on the last day of the first Interest Period, pay an amount to the Agent (in the currency of the outstanding Term Loan or the Facility B Loan, as the case may be, for the first applicable Interest Period) equal to the difference.
(d)	If any part of the amount paid to the Agent by the Lenders pursuant to paragraph (a)(iv) above is not needed to purchase the amount required to be repaid by the relevant Borrower, the Agent shall promptly notify that Borrower and pay that Borrower, on the last day of the first Interest Period that part of that amount (in the new currency).
6.4	Same Optional Currency during successive Interest Periods
(a)	If a Term Loan or a Facility B Loan is to be denominated in the same Optional Currency during two successive Interest Periods, the Agent shall calculate the amount of any Term Loan or Facility B Loan, as the case may be, in the Optional Currency for the second of those Interest Periods (by calculating the amount of Optional Currency equal to the Base Currency Amount of that Term Loan, as the case may be, or Facility B Loan at the Agent's Spot Rate of Exchange at the Specified Time) and (subject to paragraph (b) below):
	(i)	if the amount calculated is less than the existing amount of that Term Loan or Facility B Loan, as the case may be, in the Optional Currency during the first Interest Period, promptly notify the Borrower that has borrowed that Term Loan, as the case may be, or Facility B Loan and that Borrower shall pay, on the last day of the first Interest Period, an amount equal to the difference; or
	(ii)	if the amount calculated is more than the existing amount of that Term Loan or Facility B Loan, as the case may be, in the Optional Currency during the first Interest Period, promptly notify each Lender and, if no Event of Default is continuing, each Lender shall, on the last day of the first Interest Period, pay its participation in an amount equal to the difference.
(b)	If the calculation made by the Agent pursuant to paragraph (a) above shows that the amount of the Term Loan or Facility B Loan, as the case may be, in the Optional Currency for the second of those Interest Periods converted into the Base Currency at the Agent's Spot Rate of Exchange at the Specified Time has increased or decreased by less than 5 per cent. compared to its Base Currency Amount (taking into account any payments made pursuant to paragraph (a) above), no notification shall be made by the Agent and no payment shall be required under paragraph (a) above.
6.5	Agent's calculations
(a)	All calculations made by the Agent pursuant to this Clause 6 will take into account any repayment, prepayment, consolidation or division of Term Loans or Facility B Loans, as the case may be, to be made on the last day of the first Interest Period.
(b)	Each Lender's participation in a Loan will, subject to paragraph (a) above, be determined in accordance with paragraph (b) of Clause 5.4 (Lenders' participation).

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SECTION 4

REPAYMENT, PREPAYMENT AND CANCELLATION

7.	REPAYMENT
7.1	Repayment of Facility A Loans
(a)	Subject to Clause 7.4 (Term Out Option), each Borrower which has drawn a Facility A Loan shall repay that Facility A Loan on the last day of its Interest Period.
(b)	Each Borrower shall repay each Term Loan made to it on the Final Facility A Termination Date.
7.2	Repayment of Facility B Loans
(a)	Each Borrower which has drawn a Facility B Loan shall repay that Loan on the Facility B Repayment Date.
(b)	No Borrower may reborrow any part of Facility B which is repaid.
7.3	Repayment of Facility C Loans
	Each Borrower which has drawn a Facility C Loan shall repay that Facility C Loan on the last day of its Interest Period.
7.4	Term Out Option
(a)	The Company may elect to convert all or part of the Facility A Loans into Term Loans.
(b)	The Company may exercise the term out option by not less than 5 Business Days notice (substantially in the form set out in Schedule 12 (Form of Term Out Notice)) (the "Term out Notice ") to the Agent. Only one such notice may be given and such notice is irrevocable.
(c)	That notice shall specify the Facility A Loan(s) in relation to which the Term Out Option is being exercised and the proposed Term Out Date (which shall be a date on or prior to the original Termination Date relating to Facility A).
(d)	The Agent shall promptly notify each Lender of the Loans specified in the Term Out Notice.
(e)	If the Term Out Option is so exercised and the matters set out in paragraph (f) below are satisfied, then on the Term Out Date:
	(i)	the Facility A Loan(s) to be converted shall be converted into Term Loan(s);
	(ii)	any Available Commitment under Facility A shall be automatically cancelled;
	(iii)	the Termination Date for Facility A shall be extended to the date which is 24 months from the date of this Agreement; and
	(iv)	the fee specified in Clause 12.4 (Term Out fee) shall become due and payable.
(f)	The following must be satisfied on the Term Out Date for the Term Out Option to be effected as specified in (e) above:
	(i)	the Repeating Representations are true in all material respects; and
	(ii)	no Default is continuing or would result from the Facility A Loan(s) being converted into Term Loan(s).

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8.	PREPAYMENT AND CANCELLATION
8.1	Illegality
	If it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in any Loan:
	(a)	that Lender shall promptly notify the Agent upon becoming aware of that event;
	(b)	upon the Agent notifying the Company, the Commitment of that Lender will be immediately cancelled; and
	(c)	each Borrower shall repay that Lender's participation in the Loans made to that Borrower on the last day of the Interest Period for each Loan occurring after the Agent has notified the Company or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law).
8.2	Change of control
(a)	If any person or group of persons acting in concert gains control of the Company (other than as a result of, or in connection with, the Separation):
	(i)	the Company shall promptly notify the Agent upon becoming aware of that event;
	(ii)	a Lender shall not be obliged to fund a Utilisation (except for a Rollover Loan); and
	(iii)	if a Lender so requires, the Agent shall, by not less than 30 days' notice to the Company, cancel the Commitment of that Lender whereupon it shall be immediately reduced to zero and the participation of that Lender in each Loan and all other amounts due to it will become immediately due and payable.
(b)	For the purpose of paragraph (a) above "control" has the meaning given to it in section 840 of the Taxes Act.
(c)	For the purpose of paragraph (a) above "acting in concert " has the meaning given to it in the City Code on Takeovers and Mergers.
8.3	Debt Issues
	Until such time as the Facility A Commitments and any Facility A Loans are repaid and cancelled in full, if the Company or any member of the Group raises any External Debt then the Company shall procure that the Net Proceeds of that External Debt are applied in reduction of Facility A on the date of receipt of such Net Proceeds as follows:
	(a)	in cancellation of the Total Facility A Commitments (with any such cancellation reducing the Facility A Commitments of the Lenders rateably); and
	(b)	in prepayment of a sufficient amount of the Facility A Loans to the extent necessary so that the aggregate of the Base Currency Amounts of the outstanding Facility A Loans after that prepayment is equal to or less than the reduced amount of the Total Facility A Commitments.
8.4	Disposals
(a)	Until such time as the Facility A Commitments and any Facility A Loans are repaid and cancelled in full, if the Company or any member of the Group receives Disposal Proceeds then the

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	Company shall procure that an amount equal to the Net Proceeds of those Disposal Proceeds are applied in reduction of Facility A Loans on the date of receipt of such Net Proceeds as follows:
	(i)	in cancellation of the Total Facility A Commitments (with any such cancellation reducing the Facility A Commitments of the Lenders rateably); and
	(ii)	in prepayment of a sufficient amount of the Facility A Loans to the extent necessary so that the aggregate of the Base Currency Amounts of the outstanding Facility A Loans after that prepayment is equal to or less than the reduced amount of the Total Facility A Commitments.
(b)	No such prepayment and cancellation shall be required to be made pursuant to paragraph (a) above if that prepayment and cancellation would (i) result in a material amount of Tax being required to be paid by the Company or any member of the Group which would not otherwise have had to be paid or (ii) breach any applicable laws in any relevant jurisdiction by the member of the Group making the Disposal making available or repatriating the Net Proceeds of such Disposal for prepayment.
(c)	Each relevant member of the Group shall use reasonable endeavours to transfer the Net Proceeds of Disposal Proceeds to a Borrower for the purposes of prepayment and cancellation in this Clause 8.4 (i) without breaching applicable laws and (ii) to the extent it would not result in a material amount of Tax being required to be paid, in each case, as specified in paragraph (b) above.
8.5	No Separation Date
(a)	If the Separation Date has not occurred by the earlier of (i) the date falling 3 months after the date on which the last shareholders' circular relating to the Separation is posted to shareholders of Six Continents PLC and (ii) 31 May 2003 (the "No Separation Date"), the Facilities shall be automatically cancelled on the No Separation Date and the Commitments shall be immediately reduced to zero.
(b)	If at any time after the date of this Agreement a formal announcement is made by Six Continents PLC stating that the Separation will not be taking place, the Facilities shall be automatically cancelled on that date and the Commitments shall be immediately reduced to zero.
8.6	Voluntary cancellation
	The Company may, if it gives the Agent not less than 5 Business Days' (or such shorter period as the Majority Lenders may agree) prior notice in writing, cancel the whole or any part (being a minimum amount of $30,000,000 and in multiples of $10,000,000) of an Available Facility. Any cancellation under this Clause 8.6 shall reduce the Commitments of the Lenders rateably under that Facility.
8.7	Voluntary prepayment
	A Borrower to which a Loan has been made, may, if it gives the Agent not less than 5 Business Days (or such shorter period as the Majority Lenders may agree) prior notice in writing, prepay the whole or any part of a Loan (but, if in part, being an amount that reduces the Base Currency Amount of the Loan by a minimum amount of $60,000,000 and in multiples of $15,000,000);

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8.8	Right of repayment and cancellation in relation to a single Lender
(a)	If:
	(i)	any sum payable to any Lender by an Obligor is required to be increased under paragraph (c) of Clause 13.2 (Tax gross-up);
	(ii)	any Lender claims indemnification from the Company under Clause 13.3 (Tax indemnity) or Clause 14.1 (Increased costs); or
	(iii)	any Lender notifies the Agent of its Additional Cost Rate under paragraph 3 of Schedule 4 (Mandatory Cost formulae),
	the Company may, whilst (in the case of paragraphs (i) and (ii) above) the circumstance giving rise to the requirement or indemnification continues, or (in the case of paragraph (iii) above) that Additional Cost Rate is greater than zero, give the Agent notice of cancellation of the Commitment of that Lender and/or its intention to procure the repayment of that Lender's participation in the Loans.
(b)	On receipt of a notice referred to in paragraph (a) above, the Commitment of that Lender shall immediately be reduced to zero.
(c)	On the last day of each Interest Period which ends after the Company has given notice under paragraph (a) above (or, if earlier, the date specified by the Company in that notice), each Borrower (or, as the case may be, the specified Borrower) to which a Loan is outstanding shall repay that Lender's participation in that Loan.
8.9	Restrictions
(a)	Any notice of cancellation or prepayment given by any Party under this Clause 8 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.
(b)	Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.
(c)	No Borrower may reborrow all or any part of a Term Loan or any part of Facility B which is prepaid.
(d)	Unless a contrary indication appears in this Agreement, any part of Facility A which is prepaid prior to the Term Out Date or any part of Facility C which is prepaid may be reborrowed in accordance with the terms of this Agreement.
(e)	The Borrowers shall not repay or prepay all or any part of the Loans or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.
(f)	No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.
(g)	If the Agent receives a notice under this Clause 8 it shall promptly forward a copy of that notice to either the Company or the affected Lender, as appropriate.

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SECTION 5

COSTS OF UTILISATION

9.	INTEREST
9.1	Calculation of interest
	The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:
	(a)	Margin;
	(b)	LIBOR or, in relation to any Loan in euro, EURIBOR; and
	(c)	Mandatory Cost, if any.
9.2	Payment of interest
	The Borrower to which a Loan has been made shall pay accrued interest on that Loan on the last day of each Interest Period (and, if the Interest Period is longer than six Months, on the dates falling at six monthly intervals after the first day of the Interest Period).
9.3	Default interest
(a)	If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is the sum of 1 per cent. and the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing under this Clause 9.3 shall be immediately payable by the Obligor on demand by the Agent.
(b)	If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:
	(i)	the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and
	(ii)	the rate of interest applying to the overdue amount during that first Interest Period shall be the sum of 1 per cent. and the rate which would have applied if the overdue amount had not become due.
(c)	Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.
9.4	Notification of rates of interest
	The Agent shall promptly notify the Lenders and the relevant Borrower of the determination of a rate of interest under this Agreement.

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10.	INTEREST PERIODS
10.1	Selection of Interest Periods
(a)	A Borrower (or the Company on behalf of a Borrower) may select an Interest Period for a Loan in the Utilisation Request for that Loan or (if the Loan has already been borrowed) in a Selection Notice.
(b)	Each Selection Notice for a Term Loan or a Facility B Loan is irrevocable and must be delivered to the Agent by the Borrower (or the Company on behalf of a Borrower) to which that Term Loan or Facility B Loan was made not later than the Specified Time.
(c)	If a Borrower (or the Company) fails to deliver a Selection Notice to the Agent in accordance with paragraph (b) above, the relevant Interest Period will be one Month.
(d)	Subject to this Clause 10, a Borrower (or the Company) may select an Interest Period of 1, 2, 3 or 6 Months or any other period agreed between the Company and the Agent (acting on the instructions of all the Lenders).
(e)	An Interest Period for:
	(i)	a Loan shall not extend beyond the Termination Date applicable to its Facility; and
	(ii)	for a Term Loan shall not extend beyond the Final Facility A Termination Date.
(f)	Each Interest Period for a Term Loan or a Facility B Loan shall start on the Utilisation Date or (if already made) on the last day of its preceding Interest Period.
(g)	A Facility A Loan prior to the Term Out Date and a Facility C Loan has one Interest Period only.
10.2	Non-Business Days
	If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
10.3	Consolidation and division of Term Loans and Facility B Loans
(a)	Subject to paragraph (b) below, if two or more Interest Periods:
	(i)	relate to Term Loans or Facility B Loans in the same currency;
	(ii)	end on the same date; and
	(iii)	are made to the same Borrower,
	the relevant Term Loans or Facility B Loans will, unless that Borrower (or the Company on its behalf) specifies to the contrary in the Selection Notice for the next Interest Period, be consolidated into, and treated as, a single Term Loan or Facility B Loan, as the case may be, on the last day of the Interest Period.
(b)	Subject to Clause 4.4 (Maximum number of Loans) and Clause 5.3 (Currency and amount), if a Borrower (or the Company on its behalf) requests in a Selection Notice that a Term Loan or Facility B Loan be divided into two or more respective Term Loans or Facility B Loans, as the case may be, that Term Loan or Facility B Loan will, on the last day of its Interest Period, be so divided with Base Currency Amounts specified in that Selection Notice, being an aggregate Base

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	Currency Amount equal to the Base Currency Amount of the respective Term Loan or Facility B Loan, as the case may be, immediately before its division.
11.	CHANGES TO THE CALCULATION OF INTEREST
11.1	Absence of quotations
	Subject to Clause 11.2 (Market disruption), if LIBOR or, if applicable, EURIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by the Specified Time on the Quotation Day, the applicable LIBOR or EURIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.
11.2	Market disruption
(a)	If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Lender's share of that Loan for the Interest Period shall be the rate per annum which is the sum of:
	(i)	the applicable Margin;
	(ii)	the rate notified to the Agent by that Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in that Loan from whatever source it may reasonably select; and
	(iii)	the Mandatory Cost, if any, applicable to that Lender's participation in the Loan.
(b)	In this Agreement "Market Disruption Event" means:
	(i)	at or about noon on the Quotation Day for the relevant Interest Period the Screen Rate is not available and none or only one of the Reference Banks supplies a rate to the Agent to determine LIBOR or, EURIBOR for the relevant currency and Interest Period; or
	(ii)	before close of business in London on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in a Loan exceed 35 per cent. of that Loan) that the cost to it of obtaining matching deposits in the Relevant Interbank Market would be in excess of LIBOR or, if applicable, EURIBOR.
11.3	Alternative basis of interest or funding
(a)	If a Market Disruption Event occurs and the Agent or the Company so requires, the Agent and the Company shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest.
(b)	Any alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of all the Lenders and the Company, be binding on all Parties.
11.4	Break Costs
(a)	Each Borrower shall, within five Business Days of a demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.

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(b)	Each Lender shall, together with its demand provide a certificate confirming the amount and basis of calculation of its Break Costs for any Interest Period in which they accrue.
12.	FEES
12.1	Commitment fee
(a)	The Company shall pay to the Agent (for the account of each Lender) a fee in the Base Currency computed at the rate of:
	(i)	0.10 per cent. per annum on that Lender's Available Commitment for the period from the date of this Agreement up to and including the Separation Date;
	(ii)	30 per cent. of the Margin on that Lender's Available Commitment under Facility A from the day following the Separation Date up to and including the last day of the Availability Period applicable to Facility A; and
	(iii)	45 per cent. of the Margin on that Lender's Available Commitment under Facility B and Facility C from the day following the Separation Date up to and including the last day of the Availability Period applicable to Facility B and Facility C.
(b)	The accrued commitment fee is payable on the last day of each successive period of three Months which ends during the relevant Availability Period, on the last day of the Availability Period and, if cancelled in full, on the cancelled amount of the relevant Lender's Available Commitment at the time the cancellation is effective.
12.2	Underwriting and Syndication fee
	The Company shall pay, or procure that the same is paid, to the Arranger (for its own account and the account of the Lenders as applicable) an underwriting and syndication fee in the amount and at the times agreed in the Mandate Letter.
12.3	Agency fee
	The Company shall pay, or procure that the same is paid, to the Agent (for its own account) an agency fee in the amount and at the times agreed in the Agency Fee Letter.
12.4	Term Out fee
	The Company shall pay to the Agent (for the account of each Lender) a term out fee in the Base Currency of 0.15 per cent. flat on that Lender's participation into the Base Currency Amount of the Facility A Loan(s) in relation to which the Term Out Option has been exercised, such fee to be paid on the Term Out Date.

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SECTION 6

ADDITIONAL PAYMENT OBLIGATIONS

13.	TAX GROSS UP AND INDEMNITIES
13.1	Definitions
(a)	In this Agreement:
	"Protected Party" means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.
	"Qualifying Lender" means a Lender which is beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document and is:
	(i)	a Lender:
		(A)	which is a bank (as defined for the purpose of section 349 of the Taxes Act) making an advance under a Finance Document; or
		(B)	in respect of an advance made under a Finance Document by a person that was a bank (as defined for the purpose of section 349 of the Taxes Act) at the time that that advance was made,
		and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance; or
	(ii)	a Lender which is:
		(A)	a company resident in the United Kingdom for United Kingdom tax purposes;
		(B)	a partnership each member of which is a company resident in the United Kingdom for United Kingdom tax purposes; or
		(C)	a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a branch or agency and which brings into account interest payable in respect of that advance in computing its chargeable profits (within the meaning given by section 11(2) of the Taxes Act); or
	(iii)	a Treaty Lender.
	"Tax Confirmation" means a confirmation by a Lender that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:
	(i)	a company resident in the United Kingdom, or a partnership each member of which is a company resident in the United Kingdom, for United Kingdom tax purposes; or
	(ii)	a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a branch or agency and that interest payable in respect of that advance falls to be brought into account in computing the chargeable profits of that company for the purposes of section 11(2) of the Taxes Act.
	"Tax Credit " means a credit against, relief or remission for, or repayment of any Tax.

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	"Tax Deduction" means a deduction or withholding for or on account of Tax from a payment under a Finance Document.
	"Tax Payment " means the amount by which a payment made by an Obligor to a Finance Party is increased under Clause 13.2 (Tax gross-up) or a payment under Clause 13.3 (Tax indemnity).
	"Treaty Lender" means a Lender which:
	(i)	is treated as a resident of a Treaty State for the purposes of the Treaty; and
	(ii)	does not carry on a business in the United Kingdom through a permanent establishment with which that Lender's participation in the Loans is effectively connected.
	"Treaty State" means a jurisdiction having a double taxation agreement (a "Treaty") with the United Kingdom which makes provision for full exemption from tax imposed by the United Kingdom on interest.
	"UK Non-Bank Lender" means, where a Lender becomes a Party to this Agreement after the day on which this Agreement is entered into, a Lender which gives a Tax Confirmation in the Transfer Certificate which it executes on becoming a Party to this Agreement.
(b)	Unless a contrary indication appears, in this Clause 13 a reference to "determines" or "determined" means a determination made in the absolute discretion of the person making the determination.
13.2	Tax gross-up
(a)	Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.
(b)	The Company shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent accordingly. Similarly, a Lender shall promptly notify the Agent on becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from a Lender it shall promptly notify the Company and that Obligor.
(c)	If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.
(d)	An Obligor is not required to make an increased payment to a Lender under paragraph (c) above for a Tax Deduction in respect of tax imposed by the United Kingdom from a payment of interest on a Loan, if on the date on which the payment falls due:
	(i)	the payment could have been made to the relevant Lender without a Tax Deduction if it was a Qualifying Lender, but on that date that Lender is not or has ceased to be a Qualifying Lender other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty, or any published practice or concession of any relevant taxing authority; or

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	(ii)
		(A)	the relevant Lender is a UK Non-Bank Lender, or would have been a UK Non-Bank Lender were it not for any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty, or any published practice or concession of any relevant taxing authority; and
		(B)	the Board of the Inland Revenue has given (and not revoked) a direction under section 349C of the Taxes Act (as that provision has effect on the date on which the relevant Lender became a party to this Agreement) which relates to that payment and that Obligor has notified that UK Non-Bank Lender of the precise terms of that notice; or
	(iii)	the relevant Lender is a Treaty Lender and the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without the Tax Deduction had that Lender complied with its obligations under paragraph (g) below.
(e)	If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.
(f)	Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.
(g)	A Treaty Lender and each Obligor which makes a payment to which that Treaty Lender is entitled shall co-operate in promptly completing any procedural formalities (including completing and submitting appropriate documents to the applicable taxation authorities) necessary for that Obligor to obtain authorisation to make that payment without a Tax Deduction.
(h)	A UK Non-Bank Lender shall promptly notify the Company and the Agent if there is any change in the position from that set out in the Tax Confirmation.
(i)	Each Lender severally warrants to the Company that it is a Qualifying Lender on the date it becomes a Party to this Agreement. If at any time after this Agreement is entered into any Lender becomes aware that it is not or will not or will cease to be a Qualifying Lender, it shall promptly notify the Agent and the Company.
13.3	Tax indemnity
(a)	The Company shall (within five Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.
(b)	Paragraph (a) above shall not apply:
	(i)	with respect to any Tax assessed on a Finance Party:

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		(A)	under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or
		(B)	under the law of the jurisdiction in which that Finance Party's Facility Office is located in respect of amounts received or receivable in that jurisdiction,
		if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; or
	(ii)	to the extent a loss, liability or cost:
		(A)	is compensated for by an increased payment under Clause 13.2 (Tax gross-up); or
		(B)	would have been compensated for by an increased payment under Clause 13.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 13.2 (Tax gross-up) applied.
(c)	A Protected Party making, or intending to make, a claim under paragraph (a) above shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall promptly notify the Company.
(d)	A Protected Party shall, on receiving a payment from an Obligor under this Clause 13.3, notify the Agent.
13.4	Tax Credit
	If an Obligor makes a Tax Payment and the relevant Finance Party determines that:
	(a)	a Tax Credit is attributable either to an increased payment of which that Tax Payment forms part or to that Tax Payment; and
	(b)	that Finance Party has obtained, utilised and retained that Tax Credit,
	the Finance Party shall pay an amount to the Obligor which that Finance Party determines will leave it (after that payment) in no better and no worse position in respect of its worldwide tax liabilities than it would have been in had the Tax Payment not been required to be made by the Obligor.
13.5	Stamp taxes
	The Company shall pay and, within five Business Days of demand, indemnify each Finance Party against any cost, loss or liability that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.
13.6	Value added tax
(a)	All consideration expressed to be payable under a Finance Document by any Party to a Finance Party shall be deemed to be exclusive of any VAT. If VAT is chargeable on any supply made by any Finance Party to any Party in connection with a Finance Document, that Party shall pay to the Finance Party (in addition to and at the same time as paying the consideration) an amount equal to the amount of the VAT.

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(b)	Where a Finance Document requires any Party to reimburse a Finance Party for any costs or expenses, that Party shall also at the same time pay and indemnify the Finance Party against all VAT incurred by the Finance Party in respect of the costs or expenses save to the extent that the Finance Party is entitled to repayment or credit in respect of such VAT.
13.7	PTR Scheme
(a)	Each Treaty Lender:
	(i)	irrevocably appoints the Agent to act as syndicate manager under, and authorises the Agent to operate, and take any action necessary or desirable under, the PTR Scheme in connection with the Facilities;
	(ii)	shall co-operate with the Agent in completing any procedural formalities necessary under the PTR Scheme, and shall promptly supply to the Agent such information as the Agent may request in connection with the operation of the PTR Scheme;
	(iii)	without limiting the liability of any Borrower under this Agreement, shall, within 5 Business Days of demand, indemnify the Agent for any liability of loss incurred by the Agent as a result of the Agent acting as syndicate manager under the PTR Scheme in connection with the Treaty Lender's participation in any Loan (except to the extent the liability or loss arises directly from the Agent's gross negligence or wilful misconduct); and
	(iv)	shall, within 5 Business Days of demand, indemnify each Borrower for any Tax which such Borrower becomes liable to pay in respect of any prepayments made to such Treaty Lender arising as a result of any incorrect information supplied by such Treaty Lender under paragraph (iii) above which results in a provisional authority issued by the UK Inland Revenue under the PTR Scheme being withdrawn.
(b)	Each Borrower acknowledges that it is fully aware of its contingent obligations under the PTR Scheme and shall:
	(i)	promptly supply to the Agent such information as the Agent may request in connection with the operation of the PTR Scheme; and
	(ii)	act in accordance with any provisional notice issued by the UK Inland Revenue under the PTR Scheme.
(c)	The Agent agrees to provide, as soon as reasonably practicable, a copy of any provisional authority issued to it under the PTR Scheme in connection with any Loan to those Borrowers specified in such provisional authority.
(d)	All Parties acknowledge that the Agent:
	(i)	is entitled to rely completely upon information provided to it in connection with sub-paragraph (a) or (b) above;
	(ii)	is not obliged to undertake any enquiry into the accuracy of such information, nor into the status of the Treaty Lender or, as the case may be, Borrower providing such information; and

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	(iii)	shall have no liability to any person for the accuracy of any information it submits in connection with paragraph (a)(i) above.
(e)	In this Clause "PTR Scheme" means the Provisional Treaty Relief scheme as described in Inland Revenue Guidelines dated July 1999 and administered by the Inland Revenue's Centre for Non-Residents.
14.	INCREASED COSTS
14.1	Increased costs
(a)	Subject to Clause 14.3 (Exceptions) the Company shall, within five Business Days of a demand by the Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement.
(b)	In this Agreement "Increased Costs" means:
	(i)	a reduction in the rate of return from the Facility or on a Finance Party's (or its Affiliate's) overall capital;
	(ii)	an additional or increased cost; or
	(iii)	a reduction of any amount due and payable under any Finance Document,
	which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document.
14.2	Increased cost claims
(a)	A Finance Party intending to make a claim pursuant to Clause 14.1 (Increased costs) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Company.
(b)	Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount and reasonable details of the calculation of its Increased Costs.
14.3	Exceptions
(a)	Clause 14.1 (Increased costs) does not apply to the extent any Increased Cost is:
	(i)	attributable to a Tax Deduction required by law to be made by an Obligor;
	(ii)	compensated for by Clause 13.3 (Tax indemnity) (or would have been compensated for under Clause 13.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 13.3 (Tax indemnity) applied);
	(iii)	compensated for by the payment of the Mandatory Cost; or
	(iv)	attributable to the negligence or wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.
(b)	In this Clause 14.3, a reference to a "Tax Deduction" has the same meaning given to the term in Clause 13.1 (Definitions).

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15.	OTHER INDEMNITIES
15.1	Currency indemnity
(a)	If any sum due from an Obligor under the Finance Documents (a "Sum"), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the "First Currency") in which that Sum is payable into another currency (the "Second Currency") for the purpose of:
	(i)	making or filing a claim or proof against that Obligor;
	(ii)	obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,
	that Obligor shall as an independent obligation, within five Business Days of demand, indemnify each Finance Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.
(b)	Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.
15.2	Other indemnities
	The Company shall (or shall procure that an Obligor will), within five Business Days of demand, indemnify each Finance Party against any cost, loss or liability incurred by that Finance Party as a result of:
	(a)	the occurrence of any Event of Default;
	(b)	a failure by an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 28 (Sharing among the Finance Parties);
	(c)	funding, or making arrangements to fund, its participation in a Loan requested by a Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Finance Party alone); or
	(d)	a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given by a Borrower or the Company.
15.3	Indemnity to the Agent
	The Company shall promptly indemnify the Agent against any cost, loss or liability incurred by the Agent (acting reasonably) as a result of:
	(a)	investigating any event which it reasonably believes is an Event of Default;
	(b)	entering into or performing any foreign exchange contract for the purpose of paragraph (b) of Clause 6.3 (Change of currency); or
	(c)	acting or relying on any notice, request or instruction made by an Obligor which it reasonably believes to be genuine, correct and appropriately authorised.

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16.	MITIGATION BY THE LENDERS
16.1	Mitigation
(a)	Each Finance Party shall, in consultation with the Company, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 8.1 (Illegality), Clause 13 (Tax gross-up and indemnities), Clause 14 (Increased costs) or paragraph 3 of Schedule 4 (Mandatory Cost formulae) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.
(b)	Paragraph (a) above does not in any way limit the obligations of any Obligor under the Finance Documents.
16.2	Limitation of liability
(a)	The Company shall indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 16.1 (Mitigation).
(b)	A Finance Party is not obliged to take any steps under Clause 16.1 (Mitigation) if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.
17.	COSTS AND EXPENSES
17.1	Transaction expenses
	The Company shall promptly on demand pay the Agent and the Arranger the amount of all reasonable costs and expenses (including legal fees) reasonably incurred by any of them (subject to a maximum in respect of legal fees as agreed with the Company) in connection with the negotiation, preparation, printing, execution and syndication of:
	(a)	this Agreement and any other documents referred to in this Agreement; and
	(b)	any other Finance Documents executed after the date of this Agreement.
17.2	Amendment costs
	If (a) an Obligor requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 29.9 (Change of Currency), the Company shall, within five Business Days of demand, reimburse the Agent for the amount of all reasonable costs and expenses (including legal fees) reasonably incurred by the Agent in evaluating, negotiating or complying with that request.
17.3	Enforcement costs
	The Company shall, within five Business Days of demand, pay to each Finance Party the amount of all costs and expenses (including legal fees) incurred by that Finance Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

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SECTION 7
GUARANTEE
18.	GUARANTEE AND INDEMNITY
18.1	Guarantee and indemnity
	Each Guarantor irrevocably and unconditionally jointly and severally:
	(a)	guarantees to each Finance Party punctual performance by each Borrower of all that Borrower's payment obligations under the Finance Documents;
	(b)	undertakes with each Finance Party that whenever a Borrower does not pay any amount when due under or in connection with any Finance Document, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and
	(c)	indemnifies each Finance Party immediately on demand against any cost, loss or liability suffered by that Finance Party if any payment obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which that Finance Party would otherwise have been entitled to recover.
18.2	Continuing guarantee
	This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.
18.3	Reinstatement
	If any payment by an Obligor or any discharge given by a Finance Party (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:
	(a)	the liability of each Obligor shall continue as if the payment, discharge, avoidance or reduction had not occurred; and
	(b)	each Finance Party shall be entitled to recover the value or amount of that security or payment from each Obligor, as if the payment, discharge, avoidance or reduction had not occurred.
18.4	Waiver of defences
	The obligations of each Guarantor under this Clause 18 will not be affected by an act, omission, matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 18 (without limitation and whether or not known to it or any Finance Party) including:
	(a)	any time, waiver or consent granted to, or composition with, any Obligor or other person;
	(b)	the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;
	(c)	the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor

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		or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;
	(d)	any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;
	(e)	any amendment (however fundamental) or replacement of a Finance Document or any other document or security;
	(f)	any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or
	(g)	any insolvency or similar proceedings.
18.5	Immediate recourse
	Each Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 18. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.
18.6	Appropriations
	Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, while a Default is continuing, each Finance Party (or any trustee or agent on its behalf) may:
	(a)	refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and
	(b)	hold in an interest-bearing suspense account any moneys received from any Guarantor or on account of any Guarantor's liability under this Clause 18.
18.7	Deferral of Guarantors' rights
	Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless the Agent otherwise directs, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents:
	(a)	to be indemnified by an Obligor;
	(b)	to claim any contribution from any other guarantor of any Obligor's obligations under the Finance Documents; and/or
	(c)	to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Finance Party.

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18.8	Additional security
	This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Finance Party.

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SECTION 8
REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT
19.	REPRESENTATIONS
	Each Obligor makes the representations and warranties set out in this Clause 19 to each Finance Party, on the date of this Agreement and on the Separation Date except as specified in Clause 19.8 (Financial statements).
19.1	Status
(a)	It is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation.
(b)	It and each of its Material Subsidiaries has the power to own its assets and carry on its business as it is being conducted.
19.2	Binding obligations
	The obligations expressed to be assumed by it in each Finance Document are subject to any general principles of law limiting its obligations which are specifically referred to in any legal opinion delivered pursuant to Clause 4 (Conditions of Utilisation) or Clause 25 (Changes to the Obligors) legal, valid, binding and enforceable obligations.
19.3	Non-conflict with other obligations
	The entry into and performance by it of, and the transactions contemplated by, the Finance Documents do not and will not conflict with:
	(a)	any law or regulation applicable to it;
	(b)	its constitutional documents; or
	(c)	any agreement or instrument binding upon it or any of its Subsidiaries or any of its or any of its Subsidiaries' assets breach of which would have a Material Adverse Effect.
19.4	Power and authority
	It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents to which it is a party and the transactions contemplated by those Finance Documents.
19.5	Validity and admissibility in evidence
	All Authorisations required:
	(a)	to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party; and
	(b)	to make the Finance Documents to which it is a party admissible in evidence in its jurisdiction of incorporation,
	have been obtained or effected and are in full force and effect (or, in each case, will be when required).

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19.6	No default
(a)	No Event of Default is continuing or could reasonably be expected to result from the making of any Utilisation.
(b)	No other event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on it or any of its Subsidiaries or to which its (or any of its Subsidiaries') assets are subject which has or could reasonably be expected to have a Material Adverse Effect.
19.7	No misleading information
(a)	Any material written factual information provided by or on behalf of any member of the Group for the purposes of the Information Memorandum, was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated.
(b)	The financial projections contained in the Information Memorandum have been prepared on the basis of recent historical information and on the basis of assumptions believed by it at the time to be reasonable.
(c)	Nothing has occurred or been omitted from the Information Memorandum and no information has been given or withheld that results in the information referred to in paragraph (a) contained in the Information Memorandum being untrue or misleading in any material respect.
19.8	Financial statements
(a)	The Original Financial Statements were prepared in accordance with GAAP consistently applied.
(b)	The Original Financial Statements give a true and fair view of the consolidated financial condition and operations of Six Continents PLC during the relevant financial year.
(c)	The pro forma financial information of the Hotels Group for the year ended 30 September 2002 as disclosed in the listing particulars has been properly compiled in accordance with paragraphs 12.29 to 12.34 of the Listing Rules of the UK Listing Authority and is consistent with the accounting policies of the Company.
(d)	There has been no material adverse change in the business or financial condition of the Hotels Group since the date of the listing particulars relating to the Hotels Group last posted to the shareholders of Six Continents PLC.
(e)	For the purposes of this Clause 19.8:
	(i)	the representation set out in paragraphs (a) and (b) above will be made on the date of this Agreement and on the Separation Date; and
	(ii)	the representation set out in paragraphs (c) and (d) will be made only on the Separation Date.
19.9	Pari passu ranking
	Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

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19.10	No proceedings pending or threatened
	No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which are reasonably likely to be adversely determined and, if adversely determined, could be reasonably likely to have a Material Adverse Effect have (to the best of its knowledge and belief) been started or threatened against it or any of its Subsidiaries.
19.11	Repetition
	The Repeating Representations are deemed to be made by each Obligor by reference to the facts and circumstances then existing on:
	(a)	the date of each Utilisation Request and the first day of each Interest Period; and
	(b)	in the case of an Additional Obligor, the day on which the company becomes (or it is proposed that the company becomes) an Additional Obligor.
20.	INFORMATION UNDERTAKINGS
	The undertakings in this Clause 20 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.
20.1	Financial statements
	The Company shall supply to the Agent in sufficient copies for all the Lenders:
	(a)	as soon as the same become available, but in any event within 120 days after the end of each of its financial years:
		(i)	its audited consolidated financial statements for that financial year; and
		(ii)	the financial statements of each Obligor for that financial year (which shall be audited if that Obligor produces audited financial statements); and
	(b)	as soon as the same become available, but in any event within 90 days after the end of the first half of each of its financial years, its consolidated financial statements for that financial half year.
20.2	Compliance Certificate
(a)	The Company shall supply to the Agent, with each set of financial statements delivered pursuant to paragraph (a)(i) or (b) of Clause 20.1 (Financial statements), a Compliance Certificate setting out:
	(i)	(in reasonable detail) computations as to compliance with Clause 21 (Financial covenants); and
	(ii)	an updated list of Material Subsidiaries,
	in each case, as at the date at which those financial statements were drawn up.
(b)	The Company shall supply to the Agent within 90 days of 30 September 2003, a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 21 (Financial covenants) as at 30 September 2003.
(c)	Each Compliance Certificate shall be signed by a director or an authorised signatory on behalf of the Company.

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20.3	Requirements as to financial statements
(a)	Each set of financial statements delivered by the Company pursuant to Clause 20.1(a) (Financial statements) shall be certified by an authorised signatory on behalf of the relevant company as fairly representing its (or, as the case may be, its consolidated) financial condition and operations as at the end of and for the period in relation to which those financial statements were drawn up.
(b)	The Company shall procure that each set of financial statements of the Group delivered pursuant to Clause 20.1 (Financial statements) is prepared using GAAP and it shall deliver to the Agent:
	(i)	sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Lenders to determine whether Clause 21 (Financial covenants) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and the Original Financial Statements; and
	(ii)	a description of any change necessary for those financial statements to reflect the Applicable Accounting principles upon which the Original Financial statements were prepared.
(c)	Any reference in this Agreement to the financial statements of the Group delivered pursuant to Clause 20.1 ( Financial statements) shall be construed as a reference to those financial statements as adjusted to reflect the Applicable Accounting Principles.
20.4	Information: miscellaneous
	The Company shall supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests):
	(a)	all documents dispatched by the Company to its shareholders (or any class of them) or its creditors generally at the same time as they are dispatched;
	(b)	promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any member of the Group, and which might, if adversely determined, have a Material Adverse Effect;
	(c)	promptly, such further information regarding the financial condition, business and operations of any member of the Group as any Finance Party (through the Agent) may reasonably request except to the extent that disclosure of the information would breach any law regulation, stock exchange requirement or duty of confidentiality; and
	(d)	as soon as reasonably practicable after becoming aware of the same the Company shall inform the Agent of a change in the Company's published long term unsecured debt rating (as determined by S&P and Moody's).
20.5	Notification of default
(a)	Each Obligor shall notify the Agent of any Default and the steps, if any, being taken to remedy it promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor).

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(b)	Promptly upon a request by the Agent, the Company shall supply to the Agent a certificate signed by a director or authorised signatory on its behalf certifying that no Default is continuing (or if continuing, specifying the steps, if any, being taken to remedy it).
20.6	Separation
	The Company shall promptly notify the Agent after it has been decided by Six Continents PLC that the Separation is not to, or shall not, proceed.
20.7	Use of websites
(a)	The Company may satisfy its obligation under this Agreement to deliver any information in relation to those Lenders (the "Website Lenders") who accept this method of communication by posting this information onto an electronic website designated by the Company and the Agent (the "Designated Website") if:
	(i)	the Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method;
	(ii)	both the Company and the Agent are aware of the address of and any relevant password specifications for the Designated Website; and
	(iii)	the information is in a format previously agreed between the Company and the Agent.
	If any Lender (a "Paper Form Lender") does not agree to the delivery of information electronically then the Agent shall notify the Company accordingly and the Company shall supply the information to the Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event the Company shall supply the Agent with at least one copy in paper form of any information required to be provided by it.
(b)	The Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Company and the Agent:
(c)	The Company shall promptly upon becoming aware of its occurrence notify the Agent if:
	(i)	the Designated Website cannot be accessed due to technical failure;
	(ii)	the password specifications for the Designated Website change;
	(iii)	any new information which is required to be provided under this Agreement is posted onto the Designated Website;
	(iv)	any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or
	(v)	the Company becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.
	If the Company notifies the Agent under paragraph (c)(i) or paragraph (c)(v) above, all information to be provided by the Company under this Agreement after the date of that notice shall be supplied in paper form unless and until the Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.

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(d)	Any Website Lender may request, through the Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website. The Company shall comply with any such request within ten Business Days.
21.	FINANCIAL COVENANTS
21.1	Financial Condition
	The Company shall ensure that:
	(a)	the ratio of EBITDA to Net Interest Payable for the Relevant Period ending on 30 September 2003 and for each Relevant Period thereafter (the first such subsequent Relevant Period ending on 31 December 2003) will not be less than 3.5:1;
	(b)	the ratio of Net Borrowings, as at the last day of each Relevant Period to EBITDA for that Relevant Period will not be more than 3.25:1, where:
		(i)	the first test period for this covenant shall be the Relevant Period ending 30 September 2003; and
		(ii)	EBITDA for the purpose of this covenant shall be adjusted to take into account the pro forma impact of any acquisitions or disposals made during the Relevant Period by a member of the Group; and
	(c)	Consolidated Net Worth at the end of each Relevant Period is at least £1,500,000,000.
	The covenants set out in paragraphs (a) and (b) above in relation to the Relevant Periods ending 30 September 2003 and 31 December 2003 shall be determined on a pro forma basis on actual results of the Group and based on the assumption that the Separation Date was 1 October 2002.
21.2	Financial covenant calculations
	For the purposes of this Agreement, Borrowings (including Financial Indebtedness for the purpose of calculating Borrowings), EBITDA, Consolidated Net Worth, Net Borrowings and Net Interest Payable shall be:
	(a)	calculated and interpreted on a consolidated basis in accordance with the Applicable Accounting Principles of the Company and shall be expressed in sterling; and
	(b)	extracted (except as needed to reflect the terms of this Clause 21) from the financial statements of the Group delivered under Clause 20.1 (Financial statements) and Clause 20.2 (Compliance Certificate),
	and "Group" shall, for the purpose of this Clause 21, include Britvic.
21.3	Definitions
	In this Agreement:
	"Borrowings" means, as at any particular time, the aggregate outstanding principal, capital or nominal amount (and any fixed or minimum premium payable on redemption) of the Financial Indebtedness of members of the Group, other than:
	(a)	any indebtedness referred to in paragraph (g) of the definition of Financial Indebtedness;
	(b)	any Project Finance Indebtedness; and

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(c)	any indebtedness referred to in paragraphs (f)(ii), (i) and (j) of the definition of Financial Indebtedness except, in the case of paragraphs (i) and (j), to the extent any such obligation or liability specified in such paragraphs has been provided for in the financial statements of the Group delivered under Clause 20.1 (Financial statements) or is disclosed as a contingency in the notes thereto and is quantified,
and deducting, to the extent included, amounts attributable to interests of third parties in members of the Group.
For this purpose, any amount outstanding or repayable in a currency other than sterling shall on that day be taken into account in its sterling equivalent at the rate of exchange that would have been used had an audited consolidated balance sheet of the Group been prepared as at that day in accordance with the GAAP applicable to the Original Financial Statements.
"Cash" means any credit balances on any deposit, savings, current or other account, and any cash in hand, which is:
(a)	freely withdrawable on demand;
(b)	not subject to any Security (other than permitted pursuant to Clause 22.3 (Negative pledge));
(c)	denominated and payable in freely transferable and freely convertible currency; and
(d)	capable of being remitted to an Obligor in the United Kingdom.
"Cash Equivalent Investments" means:
(a)	securities issued or fully guaranteed or insured by the Government of the United States or any member state of the European Union which is rated at least AA by S&P and/or Fitch (each as defined in "Margin") or Aa by Moody's (as defined in "Margin");
(b)	commercial paper or other debt securities issued by an issuer rated at least A-1 by S&P and/or Fitch (each as defined in "Margin") or P-1 by Moody's (as defined in "Margin"); and
(c)	certificates of deposit or time deposits of any commercial bank (which has outstanding debt securities rated as referred to in paragraph (b) above),
in each case not subject to any Security (other than permitted pursuant to Clause 22.3 (Negative pledge)) denominated and payable in freely transferable and freely convertible currency and the proceeds of which are capable of being remitted to an Obligor in the United Kingdom.
"ConsolidatedNet Worth" means, as at any particular time, the aggregate of:
(a)	the amount paid up or credited as paid up on the issued share capital of the Company; and
(b)	the amount standing to the credit of the consolidated reserves of the Group,
less (but without double counting) any amount included in the above which is attributable to:
(i)	goodwill or other intangible assets other than goodwill arising on acquisitions of any businesses of a type similar to those carried on by the Group at the date of this

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	Agreement or the Separation Date made after the date of this Agreement (so long as the business or businesses acquired remain(s) within the Group);
(ii)	amounts set aside for Tax;
(iii)	minority interests;
(iv)	the amount by which the net book value of any asset has been written up after 30 September 2002 (or, in the case of a person becoming a member of the Group after that date, the date on which that person became or becomes a member of the Group) by way of revaluation or on its transfer from one member of the Group to another; and
(v)	any dividend or other distribution declared but not paid by any member of the Group to a person not a member of the Group.
"EBITDA" means, in relation to any Relevant Period, the total consolidated operating profit of the Group for that Relevant Period:
(a)	before taking into account:
	(i)	Net Interest Payable;
	(ii)	Tax;
	(iii)	all extraordinary and exceptional items; and
(b)	after adding back all amounts provided for depreciation and amortisation (including any amortisation of underwriting and syndication fees in connection with the Facilities); and
(c)	deducting, to the extent included, amounts attributable to interests of third parties in members of the Group.
"Net Borrowings" means, as at any particular time, Borrowings less Cash and Cash Equivalent Investments.
"Net Interest Payable" means, in relation to any Relevant Period, the aggregate amount of interest and any other finance charges accrued by the Group in that Relevant Period in respect of Borrowings including:
(a)	the interest element of leasing and hire purchase payments;
(b)	commitment fees, commissions and guarantee fees; and
(c)	amounts in the nature of interest payable in respect of any shares other than equity share capital, adjusted (but without double counting) by:
(i)	adding back the net amount payable (or deducting the net amount receivable) by members of the Group in respect of that Relevant Period under any interest or (so far as they relate to interest) currency hedging arrangements;
(ii)	deducting interest income of the Group in respect of that Relevant Period; and
(iii)	deducting, to the extent included, the amount of interest and other finance charges attributable to interests of third parties in members of the Group and adjusting, as

49

		appropriate, the additions or deductions specified in paragraphs (i) and (ii) above as a consequence of interests of third parties in members of the Group.
	"Relevant Period" means:
	(a)	the period of 12 months ending on 30 September 2003; and thereafter
	(b)	each financial year of the Company; and
	(c)	each period beginning on the first day of the second half of a financial year of the Company and ending on the last day of the first half of its next financial year.
22.	GENERAL UNDERTAKINGS
	The undertakings in this Clause 22 remain in force from the date of this Agreement (or, in the case of Clause 22.3 (Negative pledge), Clause 22.5 (Subsidiary Indebtedness ), Clause 22.6 (Change of business) or Clause 22.7 (Insurance), from the Separation Date) for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.
22.1	Authorisations
	Each Obligor shall promptly:
	(a)	obtain, comply with and do all that is necessary to maintain in full force and effect; and
	(b)	supply certified copies to the Agent of,
	any Authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance Document.
22.2	Compliance with laws
	Each Obligor shall comply with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Finance Documents.
22.3	Negative pledge
	(a)	No Obligor shall (and the Company shall ensure that no other member of the Group will) create or permit to subsist any Security over any of its assets.
	(b)	Paragraph (a) above does not apply to:
		(i)	any Security listed in Schedule 9 (Security) except to the extent the principal amount secured by that Security exceeds the amount stated in that Schedule;
		(ii)	any cash management, netting or set-off arrangement entered into by any member of the Group in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;
		(iii)	any lien arising by operation of law and in the ordinary course of business;
		(iv)	any Security over or affecting any asset acquired by a member of the Group after the date of this Agreement to the extent that:
			(A)	the Security was not created in contemplation of the acquisition of that asset by a member of the Group; and

50

			(B)	the principal amount secured has not been increased in contemplation of or since the acquisition of that asset by a member of the Group;
		(v)	any Security over or affecting any asset of any company which becomes a member of the Group after the date of this Agreement, where the Security is created prior to the date on which that company becomes a member of the Group, to the extent that:
			(A)	the Security was not created in contemplation of the acquisition of that company; and
			(B)	the principal amount secured has not increased in contemplation of or since the acquisition of that company;
		(vi)	any Security created pursuant to any Finance Document;
		(vii)	any title transfer or retention of title arrangement entered into by any member of the Group in the ordinary course of business;
		(viii)	pledges of goods, the related documents of title and/or other related documents arising or created in the ordinary course of business as security for indebtedness to a bank or financial institution directly relating to the goods or documents over which that pledge exists;
		(ix)	any Security over cash or other investments for bank guarantees given in the ordinary course of trading securing liabilities of up to £50,000,000 or to meet any margin requirement in respect of derivative transactions;
		(x)	any Security resulting from the rules and regulations of any clearing system or stock exchange over shares and/or other securities held in that clearing system or stock exchange;
		(xi)	any Security securing Project Finance Indebtedness;
		(xii)	any Security replacing any Security permitted under paragraph (i) above or this paragraph (xii) and securing the same indebtedness or obligations whose principal amount does not exceed the maximum principal amount secured, or which could be secured, by the replaced Security when it is replaced;
		(xiii)	any Security securing indebtedness the principal amount of which (when aggregated with the principal amount of any other indebtedness which has the benefit of Security given by any member of the Group other than any permitted under paragraphs (i) to (xii) above) does not exceed 5 per cent. of the Consolidated Gross Assets of the Group (or its equivalent in another currency or currencies as calculated using the most recently delivered financial statements of the Group or, prior to the receipt of the first consolidated financial statements of the Group required to be delivered pursuant to Clause 20.1 (Financial statements), the Initial Financial Statements); or
		(xiv)	any other Security created or outstanding with the prior consent of the Majority Lenders.
22.4	Disposals
	(a)	Except as provided in paragraph (b) below, no Obligor shall (and the Company shall ensure that no other member of the Group will) whether by a single transaction or a series of transactions

51

	(whether related or not and whether voluntary or involuntary) sell, lease, transfer or otherwise dispose of any asset (each a "Disposal").
(b)	Paragraph (a) above does not apply to any Disposal:
	(i)	made in the ordinary course of day-to-day business of the disposing entity (which expression shall not include the Disposal of a Lodging Asset);
	(ii)	of assets which are exchanged for other assets of similar or superior type or where all or part of the net proceeds (calculated, mutatis mutandis, on the same basis as Net Proceeds) (or an equivalent amount) are, or are committed to be, applied in the purchase, refurbishment or improvement of any Extended Lodging Asset, in each case, within the period of 6months following receipt of the proceeds of that Disposal and where the balance (if any) of such net proceeds (or equivalent amount) not so applied or committed is attributed to, or applied pursuant to, another paragraph or paragraphs of this Clause 22.4(b)
	(iii)	where any member of the Group has applied funds in the purchase, refurbishment or improvement of any Extended Lodging Asset, in each case, within the period of 6 months prior to the receipt of the proceeds of that Disposal and where the amount so applied is at least equal to the proceeds of that Disposal or, to the extent it is less than the proceeds of that Disposal, the balance is attributed to, or applied pursuant to, another paragraph or paragraphs of this Clause 22.4(b);
	(iv)	at arm's length of assets which are obsolete;
	(v)	which constitutes the payment of cash for any purpose not prohibited by any Finance Document;
	(vi)	by any member of the Group to:
		(A)	another member of the Group which is either a wholly owned member of the Group, or any member of the Group which would be a wholly owned, but for a nominal shareholding owned by a chosen nominee; or
		(B)	a Project Group Member or a Joint Venture Entity where, in each case, the net asset position of the Group following that Disposal is neutral or enhanced;
	(vii)	which constitutes any short term investment of funds not immediately required in the Group's business and the realisation of those investments;
	(viii)	which constitutes the making of a lawful distribution;
	(ix)	where an amount equal to the Net Proceeds thereof (or such smaller amount having regard to other Disposals which are permitted to be made pursuant to the other paragraphs of this Clause 22.4(b)) is used in or towards making a prepayment and cancellation of Facility A under Clause 8.4 ( Disposals) or, following the prepayment and cancellation in full of Facility A, towards prepayment and cancellation of such other Facility as the Company may decide;
	(x)	by the granting of any lease, licence or any other right over real property on arm's length terms and in the ordinary course of business of the disposing entity;

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	(xi)	to which the Majority Lenders have consented; or
	(xii)	in a financial year, in addition to any Disposal permitted under paragraphs (i) to (xi) (inclusive) above, which relates to an asset which does not (or assets which do not) together with other Disposals made under or attributed to this paragraph (xii) in that financial year, generate, in aggregate, net proceeds in excess of 7.5 per cent. of Consolidated Gross Assets of the Group (where Consolidated Gross Assets is, for the purposes of this provision, based on Consolidated Gross Assets) as calculated for the financial year of the Company immediately prior to the financial year in which such Disposal is made,
	provided that in the case of paragraphs (ii) and (iii) above, there shall be no double counting with respect to an application made prior to a Disposal and an application made following a Disposal. For the purposes of paragraph (xii) above Consolidated Gross Assets shall, prior to the receipt of the first consolidated financial statements required to be delivered pursuant to Clause 20.1 (Financial statements) be calculated, by reference to the Initial Financial Statements.
22.5	Subsidiary Indebtedness
(a)	The Company shall ensure that the portion of Financial Indebtedness which is borrowed or incurred by Subsidiaries that are not Guarantors under this Agreement shall not at any time exceed the aggregate of:
	(i)	£250,000,000; and
	(ii)	£150,000,000 (provided such amount relates exclusively to Financial Indebtedness specified in paragraphs (f)(ii), (i) and (j) of the definition of Financial Indebtedness), and provided that Financial Indebtedness for the purpose of this Clause 22.5 shall exclude:
		(A)	amounts borrowed under this Agreement;
		(B)	qualifying amounts specified in paragraph (b) below which are secured as permitted pursuant to paragraphs (iv) or (v) of Clause 22.3 (Negative Pledge) or otherwise is outstanding for the period of up to 6 months following the relevant acquisition; and.
		(C)	amounts which would be included as Financial Indebtedness under paragraph (d) of the definition of Financial Indebtedness due to a change in GAAP after the date of this Agreement but would not be treated as Financial Indebtedness using Applicable Accounting Principles.
(b)	Where a member of the Group acquires an asset or a company after the date of this Agreement in respect of which Financial Indebtedness is outstanding (other than Project Finance Indebtedness), where:
	(i)	that Financial Indebtedness was not created in contemplation of the acquisition of that asset or company; and
	(ii)	that Financial Indebtedness has not increased in contemplation of or since that acquisition,

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	then that Financial Indebtedness shall be taken into account for the purposes of the exclusion specified in paragraph (a) above.
22.6	Change of business
	The Company shall procure that no substantial change is made to the general nature of the business of the Group taken as a whole from that anticipated to be carried on from the Separation Date but this shall not prevent any member of the Group engaging in any ancillary or related business.
22.7	Insurance
	Each Obligor shall (and the Company shall ensure that each other member of the Group will) maintain insurances on and in relation to its business and assets with reputable underwriters or insurance companies against those risks, and to the extent, usually insured against by prudent companies located in the same or a similar location and carrying on a similar business.
22.8	Acquisitions
	No Obligor shall (and the Company shall ensure that no other member of the Group will) complete (without the approval of the Majority Lenders) any acquisition which constitutes a Class 1 Transaction as defined in Chapter 10 of the UK Listing Rules where the consideration for that acquisition is funded all or substantially all by way of debt.
22.9	Britvic
	The Company and its Subsidiaries shall at all times act on arms-length terms with Britvic.
23.	EVENTS OF DEFAULT
	Each of the events or circumstances set out in Clause 23 is an Event of Default.
23.1	Non-payment
	An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless:
	(a)	its failure to pay is caused by administrative or technical error; and
	(b)	payment is made within 5 Business Days of its due date.
23.2	Financial covenants
	Any requirement of Clause 21 (Financial covenants) is not satisfied.
23.3	Other obligations
(a)	An Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 23.1 (Non-payment ) and Clause 23.2 (Financial covenants)).
(b)	No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within 20 days of the earlier of Agent giving notice to the Company or the Company becoming aware of the failure to comply.
23.4	Misrepresentation
(a)	Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered by or on behalf of any Obligor under or in

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	connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made.
(b)	No Event of Default under paragraph (a) above will occur if the circumstances giving rise to a misrepresentation or misstatement is/are capable of remedy and is/are remedied within 20 days of the Agent giving notice to the Company requiring such remedy or (if earlier) the Company becoming aware of its failure to comply.
23.5	Cross default
(a)	Any Financial Indebtedness of any member of the Group is not paid when due nor with in any applicable grace period.
(b)	Any Financial Indebtedness of any member of the Group is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).
(c)	Any creditor of any member of the Group becomes entitled to declare any Financial Indebtedness of any member of the Group due and payable prior to its specified maturity as a result of an event of default (however described).
(d)	No Event of Default will occur under this Clause 23.5 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (a) to (b) above is less than £25,000,000 (or its equivalent in any other currency or currencies) and Financial Indebtedness for the purposes of this Clause 23.5 shall exclude, in each case, Project Finance Indebtedness.
23.6	Insolvency
(a)	An Obligor or a Material Subsidiary is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.
(b)	A moratorium is declared or takes effect in respect of all or a material part (or a particular type of) the indebtedness of any member of an Obligor or a Material Subsidiary.
23.7	Insolvency proceedings
(a)	Any corporate action or legal proceeding is taken (subject to paragraph (d) below) for the winding-up or dissolution of an Obligor or Material Subsidiary, or the appointment of a liquidator, administrator, compulsory manager or other similar officer is appointed in respect of, an Obligor or Material Subsidiary other than for a solvent winding-up, dissolution or liquidation of an Obligor (other than the Company or the Guarantors) or a Material Subsidiary.
(b)	Any corporate action or legal proceeding is taken (subject to paragraph (d) below), or an agreement is entered into or proposed by an Obligor or Material Subsidiary, for the suspension of payments by, a moratorium of any indebtedness of, or a general composition or assignment for the benefit of the creditors of, an Obligor or Material Subsidiary.
(c)	A receiver, administrative receiver, compulsory manager or other similar officer is appointed in respect of an Obligor or Material Subsidiary or any of its assets, or any Security is enforced over an Obligor's or Material Subsidiary's assets, having an aggregate value of and in respect of

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	indebtedness aggregating not less than £25,000,000 (or its equivalent in any other currency or currencies).
(d)	A person presents a petition for the winding up, liquidation, dissolution, administration or suspension of payments of an Obligor or Material Subsidiary except:
	(i)	where such petition is being contested in good faith and by appropriate means and is in any event dismissed within 30 days of its presentation; or
	(ii)	where such presentation is frivolous or vexatious or an abuse of process and is in any event dismissed within 30 days of its presentation.
23.8	Creditors' process
	Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of an Obligor or Material Subsidiary having an aggregate value of and in respect of indebtedness aggregating at least £25,000,000 and is not discharged within 30 days.
23.9	Ownership of the Obligors
	An Obligor (other than the Company) is not or ceases to be a Subsidiary of the Company.
23.10	Unlawfulness
	It is or becomes unlawful for an Obligor to perform any of its material obligations under the Finance Documents.
23.11	Repudiation
	An Obligor repudiates a Finance Document or evidences an intention to repudiate a Finance Document.
23.12	Cession of business
	An Obligor ceases to carry on its business except pursuant to a reconstruction, amalgamation, merger or consolidation on solvent terms or by way of a Disposal permitted pursuant to Clause 22.4 (Disposals).
23.13	Material adverse change
(a)	Any event or circumstance occurs which has a material adverse effect on the ability of the Company to perform and comply with its obligations under Clause 21 (Financial covenants).
(b)	Any event or circumstance occurs which has or could reasonably be expected to have a material adverse effect on the ability of the Obligors (taken as a whole) to perform and comply with their payment obligations under any Finance Document.
23.14	Acceleration
	On and at any time after the occurrence of an Event of Default which is continuing the Agent may, and shall if so directed by the Majority Lenders, by notice to the Company:
	(a)	cancel the Total Commitments whereupon they shall immediately be cancelled;
	(b)	declare that all or part of the Loans, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or

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(c) declare that all or part of the Loans be payable on demand, whereupon they shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders.

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SECTION 9

CHANGES TO PARTIES

24.	CHANGES TO THE LENDERS
24.1	Assignments and transfers by the Lenders
	Subject to this Clause 24, a Lender (the "Existing Lender") may:
	(a)	assign any of its rights; or
	(b)	transfer by novation any of its rights and obligations,
	to another bank or financial institution which is a Qualifying Lender or, following the occurrence of an Event of Default which is continuing, to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets which, in each case, is a Qualifying Lender (the "New Lender").
24.2	Conditions of assignment or transfer
(a)	The consent of the Company is required for an assignment or transfer by a Lender, unless the assignment or transfer relates to Facility B only or is to another Lender or an Affiliate of a Lender or following the occurrence of an Event of Default which is continuing.
(b)	The consent of the Company to an assignment or transfer must not be unreasonably withheld or delayed. The Company will be deemed to have given its consent ten days after the Lender has requested it unless consent is expressly refused by the Company within that time.
(c)	The consent of the Company to an assignment or transfer must not be withheld solely because the assignment or transfer may result in an increase to the Mandatory Costs.
(d)	A partial transfer by a Lender shall be in a minimum amount of $15,000,000 whether in respect to one or more of the Facilities.
(e)	An assignment will only be effective on receipt by the Agent of written confirmation from the New Lender (in form and substance satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties as it would have been under if it was an Original Lender.
(f)	A transfer will only be effective if the procedure set out in Clause 24.5 (Procedure for transfer) is complied with.
(g)	If:
	(i)	a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and
	(ii)	as a result of circumstances existing at the date the assignment, transfer or change occurs, an Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 13 (Tax gross-up and indemnities) or Clause 14 (Increased Costs),
	then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred.

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24.3	Assignment or transfer fee
	The New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Agent (for its own account) a fee of £1,000.
24.4	Limitation of responsibility of Existing Lenders
(a)	Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:
	(i)	the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;
	(ii)	the financial condition of any Obligor;
	(iii)	the performance and observance by any Obligor of its obligations under the Finance Documents or any other documents; or
	(iv)	the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document,
	and any representations or warranties implied by law are excluded.
(b)	Each New Lender confirms to the Existing Lender and the other Finance Parties that it:
	(i)	has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Finance Document; and
	(ii)	will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.
(c)	Nothing in any Finance Document obliges an Existing Lender to:
	(i)	accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause 24; or
	(ii)	support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise.
24.5	Procedure for transfer
(a)	Subject to the conditions set out in Clause 24.2 (Conditions of assignment or transfer) a transfer is effected in accordance with paragraph (b) below when the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Agent shall, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.
(b)	On the Transfer Date:

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	(i)	to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents each of the Obligors and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and their respective rights against one another under the Finance Documents shall be cancelled (being the "Discharged Rights and Obligations");
	(ii)	each of the Obligors and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor and the New Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender;
	(iii)	the Agent, the Arranger, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Agent, the Arranger and the Existing Lender shall each be released from further obligations to each other under the Finance Documents; and
	(iv)	the New Lender shall become a Party as a "Lender".
24.6	Disclosure of information
	Any Lender may disclose, on a need to know basis, to any of its Affiliates and any other person:
	(a)	to (or through) whom that Lender assigns or transfers (or may potentially assign or transfer) all or any of its rights and obligations under this Agreement for the purpose of that actual or potential assignment or transfer;
	(b)	with (or through) whom that Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, this Agreement or any Obligor for the purpose of that actual or potential sub-participation or transfer; or
	(c)	to whom, and to the extent that, information is required to be disclosed by any applicable law or regulation,
	any information about any Obligor, the Group and the Finance Documents as that Lender shall consider appropriate if, in relation to paragraphs (a) and (b) above, the person to whom the information is to be given has entered into a Confidentiality Undertaking. This Clause supersedes any previous agreement relating to the confidentiality of this information.
24.7	Confidentiality
	Each Finance Party undertakes with each Obligor:
	(a)	to keep confidential and not to disclose to anyone any information (including any projections) relating to the Group, any member of the Group or any Finance Document, in whatever form, and including information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information except:

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		(i)	for any lawfully obtained from any other source, or that is or becomes public knowledge, other than as a direct or indirect result of any breach of any obligation of confidentiality; or
		(ii)	as permitted by Clause 24.6 ( Disclosure of information) or by a Confidentiality Undertaking envisaged by that Clause;
	(b)	to use that information only for the purpose of, or as permitted by, the Finance Documents; and
	(c)	to use all reasonable endeavours to ensure that any person to whom that Finance Party passes any such information (unless disclosed under paragraph (c) of Clause 24.6 (Disclosure of information ) acknowledges and complies with the provisions of this Clause 24.7 as if that person were also bound by it.
25.	CHANGES TO THE OBLIGORS
25.1	Assignments and transfer by Obligors
	No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.
25.2	Additional Borrowers
(a)	The Company may request that any of its Subsidiaries becomes an Additional Borrower. That Subsidiary shall become an Additional Borrower if:
	(i)	all Lenders (acting reasonably) approve the addition of that Subsidiary and which they shall do so if that Subsidiary is a wholly owned subsidiary incorporated in the United Kingdom;
	(ii)	the Company delivers to the Agent a duly completed and executed Accession Letter;
	(iii)	the Company confirms that no Default is continuing or would occur as a result of that Subsidiary becoming an Additional Borrower; and
	(iv)	the Agent has received all of the documents and other evidence listed in Part II of Schedule 2 (Conditions Precedent) in relation to that Additional Borrower, each in form and substance reasonably satisfactory to the Agent.
(b)	The Agent shall notify the Company and the Lenders promptly upon being satisfied that it has received (in form and substance reasonably satisfactory to it) all the documents and other evidence listed in Part II of Schedule 2 (Conditions Precedent).
25.3	Resignation of a Borrower
(a)	The Company may request that a Borrower (other than the Company) ceases to be a Borrower by delivering to the Agent a Resignation Letter.
(b)	The Agent shall accept a Resignation Letter and notify the Company and the Lenders of its acceptance if:
	(i)	no Default is continuing or would result from the acceptance of the Resignation Letter (and the Company has confirmed this is the case); and

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	(ii)	the Borrower is under no actual or contingent obligations as a Borrower under any Finance Documents,
	whereupon that company shall cease to be a Borrower and shall have no further rights or obligations under the Finance Documents.
25.4	Additional Guarantors
(a)	The Company may request that any of its Subsidiaries become an Additional Guarantor. That Subsidiary shall become an Additional Guarantor if:
	(i)	the Company delivers to the Agent a duly completed and executed Accession Letter; and
	(ii)	the Agent has received all of the documents and other evidence listed in Part II of Schedule 2 (Conditions Precedent) in relation to that Additional Guarantor, each in form and substance reasonably satisfactory to the Agent.
(b)	The Agent shall notify the Company and the Lenders promptly upon being satisfied that it has received (in form and substance reasonably satisfactory to it) all the documents and other evidence listed in Part II of Schedule 2 (Conditions Precedent).
25.5	Repetition of Representations
	Delivery of an Accession Letter constitutes confirmation by the relevant Subsidiary that the Repeating Representations are true and correct in relation to it as at the date of delivery as if made by reference to the facts and circumstances then existing.
25.6	Resignation of a Guarantor
(a)	The Company may request that a Guarantor (other than the Company) ceases to be a Guarantor by delivering to the Agent a Resignation Letter.
(b)	The Agent shall accept a Resignation Letter and notify the Company and the Lenders of its acceptance if:
	(i)	no Default is continuing or would result from the acceptance of the Resignation Letter (and the Company has confirmed this is the case); and
	(ii)	all the Lenders have consented to the Company's request.

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SECTION 10
THE FINANCE PARTIES
26.	ROLE OF THE AGENT AND THE ARRANGER
26.1	Appointment of the Agent
(a)	Each other Finance Party appoints the Agent to act as its agent under and in connection with the Finance Documents.
(b)	Each other Finance Party authorises the Agent to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.
26.2	Duties of the Agent
(a)	The Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Agent for that Party by any other Party.
(b)	Except where a Finance Document specifically provides otherwise, the Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.
(c)	If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the Finance Parties.
(d)	If the Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent or the Arranger) under this Agreement it shall promptly notify the other Finance Parties.
(e)	The Agent's duties under the Finance Documents are solely mechanical and administrative in nature.
26.3	Role of the Arranger
	Except as specifically provided in the Finance Documents, the Arranger has no obligations of any kind to any other Party under or in connection with any Finance Document.
26.4	No fiduciary duties
(a)	Nothing in this Agreement constitutes the Agent or the Arranger as a trustee or fiduciary of any other person.
(b)	Neither the Agent nor the Arranger shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.
26.5	Business with the Group
	The Agent and the Arranger may acc ept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group.
26.6	Rights and discretions of the Agent
(a)	The Agent may rely on:
	(i)	any representation, notice or document believed by it to be genuine, cor rect and appropriately authorised; and

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	(ii)	any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.
(b)	The Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that:
	(i)	no Default has occurred (unless it has actual knowledge of a Default arising under Clause 23.1 (Non -payment));
	(ii)	any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised; and
	(iii)	any notice or request made by the Company (other than a Utilisation Request or Selection Notice) is made on behalf of and with the consent and knowledge of all the Obligors.
(c)	The Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.
(d)	The Agent may act in relation to the Finance Documents through its personnel and agents.
(e)	The Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.
(f)	Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor the Arranger is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.
26.7	Majority Lenders' instructions
(a)	Unless a contrary indication appears in a Finance Document, the Agent shall (i) exercise any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from exercising any right, power, authority or discretion vested in it as Agent) and (ii) not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with an instruction of the Majority Lenders.
(b)	Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be binding on all the Finance Parties.
(c)	The Agent may refrain from acting in accordance with the instructions of the Majority Lenders (or, if appropriate, the Lenders) until it has received such security as it may require for any cost, loss or liability ( together with any associated VAT) which it may incur in complying with the instructions.
(d)	In the absence of instructions from the Majority Lenders (or, if appropriate, the Lenders), the Agent may act (or refrain from taking action) as it considers to be in the best interest of the Lenders.
(e)	The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender's consent) in any legal or arbitration proceedings relating to any Finance Document.

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26.8	Responsibility for documentation
	Neither the Agent nor the Arranger:
	(a)	is responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Agent, the Arranger, an Obligor or any other person given in or in connection with any Finance Document or the Information Memorandum; or
	(b)	is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection w ith any Finance Document.
26.9	Exclusion of liability
(a)	Without limiting paragraph (b) below, the Agent will not be liable for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.
(b)	No Party (other than the Agent) may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind by that officer, employee or agent i n relation to any Finance Document and any officer, employee or agent of the Agent may rely on this Clause.
(c)	The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose.
26.10	Lenders' indemnity to the Agent
	Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent, within three Business Days of demand, against any cost, loss or liability incurred by the Agent (otherwise than by reason of the Agent's gross negligence or wilful misconduct) in acting as Agent under the Finance Documents (unless the Agent has been reimbursed by an Obligor pursuant to a Finance Document).
26.11	Resignation of the Agent
(a)	The Agent may resign and appoint one of its Affiliates acting through an office in the United Kingdom as successor by giving notice to the other Finance Parties and the Company.
(b)	Alternatively the Agent may resign by giving notice to the other Finance Parties and the Company, in which case the Majority Lenders (after consultation with the Company) may appoint a successor Agent.
(c)	If the Majority Lenders have not appointed a successor Agent in accordance with paragraph (b) above within 30 days after notice of resignation was given, the Agent (after consultation with the Company) may appoint a successor Agent (acting through an office in the United Kingdom).

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(d)	The retiring Agent shall, at its own cost, make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents.
(e)	The Agent's resignation notice shall only take effect upon the appointment of a successor.
(f)	Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 26. Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
(g)	After consultation with the Company, the Majority Lenders may, by notice to the Agent , require it to resign in accordance with paragraph (b) above. In this event, the Agent shall resign in accordance with paragraph (b) above.
26.12	Confidentiality
(a)	In acting as agent for the Finance Parties, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.
(b)	If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it.
26.13	Relationship with the Lenders
(a)	The Agent may treat each Lender as a Lender, entitled to payments under this Agreement and acting through its Facility Office unless it has received not less than five Business Days prior notice from that Lender to the contrary in accordance with the terms of this Agreement.
(b)	Each Lender shall supply the Agent with any information required by the Agent in order to calculate the Mandatory Cost in accordance with Schedule 4 (Mandatory Cost formulae).
26.14	Credit appraisal by the Lenders
	Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms to the Agent and the Arranger that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including but not limited to:
	(a)	the financial condition, status and nature of each mem ber of the Group;
	(b)	the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document;
	(c)	whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and

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	(d)	the adequacy, accuracy and/or completeness of the Information Memorandum and any other information provided by the Agent, any Party or by any other person under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document.
26.15	Reference Banks
	If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Agent shall (in agreement with the Company, such agreement not to be unreasonably withheld) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank.
26.16	Deduction from amounts payable by the Agent
	If any Party owes an amount to the Agent under the Finance Documents the Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Fi nance Documents that Party shall be regarded as having received any amount so deducted.
27.	CONDUCT OF BUSINESS BY THE FINANCE PARTIES
	No provision of this Agreement will:
	(a)	interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;
	(b)	oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or
	(c)	oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.
28.	SHARING AMONG THE FINANCE PARTIES
28.1	Payments to Finance Parties
	If a Finance Party (a " Recovering Finance Party") receives or recovers any amount from an Obligor other than in accordance with Clause 29 ( Payment mechanics) and applies that amount to a payment due under the Finance Documents then:
	(a)	the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery to the Agent;
	(b)	the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with Clause 29 (Payment mechanics), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and
	(c)	the Recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the "Sharing Payment") equal to such receipt or recovery

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		less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 29.5 (Partial payments).
28.2	Redistribution of payments
	The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) in accordance with Clause 29.5 ( Partial payments).
28.3	Recovering Finance Party's rights
(a)	On a distributi on by the Agent under Clause 28.2 (Redistribution of payments ), the Recovering Finance Party will be subrogated to the rights of the Finance Parties which have shared in the redistribution.
(b)	If and to the extent that the Recovering Finance Party is not able to rely on its rights under paragraph (a) above, the relevant Obligor shall be liable to the Recovering Finance Party for a debt equal to the Sharing Payment which is immediately due and payable.
28.4	Reversal of redistribution
	If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:
	(a)	each Finance Party which has received a share of the relevant Sharing Payment pursuant to Clause 28.2 (Redistribution of payments) shall, upon request of the Agent, pay to the Agent for account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay); and
	(b)	that Recovering Finance Party's rights of subrogation in respect of any reimbursement shall be cancelled and the relevant Obligor will be liable to the reimbursing Finance Party for the amount so reimbursed.
28.5	Exceptions
(a)	This Clause 28 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and enforceable claim against the relevant Obligor.
(b)	A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:
	(i)	it notified that other Finance Party of the legal or arbitration proceedings; and
	(ii)	that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.

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SECTION 11

ADMINISTRATION

29.	PAYMENT MECHANICS
29.1	Payments to the Agent
(a)	On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, that Obligor or Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.
(b)	Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to euro, in the principal financial centre in a Participating Member State or London) with such bank as the Agent specifies.
29.2	Distributions by the Agent
	Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 29.3 (Distributions to an Obligor ) and Clause 29.4 (Clawback), be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Agent by not less than five Business Days' notice with a bank in the principal financial centre of the country of that currency (or, in relation to euro, in the principal financial centre of a Participating Member State or London).
29.3	Distributions to an Obligor
	The Agent may (with the consent of the Obligor or in accordance with Clause 30 (Set-off)) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.
29.4	Clawback
(a)	Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.
(b)	If the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Agent shall on demand refund the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds.
29.5	Partial payments
(a)	If the Agent receives a payment that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Agent shall apply that payment towards the obligations of that Obligor under the Finance Documents in the following order:

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	(i)	first , in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent or the Arranger under the Finance Documents;
	(ii)	secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;
	(iii)	thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and
	(iv)	fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.
(b)	The Agent shall, if so directed by the Majority Lenders, vary the order set out in paragraphs (a)(ii) to (iv) above.
(c)	Paragraphs (a) and (b) above will override any appropriation made by an Obligor.
29.6	No set-off by Obligors
	All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set -off or counterclaim.
29.7	Business Days
(a)	Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
(b)	During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.
29.8	Currency of account
(a)	Subject to paragraphs (b) to (e) below, the Base Currency is the currency of account and payment for any sum due from an Obligor under any Finance Document.
(b)	A repayment of a Loan or Unpaid Sum or a part of a Loan or Unpaid Sum shall be made in the currency in which that Loan or Unpaid Sum is denominated on its due date.
(c)	Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.
(d)	Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.
(e)	Any amount expressed to be payable in a currency other than the Base Currency shall be paid in that other currency.
29.9	Change of currency
(a)	Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:
	(i)	any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in,

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		the currency or currency unit of that country designated by the Agent (acting reasonably and after consultation with the Company); and
	(ii)	any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent (acting reasonably and after consultation with the Company).
(b)	If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Company) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.
30.	SET-OFF
	Without prejudice to the normal rights of the Finance Parties at law, after the occurrence of an Event of Default which is continuing, a Finance Party may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a m arket rate of exchange in its usual course of business for the purpose of the set-off. That Finance Party shall promptly notify that Obligor of any such set -off or conversion.
31.	NOTICES
31.1	Communications in writing
	Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.
31.2	Addresses
	The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:
	(a)	in the case of the Company, that identified with its name below;
	(b)	in the case of each Lender or any other Obligor, that notified in writing to the Agent on or prior to the date on which it becomes a Party; and
	(c)	in the case of the Agent, that identified with its name below,
	or any substitute address, fax number or department or officer as the Party may notify to the Agent (or the Agent may notify to the other Parties, if a change is made by the Agent) by not less than five Business Days' notice.
31.3	Delivery
(a)	Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:
	(i)	if by way of fax, when received in legible form; or

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	(ii)	if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,
	and, if a par ticular department or officer is specified as part of its address details provided under Clause 31.2 (Addresses), if addressed to that department or officer.
(b)	Any communication or document to be made or delivered to the Agent will be effective only when actually received by the Agent and then only if it is expressly marked for the attention of the department or officer identified with the Agent's signature below (or any substitute department or officer as the Agent shall specify for this purpose).
(c)	All notices from or to an Obligor shall be sent through the Agent.
(d)	Any communication or document made or delivered to the Company in accordance with this Clause will be deemed to have been made or delivered to each of the Obligors.
31.4	Notification of address and fax number
	Promptly upon receipt of notification of an address and fax number or change of address or fax number pursuant to Clause 31.2 (Addresses) or changing its own address or fax number, the Agent shall notify the other Parties.
31.5	Electronic communication
(a)	Any communication to be made between the Agent and a Lender or an Obligor and the Agent under or in connection with the Finance Documents may be made by electronic mail or other electronic means, if the Agent and the relevant Lender or, as appropriate, the relevant Obligor and the Agent:
	(i)	agree that, unless and until notified to the contrary, this is to be an accepted form of communication;
	(ii)	notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and
	(iii)	notify each other of any change to their address or any other such information supplied by them.
(b)	Any electronic communication made between the Agent and a Lender or an Obligor and the Agent will be effective only when actually received in readable form and in the case of any electronic communication made by a Lender to the Agent or an Obligor to the Agent only if it is addressed in such a manner as the Agent shall specify for this purpose.
(c)	The ability of an Obligor to use electronic communications is without prejudice to its obligation to submit any Utilisation Request, Selection Notice, Accession Letter, Resignation Letter, Term Out Notice or Compliance Certificate in the form required under this Agreement or any other document or notice which requires the signature of any director or authorised signatory of an Obligor.
31.6	English language
(a)	Any notice given under or in connection with any Finance Document must be in English.
(b)	All other documents provided under or in connection with any Finance Document must be:

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	(i)	in English; or
	(ii)	if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.
32.	CALCULATIONS AND CERTIFICATES
32.1	Accounts
	In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.
32.2	Certificates and Determinations
	Any certification or determination by a Finance Party of a rate or amount under any Finance Document shall set out the basis of calculation in reasonable detail and is prima facie evidence of the matters to which it relates.
32.3	Day count convention
	Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 365 days in the case of sterling or 360 days in the case of euros and US Dollars or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.
33.	PARTIAL INVALIDITY
	If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
34.	REMEDIES AND WAIVERS
	No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.
35.	AMENDMENTS AND WAIVERS
35.1	Required consents
(a)	Subject to Clause 35.2 (Exceptions) any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Obligors and any such amendment or waiver will be binding on all Parties.
(b)	The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause.

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35.2	Exceptions
(a)	An amendment or waiver that has the effect of changing or which relates to:
	(i)	the definition of "EURIBOR", "LIBOR", "Majority Lenders" in Clause 1.1 (Definitions);
	(ii)	an extension to the date of payment of any amount under the Finance Documents;
	(iii)	a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;
	(iv)	an increase in or an extension of any Commitment;
	(v)	a change to the Borrowers or Guarantors other than in accordance with Clause 25 (Changes to the Obligors);
	(vi)	any provision which expressly requires the consent of all the Lenders;
	(vii)	Clause 2.2 ( Finance Parties' rights and obligations ), Clause 24 ( Changes to the Lenders), Clause 28 (Sharing among the Finance Parties), or this Clause 35,
	shall not be made without the prior consent of all the Lenders.
(b)	An amendment or waiver which relates to the rights or obligations of the Agent or the Arranger may not be effected without the consent of the Agent or the Arranger.
36.	COUNTERPARTS
	Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

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SECTION 12

GOVERNING LAW AND ENFORCEMENT

37.	GOVERNING LAW
	This Agreement is governed by English law.
38.	ENFORCEMENT
38.1	Jurisdiction
(a)	The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a "Dispute").
(b)	The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.
(c)	This Clause 38.1 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from taking proceedings relating to a dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.
38.2	Service of process
	Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in England and Wales):
	(a)	irrevocably appoints the Company as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and
	(b)	agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned.
This Agreement has been entered into on the date stated at the beginning of this Agreement.

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SCHEDULE 1

THE ORIGINAL LENDERS

Name of Original	Facility A Commitment	Facility B Commitment	Facility C Commitment
Lender
Barclays Bank PLC	$200,000,000	$180,000,000	$150,000,000
Citibank, N.A.	$200,000,000	$180,000,000	$150,000,000
HSBC Bank plc	$200,000,000	$180,000,000	$150,000,000
JPMorgan Chase Bank	$200,000,000	$180,000,000	$150,000,000
The Royal Bank of Scotland plc	$200,000,000	$180,000,000	$150,000,000
	$1,000,000,000	$900,000,000	$750,000,000

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SCHEDULE 2

CONDITIONS PRECEDENT

PART I A

CONDITIONS PRECEDENT TO INITIAL UTILISATION

1.	The Company
(a)	A copy of the constitutional documents of the Company.
(b)	A copy of a resolution of the board of directors and/or a committee of the board of directors of the Company (together with a copy of the resolutions appointing such committee):
	(i)	approving the terms of, and the transactions contemplated by, the Finance Documents and resolving that it execute the Finance Documents;
	(ii)	authorising a specified person or persons to execute the Finance Documents on its behalf; and
	(iii)	authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, any Utilisation Request and Selection Notice) to be signed and/or despatched by it under or in connection with the Finance Documents.
(c)	A specimen of the signature of each person authorised by the resolution referred to in paragraph (b) above.
(d)	A certificate of the Company (signed by a duly authorised officer) confirming that borrowing or guaranteeing, as appropriate, the Total Commitments would not cause any borrowing, guaranteeing or similar limit binding on the Company to be exceeded.
(e)	A certificate of the Company (signed by an authorised signatory) certifying that each copy document relating to it specified in this Part IA of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
(f)	The Original Financial Statements.
(g)	A cancellation notice (which shall be irrevocable) in respect of the Bridge Facility to be effective on the Separation Date and such that the Bridge Facility will be cancelled and prepaid in full on the Separation Date.
(h)	A chain of irrevocable payment instructions evidencing the instructions to the Agent to ensure the relevant amount of proceeds of the drawings under each of this Agreement and TopCo Facility Agreement which are required to be made to prepay the Bridge Facility in full on the Separation Date.
(i)	Evidence of the Company's long-term credit rating (as defined in the definition of Margin).
2.	Legal opinions
	A legal opinion of Clifford Chance, Limited Liability Partnership legal advisers to the Arranger and the Agent in England, substantially in the form distributed to the Original Lenders prior to signing this Agreement.

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PARTIB

CONDITIONS PRECEDENT TO INITIAL UTILISATION

Other documents and evidence
1.	A certified copy of the listing particulars and the shareholders' circular sent to the shareholders of Six Continents PLC in respect of the Separation.
2.	A copy of the Business Plan and Working Capital Memorandum and Report of Ernst & Young in respect of the Company.
3.	A certificate from a duly authorised officer of the Company confirming that the ordinary shares of the Company have been admitted to the Official List of the UK Listing Authority and the listing has become effective pursuant to paragraph 7.1 of the Listing Rules.

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PART II

CONDITIONS PRECEDENT REQUIRED TO BE

DELIVERED BY AN ADDITIONAL OBLIGOR

1.	An Accession Letter, duly executed by the Additional Obligor and the Company.
2.	A copy of the constitutional documents of the Additional Obligor.
3.	A copy of a resolution of (or of a committee of) the board of directors of the Additional Obligor:
	(a)	approving the terms of, and the transactions contemplated by, the Accession Letter and the Finance Documents and resolving that it execute the Accession Letter;
	(b)	authorising a specified person or persons to execute the Accession Letter on its behalf; and
	(c)	authorising a specified person or persons, on its behalf, to sign and/or despatch all other documents and notices (including, in relation to an Additional Borrower, any Utilisation Request or Selection Notice) to be signed and/or despatched by it under or in connection with the Finance Documents.
4.	A specimen of the signature of each person authorised by the resolution referred to in paragraph 3 above.
5.	A copy of any necessary resolutions signed by all the holders of the issued shares of the Additional Guarantor which are members of the Group, approving the terms of, and the transactions contemplated by, the Finance Documents to which the Additional Guarantor is a party.
6.	A certificate of the Additional Obligor (signed by an authorised signatory) confirming that borrowing or guaranteeing, as appropriate, the Total Commitments would not cause any borrowing, guaranteeing or similar limit binding on it to be exceeded.
7.	A certificate of the Additional Obligor (signed by an authorised signatory) certifying that each copy document listed in this Part II of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Accession Letter.
8.	If available, the latest audited financial statements of the Additional Obligor.
9.	A legal opinion of Clifford Chance, Limited Liability Partnership legal advisers to the Arranger and the Agent in England.
10.	If the Additional Obligor is incorporated in a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Arranger and the Agent in the jurisdiction in which the Additional Obligor is incorporated.
11.	If the proposed Additional Obligor is incorporated in a jurisdiction other than England and Wales, evidence that the process agent specified in Clause 38.2 (Service of process), if not an Obligor, has accepted its appointment in relation to the proposed Additional Obligor.

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SCHEDULE 3

REQUESTS

PART I

UTILISATION REQUEST

From:	[Borrower]
To:	[Agent]

Dated:

Dear Sirs

InterContinental Hotels Group PLC - $2,650,000,000 Facility Agreement
dated 13 February 2003 (the "Agreement")

1.	We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.
2.	We wish to borrow a Loan on the following terms:
	Proposed Utilisation Date:	[_________] (or, if that is not a Business Day, the next Business Day)
	Facility to be utilised:	[Facility A]/[Facility B]/[Facility C]1
	Currency of Loan:	[_________]
	Amount:	[_________] or, if less, the Available Facility
	Interest Period:	[_________]
3.	We confirm that each condition specified in Clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request.
4.	The proceeds of this Loan should be credited to [account].
5.	[This Utilisation Request is irrevocable.]2
6.	[We acknowledge that the receipt of funds pursuant to this Utilisation Request is conditional upon you having received the certificate listed in paragraph 2 of Part IB of Schedule 2 (Conditions Precedent).]

Yours faithfully

authorised signatory for
[name of relevant Borrower]

1	Delete as appropriate.
2	In the case of a Conditional Utilisation Request, delete clause 5 and add clause 6.

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PART II

SELECTION NOTICE

APPLICABLE TO A TERM LOAN OR A FACILITY BLOAN

From:	[Borrower]
To:	[Agent]

Dated:

Dear Sirs

InterContinental Hotels Group PLC - $2,650,000,000
Facility Agreement dated 13 February 2003 (the "Agreement")

1.	We refer to the Agreement. This is a Selection Notice. Terms defined in the Agreement have the same meaning in this Selection Notice unless given a different meaning in this Selection Notice.
2.	We refer to the following Term Loan[s]/Facility B Loan[s] in [identify currency] with an Interest Period ending on [_________] .3
3.	[We request that the above Term Loan[s]/Facility B Loan[s] be divided into [_________]  Term Loan/Facility B Loans with the following Base Currency Amounts and Interest Periods:]4
	or
	[We request that the next Interest Period for the above Term Loan[s]/Facility B Loan[s] is [_________] ].5
4.	We request that the above Term Loan[s]/Facility B Loan[s] [is]/[are] [denominated in the same currency for the next Interest Period]/[denominated in the following currencies: [_________] . As this results in a change of currency we confirm that each condition specified in Clause 4.2 (Further conditions precedent) is satisfied on the date of this Selection Notice. The proceeds of any change in currency should be credited to [account]].
5.	This Selection Notice is irrevocable.

Yours faithfully

authorised signatory for
[the Company on behalf of]
[name of relevant Borrower]

3	Insert details of all Facility A Loans in the same currency which have an Interest Period ending on the same date.
4	Use this option if division of Loans is requested.
5	Use this option if sub-division is not required.

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SCHEDULE 4

MANDATORY COST FORMULAE

1.	The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.
2.	On the first day of each Interest Period (or as soon as possible ther eafter) the Agent shall calculate, as a percentage rate, a rate (the "Additional Cost Rate") for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders' Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.
3.	The Additional Cost Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Agent. This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender's participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.
4.	The Additional Cost Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Agent as follows:
	(a)	in relation to a sterling Loan:

		AB + C(B - D) + E ´ 0.01
			per cent. per annum
		100 - (A + C)
(b)	in relation to a Loan in any currency other than sterling:
		E ´ 0.01
			per cent. per annum.
		300

Where:
A	is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.
B	is the percentage rate of interest (excluding the Margin and the Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of interest specified in paragraph (a) of Clause 9.3 (Default interest)) payable for the relevant Interest Period on the Loan.
C	is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.
D	is the percentage rate per annum payable by the Bank of England to the Agent on interest bearing Special Deposits.

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	E	is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.
5.	For the purposes of this Schedule:
	(a)	"Eligible Liabilities" and "Special Deposits" have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;
	(b)	"Fees Rules" means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;
	(c)	"Fee Tariffs" means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and
	(d)	"Tariff Base" has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.
6.	In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.
7.	If requested by the Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.
8.	Each Lender shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:
	(a)	the jurisdiction of its Facility Office; and
	(b)	any other information that the Agent may reasonably require for such purpose.
	Each Lender shall promptly notify the Agent of any change to the information provided by it pursuant to this paragraph.
9.	The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifi es the Agent to the contrary, each Lender's obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.

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10.	The Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.
11.	The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8 above.
12.	Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.
13.	The Agent may from time to time, after consultation with the Company and the Lenders, determine and notify to all Parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.

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SCHEDULE 5
FORM OF TRANSFER CERTIFICATE

To:	[ ___________________] as Agent
From:	[The Existing Lender] (the "Existing Lender") and [The New Lender] (the "New Lender")
Dated:

InterContinental Hotels Group PLC - $2,650,000,000 Facility Agreement
dated 13 February 2003 (the "Agreement")

1.	We refer to the Agreement. This is a Transfer Certificate. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.
2.	We refer to Clause 24.5 (Procedure for transfer):
	(a)	The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender by novation all or part of the Existing Lender's Commitment, rights and obligations referred to in the Schedule in accordance with Clause 24.5 (Procedure for transfer).
	(b)	The proposed Transfer Date is [___________________].
	(c)	The Facility Office, administrative office (if different) and address, fax number and attention details for notices of the New Lender for the purposes of Clause 31.2 (Addresses) are set out in the Schedule.
3.	The New Lender expressly acknowledges the limitations on the Existing Lender's obligations set out in paragraph (c) of Clause 24.4 (Limitation of responsibility of Existing Lenders).
4.	The New Lender represents that it is a Qualifying Lender.
[5.]	[The New Lender confirms that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:
	(a)	a company resident in the United Kingdom, or a partnership each member of which is a company resident in the United Kingdom, for United Kingdom tax purposes; or
	(b)	a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a branch or agency and interest payable in respect of an advance under a Finance Document falls to be brought into account in computing the chargeable profits of that company for the purposes of section 11(2) of the Taxes Act.]6
[5/6]	This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate.
[6/7]	This Transfer Certificate is governed by English law.
6	Include if New Lender comes within paragraph (ii) of the definition of Qualifying Lender in Clause 13.1 (Definitions )

85

THE SCHEDULE

Commitment/rights and obligations to be transferred

[insert relevant details]

[Facility Office, administrative office (if different) address, fax number and attention details for notices and account details for payments.]

[Existing Lender]	[New Lender]
By:	By:

This Transfer Certificate is accepted by the Agent and the Transfer Date is confirmed as

[_________].

[Agent]

By:

86

SCHEDULE 6

FORM OF ACCESSION LETTER

To:	[______________] as Agent
From:	[Subsidiary] and InterContinental Hotels Group PLC

Dated:

Dear Sirs

InterContinental Hotels Group PLC - $2,650,000,000 Facility Agreement
dated 13 February 2003 (the "Agreement")

1.	We refer to the Agreement. This is an Accession Letter. Terms defined in the Agreement have the same meaning in this Accession Letter unless given a different meaning in this Accession Letter.
2.	[Subsidiary] agrees to become an Additional [Borrower]/[Guarantor] and to be bound by the terms of the Agreement as an Additional [Borrower]/[Guarantor] pursuant to [Clause 25.2 (Additional Borrowers)]/[Clause 25.4 (Additional Guarantors)] of the Agreement. [Subsidiary] is a company duly incorporated under the laws of [name of relevant jurisdiction].
3.	[Subsidiary's] administrative details are as follows:
	Address:
	Fax No:
	Attention:
4.	This Accession Letter is governed by English law.
	[This Guarantor Accession Letter is entered into by deed.]
	InterContinental Hotels Group PLC	[Subsidiary]

87

SCHEDULE 7

FORMOF RESIGNATION LETTER

To:	[_________] as Agent
From:	[resigning Obligor] and InterContinental Hotels Group PLC
Dated:

Dear Sirs

InterContinental Hotels Group PLC - $2,650,000,000 Facility Agreement
dated 13 February 2003 (the "Agreement")

1.	We refer to the Agreement. This is a Resignation Letter. Terms defined in the Agreement have the same meaning in this Resignation Letter unless given a different meaning in this Resignation Letter.
2.	Pursuant to [Clause 25.3 (Resignation of a Borrower)]/[Clause 25.6 (Resignation of a Guarantor)], we request that [resigning Obligor] be released from its obligations as a [Borrower]/[Guarantor] under the Agreement.
3.	We confirm that:
	(a)	no Default is continuing or would result from the acceptance of this request; and
	(b)	[_________]
4.	This Resignation Letter is governed by English law.
	InterContinental Hotels Group PLC		[Subsidiary]
	By:		By:

88

SCHEDULE 8

FORM OF COMPLIANCE CERTIFICATE

To:	[_________] as Agent
From:	InterContinental Hotels Group PLC
Dated:

Dear Sirs

InterContinental Hotels Group PLC - $2,650,000,000 Facility Agreement
dated 13 February 2003 (the "Agreement")

1.	We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.
2.	We confirm that:
	(a)	the ratio of EBITDA to Net Interest Payable for the Relevant Period ending [_________] was [_________]:1;
	(b)	the ratio of Net Borrowings, as at the last day of the Relevant Period ending [_________], to EBITDA for that Relevant Period was [_________] :1; and
	(c)	Consolidated Net Worth at the end of the Relevant Period ending [_________] was £[_________].
	Computations of the above (in reasonable detail) are attached to this Compliance Certificate.
3.	The Material Subsidiaries as at the period ending [_________] are [_________].
4.	[We confirm that no Default is continuing.]7

Signed:
		Director/Authorised Signatory
		of
		InterContinental Hotels Group PLC
	7	If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it.

89

SCHEDULE 9

SECURITY

Member of the Group	Counterparty	Maturity Date	Principal amount   secured
American Hotel B.V.	FGH Bank N.V.	12/12/2007	£11,810,000
Intercontinental Hotel	Credit Anstalt Bankverein	30/06/2007	£16,410,000
Betriebsgesellschaft
m.b.H
Hotelera El Carmen S.A.	Banco Central	28/01/2010	£8,444,000
	Hispanoamericano S.A.
Penta Hotels München	Frankfurter	15/09/2008	£956,000
GmbH & Co.	Hypothekenbank
BVH	Frankfurter	30/06/2008	£9,916,000
Hotelbesitzgesellschaft	Hypothekenbank
mbH & Co. Verwaltungs-
KG
Midland Hotel and	The Royal Bank of	30/06/2006	£20,000,000
Conference Centre	Scotland plc
Limited
Hotels Holiday Inns BV –	The Law Debenture	—	£12,500,000
UK Branch	Trust Corporation

90

SCHEDULE 10

TIMETABLES

"D - " refers to the number of Business Days before the relevant Utilisation Date/the first day of the relevant Interest Period.

	Loans in euro	Loans in sterling	Loans in US Dollars	Loans in other currencies
Request for approval as an	—	—	—	D-5
Optional Currency, if required				10:30 a.m.
(Clause 4.3 (Conditions relating
to Optional Currencies))
Agent notifies the Lenders of the	—	—	—	D-5
request (Clause 4.3 (Conditions				3:00 p.m.
relating to Optional Currencies))
Responses by Lenders to the	—	—	—	D-4
request (Clause 4.3 (Conditions				1:00 p.m.
relating to Optional Currencies))
Agent notifies the Company if a	—	—	—	D-4
currency is approved as an				5:00 p.m.
Optional Currency in accordance
with Clause 4.3 (Conditions
relating to Optional Currencies)
Delivery of a duly completed	D - 3	D - 1	D - 3	D - 3
Utilisation Request (Clause 5.1	10:30 a.m.	10:30 a.m.	10:30 a.m.	10:30 a.m.
(Delivery of a Utilisation
Request)) or a Selection Notice
(Clause 10.1 (Selection of
Interest Periods))
Agent determines (in relation to a	D - 3	D - 1	D - 3	D - 3
Utilisation) the Base Currency	11:00 a.m.	11:00 a.m.	11:00 a.m.	11:00 a.m.
Amount of the Loan, if required
under Clause 5.4 (Lenders'
participation) and notifies the
Lenders of the Loan in
accordance with Clause 5.4
(Lenders' participation)

91

	Loans in euro	Loans in sterling	Loans in US Dollars	Loans in othercurrencies
Agent receives a notification from	Quotation Day	—	Quotation Day	Quotation Day
a Lender under Clause 6.2	3:00 p.m.		3:00 p.m.	3:00 p.m.
(Unavailability of a currency)
Agent gives notice in accordance	Quotation Day	—	Quotation Day	Quotation Day
with Clause 6.2 (Unavailability of	5:00 p.m.		5:00 p.m.	5:00 p.m.
a currency)
Agent determines amount of the	D-3	—	D-3	D-3
Term Loan/Facility B Loan in	11:00 a.m.		11:00 a.m.	11:00 a.m.
Optional Currency in accordance
with Clause 6.3 (Change of
currency)
Agent determines amount of the	D-3	—	D-3	D-3
Term Loan/Facility B Loan in	11:00 a.m.		11:00 a.m.	11:00 a.m.
Optional Currency in accordance
with Clause 6.4(a) (Same
Optional Currency during
successive Interest Periods)
Agent determines amount of Term	D-3	—	D-3	D-3
Loan/Facility B Loan in Optional	11:00 a.m.		11:00 a.m.	11:00 a.m.
Currency converted into Base
Currency in accordance with
Clause 6.4 (b) (Same Optional
Currency during successive
Interest Periods)
LIBOR or EURIBOR is fixed	Quotation Day	Quotation Day	Quotation Day	Quotation Day
	as of	as of	as of	as of
	11:00 a.m.	11:00 a.m.	11:00 a.m.	11:00 a.m.
	Brussels time

92

SCHEDULE 11
FORM OF LMACONFIDENTIALITY UNDERTAKING

LMA CONFIDENTIALITY LETTER (SELLER)

[Letterhead of Seller/Seller's agent/broker]

  To:

  Re: The Agreement

  Company:

  Date:

  Amount:

  Agent:

[insert name of Potential Purchaser/ Purchaser's agent/broker

Dear Sirs

We understand that you are considering [acquiring]¹/[arranging the acquisition of]² an interest in the Agreement (the "Acquisition"). In consideration of us agreeing to make available to you certain information, by your signature of a copy of this letter you agree as follows:

1.	Confidentiality Undertaking
	You undertake (a) to keep the Confidential Information confidential and not to disclose it to anyone except as provided for by paragraph 2 below and to ensure that the Confidential Information is protected with security measures and a degree of care that would apply to your own confidential information, (b) to use the Confidential Information only for the Permitted Purpose, (c) to use all reasonable endeavours to ensure that any person to whom you pass any Confidential Information (unless disclosed under paragraph 2[(c)/(d)]3 below) acknowledges and complies with the provisions of this letter as if that person were also a party to it, and (d) not to make enquiries of any member of the Group or any of their officers, directors, employees or professional advisers relating directly or indirectly to the Acquisition.
2.	Permitted Disclosure
	We agree that you may disclose Confidential Information:
	(a)	to members of the Purchaser Group and their officers, directors, employees and professional advisers to the extent necessary for the Permitted Purpose and to any auditors of members of the Purchaser Group;

93

	(b)	subject to the requirements of the Agreement, in accordance with the Permitted Purpose so long as any prospective purchaser has delivered a letter to you in equivalent form to this letter;]
	[(b/c)]3	subject to the requirements of the Agreement, to any person to (or through) whom you assign or transfer (or may potentially assign or transfer) all or any of the rights, benefits and obligations which you may acquire under the Agreement or with (or through) whom you enter into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, the Agreement or the Borrower or any member of the Group so long as that person has delivered a letter to you in equivalent form to this letter; and
	[(c/d)]3	(i) where requested or required by any court of competent jurisdiction or any competent judicial, governmental, supervisory or regulatory body, (ii) where required by the rules of any stock exchange on which the shares or other securities of any member of the Purchaser Group are listed or (iii) where required by the laws or regulations of any country with jurisdiction over the affairs of any member of the Purchaser Group.
3.	Notification of Required or Unauthorised Disclosure
	You agree (to the extent permitted by law) to inform us of the full circumstances of any disclosure under paragraph 2[(c)/(d)]3 or upon becoming aware that Confidential Information has been disclosed in breach of this letter.
4.	Return of Copies
	If we so request in writing, you shall return all Confidential Information supplied to you by us and destroy or permanently erase all copies of Confidential Information made by you and use all reasonable endeavours to ensure that anyone to whom you have supplied any Confidential Information destroys or permanently erases such Confidential Information and any copies made by them, in each case save to the extent that you or the recipients are required to retain any such Confidential Information by any applicable law, rule or regulation or by any competent judicial, governmental, supervisory or regulatory body or in accordance with internal policy, or where the Confidential Information has been disclosed under paragraph 2[(c)/(d)]3 above.
5.	Continuing Obligations
	The obligations in this letter are continuing and, in particular, shall survive the termination of any discussions or negotiations between you and us. Notwithstanding the previous sentence, the obligations in this letter shall cease (a) if you become a party to or otherwise acquire (by assignment or sub-participation) an interest, direct or indirect, in the Agreement or (b) twelve months after you have returned all Confidential Information supplied to you by us and destroyed or permanently erased all copies of Confidential Information made by you (other than any such Confidential Information or copies which have been disclosed under paragraph 2 above (other than sub -paragraph 2(a)) or which, pursuant to paragraph 4 above, are not required to be returned or destroyed).

94

6.	No Representation; Consequences of Breach, etc
	You acknowledge and agree that:
	(a)	neither we, [nor our principal]4 nor any member of the Group nor any of our or their respective officers, employees or advisers (each a "Relevant Person") (i) make any representation or warranty, express or implied, as to, or assume any responsibility for, the accuracy, reliability or completeness of any of the Confidential Information or any other information supplied by us or the assumptions on which it is based or (ii) shall be under any obligation to update or correct any inaccuracy in the Confidential Information or any other information supplied by us or be otherwise liable to you or any other person in respect to the Confidential Information or any such information; and
	(b)	we [or our principal]4 or members of the Group may be irreparably harmed by the breach of the terms hereof and damages may not be an adequate remedy; each Relevant Person may be granted an injunction or specific performance for any threatened or actual breach of the provisions of this letter by you.
7.	No Waiver; Amendments, etc
	This letter sets out the full extent of your obligations of confidentiality owed to us in relation to the information the subject of this letter. No failure or delay in exercising any right, power or privilege hereunder will operate as a waiver thereof nor will any single or partial exercise of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privileges hereunder. The terms of this letter and your obligations hereunder may only be amended or modified by written agreement between us and the Company.
8.	Inside Information
	You acknowledge that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation relating to insider dealing and you undertake not to use any Confidential Information for any unlawful purpose.
9.	Nature of Undertakings
	The undertakings given by you under this letter are given to us and (without implying any fiduciary obligations on our part) are also given for the benefit of [our principal,]4 the Company and each other member of the Group.
10.	[Third Party Rights]
(a)	Subject to paragraph 6 and to paragraph 9 the terms of this letter may be enforced and relied upon only by you and us and the operation of the Contracts (Rights of Third Parties) Act 1999 is excluded.

95

(b)	Notwithstanding any provisions of this letter, the parties to this letter do not require the consent of any Relevant Person (except for the Company) or any member of the Group to rescind or vary this letter at any time.
11.	Governing Law and Jurisdiction
	This letter (including the agreement constituted by your acknowledgement of its terms) shall be governed by and construed in accordance with the laws of England and the parties submit to the non-exclusive jurisdiction of the English courts.
12.	Definitions
	In this letter (including the acknowledgement set out below) terms defined in the Agreement shall, unless the context otherwise requires, have the same meaning and:
	"Confidential Information" means any information relating to the Company, any member of the Group, the Agreement and/or the Acquisition provided to you by us or any of our affiliates or advisers, in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that (a) is or becomes public knowledge other than as a direct or indirect result of any breach of this letter or (b) is known by you before the date the information is disclosed to you by us or any of our affiliates or advisers or is lawfully obtained by you thereafter, other than from a source which is connected with the Group and which, in either case, as far as you are aware, has not been obtained in violation of, and is not otherwise subject to, any obligation of confidentiality;
	"Group" means the Company and each of its holding companies and subsidiaries and each subsidiary of each of its holding companies (as each such term is defined in the Companies Act 1985);
	"Permitted Purpose" means [subject to the terms of this letter, passing on information to a prospective purchaser for the purpose of]2 considering and evaluating whether to enter into the Acquisition; and
	"Purchaser Group" means you, each of your holding companies and subsidiaries and each subsidiary of each of your holding companies (as each such term is defined in the Companies Act 1985).
Please acknowledge your agreement to the above by signing and returning the enclosed copy.
Yours faithfully
For and on behalf of
[Seller/Seller's agent/broker]
To:	[Seller]
	[Seller's agent/broker]

96

	The Borrower and each other member of the Group
We acknowledge and agree to the above:
For and on behalf of
[Potential Purchaser/Purchaser's agent/broker]
1	delete if addressee is acting as broker or agent.
2	delete if addressee is acting as principal.
3	delete as applicable.
4	delete if letter is sent out by the Seller rather than the Seller’s broker or agent.

97

SCHEDULE 12
FORM OF TERM OUT NOTICE
From:		InterContinental Hotels Group PLC
To:		[Agent]
Dated:
Dear Sirs
InterContinental Hotels Group PLC - $2,650,000,000 Facility Agreement dated 13 February 2003 (the "Agreement")
1.	We refer to the Agreement. This is a Term Out Notice. Terms defined in the Agreement have the same meaning in this Term Out Notice unless given a different meaning in this Term Out Notice.
2.	We elect to exercise the Term Out Option pursuant to Clause 7.4 (Term Out Option) of the Agreement in relation to [all Facility A Loans/the following Loans[s]]:
	Amount:		[_______]
	Currency:		[_______]
	Interest Period:		[_______].
3.	This Term Out Notice is irrevocable.
Yours faithfully
.................................................
authorised signatory for
InterContinental Hotels Group PLC

98

The Company
INTERCONTINENTAL HOTELS GROUP PLC
Address:	20 North Audley Street
	London W1K 6WN
Fax No:	020 7409 8527
Attention:	The Company Secretary
cc:	Treasurer
	InterContinental Hotels Group PLC
	No 1 First Avenue
	Centrum 100
	Burton on Trent
	Staffordshire DE14 2WB
Fax No:	01283 514767
By:	ANTHONY STERN
The Arranger
BARCLAYS CAPITAL
By:	PETER FLEMING
HSBC BANK plc
By:	BRYONY SAYERS
J.P. MORGAN plc
By:	MORTEN KNUDSEN
SALOMON BROTHERS INTERNATIONAL LIMITED
By:	JOHN STAFFORD
THE ROYAL BANK OF SCOTLAND plc
By:	LOIS SALTER
The Original Lenders
BARCLAYS BANK PLC
By:	PETER FLEMING

99

CITIBANK, N.A
By:	JOHN STAFFORD
HSBC BANK plc
By:	SUE BORRETT
JPMORGAN CHASE BANK
By:	MORTEN KNUDSEN
THE ROYAL BANK OF SCOTLAND plc
By:	DAVID TREACHER
The Agent
HSBC BANK plc
Address:	8 Canada Square
	Level 17
	London
	E14 5HQ
Fax No:	020 7991 4351
Attention:
Chris Merrett
By:	BRYONY SAYERS

100

EX-4

Exhibit 4(a)(iii)

Dated 10 February 1986


BRITANNIA SOFT DRINKS LIMITED

and

INTERCONTINENTAL HOTELS GROUP PLC

and

WHITBREAD PLC

and

ALLIED DOMECQ PLC

and

SIX CONTINENTS INVESTMENTS LIMITED

and

WHITBREAD GROUP PLC

and

ALLIED DOMECQ OVERSEAS (CANADA) LIMITED




JOINT VENTURE AGREEMENT


as amended by five supplementary agreements
dated 18 May 1989, 15 March 1990, 2 October 1995,
an unspecified date in 1997 and 10 March 2004

One Silk Street
London EC2Y 8HQ



Telephone (44-20) 7456 2000
Facsimile (44-20) 7456 2222

Ref Stuart Bedford

This Agreement is made the 10th day of February 1986 between:

(1) BRITANNIA SOFT DRINKS LIMITED (No. 47094) whose registered office is situate at 8-12 Station Road, Kettering, Northants NN15 7HA (“BSD”); and

(2) INTERCONTINENTAL HOTELS GROUP PLC (No. 4551528) whose registered office is situate at 67 Alma Road, Windsor, Berkshire, SL4 3HD (“IHG”); and

(3) WHITBREAD PLC (No. 29423) whose registered office is situate at The Brewery, Chiswell Street, London EC1Y 4SD (“Whitbread”);

(4) ALLIED DOMECQ PLC (No. 689729) whose registered office is situate at 24 Portland Place, London, WC1N 4BB (“Allied”);

(5) SIX CONTINENTS INVESTMENTS LIMITED (No. 694156) whose registered office is situate at 67 Alma Road, Windsor, Berkshire, SL4 3HD (“Six Continents Investments”);

(6) WHITBREAD GROUP PLC (No. 29423) whose registered office is situate at CityPoint, 1 Ropemaker Street, London, EC2Y 9HX (“Whitbread Group”); and

(7) ALLIED DOMECQ OVERSEAS (CANADA) LIMITED (No. 2266065) whose registered office is situate at The Pavilions, Bridgwater Road, Bedminster Down, Bristol BS13 8AR (“ADO”).

Whereas:

(A) By an Agreement dated 29 September 1980 Six Continents and Whitbread agreed to merge their soft drinks interests in a joint venture company and co-operate fully on a long term basis in building up a significant market share for such company in the UK soft drinks trade.

(B) BSD, particulars of which are set out in Part A of Schedule 1, is that joint venture company.

(C) British Vitamin Products Limited (“BVP”) is incorporated in England with registered number 484529 under the Companies Act 1948 and has an authorised and issued and allotted share capital as specified in Part A of the Second Schedule hereto and the names of its Directors and Secretary and other particulars are as set out in such Schedule. BVP has the subsidiaries details of which are set out in Part B of the Second Schedule, each of which is directly or indirectly wholly-owned by BVP.

(D) Allied, IHG and Whitbread wish to merge BVP, the company which owns or controls substantially the whole of the UK soft drinks interests of the Allied group, into the existing joint venture and to join in co-operating fully on a long term basis for the purpose mentioned in Recital (G) below, and for this purpose have invited BSD to offer to acquire the BVP Shares (as defined in Clause 1.1)).

(E) Having increased its authorised share capital with a view to the acquisition of the BVP Shares BSD has offered to acquire the BVP Shares on the terms and conditions set out below in exchange for an issue of Shares in BSD, and the shareholders of BVP have accepted such offer. Allied proposes to grant an option to BSD to purchase the remaining Ordinary Shares in BVP and £4,000,000 of Loan Stock of BVP.

(F) [No longer required]

(G) The parties hereto therefore desire to enter into this Agreement in substitution for the Agreement referred to in Recital (A) above to record their commitment to co-operating fully on a long term basis in building up a significant profitable market share in the UK soft drinks trade through BSD.

1

Now it is hereby agreed as follows:

1 Definitions

1.1 In this Agreement, the following definitions shall bear the following meanings:

“Accounts” means the latest audited accounts of the relevant company which in the case of BVP shall be deemed to be the estimated financial data and the Report by Peat Marwick Mitchell & Co. referred to in Clause 4.2.1(i);

“Associated Company” means, in relation to a Party, any holding company, subsidiary or any other subsidiaries of any such holding company;

“Balance Sheet Date” means 14 September 1985 in the case of BVP and the BVP Subsidiaries and 28 September 1985 in the case of BSD and the BSD Subsidiaries;

“BVP Shares” means 418,696 of the Ordinary Shares and all of the Deferred Shares of £1 each in BVP;

“BSD Board” means the board of directors of BSD from time to time;

“BSD Shares” means Ordinary Shares of £1 each in BSD;

“BVP Subsidiaries” means the companies of which details are set out in Part B of Schedule 2;

“BSD Subsidiaries” means the companies of which details are set out in Part B of Schedule 1;

“BSD Group” means BSD and its Subsidiary Companies from time to time after Completion;

“BVP Group” means BVP and its Subsidiary Companies at Completion;

“BSD Disclosure Letter” means the disclosure letter setting out exceptions to the warranties and undertakings given by IHG and Whitbread pursuant to Clause 7.2;

“BVP Disclosure Letter” means the disclosure letter setting out exceptions to the warranties and undertakings given by Allied pursuant to Clause 7.1;

“BSD Deed of Indemnity” means a deed of indemnity substantially in the form set out in Schedule 5 given by IHG and Whitbread as several Covenantors to Allied indemnifying BSD and the BSD Subsidiaries against taxation;

“BVP Deed of Indemnity” means a deed of indemnity substantially in the form set out in Schedule 5 given by Allied as Covenantor to IHG and Whitbread indemnifying BVP and the BVP Subsidiaries against taxation;

“Completion” means the completion of the matters contemplated by Clause 4;

“Discretionary Products” means products which are derived from beer, wine, spirit or cider (which includes both apple and pear juice) technology and products derived from tea or coffee with in all cases no or less than 1.20 per cent alcohol by volume in their saleable state;

2

“Group Companies” has, for the purposes of Schedule 3 only, the special meaning given to those words by Clauses 7.1 and 7.2;

“Parties” means the parties to this Agreement; and “Party” means any one of them; “Six Continents” means Six Continents PLC (No. 913450), formerly Bass Public Limited Company, whose registered office is situate at 67 Alma Road, Windsor, Berkshire SL4 3HD. Pursuant to a demerger by Six Continents of its hotels and soft drinks business from its pubs business on 15 April 2003, Six Continents became a wholly owned subsidiary of IHG;

“Soft Drinks” means mineral water, carbonated drinks, squashes and cordials, fruit juices or those drinks blended with beer wine or spirits and similar beverages with no or less than 1.20 per cent alcohol by volume in their saleable state, other than Discretionary Products; a list of current BSD and BVP Soft Drinks and agreed exclusions is attached as Appendix I;

“Taxation” and “Transaction” shall bear the same meanings respectively ascribed thereto in the Deed of Indemnity;

“Territory” means all countries of the world;

“Warranties” means the warranties set out in Schedule 3.

1.2 So far as not inconsistent with the context, references to IHG, Whitbread or Allied shall be deemed to include not only such company itself but also any subsidiary thereof which shall for the time being hold any interest in BSD and the provisions of Clause 6 shall apply in relation thereto.

1.3 Any reference to a document being “in the agreed terms” means in the terms agreed between the parties and for the purposes of identification signed by the respective solicitors acting for IHG, Whitbread and Allied.

1.4 Any reference to “Accounts” shall include the relevant balance sheets and profit and loss accounts together with all documents which are or would (if they were statutory accounts) be required by law to be annexed to the accounts of the company concerned to be laid before the company in general meeting for the accounting reference period in question.

1.5 References to Recitals, Clauses and Schedules are to Recitals, Clauses and Schedules of this Agreement.

1.6 The headings are for convenience only and shall not affect the interpretation hereof.

2 Exchange of Shares

2.1 Allied, IHG and Whitbread hereby agree to sell to BSD and BSD hereby agrees to purchase the BVP Shares free from all charges, liens and encumbrances and with all rights now and hereafter attaching thereto.

2.2 The consideration for the purchase of the BVP Shares shall be the allotment and issue credited as fully paid up of 962,154 BSD Shares to Allied or the relevant registered holder in exchange for its 196,634 BVP Ordinary Shares, 754,310 BSD Shares to IHG in exchange for its 154,173 BVP Shares and 332,154 BSD Shares to Whitbread in exchange for its 67,889 BVP Shares and the payment to Allied of £1,000 cash for its BVP Deferred Shares.

3

3 Interests in BSD

It is hereby declared to be the intention that in due course if BVP becomes a wholly-owned subsidiary of BSD IHG shall hold only two shares in excess of 50 per cent of the share capital of BSD and Whitbread and (subject to Clause 6) Allied shall each hold one share below 25 per cent of the shares of BSD and that any Loan Stock of BSD shall be held by them in the proportions 50:25:25 respectively.

4 Completion

4.1 This Agreement is conditional upon the Office of Fair Trading having announced in terms acceptable to each of the parties hereto that it is not the intention of the Secretary of State for Trade and Industry to refer the arrangements contemplated by this Agreement to the Monopolies and Mergers Commission for investigation. If this condition is satisfied on or before 21 February 1986, completion shall take place on 1 March 1986, or, if after 21 February 1986, within seven days of such satisfaction up to 23 June 1986; if this condition is not so satisfied the parties shall provide that the state of affairs in relation to this matter shall revert to that prevalent prior to the entry into of this Agreement or any negotiations antecedent thereto.

4.2

4.2.1 Before completion:

(i) IHG has produced and handed to Allied the audited Accounts of BSD for the year ended 28 September 1985;

(ii) Allied shall produce and hand to BSD a Report from Peat Marwick Mitchell & Co. in terms satisfactory to BSD certifying that the estimated financial data relevant to BVP in the agreed terms as at 14 September 1985 is accurate in all material respects;

4.2.2 At Completion there shall be delivered to BSD:

(i) duly executed transfers in favour of BSD or as it may direct accompanied by the relative share certificates in respect of the BVP Shares;

(ii) irrevocable powers of attorney (in such form as BSD may reasonably require) executed by each of the holders of the BVP Shares in favour of BSD to enable BSD (pending registration of the said transfers) to exercise all voting and other rights attaching to the BVP Shares and to appoint proxies for this purpose;

(iii) the BVP Deed of Indemnity duly executed by Allied; and

(iv) the BSD Deed of Indemnity duly executed by IHG and Whitbread;

4.2.3 Allied shall procure the Directors of BVP and each BVP Subsidiary to pass board resolutions:

(i) authorising the sealing by BVP and each BVP Subsidiary of the BVP Deed of Indemnity;

(ii) (in the case of BVP only) approving the registration, subject (in the case of the transfers of the Ordinary Shares) to their being duly adjudged not stampable with any stamp duty, of the transfers referred to in 4.2.2(i) above;

and shall deliver to BSD duly certified copies of such resolutions;

4

4.2.4	Against compliance with the foregoing provisions, BSD shall satisfy the consideration for the purchase of the BVP Shares by allotting the BSD Shares and paying the cash referred to in Clause 2.2 and BSD shall:
	(i)	hand Allied a Cheque for £1,000; and

(ii) deliver to Allied, IHG & Whitbread duly certified copies of the board resolution of BSD making such allotments and share certificates for the BSD Shares so allotted;

and shall procure that details of such allotments are entered in the statutory books of BSD;

4.2.5 IHG and Whitbread shall procure the Directors of BSD and each BSD Subsidiary to pass board resolutions authorising the sealing by BSD and each BSD Subsidiary of the BSD Deed of Indemnity and shall deliver to Allied duly certified copies of such resolutions;

4.2.6 if for any reason any of the documents referred to above are not forthcoming or if any of the actions required to be taken are not so taken, or if in any other respect the foregoing provisions of this Clause are not fully complied with, the party which is not in default shall be entitled (in addition to and without prejudice to all other rights and remedies available to it) to elect to rescind this Agreement or to effect Completion so far as practicable having regard to the defaults which have occurred or to fix a new date for Completion not being more than 28 days from the date hereof.

5 Further Agreements

Forthwith upon Completion Allied shall enter jointly into a Distribution Agreement with BSD in the agreed terms and the existing Distribution Agreements between IHG and BSD and between Whitbread and BSD shall be replaced by substitute Distribution Agreements in the agreed terms.

6 Group Interests

6.1 It is hereby agreed that if for whatever reason any part of the interest of IHG, Whitbread or Allied in BSD is for the time being held or owned by any company or companies which are subsidiaries of the parties hereto then such company or companies (which must be wholly-owned subsidiaries) shall become a party to this Agreement by entering into such documents in such form as the parties hereto may reasonably require.

6.2 IHG, Whitbread and Allied hereby undertake, and as part of the arrangements whereunder any other company becomes a party hereto pursuant to sub-Clause 6.1 above such other company shall be required similarly to undertake, that they will procure that their ultimate holding company for the time being, if not already a party to this Agreement, shall similarly become such a party in addition to the holding company or companies which is or are already a party or parties hereto.

5

6.3 Each of IHG, Whitbread and Allied agrees, and any holding company becoming a party hereto under sub-Clause 6.2 above shall agree, to procure compliance by all of its subsidiaries with any obligations or restrictions imposed upon them hereunder.

7 Warranties

7.1 Allied hereby warrants to and undertakes with IHG and Whitbread in relation to BVP and the BVP Subsidiaries in the terms set out in Schedule 3 subject to:

7.1.1 any exceptions fairly disclosed in the BVP Disclosure Letter or expressly provided for under the terms of this Agreement; and

7.1.2 any matter or thing hereafter done or omitted to be done at the request in writing or with the approval in writing of BSD.

For the purposes of this sub-Clause 7.1, in Schedule 3 and sub-Clause 7.3 below the expression “the Company” shall mean BVP, the expression “Group Companies” shall mean BVP and the BVP Subsidiaries, the expression “the Warrantee” shall mean IHG and Whitbread jointly and the expression “the Warrantor” shall mean Allied. Allied shall not be liable in respect of any breach of the said warranties and undertakings if and to the extent that the loss occasioned thereby has been recovered under the BVP Deed of Indemnity.

7.2 IHG and Whitbread hereby severally warrant to and undertake with Allied in relation to BSD and the BSD Subsidiaries in the terms set out in Schedule 3 subject to:

7.2.1 any exceptions fairly disclosed in the BSD Disclosure Letter or expressly provided for under the terms of this Agreement; and

7.2.2 any matter or thing hereafter done or omitted to be done at the request in writing or with the approval in writing of Allied.

For the purposes of this sub-Clause 7.2, in Schedule 3 and sub-Clause 7.3 below the expression “the Company” shall mean BSD, the expression “Group Companies” shall mean BSD and the BSD Subsidiaries, the expression “the Warrantee” shall mean Allied and the expression “the Warrantor” shall mean IHG and Whitbread severally in the proportions 65:35 of any liability thereunder. IHG and Whitbread shall not be liable in respect of any breach of the said warranties and undertakings if and to the extent that the loss occasioned thereby has been recovered under the BSD Deed of Indemnity.

7.3 

7.3.1 The Warrantor shall not be liable in respect of any breach of the Warranties unless written notice thereof (specifying in reasonable detail the event matter or default giving rise to the claim the breach the results and the amount claimed) shall have been given to the Warrantor on or before 31 January 1991 provided that any such claim shall (if it has not been previously satisfied settled or withdrawn) be deemed to have been withdrawn at the expiration of five years from Completion unless proceedings in respect of it have been commenced by being both issued and served on the Warrantor.

7.3.2 The Warrantor shall not be liable for nor shall the Warrantee present any claim in respect of any breach of the Warranties unless the aggregate liability of the Warrantor in respect of one or more breaches of the Warranties exceeds £20,000.

6

7.3.3 The aggregate liability of the Warrantor in respect of the Warranties and of the Deed of Indemnity shall be limited to £28,600,000.

7.4 The said warranties and undertakings shall be separate and independent and save as expressly otherwise provided shall not be limited by reference to any other paragraphs of the said Schedule 3 or by anything in this Agreement or the BSD Deed of Indemnity or the BVP Deed of Indemnity.

8 Consortium Relief and Income

8.1 Each of IHG, Allied and Whitbread which is a member of the consortium which owns BSD for the purpose of Section 413(6) of the Income and Corporation Taxes Act 1988 (“ICTA”) shall be entitled to require BSD or any ninety per cent. trading subsidiary (as defined by Section 838 and Section 413(7) ICTA) of BSD (all of which are collectively hereinafter called the “Consortium Companies” and each of which is a “Consortium Company”) to surrender to it (or any company which is a member of its group for the purposes of Section 406 ICTA) (each a “Consortium Member”) the losses or other amounts of any such Consortium Company permitted to be surrendered to the Consortium Member as consortium relief under Chapter IV Part X ICTA (the “Consortium Relief”) and shall (to the extent that it or any such member of its group is permitted by applicable tax legislation to do so) use all reasonable commercial endeavours to accept the surrender to it (or procure that any such associated company uses all reasonable commercial endeavours to accept the surrender to it) of the Consortium Relief which may be available to it and which arises from the relevant activities of a Consortium Company.

8.2 Each of IHG, Allied and Whitbread, for themselves or on behalf of the member of its group which is the applicable Consortium Member, shall pay to the Consortium Company on the date on which the Consortium Member does not have to make a payment of tax that it would, but for the surrender, have had to make an amount equal to the amount of the Consortium Relief surrendered to it multiplied by the rate of corporation tax on income profits for the account period of the Consortium Member to which the Consortium Relief relates (or if more than one rate of corporation tax applies for the period, multiplied by the average, on a time-apportioned basis, of those rates).

8.3 In the event that payments are made under Clause 8.2 for Consortium Relief which is subsequently found not to be available or not required, the relevant Consortium Company shall repay the amount overpaid plus interest on such amount at the rate specified in Clause 8.9 from (but excluding) the date of payment for the Consortium Relief by the Consortium Member to (and including) the date of repayment by the Consortium Company within 14 Business Days of the issue of a written claim by the Consortium Member to which the Consortium Relief was surrendered.

8.4 Each of IHG, Allied and Whitbread are entitled to surrender Consortium Relief of themselves or to procure the surrender of Consortium Relief by any Consortium Member under their control to the Consortium Companies as permitted under Chapter IV Part X ICTA and each shall use all reasonable commercial endeavours to procure that the relevant Consortium Company does (to the extent that it is permitted by applicable tax legislation to do so) everything necessary to give effect to the surrender.

8.5 The applicable Consortium Company referred to in Clause 8.4 shall pay to the Consortium Member which surrendered the Consortium Relief on the date on which the Consortium Company does not have to make a payment of tax that it would, but for the surrender, have had to make an amount equal to the amount of the Consortium Relief surrendered to it multiplied by the rate of corporation tax on income profits for the account period of the Consortium Company to which the Consortium Relief relates (or if more than one rate of corporation tax applies for the period, multiplied by the average, on a time-apportioned basis, of those rates).

7

8.6 In the event that payments are made under Clause 8.5 for Consortium Relief which is subsequently found not to be available or not required, the relevant Consortium Member shall repay the amount overpaid plus interest on such amount at the rate specified in Clause 8.9 from (but excluding) the date of payment for the Consortium Relief by the Consortium Company to (and including) the date of repayment by the Consortium Member within 14 Business Days of the issue of a written claim by the Consortium Company to which the Consortium Relief was surrendered.

8.7 No Consortium Member shall knowingly enter into arrangements (for the purposes of Section 410 ICTA) which shall affect the right of any of them to obtain Consortium Relief at any time when a Consortium Company has losses or other amounts available for surrender by way of consortium relief.

8.8 Each of IHG, Allied and Whitbread shall, on request, sign a consent in the form required under Chapter IV Part X ICTA and Part VIII Schedule 3 Finance Act 1998 to give effect to the surrender of any Consortium Relief surrendered under Clause 8.1 or Clause 8.4, and shall send such signed consent to the company requesting it within any time period stated in such request.

8.9 The rate at which interest shall be payable shall be:

8.9.1 where the repayment results from the unavailability of some or all of the Consortium Relief, the rate at which the Consortium Member (in the case of Clause 8.3) or the Consortium Company (in the case of Clause 8.6) is required to pay interest to the Inland Revenue in respect of late payment of tax; and

8.9.2 where the repayment results from the unavailability of profits in the company receiving the Consortium Relief, the HSBC base rate for the time being.”

9 BSD New Articles of Association

Immediately after Completion BSD shall adopt new Articles of Association in the agreed terms.

10 Alternative Employment

10.1 Prior to 31 March 1987:

10.1.1 Allied shall if possible and at its discretion at the request of BSD offer suitable alternative employment to any employees of BVP or the BVP Subsidiaries, who are offered by BSD terms and conditions of employment which are unacceptable to them;

10.1.2 when dealing with matters of redundancy, reorganisation and relocation BSD shall use reasonable criteria and apply them fairly so that all the employees are treated fairly;

8

10.1.3 Allied, IHG and Whitbread shall if possible and at their discretion at the request of BSD offer suitable alternative employment to any employees of BSD or BVP whose services are not required by the BSD Group;

10.1.4 Allied and Whitbread shall use their best endeavours to offer terms which taken as a whole are broadly equivalent to any employee transferred as a result of sub-Clause 10.1.3 above but any contribution from BSD will be restricted to any sums which would become payable as a consequence of redundancy.

10.2 Any sums payable as a consequence of redundancy before 31 March 1987 will where possible reflect the terms which would have applied before completion date in the original employing company and the parties to this agreement undertake to do nothing to inflate expectation. Any sums payable as a consequence of such redundancies will be paid by BSD.

11 Pensions

The provisions of Schedule 6 shall apply to the intent that the pension rights of BVP Group employees shall be safeguarded in the manner there described and the appropriate transfer payments and arrangements made to effect the same.

12 Bonus and Share Ownership Scheme

12.1 Employees of BVP or of the BVP Subsidiaries who currently receive a bonus from BVP will (subject to the terms of the Scheme) be offered the opportunity to participate with effect from 1 October in the year 1986 (or the first year in which they are qualified so to participate) in the IHG Employee Share Ownership Scheme and will until such date receive a share calculated to the relevant 30 September in the said bonus. For the purpose of qualifying for such participation and subject to the rules of the scheme all qualifying service with Allied and/or any of its subsidiary companies shall count as qualifying service with IHG. Participation by employees of companies within the BSD Group in the IHG Employee Share Ownership Scheme shall be funded by the employing Company within the BSD Group.

12.2 The IHG Employees Savings Related Share Option Scheme shall be made available to all qualifying employees of BVP and the BVP Subsidiaries as soon as possible.

13 Undertakings

13.1 IHG, Whitbread and Allied hereby undertake to use their reasonable endeavours:

13.1.1 to co-operate fully on a long term basis in building a significant profitable share in the Soft Drinks trade in the United Kingdom, Isle of Man and Channel Islands; and

13.1.2 to take all such action as they deem necessary or appropriate to protect and support BSD and its business; and

13.1.3 to exercise such voting and other rights as they may have at any relevant time to procure that BSD complies with the terms of this Agreement.

9

14 Management of BSD

14.1 In recognition of the desire of IHG, Whitbread and Allied to exercise their rights as shareholders of BSD in a spirit of mutual co-operation and consultation and to have full regard to each others views and requirements in relation to the operations and management of the BSD Group, IHG as controlling shareholder undertakes:

14.1.1 to consult fully with Whitbread and Allied, either directly or through the Directors of BSD appointed by IHG, and to endeavour to reach agreement with Whitbread and Allied on all matters of policy relating to the financing management and operations of the BSD Group;

14.1.2 that it will be deemed to have a fiduciary relationship to BSD; and

14.1.3 that it will exercise its rights as holder of majority board representation or as controlling shareholder only as a last resort.

14.2

14.2.1 In the event of any major disagreement arising between the Directors of BSD appointed by IHG and those appointed by Whitbread and/or Allied on any policy matter, the question shall be referred to the then respective Chairmen of IHG, Whitbread and Allied with the view to arriving at an amicable settlement.

14.2.2 If the Chairmen of IHG, Whitbread and Allied are unable to reach an amicable settlement of a major disagreement in accordance with paragraph 14.2.1 above and the disagreement is resolved by the exercise by IHG of its rights as holder of majority board representation or as a controlling shareholder then Whitbread and/or Allied may within one month thereafter require IHG to purchase all of its BSD Shares at the Sale Price (calculated as for a “put” option under Clause 20) referred to in Article 35 of the New Articles of Association of BSD.

14.3 The accounting policies, reporting procedures and accounting reference dates of the BSD Group shall be consistent with those of IHG or as otherwise agreed.

14.4 All matters which require to be approved by the IHG Executive Committee shall also be required to be approved by the BSD Board.

These references will include:

14.4.1 plans and budgets;

14.4.2 major capital projects;

14.4.3 key executive appointments;

14.4.4 marketing strategy.

14.5 IHG shall provide management services to the BSD Group at the lower of cost or market value and the use of the premises owned by IHG, Whitbread, Allied and BSD shall be charged to the user at market rental. Until such time as IHG is able to provide the management services currently provided by Allied (which IHG undertakes to do as soon as reasonably practicable), Allied shall continue to maintain them and management services provided by Allied shall be accounted for at the lower of cost or market value.

10

15 Financing of BSD

15.1 A financial and business plan for the BSD Group will be prepared and reviewed annually and will comprise (inter alia) policies for marketing, producing, packaging, distribution, wage rates, pricing and discounts.

15.2

15.2.1 The BSD Group may enter into short term loans from IHG which IHG will make available at 1 per cent over HSBC base rate for the time being.

15.2.2 All long term loan finance for the BSD Group shall be procured direct by BSD.

15.2.3 Short term cash surpluses of BSD may be lent to IHG at 1 per cent over the Midland Bank base rate for the time being.

15.2.4 BSD shall distribute to its shareholders all of BSD’s profits lawfully available for distribution in each financial year, provided that if:

(i) the distribution would result in a breach of any covenant or undertaking given by BSD to any lender or would, in the opinion of the BSD Board, be likely to do so within the following 12 months; or

(ii) the BSD Board resolves that the distribution is materially prejudicial to the interest of BSD having regard to:

(a) implementation of the investment programme approved by the BSD shareholders in any business plan or budget or otherwise;

(b) the trading prospects of BSD; and

(c) the need to maintain the sound financial standing of BSD,

15.2.5 then BSD shall distribute the maximum amount of its profits which may be distributed without having either of the effects described in sub-clauses (I) and (II) above.Each Company within the BSD Group may arrange unsecured overdraft facilities with their respective Banks and will complete a letter of set off to their clearing banks to enable their bank balance to be set off for interest purposes against balances of other companies within the IHG Group. Any interest charge or benefit obtained from set off will be charged or credited to BSD by IHG.

16 Trading of the BSD Group

16.1 The BSD Group shall be free to enter into such trading arrangements with third parties as it may consider necessary to develop the sale of its products and shall operate in the ordinary course of business and at arms length from its shareholders in any trading arrangements it may make with them particularly as regards pricing and discounts.

16.2 IHG, Whitbread and Allied (the “Ventures”) and their respective subsidiaries other than the BSD Group have transferred to an appropriate member of the BSD Group trade names and marks for use in relation to Soft Drinks owned or controlled by the Venturers respectively which BSD wishes to use.

16.3 New brand names, products and devices introduced by the BSD Group shall not include the name of the Venturers or any device associated with such name (or any of their respective subsidiaries from time to time) without the consent of each of them.

11

17 Property Option

17.1 If any company within the BSD Group wishes to sell any property which prior to the date hereof was owned by Allied or any of its subsidiaries (including BVP and the BVP Subsidiaries), Allied shall have first option to repurchase such property at the then current market value and if Allied does not wish to exercise such option, the property shall be offered to IHG and Whitbread at the same value. If neither IHG nor Whitbread wish to purchase such property at the current market value, Allied may exercise its option at any lower value at which such property might be offered for sale to a third party and if Allied does not wish to exercise such option, the property shall be offered to IHG and Whitbread at the same value before disposal at such value to any third party.

17.2 The provisions of 17.1 above shall apply mutatis mutandis to property owned by IHG or any of its subsidiaries (including BSD and the BSD Subsidiaries) or by Whitbread or any of its subsidiaries (including R White & Sons Limited and its subsidiaries) before 29 September 1980.

18 Other Interests

18.1 Allied undertakes to use its best endeavours subject to any necessary consent of the Guinness Group company (if any) owning an interest in Cantrell & Cochrane Group Limited in Ireland at that time to procure that, if CC Soft Drinks Limited shall cease to use the “Club” brand name in England, Scotland and Wales, the same shall be offered to BSD, free of charge if possible.

18.2 In the event that IHG, Whitbread or Allied acquires either directly or indirectly a controlling interest in a Soft Drinks business operating primarily in the UK it shall be offered to BSD either at purchase value if acquired directly or at a value to be agreed with BSD if acquired indirectly or in the absence of agreement at a price to be fixed by an independent valuer.

18.3 In the event that IHG, Whitbread or Allied acquires either directly or indirectly a controlling interest in a major Soft Drinks business operating internationally where the UK franchise is with a third party the UK franchise shall subject to their existing arrangements be offered to BSD. Where the UK franchise forms a discrete business, such business will be offered to BSD at a fair price.

19 Control

If an unconnected party (or a number of parties acting in concert) acquires directly or indirectly a controlling interest (by which is meant the right to cast over 50 per cent of the votes currently exercisable at a general meeting) in any party hereto the provisions of Clause 6 shall apply and the parties hereto shall consult together with a view to determining upon an agreed plan for the enhanced future development of BSD.

20 Termination

20.1 The others of IHG, Whitbread or Allied shall have the option hereinafter mentioned in relation to the third of them (“that third party” and in Schedule 7 “the defaulting party”):

20.1.1 within three months thereafter, if BSD lawfully terminates its Distribution Agreement referred to in Clause 5 above under Clause 7 thereof with that third party;

12

20.1.2 within three years thereafter, if that third party unlawfully terminates such Agreement;

20.1.3 within three months thereafter, if the parties shall have failed to agree upon a plan under Clause 19 on or before the hundredth day after any such acquisition of a controlling interest in that third party;

20.1.4 within 12 months thereafter (but not earlier than 10 months thereafter) if the Coca Cola Company (or any subsidiary or affiliate) or its United Kingdom bottler (or any subsidiary or affiliate) (collectively called “a Coca-Cola Interest”) acquires the right to cast 30 per cent or more of the votes exercisable at a general meeting of Whitbread or Allied and continues to hold such right at the time of exercise of the option PROVIDED if Coca Cola Interest acquires a controlling interest as specified in Clause 20.1.3 the terms of the said Clause 20.1.3 shall apply and this Clause 20.1.4 shall have no effect; or

20.1.5 within 12 months thereafter if a Coca Cola Interest acquires the right to cast 30 per cent or more of the votes exercisable at a general meeting of IHG PROVIDED that if a Coca Cola Interest acquires a controlling interest as specified in Clause 20.1.3 the terms of the said Clause 20.1.3 shall apply and this Clause 20.1.5 shall have no effect.

20.2 The said option shall be derived from the option matrix contained in Schedule 7.

20.3 Any transaction under option 1 (where Allied or Whitbread is that third party) or under option 2 in Schedule 7 shall be exercisable at the Sale Price (determined in accordance with Article 35 of the new Articles of Association of BSD) but the price at which any other transaction under options 1, 3, 4 and 5 in Schedule 7 shall take place shall be such Sale Price (determined as aforesaid) without taking into account the effect of any breach or termination of that third party’s Distribution Agreement with BSD provided that if Allied is that third party and option 1 or 2 is exercised then in acknowledgement of the effort and expense incurred by IHG and Whitbread in enabling Allied to merge BVP into the joint venture, it is hereby declared to be fair and is agreed that such options shall for three years from completion be exercisable at two thirds of the Sale Price so determined.

21 Activities

The activities of BSD and its Subsidiaries shall not without the consent of the holders of at least 85 per cent of the issued Share capital of BSD consist of activities other than the manufacture, distribution, sale and purchase for resale of Soft Drinks and the Discretionary Products which BSD may handle from time to time and purposes ancillary thereto in the Territory.

22 Costs

Each party shall be responsible for its own costs in connection with the preparation of this Agreement and the other Agreements relating hereto.

13

23 Notices

Any notice to any party hereunder shall be deemed to have been sufficiently served if delivered personally at or sent by registered post to the registered office of the relevant company for the time being. In proving such service it shall be sufficient to prove that any letter was properly addressed, stamped and posted and the same shall be assumed to have reached the addressee two business days after posting.

24 Substitution

This Agreement shall terminate and be in substitution for the Joint Venture Agreement dated 29 September 1980 and made between IHG and Whitbread.

In witness whereof the parties hereto have entered into this agreement the day and year first above written.

14

Schedule 1
Part A

Company:	Britannia Soft Drinks Limited
Authorised capital:	4,000,000 Ordinary Shares of £1 each
Issued capital:	1,800,000 Ordinary Shares of £1 each fully paid
Shareholders:	Bass plc	1,170,000
	Whitbread & Company plc	630,000
Directors:	K Richards G P Hewitt P J Jarvis S C Lewis T W Morkill A D Portno L J Ross P F Scurlock
Secretary:	J W Angles
Company No.:	47094
VAT No.:	232 1538 95 (Bass)
Subsidiary companies:	Canada Dry Rawlings Limited
(all 100 per cent)	•     Hooper Struve Limited
	•     R White & Sons Limited
	•     H D Rawlings Limited
	•     Moorhouse Bros Limited
	•     The London Essence Company Limited
	•     The Southern Table Water Company Limited

15

Schedule 1
Part B

Company:	(Subsidiary)
	H D Rawlings Limited
Authorised capital:	81,560 Ordinary Shares of £1 each
Issued capital:	41,155 Ordinary Shares of £1 each fully paid
Shareholders:	R White & Sons Limited	41,150
	B W King	5
Directors:	G P Hewitt J W Angles B W King
Secretary:	M H Humby
Company No.:	34014
Vat No.:	232 1538 95 (Bass)
Subsidiary companies:	–
Company:	(Subsidiary)
	Moorhouse Bros Limited
Authorised capital:	5,000 Ordinary Shares of £1 each
Issued capital:	5,000 Ordinary Shares of £1 each fully paid
Shareholders:	R White & Sons Limited	4,999
	G P Hewitt	1
Directors:	G P Hewitt P W Knights R G White
Secretary:	M H Humby
Company No.:	347522
Vat No.:	232 1538 95 (Bass)
Subsidiary companies:	–

16

Company:	(Subsidiary)
	London Essence Company Limited
Authorised capital:	110,000 Ordinary Shares of £1 each
Issued capital:	110,000 Ordinary Shares of £1 each fully paid
Shareholders:	R White & Sons Limited	109,999
	G P Hewitt	1
Directors:	G P Hewitt A A Vokins R G White
Secretary:	M H Humby
Company No.:	151590
Vat No.:	232 1538 95 (Bass)
Subsidiary companies:	–
Company:	(Subsidiary)
	Hooper Struve Limited
Authorised capital:	100,000 Ordinary Shares of £1 each
Issued capital:	100,000 Ordinary Shares of £1 each fully paid
Shareholders:	Canada Dry Rawlings Limited	99,700
	A W N Lake	100
	G P Hewitt	100
	M H Humby	100
Directors:	A W N Lake G P Hewitt M H Humby K Richards
Secretary:	M H Humby
Company No.:	69019
Vat No.:	232 1538 95 (Bass)
Subsidiary companies:	–

17

Company:	(Subsidiary)
	R White & Sons Limited
Authorised capital:	1,030,000 Ordinary Shares of £1 each
Issued capital:	1,030,000 Ordinary Shares of £1 each fully paid
Shareholders:	Britannia Soft Drinks Limited	1,029,900
	G P Hewitt	100
Directors:	G P Hewitt J W Angles B A Boone A A Vokins R G White
Secretary:	M H Humby
Company No.:	41646
Vat No.:	232 1538 95 (Bass)
Subsidiary companies:	The London Essence Company Limited Moorhouse Bros Limited H D Rawlings Limited The Southern Table Water Company Limited
Company:	(Subsidiary)
	Canada Dry Rawlings Limited
Authorised capital:	2,600,000 Ordinary Shares of £1 each
Issued capital:	2,600,000 Ordinary Shares of £1 each fully paid
Shareholders:	Britannia Soft Drinks Limited	2,599,999
	G P Hewitt	1
Directors:	K Richards G P Hewitt J W Angles B A Boone V C Hague P W Knights M J Redward A A Vokins R G White
Secretary:	M H Humby
Company No.:	517211
Vat No.:	232 1538 95 (Bass)
Subsidiary companies:	Hooper Struve Limited

18

Company:	(Subsidiary)
	The Southern Table Water Company Limited
Authorised capital:	Authorised 1 per cent deferred cumulative preference shares of £1 each	15,000
	Redeemable preference shares of £1 each	75
	Ordinary Shares of £1 each	10,000
		25,075
Issued capital:	1 per cent deferred cumulative preference shares of £1 each (fully paid)	15,000
	Redeemable preference shares of £1 each	75
	Ordinary Shares of £1 each	15
		15,090
Shareholders:	Redeemable Preference
	Whitbread & Company plc	74
	R E Gillah1	1
		75
	Ordinary Shares
	R White & Sons Limited	14
	H L Jenkins2	1
		15
	Deferred Cumulative Preference Shares
	Whitbread & Company plc	14,996
	M D N Shutte1	2
	R C Worland1	2
		15,000
Directors:	G P Hewitt J W Angles P W Knights
Secretary:	M H Humby
Company No.:	447909

¹ Blank transfer and declaration of trust held by Whitbread.

² Blank transfer and declaration of trust held by BSD.

19

Schedule 2
Part A

Company:	British Vitamin Products Limited
Authorised capital:	500,000 Ordinary Shares of £1 each
	13,656,000 Deferred Shares of £1 each
Issued or allotted capital:	13,656,000 Deferred Shares of £1 each
	500,000 Ordinary Shares of £1 each
Shareholders:	Bass plc	1,029,900 Ordinary
	Whitbread & Company plc	67,889 Ordinary
	Allied-Lyons plc	277,938 Ordinary
	Allied-Lyons plc	13,656,000 Deferred
Directors:	Sir D Holden-Brown   Chairman
	M C J Jackaman
	E B Colwell
	P W Rosewell
Secretary:	R W Jarred
Company No.:	484529
Vat No.:	102 1176 35
Subsidiary companies:	Britvic Limited
	Pure Fruit Juices Limited
	Britvic (NI) Limited

20

Schedule 2
Part B

Company:	(Subsidiary of BVP)
	Britvic Limited
Authorised capital:	100 Ordinary Shares of £1 each
Issued capital:	10 Ordinary Shares of £1 each
Shareholders:	British Vitamin Products Ltd	9 shares
	Showerings Vine Products & Whiteways Ltd	1 share
Directors:	E B Colwell   Chairman
	R J Jordan   Managing Director
	D N Dagwell
	S J Davies
	P H Gosling
	R W Jarred
	J E Lewis
	G E V Martin
	S J Neale
	R H Waymont
Secretary:	R W Jarred
Company No.:	346618
Vat No.:	102 1176 35
Subsidiary companies:	Minster (Soft Drinks) Ltd
	Britvic Deutschland GmbH
	Sunfresh Soft Drinks Ltd
Company:	(Subsidiary of BVP)
	Pure Fruit Juices Limited
Authorised capital:	500 Ordinary Shares of 20p each
Issued capital:	500 Ordinary Shares of 20p each
Shareholders:	British Vitamin Products Ltd	499 shares
	Showerings Vine Products & Whiteways Ltd	1 share
Directors:	R J Jordan
	R W Jarred
Secretary:	R W Jarred
Company No.:	241637
Vat No.:	102 1176 35
Subsidiary companies:	None

21

Company:	(Subsidiary of BVP)
	Britvic (NI) Limited
Authorised capital:	1,000 Ordinary Shares of £1 each
Issued capital:	4 Ordinary Shares of £1 each
Shareholders:	British Vitamin Products Ltd	3 shares
	Showerings Vine Products & Whiteways Ltd	1 share
Directors:	R J Jordan
	R W Jarred
Secretary:	R W Jarred
Company No.:	468574
Vat No.:	102 1176 35
Subsidiary companies:	None
Company:	(Subsidiary of Britvic Limited)
	Minster (Soft Drinks) Limited
Authorised capital:	12,000 Ordinary Shares of £1 each
Issued capital:	10,500 Ordinary Shares of £1 each
Shareholders:	Britvic Ltd	10,499 shares
	Showerings Vine Products & Whiteways Ltd	1 share
Directors:	R J Jordan
	R W Jarred
Secretary:	R W Jarred
Company No.:	154257
Vat No.:	102 1176 35
Subsidiary companies:	None

22

Company:	(Subsidiary of Britvic Limited)
	Sunfresh Soft Drinks Limited
Authorised capital:	5,500 Ordinary Shares of £1 each
Issued capital:	5,500 Ordinary Shares of £1 each
Shareholders:	Britvic Limited	5,499 shares
	Showerings Vine Products & Whiteways Ltd	1 share
Directors:	E B Colwell   Chairman
	R J Jordan   Managing Director
	S J Davies
	P H Gosling
	J E Lewis
	O Stern
	R H Waymont
Secretary:	R J Jarred
Company No.:	208476
Vat No.:	102 1176 35
Subsidiary companies:	None

23

Schedule 2
Part B

Company:	(Subsidiary of Britvic Limited)
	Britvic Deutschland GmbH
Authorised Capital:	100,000 DM
Issued Capital:	100,000 DM
Shareholders:	Britvic Ltd	100,000 DM
Geschäftsführer:	G E V Martin
	H A Wittrock (German)
Secretary:	None
Company No.:	Hamburg Hr B 17018
VAT No.:	—
Subsidiary companies:	None

24

Schedule 3

1 Information

The information set out in Schedule 1 or Schedule 2 (as appropriate), so far as it relates to the Company, and all other information in writing which has been given by any of the directors or officials or professional advisers of any Group Company to any of the directors or officials or professional advisers of the Warrantee in the course of the negotiations leading to this Agreement was when given true, complete and accurate in all material respects.

2 Copies of Accounts, Memorandum and Articles etc.

The copies of the Accounts and of the Memoranda and Articles of Association of each of the Group Companies delivered to the Warrantee are true copies and in the case of the Memoranda and Articles of Association have attached thereto copies of all such resolutions and agreements as are required by law to be delivered to the Registrar of Companies for registration.

3 Accounts

To the best of the knowledge and belief of the Directors of the Group Companies after making due and careful enquiries:

(i) the Accounts have been prepared in accordance with the law and on a consistent basis in accordance with accounting principles, standards and practices generally accepted at the date hereof in the United Kingdom so as to give a true and fair view of the state of affairs of each of the Group Companies at the Balance Sheet Date and of the profits or losses for the period concerned and as at that date make:

(a) full provision for all actual liabilities;

(b) proper provision (or note in accordance with good accountancy practice) for all contingent liabilities; and

(c) provision reasonably regarded as adequate for all bad and doubtful debts;

(ii) the Stock and work-in-progress were included in the Accounts at figures not exceeding the amounts which could in the circumstances existing at the Balance Sheet Date reasonably be expected to be realised in the normal course of carrying on the businesses of the Group Companies;

(iii) full provision or reserve has been made in the Accounts for all Taxation liable to be assessed on the relative Group Company or for which it is or may become accountable in respect of:

(a) profits, gains or income (as computed for Taxation purposes) arising or accruing or deemed to arise or accrue on or before the Balance Sheet Date;

(b) any Transactions effected or deemed to be effected on or before the Balance Sheet Date or provided for in the Accounts;

25

(c) realised development value accruing or deemed to accrue on or before the Balance Sheet Date (including any liability in respect of any such value deferred until a subsequent occasion whether on or before or after the Balance Sheet Date); and

(d) distributions made or deemed to be made on or before the Balance Sheet Date or provided for in the Accounts; and

(iv) proper provision or reserve for deferred taxation in accordance with the accounting policy in respect thereto as stated in the Accounts has been made in the Accounts.

4 Changes since Balance Sheet Date

Since the Balance Sheet Date as regards each Group Company:

(i) its business has been carried on in the ordinary course and so as to maintain the same as a going concern;

(ii) it has not disposed of any assets or assumed or incurred any material liabilities (including contingent liabilities) otherwise than in the ordinary course of carrying on its business;

(iii) its business has not been materially and adversely affected by the loss of any important customer or source of supply or by any abnormal factor not affecting similar businesses to a like extent and after making due and careful enquiries none of the Directors of any Group Company is aware of any facts which are likely to give rise to any such effects;

(iv) no dividend or other distribution has been declared made or paid to its members except as provided for in the relevant balance sheet;

(v) no material change has been made in the basis of the emoluments and no change has been made in the terms of employment of its directors or any of its employees who on the Balance Sheet Date were in receipt of remuneration at a rate in excess of £15,000 per annum;

(vi) it has not made or received any surrender relating to group relief or the benefit of advance corporation tax other than as accounted for in the Accounts;

(vii) there has been no deterioration in its financial position or prospects whether in consequence of normal business or otherwise; and

(viii) its stock-in-trade is in good condition and is capable of being sold in the ordinary course of business in accordance with its current price list without rebate or allowance to any purchaser.

5 Litigation etc.

(a) Since the Balance Sheet Date no claim sounding in damages has been made against any Group Company.

(b) No Group Company is at Present engaged whether as plaintiff or defendant or otherwise in any legal action, proceeding or arbitration (other than as plaintiff in the collection of debts arising in the ordinary course of its business none of which exceeds £5,000) or is being prosecuted for any criminal offence.

26

(c) There are no circumstances known to any of the Directors of any Group Company after making due and careful enquiries likely to lead to any such claim or legal action, proceeding or arbitration (other than as aforesaid) or prosecution and no notice has been given to any Group Company under any statute or governmental or municipal regulation which, in the event of failure to comply therewith, might lead to any such claim or other action as aforesaid.

6 Taxation etc.

(a) To the best of the knowledge information and belief of the Directors of each Group Company after making due and careful enquiries there is no liability to Taxation in respect of which a claim could be made under the Deed of Indemnity and there are no circumstances likely to give rise to such liability.

(b) Each Group Company has duly made all returns and given or delivered all notices, accounts and information which on or before the date hereof ought to have been made, given or delivered for the purposes of Taxation and all such returns, notices, accounts and information (and all other information supplied to the Inland Revenue or the Customs and Excise or other fiscal authority concerned for any such purpose) have been correct in all material respects and made on a proper basis and none of such returns, notices, accounts or information is disputed in any material respect by the fiscal authority concerned and there is no fact known to any of the Directors of any Group Company which might be the occasion of any such dispute or of any claim for Taxation in respect of any financial period down to and including the Balance Sheet Date not provided for in the Accounts.

7 PAYE and National Insurance

(a) All income tax deductible and payable under the PAYE system has so far as required to be deducted, been deducted from all payments made by each Group Company and all amounts due to be paid to the Inland Revenue prior to the date hereof have been so paid.

(b) All deductions and payments required to be made in respect of National Insurance contributions (including employers contributions) have been so made.

(c) Proper records have been maintained in respect of all such deductions and payments and regulations applicable thereto have been complied with.

8 VAT

(a) Each Group Company is registered for the purposes of Part I of the Finance Act 1972 and has complied in all material respects with such legislation and has maintained and obtained full, complete, correct and up-to-date records, invoices and other documents (as the case may be) appropriate or requisite for the purposes thereof.

(b) No Group Company:

(i) is in arrears with any payments or returns or notifications under such legislation, regulations or notices or liable to any abnormal or non-routine payment or any forfeiture or penalty or to the operation of any penal provisions contained therein;

(ii) has been required by the Customs and Excise to give security under such legislation.

27

9 Employees

(a) Save to the extent (if any) to which provision or allowance has been made in the Accounts:

(i) no liability has been incurred by any Group Company for breach of any contract of service or for redundancy payments (including protective awards) or for compensation for wrongful dismissal or unfair dismissal or for failure to comply with any order the reinstatement or re-engagement of any employee; and

(ii) no gratuitous payment has been made or promised by any Group Company in connection with the actual or proposed termination or suspension of employment or variation of any contract of employment of any present or former director or employee.

(b) Each Group Company has in relation to each of its employees (and so far as relevant to each of its former employees where service terminated less than six months prior to Completion) complied in all material respects with:

(i) all obligations imposed on it by all statutes and regulations relevant to the relations between it and its employees or any independent trade union and has maintained current adequate and suitable records regarding the service of each of its employees;

(ii) all collective agreements and customs and practices for the time being dealing with such relations or the conditions of service of its employees; and

(iii) all relevant orders and awards made under any relevant statute or regulation affecting the conditions of service of its employees.

(c) Within a period of one year preceding the date hereof no Group Company has given notice of any redundancies to the relevant Secretary of State or started consultations with any independent trade union or unions under the provisions of Part IV of the Employment Protection Act 1975 and no Group Company has failed to comply with any such obligation under the said Part IV.

(d) No Group Company is involved in any industrial or trade dispute or any dispute or negotiation regarding a claim of material importance with any trade union or association of trade unions or organisation or body of employees.

10 Capital Commitments, Unusual Contracts, Guarantees etc.

No Group Company:

(i) has any material capital commitments;

28

(ii) is a party to any contract entered into otherwise than in the ordinary and usual course of business of any contract of an onerous or long-term nature;

(iii) is a party to any agreement, arrangement or concerted practice which is or requires to be registered under the Restrictive Trade Practices Acts or which contravenes Articles 85(1) or 86 of the Treaty of Rome or which has been notified to the Commission of the European Communities for an exemption or in respect of which an application has been made to the said Commission for a negative clearance;

(iv) has delegated any powers under a power of attorney which remains in effect;

(v) has by reason of any default by it in any of its obligations become bound or liable to be called upon to repay prematurely any loan capital or borrowed moneys;

(vi) is a party to any agreement which is or may become terminable as a result of the entry into or completion of this Agreement;

(vii)	has entered into or is bound by any guarantee or indemnity under which any liability or contingent liability is outstanding; or
(viii)	has at any time acquired, assigned or otherwise disposed of any leasehold property in such a way that it retains (otherwise than as original or subsequent lessee) any residual liability in respect thereof.

11 Insurance

All the assets of each of the Group Companies which are of an insurable nature have at all material times been and are at the date hereof insured in amounts reasonably regarded as adequate against fire and other risks normally insured against by companies carrying on similar businesses or owning property of a similar nature and each Group Company has at all material times been and is at the date hereof adequately covered against accident, third party and other risks normally covered by insurance by such companies. In respect of all such insurances:

(i) all premiums have been duly paid to date; and

(ii) all the policies are in force and are not voidable on account of any act, omission or non-disclosure on the part of the insured party.

12 Title to Assets

(a) All assets of each Group Company (other than the Properties) and all debts due to it which are included in the Accounts or have otherwise been represented as being the property of or due to such Group Company or at the Balance Sheet Date used or held for the purposes of its business were at the Balance Sheet Date the absolute property of such Group Company and (save for those subsequently disposed of or realised in the ordinary course of trading) all such assets and all assets and debts which have subsequently been acquired or arisen are now the absolute property of such Group Company and no asset which is material in relation to the business of any Group Company is the subject of any assignment, mortgage, charge, lien, hypothecation or other encumbrance whatsoever (excepting only liens arising in the normal course of trading) or the subject of any factoring arrangement, hire-purchase, conditional sale or credit sale agreement.

29

(b) All assets of each Group Company (other than the Properties) acquired from the Warrantor or any subsidiary company of the Warrantor during the period of three months prior to the date hereof were acquired at net book value and each Group Company is the absolute owner of all assets (including properties and dispensing equipment situated in customers’ premises) which are wholly used in connection with the business of that Group Company.

13 Title to the Properties

(a) Each Group Company has a good marketable title to each of the Properties shown under its name in Schedule 4 free from all mortgages, charges, liens and encumbrances.

(b) With the exception of the Properties none of the Group Companies owns, uses or occupies any other freehold or leasehold property or occupies any other land or building whether under a licence or otherwise.

(c) All covenants, other than covenants for repair and decorations, obligations, restrictions and conditions affecting each of the Properties or any Group Company as owner thereof have been observed and performed and all outgoings of whatsoever nature in respect thereof duly paid.

(d) Each of the Properties complies (as to buildings and use) with the Town and Country Planning Acts affecting the same and with all applicable statutory and bye-law requirements as to fire precautions, public health and the health and safety of those who work in or about them.

(e) None of the Properties or Group Companies as owner thereof:

(i) is subject to any covenants, obligations, restrictions or conditions which are of an unusual or onerous nature or which would affect the use or continued use of any of the Properties for the purposes for and the extent to or the manner in which it is now used;

(ii) enjoys precariously any right, easement or privilege the withdrawal or cessation of which would affect the use or continued use of any of the Properties for the purposes for or the extent to or the manner in which it is now used; or

(iii) is affected by any of the following matters:

(a) any closing order, demolition order or clearance order;

(b) any planning application submitted less than eight weeks prior to the date hereof;

(c) any enforcement notice which has not been complied with;

(d) any compensation received consequent upon a refusal of any planning consent or the imposing of restrictions on any planning consent or the modification or withdrawal of any such consent;

(e) any order or proposal publicly advertised or of which written notice has been received for the compulsory acquisition or requisition of the whole or any part thereof or the modification of any Planning Permission or the discontinuance of any use or the removal of any building;

30

(f) any agreement with any Planning Authority Statutory Undertaker or other Public Body or Authority regulating the use or development thereof.

(f) None of the Properties is a listed building or is in a Conservation Area.

14 Compliance with Leases and Other Agreements

To the best of the knowledge and belief of the Directors of each Group Company after making due and careful enquiries:

(i) the terms of all leases, tenancies, licences, concessions and agreements of whatsoever nature to which any of the Group Companies is a party have been duly complied with by all the parties thereto; and

(ii) no such lease, tenancy, licence, concession or agreement will become subject to avoidance, revocation or be otherwise affected upon or in consequence of the making or implementation of this Agreement.

15 Books and Records

The records, statutory books and books of account of each Group Company are duly entered up and maintained in accordance with all legal requirements applicable thereto and contain true, full and accurate records of all matters required to be dealt with therein and all such books and all records and documents (including documents of title) which are its property are in its possession or under its control and all accounts, documents and returns required to be delivered or made to the Registrar of Companies have been duly and correctly delivered or made.

16 Options on Share Capital

No unissued shares of any Group Company are under option or agreed conditionally or unconditionally to be placed under option.

17 Patents and Trade Marks etc.

(a) To the best of the knowledge and belief of the Directors of each Group Company the processes employed and the products and services dealt in by each Group Company do not use, embody or infringe any United Kingdom or foreign patents, registered designs, know-how or trade secrets, copyrights, trade marks or similar intellectual property rights (whether registered or not) other than:

(i) those belonging to Group Companies and referred to in sub-paragraph (b) below; or

(ii) those in respect of which licences have been obtained and are currently in force,

31

and no claims have been made and no applications are pending of which the Directors are aware which if pursued or granted might be material thereto.

(b) To the best of the knowledge and belief of the Directors of each Group Company all United Kingdom or foreign patents, registered designs, know-how or trade secrets, copyrights, trade marks, or similar intellectual property rights (whether registered or not), and all pending applications therefor, other than those referred to in sub-paragraph (a)(ii) above, which are or are likely to be material to the business of each Group Company, are (or where appropriate in the case of pending applications will be):

(i) legally and beneficially vested in a Group Company;

(ii) valid and enforceable;

(iii) not being infringed; and

(iv) not subject to any licence or authority in favour of another.

18 Close Company Status

No Group Company is or has at any time during the period of six years ending with the Balance Sheet Date been a close Company as defined in Section 282 Income and Corporation Taxes Act 1970 or Section 39 Finance Act 1975. Each Group Company has been a wholly-owned subsidiary of the Warrantor from the beginning of that period to the date of this Agreement.

19 Pensions

(a) Expressions defined in Schedule 6 to the Agreement bear the same meaning in this Warranty 19.

(b) With the exception of the Allied Fund and the Allied Domecq Executives Pension Fund (both referred to below as the “Allied Funds”) there are not in existence nor has any proposal been announced to establish any retirement, redundancy, death, disability or sickness benefit schemes (other than the Allied Domecq PLC Accident and Disablement Scheme) or arrangements for employees of the BVP Employers or any obligations to or in respect of such employees with regard to such contingencies pursuant to which Allied or any of the BVP Employers is or may become liable to make payments and no gratuity in respect of such contingencies is currently being paid or has been promised by Allied or any of the BVP Employers to or in respect of any such employee.

(c) The Allied Funds are contracted-out schemes within the meaning of the Social Security Pensions Act 1975 and are treated as exempt approved schemes within the meaning of Chapter II Part II Finance Act 1970.

(d) True copies of all the Trust Deeds and Rules constituting and governing the Allied Funds have been delivered to IHG or their advisers and except as may be expressed otherwise therein such documents are up to date and satisfactory to ensure continued treatment of the Allied Funds as exempt approved and contracted-out schemes as aforesaid.

32

(e) True copies of all Explanatory Booklets and Announcements and other communications to employees relating to the Allied Funds have been delivered to Bass or their advisers and neither Allied nor any of the BVP Employers has any obligations under the Allied Funds in respect of any employee of the BVP Employers other than under the documents referred to in this paragraph (e) and in paragraph (d) above and under the Allied Domecq PLC Accident and Disablement Schemes.

(f) Allied has given to IHG a true and complete copy of the latest actuarial valuation reports on the Allied Funds and Allied is aware of no factor which has caused or contributed to any substantial deterioration in the level of funding of any of the Allied Funds since the date of such report.

(g) Allied has given to IHG full details of the basis on which the BVP Employers contribute to the Allied Funds.

33

Schedule 4
The Properties
Part A – Britvic Limited

Freehold Properties
1	Land adjacent to Depot at:
	Hadleigh Road Industrial Estate Ipswich Suffolk
2	Depot & Offices Crondal Road Exhall Bedworth Warwickshire
3	Depot & Offices Haydock Lane Haydock St. Helens Merseyside
4	Factory 115/133 Glover Street Perth Scotland
5	Private flat 16 Ladysmith Terrace Perth Scotland
6	Offices West House Broomfield Road Chelmsford Essex
7	Factory Swan Lane Hindley Green Wigan Lancs.
8	Land and Warehouse part of Factory Lovell Park Road Leeds W. Yorks.

34

Britvic Limited
Short Leasehold Properties

	Address	Lessor	Term	Current Rent	Other Information
1	Offices Britvic House Broomfield Road Chelmsford Essex	Legal & General Assurance Society Ltd Temple Court 11 Queen Victoria Street London EC4	25 years and 3 months from 1 July 1975. Rent review every 5 years. Current review from 1 October 1985 currently being negotiated.	£170,000 p.a.	Lessor’s agent: None. Underlease of fourth floor to Sun Life Assurance Society Ltd, 1 North Street, Liverpool L69 2AS for term of 20 years and 2 months from 1 August 1975. Current rent £40,000 p.a. – rent review every 5 years. Current review from 1 October 1985 currently being negotiated. Part of fourth floor sub-let by Sun Life to Noble Lowndes & Partners Ltd.
2	Depot & Offices 75 Northern Road Aylesbury Bucks.	Ravenseft Industrial Estates Ltd 35 Thomas Street London SE1	21 years from 24 June 1972. Rent reviews every 7 years. Next review 24.6.86.	£22,750 p.a.	Lessor’s agent: Land Securities (Management) Ltd Landsec House 21 New Fetter Lane London EC4

35

	Address	Lessor	Term	Current Rent	Other Information
3	Depot & Offices 1 Benyon Park Way Lowfield Road Industrial Estate Leeds Yorks.	Hampshire County Council The Castle Winchester Hants.	25 years from 1 November 1978. Rent reviews every 5 years. Next review 1.11.88.	£71,000 p.a.	Lessor’s agent: Richard Ellis Boundry House Jewry Street London EC3
4	Depot & Offices Unit 0 Fort Wallington Industrial Estate Fareham Hants.	London & Manchester Assurance Co. Ltd Winslade Park Exeter	21 years from 29 September 1977. Next review 29.9.88 followed by review every 5 years.	£30,500 p.a.	Lessor’s agent: Winslade Park (Management) Ltd Winslade Park Exeter
5	Depot & Offices Unit 3 Hadleigh Road Industrial Estate Ipswich Suffolk	Multioptique International SA (Luxembourg) 10 Benezet Street Ipswich	20 years from 25 March 1984. Rent review every 5 years. Next review 25.3.89.	£12,000 p.a.	Lessor’s agent: None. See also freehold land schedule for parcel of land adjacent to depot.
6	Depot & Offices Unit E New Hyth Lane Larkfield Kent	James Hiller & Partners Ltd Hiller House Godalming Surrey	25 years from 1 April 1974. Rent reviews every 5 years. Next review 1.4.89.	£52,000 p.a.	Lessor’s agent: None.

36

	Address	Lessor	Term	Current Rent	Other Information
7	Depot & Offices Plot No. 3 Traps-Pennine Trading Estate Queensway Rochdale Lancs.	The London Assurance 1 Bartholomew Lane London EC2	25 years from 24 June 1973. Next review 24.6.88.	£49,850 p.a.	Lessor’s agent: Sun Alliance Insurance PO Box 98 Wellington House 6-9 Upper St Martin’s Lane London WC2
8	Depot & Offices Unit 21 and 22 Staines Central Trading Estate Staines Middlesex	Montagu Executor and Trustee Co. Ltd 11 Devonshire Square London EC2	21 years from 24 June 1971. Rent reviews every 7 years. No further reviews to end of lease.	Unit 21: £64,750 p.a. Unit 22: £26,850 p.a.	Lessor’s agent: Knight Frank & Rutley 20 Hanover Square London W1 Unit 22 sub-let to Air Express International Agency for £26,850 p.a. – lease currently under review.
9	Warehouse & Offices Unit 7 Winslow Road Hammersmith London W6	Barclays Nominees (George Yard) Ltd 4 George Yard Lombard Street London EC3	24 years from 25 December 1979. Rent reviews every 5 years. Next review 25.12.89.	£181,500 p.a.	Lessor’s agent: Barclays Bank Trust Co Ltd Juxon House 94 St. Paul’s Churchyard London EC4. Adjoins Hanbre Road Factory.

37

	Address	Lessor	Term	Current Rent	Other Information
10	Factory Lovell Park Road Leeds Yorks.	Norwich Union Life Insurance Society Ltd Surrey Street Norwich Norfolk	42 years from 29 September 1964. Rent reviews every 21 years. Current review from 29 September 1985 currently being negotiated.	£13,174 p.a.	Lessor’s agent: None. See also freehold land schedule for parcel of land adjoining Factory.
11	Rannock Road 1 Hanbre Road (formerly 129 Rannoch Road) Hammersmith Fulham London W6	J. Lyons & Company Limited Cadby Hall London W14 0PA	An underlease beginning on 10.1.1986 end on 1 August 1989 unless previously determined by six months’ notice expiring not earlier than 10.6.87.	£144,799.50 p.a.	No rent review provision. Landlord’s Solicitors Messrs Root & Darby 30 Denmark Street Bristol.

38

Britvic Limited
Sundry Small Dispense Equipment Stores

1	Store & Workshop at Enterprise Plymouth Somerset Place Stoke Plymouth Devon	Rent: £36.15 per week
2	T W Mays & Son Ltd Eastgate Bourne Lincs. Store & Workshop 43A Eastgate Bourne Lincs.	Rent: £20.00 per week
3	Mr D B Davies “Woodside” Woodlands Terrace Swansea West Glamorgan Store & Workshop 49 Robert Street Manselton Swansea	Rent: £18.13 per week
4	Kent Supplies Ltd Mold Road Gwersyllt Nr. Wrexham Clwyd Store & Workshop Top Road Summerhill Nr. Wrexham	Rent: £25.00 per week

39

Canada Dry Rawlings Ltd
Part B

Freehold Ownership

	Property	Owning Company
1	Depot, 617 London Road, Ashford, Middlesex	R White & Sons Ltd
2	Depot, 2/4 Green Lane, Ashwell, Baldock, Herts.	R White & Sons Ltd
3	Factory, Windsor Terrace, Beckton, London E6	Southern Table Water Co Ltd (SOTA)
4	Ex Factory, Taylor Street, Birkenhead, Merseyside (50% remains unsold)	R White & Sons Ltd
5	Depot, Bodwin Road, Coventry, West Midlands	R White & Sons Ltd
6	Factory, Kennet Road, Crayford, Kent	Canada Dry Rawlings Ltd
7	Depot, 76/90 Pear Tree Road, Derby	Canada Dry Rawlings Ltd
8	Depot, Pinhoe Trading Estate, Venny Bridge, Whipton, Exeter, Devon	Canada Dry Rawlings Ltd
9	Ex Factory, 337 Bristol Road, Gloucester (To be sold to Bass Developments Ltd)	Southern Table Water Co Ltd (SOTA)
10	Essence Factory, 49/53 Glengall Road, Peckham, London (To be sold)	R White & Sons Ltd and London Essence Co Ltd
11	Depot, 71/73 Leytonstone Road, Stratford, London E15 (NB: Depot is administered by CDR and the adjoining residential and commercial property by Charrington & Co)	Bass Holdings Ltd
12	Depot, New Ford Road, Waltham Cross, Herts. (To be sold)	R White & Sons Ltd

40

Canada Dry Rawlings Ltd

Leasehold Ownership

*Rent for 1984/85

	Property	Lessee Company	Current Rent	Lease Term	Landlord
1	Production Warehouses Units 94, 96, 98 London Industrial Park Beckton London E6	Canada Dry Rawlings Ltd	93750	25 years from 24.6.84 (with break clause at end of 4th year on 12 month notice). Next rent review 24.6.89.	London Industrial Park Ltd 105 Park Street London W1Y 4AA
2	Technical Workshops Western Road Birmingham	Canada Dry Rawlings Ltd	2500	5 years from 11.4.85.	Mr S W Sapoote 12 St. George’s Close Edgbaston Birmingham 15
3	Depot The Hyde Lower Bevendean Brighton Sussex	Canada Dry (UK) Ltd	900	99 years from 4.6.62. No rent review provision.	Brighton Borough Council.
4	Mineral Water Bottling Factory 3 George Street Buxton Derbyshire SK17 6AT	Canada Dry (UK) Ltd	2250*	25 years (less 1 day) from 16.3.81. Next rent review 16.3.86.	High Peak Borough Council Municipal Buildings Glossop Derbyshire SK13 8AF

41

	Property	Lessee Company	Current Rent	Lease Term	Landlord
5	Depot 10 Baileyfield Crescent Portobello Edinburgh	Canada Dry (UK) Ltd	12400	24 years from 7.10.75. Next rent review 11.11.87.	Standard Life Assurance Company 3 George Street Edinburgh EH2 2XZ
6	Depot Quay Road Industrial Estate Rutherglen Glasgow	Canada Dry (UK) Ltd	27000*	25 years from 11.6.76. Next rent review 11.6.86.	Chellow Dene Estates Ltd Park House 297 Whitehall Road Leeds
7	Offices Clarendon House 8/12 Station Road Kettering Northants.	Canada Dry (UK) Ltd (surety Bass Charrington Ltd now Bass PLC)	44750	35 years from 25.12.75. Next rent review 25.12.90.	Croydon London Borough Council Municipal Offices Fall Road Croydon CR9 3JY
8	Offices 6 Station Road Kettering Northants. (Ex-Corby Motors building)	Canada Dry (UK) Ltd	9315	30 years from 1.1.81. Next rent review 1.1.91.	Corby Motors Ltd George Street Corby Northants NN17 1PY
9	Depot Unit 3 Royds Close Whitehall Road Leeds	Canada Dry (UK) Ltd	32000	42 years from 4.12.72 (2 leases for same term). Next rent review 4.12.86.	Royds Estate Company c/o Queen Street (Management Services) Limited Queens House Queen Street Manchester M2 5LA

42

Property		Lessee Company	Current Rent	Lease Term	Landlord
10	Production Warehouse Swinnow Lane Leeds 13	Canada Dry Rawlings Ltd (surety Bass PLC)	59250	25 years from 1.9.84. Next rent review 1.10.89.	Robert Ogden CBE Sicklinghall Grange Sicklinghall Nr. Wetherby N. Yorks.
11	Factory Swinnow Lane Industrial Estate Bramley Leeds 13	Canada Dry (UK) Ltd (surety Bass Charrington Ltd now Bass PLC)	166545	99 years from 1.1.74. Next rent review 1.1.89.	Land Developments (Hincroft) Ltd now Ogden Properties Ltd Otley Yorkshire
12	Vacant land adjoining Factory Swinnow Lane Leeds (3.17 acres)	Canada Dry (UK) Ltd (surety Bass Ltd, now Bass PLC)	23431	99 years from 1.1.74. Next rent review 1.1.89.	Robert Ogden c/o Ogden Properties Ltd Otley Yorkshire
13	Depot Unit D Mancentral Estate East Ordsall Lane Salford Manchester (acquired 7.3.84)	Canada Dry Rawlings Ltd	40800	25 years from 13.8.74. Next rent review 13.8.89.	Aubrey Investments Ltd 2 South Square Grays Inn London WC1R 5HR
14	Depot Unit E Trinity Trading Estate Sittingbourne Kent	R White & Sons Ltd	23500*	25 years from 17.5.76. Next rent review 17.5.86.	Factory Holdings Group Epic House 81 East Street Epsom Surrey KT17 1EE

43

Property		Lessee Company	Current Rent	Lease Term	Landlord
15	Depot Unit 5 Waterloo Industrial Estate Hedge End Southampton	Canada Dry Rawlings Ltd	32860	25 years from 30.8.83. Next rent review 30.8.88.	Pension Funds Securities Imperial Chemical House Hillbank London SW1P
16	Depot Colchester Road Witham Essex	Canada Dry (UK) Ltd	2725	21 years from 24.6.66	Witham Industrial & Co Investments Ltd Hast?????? House 10 Norfolk Street Strand London WC2
17	Cape Hill Depot	Canada Dry (UK) Ltd	No rent payable only rates and repairs are paid.	Annual licence	Bass Holdings Limited

44

Schedule 5

Dated [•] 1986



[•] (1)

[•] (2)

[•] (3)

THE COMPANIES NAMED IN THE SCHEDULE (4)

DEED OF INDEMNITY

One Silk Street
London EC2Y 8HQ

Telephone (44-20) 7456 2000
Facsimile (44-20) 7456 2222

Ref

45

This Deed of indemnity is made the [•] day of One thousand nine hundred and eighty-six between:

Either:

[ALLIED DOMECQ PLC (No. 689729) whose registered office is at 24 Portland Place, London WC1N 4BB (hereinafter called the “Covenantor”) of the first part INTERCONTINENTAL HOTELS GROUP PLC (No. 4551528) whose registered office is at 67 Alma Road, Windsor, Berkshire SL4 3HD and WHITBREAD PLC (No. 29423) whose registered office is at The Brewery, Chiswell Street, London WC1Y 4SD (hereinafter together called the “Covenantees”) of the second part BRITISH VITAMIN PRODUCTS LIMITED (No. 484529) whose registered office is at Britvic House, Broomfield Road, Chelmsford, Essex CM1 1TU.]

Or:

[INTERCONTINENTAL HOTELS GROUP PLC (No. 4551528) whose registered office is at 67 Alma Road, Windsor, Berkshire SL4 3HD and WHITBREAD PLC (No. 29423) whose registered office is at The Brewery, Chiswell Street, London WC1Y 4SD (hereinafter together called the “Covenantors”) of the first part ALLIED DOMECQ PLC (No. 689729) whose registered office is at 24 Portland Place, London WC1N 4BB (hereinafter called the “Covenantee”) of the second part BRITANNIA SOFT DRINKS LIMITED (No. 47094) whose registered office is at 8-12 Station Road, Kettering, Northants NN15 7HA.]

46

In both cases

(hereinafter called the “Company”) of the third part and the companies named in the Schedule (hereinafter called the “Subsidiaries”) of the fourth part.

Whereas: this Deed is entered into pursuant to the provisions of an Agreement dated the [•] day of January 1986 and made between Britannia Soft Drinks Limited of the first part InterContinental Hotels Group PLC of the second part Whitbread PLC of the third part Allied Domecq PLC of the fourth part and Allied Breweries Limited of the fifth part (hereinafter called the “Agreement”).

Now it is hereby agreed as follows:

1 In this Deed:

1.1 words and expressions defined in the Agreement shall have the same meaning wherever used herein and the provisions of Clause 1.3 of the Agreement shall be deemed to be incorporated herein;

1.2 the following expressions bear the following meanings namely:

“Claim” includes any notice, demand, assessment, letter or other document issued or action taken by the Inland Revenue or other statutory or governmental authority, body or official whosoever (whether of the United Kingdom or elsewhere in the world) whereby a Group Company is or may be placed or sought to be placed under a liability to like a payment or deprived of any relief allowance credit or repayment otherwise available;

“Completion” means completion of the matters – contemplated by Clause 4 of the Agreement;

“Group Companies” means the Company and the Subsidiaries and “Group Company” shall mean any one of them;

“Taxation” shall bear the meaning ascribed to it by Clause 1.5 hereof;

“Transaction” includes any transaction, act, event or omission of whatever nature;

1.3 where any company suffers a loss of or reduction in the amount of any relief allowance or credit or has a right to the repayment of Taxation nullified or cancelled in whole or in part and such relief allowance credit or right to repayment related to a Transaction effected on or before Completion or was granted by reference to any income profits or gains earned accrued or received on or before Completion, then such company shall be treated as having incurred a corresponding depletion in or reduction in the value of its assets as a result of a Claim for Taxation made in circumstances falling within Clause 2.1;

1.4 references to any Transaction effected on or before Completion include the combined result of two or more Transactions the first of which shall have taken place or the commencement of which shall have occurred on or before Completion;

1.5 references to “Taxation” comprise all forms of taxation whether of the United Kingdom or elsewhere in the world, past present and future (including, without limitation, corporation tax, capital gains tax, income tax, surtax, estate duty, capital transfer tax, profits tax, stamp duty, betterment levy, value added tax, purchase tax, selective employment tax, development gains tax, development land tax, petroleum revenue tax, customs and other import or export duties) and all other statutory, governmental, state, provincial, local governmental or municipal impositions duties and levies and all penalties, charges, costs and interest relating to any Claim;

47

1.6 references to income, profits or gains earned accrued or received include income, profits or gains deemed to have been or treated as earned accrued or received for Taxation purposes;

1.7 references to Clauses and the Schedule are to Clauses and the Schedule of this Deed;

1.8 words and expressions defined for the purposes of any relevant taxing or other legislation shall herein bear the same meaning.

2

2.1 Subject as hereinafter provided the Covenantor[s] hereby agree[s] with and undertake[s] to the Covenantee[s] and each Group Company to indemnify and keep indemnified each Group Company against any depletion in or reduction in value of its assets or increase in its liabilities as a result or in consequence of any Claim for Taxation which has been made or may hereafter be made:

2.1.1 in respect of or arising from any Transaction effected on or before Completion; or

2.1.2 by reference to any income, profits or gains earned, accrued or received on or before Completion.

2.2 The indemnity in this Clause shall include all reasonable costs and expenses properly payable in connection with any Claim or liability referred to herein.

2.3 [The liabilities of the Covenantors under the indemnities in this Deed shall be limited so as to be shared in such proportions that 65 per cent of the liability shall be borne by Bass Public Limited Company and 35 per cent by Whitbread and Company, Public Limited Company.]

3 The Indemnity in Clause 2 shall not cover any Claim for Taxation:

3.1 to the extent that provision or reserve in respect thereof was made in the Accounts of the relevant Group Company;

3.2 in respect of corporation tax arising out of the ordinary course of the normal trading of any Group Company since 1 March 1985;

3.3 to the extent that such Claim arises as a result only by reason of any increase in rates of Taxation or by reason of any change in legislation made after the date hereof with retrospective effect;

3.4 which would not have arisen but for a Transaction on or after Completion voluntarily effected by the Covenantee[s] or by any of the Group Companies otherwise than in the normal course of business of the person effecting such Transaction;

3.5 in respect of any change in the accounting policies or taxation treatment of assets of any Group Company affected after Completion; or

3.6 to the extent that any such Claim is referred to or covered by Clauses 7 or 8 of the Agreement.

4 In the event of the Covenantee[s] becoming aware of any Claim which could give rise to a liability under this Deed, the Covenantee[s] shall procure that notice thereof is given to the Covenantor[s] in the manner hereinafter provided and as regards any such Claim the Group Company concerned shall at the request of the Covenantor[s] take such action as [it] may reasonably request to avoid, dispute, resist appeal, compromise or defend the Claim and any adjudication in respect thereto but subject to the Covenantee[s] and the Group Company being indemnified and secured to their reasonable satisfaction by the Covenantor[s] against all losses (including additional Taxation) damages and expenses which may thereby be incurred.

48

5

5.1 In the event of any dispute as to the liability hereunder of the Covenantor[s] the matter shall be determined by a firm of chartered accountants to be agreed between the Covenantee[s] and the Covenantor[s] or failing agreement to be nominated by the President for the time being of the Institute of Chartered Accountants in England and Wales.

5.2 The said firm shall be deemed to act as experts and not as arbitrators in any determination made by them hereunder and in the absence of manifest error their determination shall be conclusive and binding on all concerned. The proper charges and disbursements of the said firm shall be paid and borne on each occasion by such of the parties concerned and in such proportions as the said firm may in their absolute discretion consider fair and reasonable.

6 Any liability of the Covenantor[s] to the Covenantee[s] or any of the Group Companies hereunder may in whole or in part be released, compounded or compromised or time or indulgence given by the Covenantee[s] or any Group Company in its absolute discretion without in any way prejudicing or affecting any other rights it may have against the Covenantor.

7 Any notice to any party hereunder shall be deemed to have been sufficiently served if delivered personally at or sent by registered post to the registered office of the relevant company for the time being. In proving such service it shall be sufficient to prove that any letter was properly addressed, stamped and posted and the same shall be assumed to have reached the addressee two business days after posting.

In witness whereof this Deed has been entered into the day and year first above written.

49

Schedule

Name of the Group Company

Either

Britvic Limited

Pure Fruit Juices Limited

Britvic (NI) Limited

Minster (Soft Drinks) Limited

Sunfresh Soft Drinks Limited

Britvic Deutschland GmbH

or

Canada Dry Rawlings Limited

Hooper Struve Limited

R White & Sons Limited

H D Rawlings Limited

Moorhouse Bros Limited

The London Essence Company Limited

The Southern Table Water Company Limited

50

Schedule 6
Pensions

A. In this Schedule the following terms shall have the following meanings:

“Adjusted Transfer Amount” means the Transfer Amount multiplied by the Gross Dividend Yield on the F.T. Actuaries All-Share Index at the date of signature of this Agreement [INSERT DIVIDEND YIELD HERE 4.35 per cent] and divided by the Gross Dividend Yield on the F.T. Actuaries All-Share Index at the Transfer Date and then notionally invested in this Index with allowance for the reinvestment of the dividend income in the Index for the period to the date of payment. This amount shall be determined by the Allied Actuaries and agreed by the Bass Actuaries;

“Allied Actuaries” means the actuaries to the Allied Fund;

“Allied Fund” means the Allied-Lyons Pension Fund;

“Bass Actuaries” means the actuaries to the Bass Plan;

“Bass Plan” means the Bass Employees’ Security Plan;

“BVP Employers” means BVP and the BVP Subsidiaries;

“Payment Date” means the date six months after the Transfer Date (or such other date as is agreed between Bass and Allied);

“Transfer Amount” means the amount determined by the Allied Actuaries which at the Transfer Date represents the “Past Service Reserve” (as defined in the letter from the Allied Actuaries dated 16 January 1985) within the Allied Fund attributable to the Transferring Members. A copy of this letter is annexed hereto and signed for the purpose of identification by the signatories hereto. The Bass Actuaries will be given all reasonable access to the data and calculations for the purpose of ascertaining (i) that the Transfer Amount has been calculated in accordance with the said letter from the Allied Actuaries and (ii) the correctness of the calculations and of the data as to the Transferring Members and their benefits;

“Transfer Date” means 1 April 1987 (or such other date as is agreed between Allied and Bass);

“Transferring Members” means those members of the Allied Fund who are employed by the BVP Employers on the day preceding Completion and who remain so employed on the day preceding the Transfer Date and who accept the offer of membership of the Bass Plan in accordance with paragraph C below, but excluding those who decline to transfer their benefits in the Allied Fund to the Bass Plan. The parties hereto will use all reasonable endeavours to ascertain the identities of the Transferring Members no later than one month after the Transfer Date.

B. The parties to this Agreement will use their best endeavours to procure that subject to the approval of the Commissioners of Inland Revenue, the BVP Employers will continue to participate (including for contracting-out purposes) in the Allied Fund up to the Transfer Date but only in respect of employees who became members of the Allied Fund before Completion. Bass undertakes to procure that the BVP Employers continue to deduct from the earnings of these employees the contributions required to be made by them to the Allied Fund at the rates prescribed in the Rules thereof and shall procure the payment on a basis consistent with the basis prevailing at the date hereof of the said contributions together with the contributions required from the BVP Employers as participating employers under the terms and provisions of the Allied Fund to the trustees of the Allied Fund.

51

C. Bass undertakes to offer membership of the Bass Plan with effect from the Transfer Date to those employees of the BVP Employers who are so eligible and who are members of the Allied Fund, on the basis set out in paragraph D below.

D.

(i) Bass will determine which Section of the Bass Plan is appropriate in each individual case.

(ii) Pensionable service under the Allied Fund up to the Transfer Date shall be deemed to be pensionable service under the relevant Section of the Bass Plan and all of the other terms and conditions of the Bass Plan shall apply to the Transferring Members without adjustment, except as now described:

(a) Transferring Members who were entitled under the Allied Fund to a scale of benefits for a part or all of their pensionable service based on an accrual rate of 80ths shall be credited with pensionable service in the Bass Plan of 75 per cent of the corresponding pensionable service in the Allied Fund EXCEPT THAT this provision shall not apply to former B Members of the Allied-Lyons 1980 Pension Scheme who would have moved to a 60ths basis on completion of the qualifying conditions prescribed in the rules of that scheme;

(b) Transferring Members who were entitled under the Allied Fund to benefits for part or all of their pensionable service which were fixed in monetary terms and which would not have increased by virtue of future increases in earnings (including fixed benefits arising from transfers in from previous pension arrangements) shall be credited with the same fixed monetary amount of pension in the Bass Plan in lieu of being credited with the corresponding pensionable service; and

(c) Transferring Members who were entitled to a scale of benefits for part or all of their pensionable service based on PAYE earnings without offset shall have a Final Lower Earnings Limit in the Bass Plan of nil in relation to the corresponding pensionable service.

E.

(i) Allied undertakes to use its best endeavours to procure that the trustees of the Allied Fund shall on the Payment Date transfer the Adjusted Transfer Amount to the Bass Plan.

(ii) If no amount is transferred under (i) above within three months of the Payment Date or if the amount so transferred is less than the Adjusted Transfer Amount, Allied undertakes to pay to Bass on the day three months after the Payment Date the Adjusted Transfer Amount less any amount so transferred.

F. Allied undertakes:

(i) that it will not take any action which prior to the Transfer Date would cause the Allied Fund to terminate or would materially change the basis of benefits or contributions prospectively and contingently payable to, by or in respect of employees of the BVP Employers without the consent in writing of Bass such consent not to be unreasonably withheld; and

52

(ii) that it will use all reasonable endeavours to procure that the trustees of the Allied Fund do not so act without the consent in writing of Bass such consent not to be unreasonably withheld.

G. Notwithstanding the provisions of this Schedule, if Bass and Allied so agree, one or more of the employees of the BVP Employers who are members of the Allied Fund may be offered membership of the Bass Plan at an earlier date than that which applies generally, in which event the provisions of this Schedule shall apply to the employees concerned subject to such amendments as Bass and Allied shall agree.

H. As regards employees of the BVP Employers who at Completion are members of the Allied-Lyons Executives Pension Fund:

(i) paragraphs A to G above will apply as if all references to the Allied Fund were references to the Allied-Lyons Executives Pension Fund; and

(ii) the terms and conditions of the Bass Plan will be varied so that the normal retirement date is the 60th birthday or such later date as applied in the Allied-Lyons Executives Pension Fund at Completion or as agreed between the Member and Bass; and

(iii) in relation to pensionable service completed prior to the Transfer Date, the terms and conditions of the Bass Plan will be varied so that the accrual rate is 2/105ths per year of pensionable service.

53

Schedule 7

	If IHG in default	If Allied in default	If Whitbread in default
Option 1	Allied and Whitbread together can put their respective shareholdings in BSD on IHG	IHG and/or Whitbread can call the whole of Allied’s shareholding in BSD in proportion to the respective shareholdings of IHG and Whitbread in BSD	IHG and/or Allied can call the whole of Whitbread’s shareholding in BSD in proportion to the respective shareholdings of IHG and Allied in BSD
Option 2	Allied and Whitbread can call from IHG and the whole of its shareholding in BSD in proportion to the respective shareholdings of Allied and Whitbread in BSD	If IHG or Whitbread does not wish to call pursuant to Option 1 the other can call the whole of Allied’s shareholding in BSD	If IHG or Allied does not wish to call pursuant to Option 1 the other can call the whole of Whitbread’s shareholding in BSD
Option 3	One of Allied or Whitbread (as they may agree between themselves) can put on or call from the other of them the whole of that other’s shareholding in BSD
Option 4	One of Allied or Whitbread (as they may agree between themselves) can put their respective shareholdings in BSD on IHG and the other of Allied and Whitbread in proportion to the respective shareholdings of IHG and the other of Allied and Whitbread in BSD
Option 5	Allied or Whitbread can put on IHG

54

Where IHG is in default the five options available to Whitbread and Allied are separate and independent so that Whitbread and Allied may not each exercise a different option and each of Options 1, 2, 3 and 4 may only be exercised if Allied and Whitbread are in agreement as to such exercise; Option 5 however may be exercised by either Whitbread or Allied alone if the other of them is unwilling to exercise, or agree on the exercise by the other of any of the other four options but in such event the party not exercising Option 5 shall have the right in priority to the relative shares being put on IHG to call for such Shares.

All transactions under Options 1, 3, 4 and 5 will, in accordance with Clause 20[ ], be at the “put” price; only under Option 2 will the “call” price apply.

55

Schedule 8

56

SIGNED by



for and on behalf of
BRITANNIA
SOFT DRINKS LIMITED
in the presence of:  

SIGNED by



for and on behalf of
INTERCONTINENTAL HOTELS GROUP PLC
in the presence of:  

SIGNED by



for and on behalf of
WHITBREAD PLC
in the presence of:  

57

SIGNED by



for and on behalf of ALLIED
DOMECQ PLC in the presence of:  

SIGNED by



for and on behalf of SIX
CONTINENTS INVESTMENTS
LIMITED in the presence of:  

SIGNED by



for and on behalf of WHITBREAD
GROUP PLC in the presence of:  

58

SIGNED by



for and on behalf of ALLIED
DOMECQ OVERSEAS (CANADA)
LIMITED in the presence of:  

59

Appendix I

Current BSD Soft Drinks

Canada Dry Brand

• Carbonates (including mixers, Cola and Soda Water) in small returnable bottles, draught and non-returnable bottles, travel pack cans

Rawlings Brand

• Fruit Juices – in small returnable bottles, draught, 5 litre ‘bag-in-box’, travel pack cans

• High Juice Carbonates – in small returnable bottles, can

• Squashes and Cordials – in large returnable and non-returnable bottles and 5 litre polyjars

R Whites Brand

• Carbonate Flavours, (including lemonade, orangeade, ginger beer) in small and large returnable and non-returnable bottles, draught, non-returnable bottles, cans

Shandies Shandy Bass, Shandy Pilsner, Shandy Cyder in half-pint returnable bottle, draught, non-returnable bottles, cans

Splitz

Carbonates, with wine and juice (alcohol less than 1.2% vol), in small returnable bottles and cans

Buxton Mineral Water (still and carbonated), in non-returnable bottles

Hooper Struve

• Soda siphons

Factored Goods

Pepsi Cola, Coca Cola, Vimto, Perrier

Agreed Exclusions

None and the following are Discretionary Products:

• Barbican

• Eisberg

Current BVP Soft Drinks

Britvic Brand

• Fruit Juice Products (including high juice carbonates) in small returnable bottles, 6 fl oz cans, 1 litre Tetra Pak, 1 litre PET and bulk dispense tanks

• Carbonates in small, medium and large returnable bottles, siphons, small and large cans. 11/2 litre PET and bulk dispense tanks

• Squashes and Cordials – in large returnable bottles, 1 gallon PET and medium-sized non-returnable bottles

60

Sunbliss Brand

• Squashes and Cordials – in 1 gallon PET

Minster Brand

• Shandy – in cans and returnable and non-returnable bottles

Lyons Brand in 1 litre Tetra Pak for fruit juices, and non-returnable bottles and 2 litre PVC for squashes

Sunland Brand – squash

Customer Own Label – Fruit juices and breakfast drinks in 1 litre Tetra Pak and squashes, cordials and blackcurrant in glass and PVC of various sizes

Factored Goods

Perrier Water, Lucozade

Agreed Exclusions

Trent Shandy
Heritage

and the following are Discretionary Products:

Apple B
Peardrax
Cidrax
Cider Vinegar
Zapple
Danish Lite

61

Table of Contents

Contents	Page
1       Definitions	2
2       Exchange of Shares	3
3       Interests in BSD	4
4       Completion	4
5       Further Agreements	5
6       Group Interests	5
7       Warranties	6
8       Consortium Relief and Income	7
9       BSD New Articles of Association	9
10     Alternative Employment	9
11     Pensions	9
12     Bonus and Share Ownership Scheme	9
13     Undertakings	10
14     Management of BSD	10
15     Financing of BSD	11
16     Trading of the BSD Group	12
17     Property Option	12
18     Other Interests	13

i

19     Control	13
20     Termination	13
21     Activities	14
22     Costs	14
23     Notices	14
24     Substitution	14
Schedule 1 Part A	15
Schedule 1 Part B	16
Schedule 2 Part A	20
Schedule 2 Part B	21
Schedule 2 Part B	24
Schedule 3	25
Schedule 4 The Properties Part A – Britvic Limited	34
Schedule 5	45
Schedule	50
Schedule 6 Pensions	51
Schedule 7	54
Schedule 8	56
Appendix I Current BSD Soft Drinks	60

ii

EX-4

Exhibit 4(c)(i)

SIX CONTINENTS HOTELS INC
c/o The Corporation Trust company
1209 Orange Street
Corporation Trust Centre
Wilmington
DE 19801
USA

12^th February 2003

Mr Richard Hartman
6 Swiss Cottage Estate
Singapore
307 518

Amendment to Employment Contract

Dear Richard

This letter (the“Letter Agreement”)sets forth our agreement concerning the terms of an amendment to the contract of employment dated 17 June 1999 as amended (the “Contract”) between you and Bass Hotels and Bass Hotels and Resorts Inc. (now known as Six Continents Hotels, Inc.) (the “Company”). Capitalized terms that are not otherwise defined in this Letter Agreement shall have the meanings assigned to them in the Service Agreement.

1	Purpose of Amendment
	You and the Company acknowledge and agree that this Letter Agreement is being entered into in contemplation of the impending demerger of the hotels and retail businesses of the Company contemplated in the Company’s announcement of 1 October 2002 (the “Separation”).
2	Effectiveness of this Letter Agreement
	This Letter Agreement shall become effective as of the date on which a copy of the UK court order approving the scheme of arrangement effecting the Separation is delivered to the Registrar of Companies in England and Wales and registered by such Registrar (the“Effective Date”). In the event that the Separation does not take place this Letter Agreement shall automatically become void and without force or effect.
3	No change of Control or Constructive Termination
	You hereby acknowledge and agree that the Separation will not be regarded as a “change of control” as such term is used in the Contract between you and the Company. In addition, you acknowledge and agree that the changes to the management structure of the Company as a result of, or in connection with, the Separation will not be or be deemed to be a constructive dismissal.

Six Continents PLC
Registered in England Number 913450
Registered office: 20 North Audley Street London W1K 6WN

  – 2 –

4	Continuing Effect of the Service Agreement
	The Service Agreement shall continue in full force and effect as amended herein.
5	Counterparts
	This Letter Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed an original, but both such counterparts shall together constitute one and the same document.
6	Headings
	The headings contained in this Letter Agreement are intended solely for convenience of reference and shall not affect the rights of the parties to this Letter Agreement.
7	Governing Law
	This Letter Agreement is governed by and shall be construed in accordance with English Law.
Please sign and return to the Company the enclosed copy of this Letter Agreement to acknowledge your acceptance of its terms.

THIS AGREEMENT is made on the 12th of February 2003 BETWEEN SIX CONTINENTSPUBLIC LIMITED COMPANY whose registered office is situated at 20 North Audley Street, London, W1K 6WN (hereinafter called “the Company”) of the first part and RICHARD HARTMAN of 6 Swiss Cottage Estate Singapore (hereinafter called “the Executive”) of the second part.

Words importing the singular include the plural and vice versa, words importing the gender include every gender and references to persons include bodies incorporate and unincorporate.

NOW IT IS HEREBY AGREED as follows :

1.	1.1     This Agreement will be conditional on the happening of the Demerger.
	1.2     The Demerger Date shall be the effective date of this Agreement.
	1.3     If Demerger Date has not happened by 31 December 2003 this Agreement shall terminate on that date without liability on either party.
	1.4     For the purposes of this Clause 1:
	“Demerger Date” means the date on which, as part of the demerger of the Six Continents Group, the ordinary shares in InterContinental Hotels Group PLC are admitted (i) to the Official List of the UK Listing Authority in accordance with paragraph 7.1 of the Listing Rules and (ii) to trading on the London Stock Exchange plc and“Demerger” shall be construed accordingly; and
	“UK Listing Authority” means the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000.
2.	The Company will employ the Executive and the Executive will serve the Company as Managing Director EMEA and as a director of InterContinental Hotels Group PLC and the Executive shall perform the duties and exercise the powers which may from time to time be reasonably assigned to or vested in him by the Directors of InterContinental Hotels Group PLC or a duly authorised committee thereof (hereinafter called “the Board”) including such duties and powers in relation to any Associated Company (as hereinafter defined) of the Company (hereinafter together with the Company called “the Group” and the expression “Group

1

	Company” shall mean a member of the Group) as the Board shall reasonably cause to be assigned to or vested in him.
3.	3.1     This Agreement shall, subject to the provisions for earlier termination herein contained, continue until terminated at any time by:
		3.1.1     the Company giving to the Executive not less than twelve months’ previous notice; or
		3.1.2.    the Executive giving to the Company not less than six months’ previous notice; or
		3.1.3     the Executive reaching age 60.
	With reference to sub-Clauses 3.1.1 and 3.1.2 the Company shall have the absolute discretion to waive the requirement for the Executive to work during his notice period for a maximum period of six months and the Executive agrees that during any period in which the Company has waived this requirement (a“Garden Leave Period”) he shall undertake such work as the Company may from time to time reasonably require of him and shall not, unless required by the Company, enter or attend the premises of the Company or any other Group Company or contact or have any communication with any employee, officer, director, agent or consultant of the Company or any other Group Company in relation to the business of the Company or any other Group Company. The Company agrees that at the end of the Garden Leave Period it will not require the Executive to return to work for the remainder of his notice period.
	3.2     The Executive’s employment within the Group began on 19 July 1999 and such previous employment shall be treated as part of the Executive’s continuous employment with the Company.
4.	Initially it is envisaged that the Executive will work at 67 Alma Road, Windsor Berkshire SL4 3HD but the Executive shall work at such location or locations as shall be necessary or convenient for the performance of his duties pursuant to Clause 2 provided that such location is within a radius of 30 miles of Windsor.
5.	5.1     The Executive’s employment is subject to the Terms and Conditions of Employment contained in the Employee Handbook, of which the Executive hereby acknowledges he has a full knowledge and understanding. Copies of this document may be obtained from Human

2

	Resources. The Company undertakes that any changes in such terms and conditions shall be updated in the Handbook.
	5.2      In the event of any conflict arising between this Agreement and the Memorandum of Terms and Conditions of Employment contained in the Handbook the terms of this Agreement shall prevail.
	5.3     Details of disciplinary and grievance procedures are contained in the Handbook. The Executive should apply to his immediate manager if he is dissatisfied with any disciplinary decision relating to him. If during the course of employment the Executive should have any grievance in connection with that employment, he should in the first instance raise it with his immediate manager. In both cases applications must be in writing giving sufficient detail to enable proper consideration of each case.
6.	6.1     Subject to the Company’s right to suspend the Executive under sub-Clauses 3.1 and 16.10, the Executive shall unless prevented by ill-health throughout the said term devote the whole of his working time under this Agreement, attention and abilities to the business of the Group except as provided in sub-Clause 6.2 below and shall obey the reasonable and lawful orders from time to time of the Board and in all respects conform to and comply with the directions and requests made by the Board and shall well and faithfully serve the Group and use his best endeavours to promote the interests thereof.
	6.2      The Executive shall not without the consent of the Company (such consent not to be unreasonably withheld) be directly or indirectly engaged or concerned or interested in any other business (which consent may be given subject to such terms or conditions which the Company may require, the breach of which shall be deemed to be a breach of this Agreement). This sub-clause shall also apply to any other activity during hours in which the Executive would not normally be engaged in duties on the Company’s behalf. However, the Executive may be the holder of not in excess of five (5) per cent, of the outstanding voting shares of any publicly traded company.
	6.3      The Executive shall be entitled to purchase goods or services from the companies within the Group with the benefit of such discounts and commissions as are from time to time authorised by the Hotels Executive Committee.
	6.4     As soon as reasonably practicable after the Executive becomes aware of any wrongdoing by any employee of any Group Company where

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	the Executive reasonably concludes that the wrongdoing is sufficiently serious the Executive will bring the wrongdoing to the attention of the Hotels Executive Committee.
7.	7.1      Subject as hereinafter provided the Executive shall during the continuance of this Agreement be remunerated for his services under this Agreement (inclusive of any remuneration to which he may be entitled as an officer of the Company or any company within the Group) by the payment of an annual gross salary of US$600,000 per annum (or such higher amount as may be agreed between the Board and the Executive) payable 4-weekly in arrears. In the event of any increase of salary being so agreed the increase shall thereafter have effect as if it were specifically provided for as a term of this Agreement.
	7.2      Any advance of a cash float to cover business expenses or an advance of pay which has not been recovered will be repayable by the Executive in the event of the termination of this employment. Any moneys repayable will be deducted from the outstanding final salary payment or holiday pay and any shortfall will be recoverable from the Executive.
8.	In addition to the said fixed salary the Executive shall be reimbursed by the Company such travelling general and entertainment expenses as shall properly be incurred by and properly claimed by him and vouched for in connection with the Group’s business.
9.	The Executive shall be entitled throughout the term of this Agreement to the following benefits :
	9.1     Use of a suitable motor car as approved by the Company for use in connection with the performance of his duties and for his own personal and private use, all costs to be borne by the Company except fuel costs incurred during holidays outside the United Kingdom.
	The Executive is to ensure that the motor car is at all times in a proper state and has a current MOT Test Certificate and that in connection with its use he shall at all times observe Company car user guidelines and be the holder of a proper driving licence.
	9.2     Membership of the following Group schemes on such terms as are from time to time in force:
		9.2.1      Six Continents Executive Pension Plan (including the Six Continents Executive Top Up Scheme) in respect of which a

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		contracting-out certificate is in force for the said employment. Details of pension arrangements are contained in the current handbook on the Six Continents Executive Pension Plan.
		9.2.2      Six Continents Private Healthcare Plan.
	9.3     Payment by the Company of up to two subscriptions to recognised professional bodies where such professional body is directly related to the Executive’s current job or to his normal professional skill.
10.	10.1      The Executive shall be entitled to five weeks’ holiday in each year atsuch time or times as may be agreed between him and the Company and shall also be entitled to all relevant Public and Bank Holidays in England and Wales.
	Holidays are earned on a monthly pro-rata basis by reference to the current holiday year. Holiday pay is based upon the gross salary of the Executive payable pursuant to sub-Clause 7.1 above. In the event that the Executive does not take 5 weeks holiday in any year, whatever the reason, he shall not be entitled to receive pay in lieu of holidays not taken. If the Executive leaves the Company he may receive payment for any pro-rata holiday entitlement earned but not taken for the current holiday year.
	10.2      The Executive will be required to work a minimum of 35 hours per week and such additional hours as the requirements of his duties dictate. There shall be no normal working hours and there shall be no entitlement to additional remuneration for any additional work undertaken by the Executive except and to the extent such remuneration may have been agreed between him and the Board.
11.	11.1      The Executive may during his employment have access to information about the business and finances of the Company and of each Associated Company and customers of the Company or any Associated Company and its and their dealings, transactions, affairs, plans and proposals, all of which information is or may be secret or confidential and important to the Company and its Associated Companies and any such customers. In this Agreement such information is called “Confidential Information” and includes, without limitation, confidential or secret information relating to:-
		11.1.1     ideas;
		11.1.2      business methods;

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	11.1.3     finances;
	11.1.4      prices;
	11.1.5     business, financial, marketing, development or manpower plans;
	11.1.6    customer lists or details;
	11.1.7      computer systems and software;
	11.1.8      know-how or other matters connected with the products or services manufactured, marketed, provided or obtained by theCompany or its Associated Companies or any such customers.
11.2      The Executive shall not without the prior written consent of the Company other than in the proper performance of his duties either during his employment or at any time after its termination:-
	11.2.1      disclose to any person (except to those authorised by the Company to know), or
	11.2.2      use for his own purposes or for any purposes other than those of the Company, or
	11.2.3     through any failure to exercise all due care and diligence, cause or permit any unauthorised disclosure of,
any Confidential Information save that these restrictions shall cease to apply to information which (otherwise than through the default of the Executive) becomes available to the public generally.
11.3      All notes, memoranda, papers, documents, correspondence and writing (which shall include information recorded or stored in writing or on magnetic tape or disc or otherwise recorded or stored for reproduction whether by mechanical or electronic means and whether or not such reproduction will result in a permanent record being made) which from time to time may be in the possession of the Executive (whether made by the Executive or not) relating to the business of the Company or its Associated Companies shall be and remain the property of the Company or Associated Company to whose business they relate and shall be delivered by the Executive to the Company or Associated Company to which they

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	belong immediately upon request and in any event upon termination of the Executive’s employment and the Executive shall not make or keep any copies or extracts of such notes, memoranda, records, papers, documents, correspondence and writing.
	11.4      The provisions of sub-Clauses 11.1, 11.2 and 11.3 shall apply mutatis mutandis in relation to each of the companies within the Group to trade secrets or confidential information which the Executive may have received or obtained while in the service of the Company and the Executive will upon the request of any such company enter into a separate agreement or undertaking with such company to the like effect.
	11.5      Nothing in this Agreement will prevent the Executive from making a “protected disclosure” in accordance with the provisions of the Employment Rights Act 1996.
12.	Where deemed necessary by the Company or statute, the Executive should at all times during the period of his employment with the Company (hereinafter called “the Employment”) maintain his membership, where appropriate, of all professional, trade and other bodies necessary for the full performance of his duties hereunder.
13.	13.1     If the Executive (whether alone or with others) shall at any time during the period of the Employment make an invention (whether or not patentable) within the meaning of the Patents Act 1977 (hereinafter called “Invention”) relating to or capable of being used in the business of the Company or any other member of the Group he shall promptly disclose to the Company full details thereof to enable the Company to assess the Invention and to determine whether under the applicable law the Invention is the property of the Company provided that any Invention which does not belong to the Company shall be treated as confidential by the Company.
	13.2      If any Invention belongs to the Company or any Associated Company the Executive shall consider himself as a trustee for the Company or any Associated Company (as the case may be) in relation to each such Invention and shall, at the request and expense of the Company, do all things necessary to vest all right, title and interest in any such Invention in the Company or any Associated Company (as the case may be) or its nominee absolutely as legal and beneficial owner and to secure and preserve full patent or other appropriate forms of protection therefore in any part of the world.

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13.3     If any Invention does not belong to the Company or any Associated Company, the Company shall have the right to acquire for itself or its nominee the Executive’s rights therein within three months after disclosure pursuant to sub-Clause 13.1 on fair and reasonable terms to be agreed or in default of agreement within one month to be acquired at a price to be determined by a single expert to be nominated in default of agreement, at the request of either the Company or the Executive, by the President for the time being of the Chartered Institute of Patent Agents or in default by the Courts.

13.4     If the Executive (whether alone or with others) shall at any time during the period of the Employment create or make any discovery, design or other work (whether registerable or not and whether or not a copyright work), which is not an Invention or made or created by the Executive and wholly unconnected with the Employment (hereinafter called “Works”), the Executive shall forthwith disclose to the Company full details thereof and shall consider himself as a trustee for the Company in relation to all such Works. The Executive shall at the request and expense of the Company execute and do all instruments and things necessary to vest all right, title and interest in and to any such Works in the Company or its nominee absolutely as legal and beneficial owner.

13.5     In consideration of the Company entering into this Agreement the Executive hereby assigns to the Company by way of assignment of future copyright the copyright, design and other proprietary rights if any for the full term thereof throughout the world in respect of all copyright works created or made by the Executive during the period of the Employment (except only those copyright works created or made by the Executive and wholly unconnected with the Employment).

13.6     If the Executive (whether alone or with others) shall at any time during the period of the Employment generate any idea, method or information relating to the business, finances or affairs of the Company or capable of use by the Company which is not an Invention or Works (hereinafter called “Information”) he shall promptly disclose to the Company full details thereof and the Executive acknowledges such Information belongs to the Company.

13.7     The Executive hereby irrevocably waives any rights the Executive may have under Chapter IV (moral rights) of Part I of the Copyright, Designs and Patents Act 1988 and any foreign corresponding rights in respect of all Works.

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	13.8     Rights and obligations under this Clause 13 shall continue in force after the termination of this Agreement in respect of each Invention, Works and Information and shall be binding upon the representatives of the Executive.
14.	If the Executive shall unreasonably have refused or failed to agree or accept employment which is (a) suitable for him having regard to his status and responsibilities and (b) is offered to him on terms (whether financial or otherwise) no less favourable to him than the terms currently in effect under this Agreement either by:
	(a)	a company or person which has acquired or agreed to acquire the whole or a substantial part of the undertaking and assets of the Company; or
	(b)	a company or person which shall own or have agreed to acquire a controlling interest in the equity share capital of the Company; or
	(c)	any subsidiary or associate of either of the above; or
	(d)	any subsidiary or associated company of the Company;
	then the Executive shall have no claim against the Company by reason of the subsequent termination of this Agreement.
15.	The Executive may be required by the Company at any time to undergo an appropriate medical examination as determined by a doctor appointed by the Company.
16.	16.1     The appointment of the Executive hereunder shall be subject to termination by the Company at the latter’s absolute discretion:-
		16.1.1  By six months’ notice in writing given at any time while the Executive is incapacitated by reason of ill-health or otherwise from performing his duties hereunder having been so incapacitated for a continuous period of not less than three hundred and sixty five days or for more than one period of sickness totalling three hundred normal working days or more in any one period of one hundred and four weeks and, subject to the Company being satisfied by medical opinion, the provisions of the Six Continents Executive Pension Plan for early retirement due to ill-health shall apply.

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	16.1.2  Forthwith by summary written notice if the Executive shall have committed any material breach or repeated or continued (after written warning) any breach of his obligations hereunder (whether expressed or implied) or shall have been guilty of conduct which has brought himself or any company within the Group into disrepute or shall have been bankrupted or compounded with his creditors generally.
16.2     If the Executive shall be incapacitated as referred to in sub-Clause 16.1.1 he shall receive the full amount of his salary hereunder and all other benefits to which he is entitled during the first six months or any shorter period during which he shall be incapacitated and thereafter during the continuance of his employment he shall receive one half of his salary. The Board may require the Executive to furnish satisfactory medical evidence of such incapacity and the cause thereof.
16.3     In the case of termination under sub-Clause 16.1 the Company shall have the absolute discretion to waive the requirement for the Executive to work during his notice period.
16.4     The Executive’s office as a director of InterContinental Hotels Group PLC or any other Group Company is subject to the Articles of Association of the relevant company (as amended from time to time). If the provisions of this Agreement conflict with the provisions of the Articles of Association, the Articles of Association will prevail but without prejudice to any rights the Executive has or may have to compensation under this Agreement or otherwise.
16.5     The Executive must resign from any office held in any Group Company (other than as a director of InterContinental Hotels Group PLC) if he is asked to do so by the Company.
16.6     If the Executive does not resign as an officer of a Group Company, having been requested to do so in accordance with sub-Clause 16.5, the Company will be appointed as his attorney to effect his resignation. By entering into this Agreement, the Executive irrevocably appoints the Company as his attorney to act on his behalf to execute any document or do anything in his name necessary to effect his resignation in accordance with sub-Clause 16.5. If there is any doubt as to whether such a document (or other thing) has been carried out within the authority conferred by this sub-Clause 16.6, a certificate in writing (signed by any director or the secretary of the Company) will be sufficient to prove that the act or thing falls within that authority.

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	16.7     The termination of any directorship or other office held by the Executive (other than his directorship of InterContinental Hotels Group PLC) will not terminate the Executive’s employment or amount to a breach of terms of this Agreement by the Company.
	16.8     During his employment the Executive will use his best endeavours to avoid any act or omission which could cause him to be disqualified from continuing to act as a director of any Group Company.
	16.9     The Executive must not, during the period of his employment under this Agreement, resign his office as a director of any Group Company without the consent of InterContinental Hotels Group PLC (such consent not be unreasonably withheld) except that if the Executive has reasonable cause he may resign his office as a director of any Group Company which is not InterContinental Hotels Group PLC or, a subsidiary of InterContinental Hotels Group PLC (as defined in section 735 of the Companies Act 1985) or a company falling within the terms of Clause 20.2 or Clause 20.3 hereof.
	16.10     Without prejudice to the Executive’s right to remuneration and other benefits hereunder if the Executive is suspected of gross misconduct, the Company shall have the right at any time to require the Executive not to attend at any place of work or otherwise to suspend the Executive from the performance of any duties under this Agreement and during the period of such suspension the Company may assign his duties, titles, or powers to another. The Company undertakes to conduct the investigation into any such misconduct expeditiously and inform the Executive regularly as to its progress.
17.	The expiration or determination of this Agreement for any reason shall not affect the obligations entered into hereunder on the part of the Executive and expressed to operate or have effect thereafter.
18.	18.1     In this Clause 18 the expressions below have the meaning ascribed to them respectively below:
	“Competing Enterprise” shall mean any person, corporation, partnership, venture or other entity (“entity”) which engages either (i) in the business of managing, franchising, running, leasing, owning or joint venturing at least 50 hotels, or (ii) which purchases or take options on hotel rooms (“hotel booking”) and in the case of (i) and (ii) the entity’s shares are publicly traded and such entity has a market capitalisation of not less than one

11

billion pounds sterling (for these purposes “market capitalisation” shall be the aggregate market value of the ordinary shares of the entity);
“Garden Leave Period” has the meaning given in sub-Clause 3.1;
“Relevant Period” means the period of six months beginning with the date the Executive’s employment terminates but reduced by one day for each day of a Garden Leave Period;
“Restricted Activities” means executive, managerial, directorial, administrative, strategic, business development or supervisory responsibilities and activities relating to all aspects of hotel ownership, hotel management, hotel franchising, hotel joint-venturing or hotel booking but excluding (a) the Executive’s employment by a unit of a Competing Enterprise which unit is not itself engaged in Restricted Activities, so long as the Executive’s duties and responsibilities with respect to such employment are limited to the business of such unit, or (b) the Executive’s employment by an entity which includes a Competing Enterprise where such Competing Enterprise produces revenues that account for less than 5% of the gross revenues of the entity and such Competing Enterprise is not a material part of the Executive’s responsibilities.
18.2     The Executive agrees that during the Relevant Period he will not without the prior written consent of the Company:
	(i)     become associated with or engage in any Restricted Activities with respect to any Competing Enterprise whether as officer, employee, principal, partner, agent, executive, independent contractor or shareholder (other than as a holder of not in excess of 5% of the outstanding voting shares of any publicly traded company); and
	(ii)     solicit or attempt to solicit for employment with or on behalf of any corporation, partnership, venture or other business entity, any person who was a band 4 level or above employee of the Company or any other Group Company (including for this purpose any General Manager of any hotel owned by the Company or any other Group Company) and with whom the Executive had contact or dealings in performing the duties of his employment at any time during the period of 12 months ending on the date the Executive’s employment terminated.

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	18.3     The Executive agrees that each of the paragraphs contained in sub-Clause 18.2 above constitute an entirely separate and independent covenant on his part and the validity of one paragraph shall not be affected by the validity or unenforceability of another.
	18.4     The Executive agrees that he will at the request and cost of the Company enter into a direct agreement or undertaking with any Group Company whereby he will accept restrictions and provisions corresponding to the restrictions and provisions contained in sub-clauses 18.1(i), and 18.2(ii) above (or such of them as may be reasonable and appropriate in the circumstances) in relation to such activities and such areas and for such a period as such company may reasonably require for the protection of its legitimate interests but provided that the duration of such restrictions and provisions are no greater than the Relevant Period.
	18.5     The Executive agrees that having regard to the facts and matters set out above the restrictive covenants contained in this Clause 18 are necessary for the protection of the business and confidential information of the Company and other Group Companies.
	18.6     The Executive and the Company agree that while the restrictions imposed in this Clause 18 are considered necessary for the protection of the Company and other Group Companies it is agreed that if any one or more of such restrictions shall either taken by itself or themselves together be adjudged to go beyond what is reasonable in all the circumstances for the protection of the Company’s or any Group Company’s legitimate interest but would be adjudged reasonable if any particular restriction or restrictions were deleted or if any part or parts of the wording thereof were deleted, restricted or limited in a particular manner then the said restrictions shall apply with such deletions, restrictions or limitations as the case may be.
19.	19.1     Upon termination of this Agreement howsoever arising the Executive will resign without claim for compensation from all offices (including directorships) held in any company within the Group (but without prejudice to any claim for compensation the Executive has or may have under this Agreement or otherwise) and will authorise the Company to appoint a person to execute any such resignation in his name.
	19.2     All equipment, records, papers and documents kept or made by or supplied to the Executive relating to the business of the Group shall be and remain the property of the Group and on the termination of the Executive’s employment hereunder shall so far as they are in his possession be delivered up to the Company.

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20.	‘Associated Company’ is defined as any company which for the time being is:
	20.1     a company having an ordinary share capital (as defined in section 832 of the Income and Corporation Taxes Act 1988) of which not less than 10 per cent is owned directly or indirectly by the Company applying the provisions of section 838 of the Income and Corporation Taxes Act 1988 in the determination of ownership; and/or
	20.2     a holding company (as defined in section 736 of the Companies Act 1985) of the Company; and/or
	20.3     a subsidiary (as defined in section 736 of the Companies Act 1985) of any such holding company other than the Company; and/or
	20.4     any other company on behalf of which the Executive carries out duties at the request of the Company; and/or
	20.5     any other company to which any company in the Group renders managerial or administrative services in the ordinary course of its business.
21.	Notices may be given by either party by first class recorded delivery letter addressed to the other party at (in the case of the Company) its registered office for the time being and (in the case of the Executive) his last known address and any such notice shall be deemed to have been given at the time at which the letter would be delivered in the ordinary course of first class post.
22.	To the extent permitted by law, no person other than the parties to this Agreement and the Group shall have the right to enforce any term of this Agreement under the Contracts (Rights of Third Parties) Act 1999. For the avoidance of doubt, save as expressly provided in this clause the application of the Contracts (Rights of Third Parties) Act 1999 is specifically excluded from this Agreement, although this does not affect any other right or remedy of any third party which exists or is available other than under this Act.
23.	The offer letter from the Company to the Executive dated 22 January 2003 also contains terms and conditions of employment. In the event of any conflict between this Agreement and that letter this Agreement shall prevail.

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24.	This Agreement shall be governed by and interpreted in accordance with English law and the parties hereby agree to submit to the exclusive jurisdiction of the English Courts.
AS WITNESS the hands of the parties the day and year first before written
EXECUTED as a DEED by

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	InterContinental Hotels Group PLC 67 Alma Road Windsor Berkshire SL4 3HD
	17th November 2003

Mr Richard Hartman
Lavenham House
Lady Margaret Road
Sunningdale
Berkshire
SL5 9QH

Dear Mr Hartman

InterContinental Hotels Group PLC (the “Company”)

Subject to the provisions of and so far as may be consistent with the Companies Act 1985 as amended by the Companies Act 1989, the Uncertificated Securities Regulations 2001 and every other statute for the time being in force concerning companies and affecting the Company, the Company hereby agrees that you shall be indemnified by the Company out of the Company's own funds against and/or exempted by the Company from all costs, charges, losses, expenses and liabilities incurred by you in actual or purported execution and/or discharge of your duties and/or the exercise or purported exercise of your powers and/or otherwise in relation to or in connection with your duties, powers or office including (without prejudice to the generality of the foregoing) any liability incurred by you in defending any proceedings, civil or criminal, which relate to anything done or omitted or alleged to have been done or omitted by you as an officer or employee of the Company and in which judgment is given in your favour (or the proceedings are otherwise disposed of without any finding or admission of any material breach of duty on your part) or in which you are acquitted or in connection with any application under any statute for relief from liability in respect of any such act or omission in which relief is granted to you by the court.

In witness whereof this letter has been executed as a deed on the date first stated above.

SIGNED as a DEED by
InterContinental Hotels Group PLC
acting by

Exec Directors Indemnity Letters.max

EX-4

   Exhibit 99
   

EX-4

EX-4

Exhibit 4(c)(iv)

SIX CONTINENTS PLC	Telephone:	+44 (0)20 7409 1919
20 North Audley Street	Facsimile:	+44 (0)20 7409 8507
London
W1K 6WN
www.sixcontinents.com

12^th February 2003

Mr Richard Solomons
8 Abbey View
Radlett
Hertfordshire WD7 8LT

Amendment to Service Agreement

Dear Richard

This letter (the “Letter Agreement”) sets forth our agreement concerning the terms of an amendment to the Service Agreement dated 1^st October 2002 as (the “Service Agreement”) between you and Six Continents Plc (the “Company”). Capitalized terms that are not otherwise defined in this Letter Agreement shall have the meanings assigned to them in the Service Agreement. Also references in this letter to the “Demerger Contract” means the Service Contract between you and the Company dated 12 February 2003 that is conditional upon Demerger as defined in that Contract.

1	Purpose of Amendment
	You and the Company acknowledge and agree that this Letter Agreement is being entered into in contemplation of the impending demerger of the hotels and retail businesses of the Company contemplated in the Company's announcement of 1 October 2002 (the “Separation”).
2	Effectiveness of this Letter Agreement
	This Letter Agreement shall become effective as of the date on which a copy of the UK court order approving the scheme of arrangement effecting the Separation is delivered to the Registrar of Companies in England and Wales and registered by such Registrar (the “Effective Date”). In the event that the Separation does not take place this Letter Agreement shall automatically become void and without force or effect.

Six Continents PLC
Registered in England Number 913450
Registered office: 20 North Audley Street London W1K 6WN

  – 2 –

3	No change of Control or Constructive Termination
	You hereby acknowledge and agree that the Separation will not be regarded as a “change of control” as such term is used in Clause 13 of the Service Agreement. In addition, you acknowledge and agree that the changes to the management structure of the Company as a result of, or in connection with, the Separation will not be or be deemed to be a constructive dismissal.
4	Continuing Effect of the Service Agreement
	The Service Agreement shall continue in full force and effect as amended herein.
5	No Separation
	If Separation does not happen before 31 December 2003 then as provided in Clause 1 of the Demerger Contract, the Demerger Contract shall terminate on 31 December 2003 without liability on the part of the Company or you. In this event your terms and conditions of employment would continue to be governed by our existing terms and conditions of employment.
6	Counterparts
	This Letter Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed an original, but both such counterparts shall together constitute one and the same document.
7	Headings
	The headings contained in this Letter Agreement are intended solely for convenience of reference and shall not affect the rights of the parties to this Letter Agreement.
8	Governing Law
	This Letter Agreement is governed by and shall be construed in accordance with English Law.

  – 3 –

Please sign and return to the Company the enclosed copy of this Letter Agreement to acknowledge your acceptance of its terms.

EXECUTED as a DEED by SIX
CONTINENTS PLC acting by:

THIS AGREEMENT is made on the 12 of February 2003 BETWEEN SIX CONTINENTS PUBLIC LIMITED COMPANY whose registered office is situated at 20 North Audley Street, London, W1K 6WN
	(hereinafter called “the Company”) of the first part and RICHARD SOLOMONS of 8 Abbey View, Radlett, Hertfordshire, WD7 8LT (hereinafter called “the Executive”) of the second part.
	Words importing the singular include the plural and vice versa, words importing the gender include every gender and references to persons include bodies incorporate and unincorporate.
NOW IT IS HEREBY AGREED as follows :
1.	1.1	This Agreement will be conditional on the happening of the Demerger.
	1.2	The Demerger Date shall be the effective date of this Agreement.
	1.3	If Demerger Date has not happened by 31 December 2003 this Agreement shall terminate on that date without liability on either party.
	1.4	For the purposes of this Clause 1:
	“Demerger Date” means the date on which, as part of the demerger of the Six Continents Group, the ordinary shares in Intercontinental Hotels Group PLC are admitted (i) to the Official List of the UK Listing Authority in accordance with paragraph 7.1 of the Listing Rules and (ii) to trading on the London Stock Exchange plc and “Demerger” shall be construed accordingly; and
	“UK Listing Authority” means the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000.
2.	The Company will employ the Executive and the Executive will serve the Company as Finance Director of InterContinental Hotels Group PLC and the Executive shall perform the duties and exercise the powers which may from time to time be reasonably assigned to or vested in him by the Directors of InterContinental Hotels Group PLC or a duly authorised committee thereof (hereinafter called “the Board”) including such duties and powers in relation to any Associated Company (as hereinafter defined) of the Company (hereinafter together with the Company called “the Group”

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	and the expression “Group Company” shall mean a member of the Group) as the Board shall reasonably cause to be assigned to or vested in him.
3.	3.1	This Agreement shall, subject to the provisions for earlier termination herein contained, continue until terminated at any time by:
		3.1.1     the Company giving to the Executive not less than twelve months' previous notice; or
		3.1.2.    the Executive giving to the Company not less than six months' previous notice; or
		3.1.3     the Executive reaching age 60.
	With reference to sub-Clauses 3.1.1 and 3.1.2 the Company shall have the absolute discretion to waive the requirement for the Executive to work during his notice period for a maximum period of six months and the Executive agrees that during any period in which the Company has waived this requirement (a “Garden Leave Period”) he shall undertake such work as the Company may from time to time reasonably require of him and shall not, unless required by the Company, enter or attend the premises of the Company or any other Group Company or contact or have any communication with any employee, officer, director, agent or consultant of the Company or any other Group Company in relation to the business of the Company or any other Group Company. The Company agrees that at the end of the Garden Leave Period it will not require the Executive to return to work for the remainder of his notice period.
	3.2     The Executive's employment within the Group began on 29 June 1992 and such previous employment shall be treated as part of the Executive's continuous employment with the Company.
4.	Initially it is envisaged that the Executive will work at 20, North Audley Street as above but the Executive shall work at such location or locations as shall be necessary or convenient for the performance of his duties pursuant to Clause 2 provided that such location is within a radius of 30 miles ofWindsor.
5.	5.1     The Executive's employment is subject to the Terms and Conditions of Employment contained in the Employee Handbook, of which the Executive hereby acknowledges he has a full knowledge and understanding. Copies of this document may be obtained from HumanResources. The Company undertakes that any changes in such terms and conditions shall be updated in the Handbook.

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	5.2    In the event of any conflict arising between this Agreement and the Memorandum of Terms and Conditions of Employment contained in the Handbook the terms of this Agreement shall prevail.
	5.3    Details of disciplinary and grievance procedures are contained in the Handbook. The Executive should apply to his immediate manager if he is dissatisfied with any disciplinary decision relating to him. If during the course of employment the Executive should have any grievance in connection with that employment, he should in the first instance raise it with his immediate manager. In both cases applications must be in writing giving sufficient detail to enable proper consideration of each case.
6.	6.1     Subject to the Company's right to suspend the Executive under sub-Clauses 3.1 and 16.10, the Executive shall unless prevented by ill-health throughout the said term devote the whole of his working time under this Agreement, attention and abilities to the business of the Group except as provided in sub-Clause 6.2 below and shall obey the reasonable and lawful orders from time to time of the Board and in all respects conform to and comply with the directions and requests made by the Board and shall well and faithfully serve the Group and use his best endeavours to promote the interests thereof.
	6.2     The Executive shall not without the consent of the Company (such consent not to be unreasonably withheld) be directly or indirectly engaged or concerned or interested in any other business (which consent may be given subject to such terms or conditions which the Company may require, the breach of which shall be deemed to be a breach of this Agreement). This sub-clause shall also apply to any other activity during hours in which the Executive would not normally be engaged in duties on the Company's behalf. However, the Executive may be the holder of not in excess of five (5) per cent, of the outstanding voting shares of any publicly traded company.
	6.3    The Executive shall be entitled to purchase goods or services from the companies within the Group with the benefit of such discounts and commissions as are from time to time authorised by the Hotels Executive Committee.
	6.4   As soon as reasonably practicable after the Executive becomes aware of any wrongdoing by any employee of any Group Company where

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	the Executive reasonably concludes that the wrongdoing is sufficiently serious the Executive will bring the wrongdoing to the attention of the Hotels Executive Committee.
7.	7.1     Subject as hereinafter provided the Executive shall during the continuance of this Agreement be remunerated for his services under this Agreement (inclusive of any remuneration to which he may be entitled as an officer of the Company or any company within the Group) by the payment of an annual gross salary of £350,000 per annum (or such higher amount as may be agreed between the Board and the Executive) payable 4-weekly in arrears. In the event of any increase of salary being so agreed the increase shall thereafter have effect as if it were specifically provided for as a term of this Agreement.
	7.2     Any advance of a cash float to cover business expenses or an advance of pay which has not been recovered will be repayable by the Executive in the event of the termination of this employment. Any moneys repayable will be deducted from the outstanding final salary payment or holiday pay and any shortfall will be recoverable from the Executive.
8.	In addition to the said fixed salary the Executive shall be reimbursed by the Company such travelling general and entertainment expenses as shall properly be incurred by and properly claimed by him and vouched for in connection with the Group's business.
9.	The Executive shall be entitled throughout the term of this Agreement to the following benefits :
	9.1     Use of a suitable motor car as approved by the Company for use in connection with the performance of his duties and for his own personal and private use, all costs to be borne by the Company except fuel costs incurred during holidays outside the United Kingdom.
	The Executive is to ensure that the motor car is at all times in a proper state and has a current MOT Test Certificate and that in connection with its use he shall at all times observe Company car user guidelines and be the holder of a proper driving licence.
	9.2     Membership of the following Group schemes on such terms as are from time to time in force:
		9.2.1     Six Continents Executive Pension Plan (including the Six Continents Executive Top Up Scheme) in respect of which a

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		contracting-out certificate is in force for the said employment. Details of pension arrangements are contained in the current handbook on the Six Continents Executive Pension Plan.
		9.2.2     Six Continents Private Healthcare Plan.
	9.3     Payment by the Company of up to two subscriptions to recognised professional bodies where such professional body is directly related to the Executive's current job or to his normal professional skill.
10.	10.1   The Executive shall be entitled to five weeks' holiday in each year at such time or times as may be agreed between him and the Company and shall also be entitled to all relevant Public and Bank Holidays in England and Wales.
	Holidays are earned on a monthly pro-rata basis by reference to the current holiday year. Holiday pay is based upon the gross salary of the Executive payable pursuant to sub-Clause 7.1 above. In the event that the Executive does not take 5 weeks holiday in any year, whatever the reason, he shall not be entitled to receive pay in lieu of holidays not taken. If the Executive leaves the Company he may receive payment for any pro-rata holiday entitlement earned but not taken for the current holiday year.
	10.2    The Executive will be required to work a minimum of 35 hours per week and such additional hours as the requirements of his duties dictate. There shall be no normal working hours and there shall be no entitlement to additional remuneration for any additional work undertaken by the Executive except and to the extent such remuneration may have been agreed between him and the Board.
11.	11.1   The Executive may during his employment have access to information about the business and finances of the Company and of each Associated Company and customers of the Company or any Associated Company and its and their dealings, transactions, affairs, plans and proposals, all of which information is or may be secret or confidential andimportant to the Company and its Associated Companies and any such customers. In this Agreement such information is called “Confidential Information” and includes, without limitation, confidential or secret information relating to:-
		11.1.1   ideas;
		11.1.2business methods;

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	11.1.3     finances;
	11.1.4     prices;
	11.1.5     business, financial, marketing, development or manpower plans;
	11.1.6    customer lists or details;
	11.1.7    computer systems and software;
	11.1.8    know-how or other matters connected with the products or services manufactured, marketed, provided or obtained by the Company or its Associated Companies or any such customers.
11.2   The Executive shall not without the prior written consent of the Company other than in the proper performance of his duties either during his employment or at any time after its termination:-
	11.2.1   disclose to any person (except to those authorised by the Company to know), or
	11.2.2   use for his own purposes or for any purposes other than those of the Company, or
	11.2.3through any failure to exercise all due care and diligence, cause or permit any unauthorised disclosure of,
any Confidential Information save that these restrictions shall cease to apply to information which (otherwise than through the default of the Executive) becomes available to the public generally.
11.3   All notes, memoranda, papers, documents, correspondence and writing (which shall include information recorded or stored in writing or on magnetic tape or disc or otherwise recorded or stored for reproduction whether by mechanical or electronic means and whether or not such reproduction will result in a permanent record being made) which from time to time may be in the possession of the Executive (whether made by the Executive or not) relating to the business of the Company or its Associated Companies shall be and remain the property of the Company or Associated Company to whose business they relate and shall be delivered by the Executive to the Company or Associated Company to which they

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	belong immediately upon request and in any event upon termination of the Executive's employment and the Executive shall not make or keep any copies or extracts of such notes, memoranda, records, papers, documents, correspondence and writing.
	11.4   The provisions of sub-Clauses 11.1, 11.2 and 11.3 shall apply mutatis mutandis in relation to each of the companies within the Group to trade secrets or confidential information which the Executive may have received or obtained while in the service of the Company and the Executive will upon the request of any such company enter into a separate agreement or undertaking with such company to the like effect.
	11.5   Nothing in this Agreement will prevent the Executive from making a “protected disclosure” in accordance with the provisions of the Employment Rights Act 1996.
12.	Where deemed necessary by the Company or statute, the Executive should at all times during the period of his employment with the Company (hereinafter called “the Employment”) maintain his membership, where appropriate, of all professional, trade and other bodies necessary for the full performance of his duties hereunder.
13	13.1   If the Executive (whether alone or with others) shall at any time during the period of the Employment make an invention (whether or not patentable) within the meaning of the Patents Act 1977 (hereinafter called “Invention”) relating to or capable of being used in the business of the Company or any other member of the Group he shall promptly disclose to the Company full details thereof to enable the Company to assess the Invention and to determine whether under the applicable law the Invention is the property of the Company provided that any Invention which does not belong to the Company shall be treated as confidential by the Company.
	13.2    If any Invention belongs to the Company or any Associated Company the Executive shall consider himself as a trustee for the Company or any Associated Company (as the case may be) in relation to each such Invention and shall, at the request and expense of the Company, do all things necessary to vest all right, title and interest in any such Invention in the Company or any Associated Company (as the case may be) or its nominee absolutely as legal and beneficial owner and to secure and preserve full patent or other appropriate forms of protection therefore in any part of the world.

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13.3     If any Invention does not belong to the Company or any Associated Company, the Company shall have the right to acquire for itself or its nominee the Executive's rights therein within three months after disclosure pursuant to sub-Clause 13.1 on fair and reasonable terms to be agreed or in default of agreement within one month to be acquired at a price to be determined by a single expert to be nominated in default of agreement, at the request of either the Company or the Executive, by the President for the time being of the Chartered Institute of Patent Agents or in default by the Courts.

13.4     If the Executive (whether alone or with others) shall at any time during the period of the Employment create or make any discovery, design or other work (whether registerable or not and whether or not a copyright work), which is not an Invention or made or created by the Executive and wholly unconnected with the Employment (hereinafter called “Works”), the Executive shall forthwith disclose to the Company full details thereof and shall consider himself as a trustee for the Company in relation to all such Works. The Executive shall at the request and expense of the Company execute and do all instruments and things necessary to vest all right, title and interest in and to any such Works in the Company or its nominee absolutely as legal and beneficial owner.

13.5     In consideration of the Company entering into this Agreement the Executive hereby assigns to the Company by way of assignment of future copyright the copyright, design and other proprietary rights if any for the full term thereof throughout the world in respect of all copyright works created or made by the Executive during the period of the Employment (except only those copyright works created or made by the Executive and wholly unconnected with the Employment).

13.6     If the Executive (whether alone or with others) shall at any time during the period of the Employment generate any idea, method or information relating to the business, finances or affairs of the Company or capable of use by the Company which is not an Invention or Works (hereinafter called “Information”) he shall promptly disclose to the Company full details thereof and the Executive acknowledges such Information belongs to the Company.

13.7     The Executive hereby irrevocably waives any rights the Executive may have under Chapter IV (moral rights) of Part I of the Copyright, Designs and Patents Act 1988 and any foreign corresponding rights in respect of all Works.

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	13.8   Rights and obligations under Clause 13 shall continue in force after the termination of this Agreement in respect of each Invention, Works and Information and shall be binding upon the representatives of the Executive.
14.	If the Executive shall unreasonably have refused or failed to agree or accept employment which is (a) suitable for him having regard to his status and responsibilities and (b) is offered to him on terms (whether financial or otherwise) no less favourable to him than the terms currently in effect under this Agreement either by:
	(a)	a company or person which has acquired or agreed to acquire the whole or a substantial part of the undertaking and assets of the Company; or
	(b)	a company or person which shall own or have agreed to acquire a controlling interest in the equity share capital of the Company; or
	(c)	any subsidiary or associate of either of the above; or
	(d)	any subsidiary or associated company of the Company;
	then the Executive shall have no claim against the Company by reason of the subsequent termination of this Agreement.
15.	The Executive may be required by the Company at any time to undergo an appropriate medical examination as determined by a doctor appointed by the Company.
16.	16.1     The appointment of the Executive hereunder shall be subject to termination by the Company at the latter's absolute discretion:-
		16.1.1     By six months' notice in writing given at any time while the Executive is incapacitated by reason of ill-health or otherwise from performing his duties hereunder having been so incapacitated for a continuous period of not less than three hundred and sixty five days or for more than one period of sickness totalling three hundred normal working days or more in any one period of one hundred and four weeks and, subject to the Company being satisfied by medical opinion, the provisions of the Six Continents Executive Pension Plan for early retirement due to ill-health shall apply.
		16.1.2     Forthwith by summary written notice if the Executive shall have committed any material breach or repeated or continued (after

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		written warning) any breach of his obligations hereunder (whether expressed or implied) or shall have been guilty of conduct which has brought himself or anycompany within the Group into disrepute or shall have been bankrupted or compounded with his creditors generally.
16.2	If the Executive shall be incapacitated as referred to in sub-Clause 16,1.1 he shall receive the full amount of his salary hereunder and all other benefits to which he is entitled during the first six months or any shorter period during which he shall be incapacitated and thereafter during the continuance of his employment he shall receive one half of his salary. The Board may require the Executive to furnish satisfactory medical evidence of such incapacity and the cause thereof.
16.3	In the case of termination under sub-Clause 16.1 the Company shall have the absolute discretion to waive the requirement for the Executive to work during his notice period.
16.4	The Executive's office as a director of Intercontinental Hotels Group PLC or any other Group Company is subject to the Articles of Association of the relevant company (as amended from time to time). If the provisions of this Agreement conflict with the provisions of the Articles of Association, the Articles of Association will prevail but without prejudice to any rights the Executive has or may have to compensation under this Agreement or otherwise.
16.5	The Executive must resign from any office held in any Group Company (other than as a director of InterContinental Hotels Group PLC) if he is asked to do so by the Company.
16.6	If the Executive does not resign as an officer of a Group Company, having been requested to do so in accordance with sub-Clause 16.5, the Company will be appointed as his attorney to effect his resignation. By entering into this Agreement, the Executive irrevocably appoints the Company as his attorney to act on his behalf to execute any document or do anything in his name necessary to effect his resignation in accordance with sub-Clause 16.5. If there is any doubt as to whether such a document (or other thing) has been carried out within the authority conferred by this sub-Clause 16.6, a certificate in writing (signed by any director or the secretary of the Company) will be sufficient to prove that the act or thing falls within that authority.

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16.7	The termination of any directorship or other office held by the Executive (other than his directorship of InterContinental Hotels Group PLC) will not terminate the Executive's employment or amount to a breach of terms of this Agreement by the Company.
16.8	During his employment the Executive will use his best endeavours to avoid any act or omission which could cause him to be disqualified from continuing to act as a director of any Group Company.
16.9	The Executive must not, during the period of his employment under this Agreement, resign his office as a director of any Group Company without the consent of InterContinental Hotels Group PLC (such consent not be unreasonably withheld) except that if the Executive has reasonable cause he may resign his office as a director of any Group Company which is not InterContinental Hotels Group PLC or, a subsidiary of InterContinental Hotels Group PLC (as defined in section 735 of the Companies Act 1985) or a company falling within the terms of Clause 20.2 or Clause 20.3 hereof.
16.10	Without prejudice to the Executive's right to remuneration and other benefits hereunder if the Executive is suspected of gross misconduct, the Company shall have the right at any time to require the Executive not to attend at any place of work or otherwise to suspend the Executive from the performance of any duties under this Agreement and during the period of such suspension the Company may assign his duties, titles, or powers to another. The Company undertakes to conduct the investigation into any such misconduct expeditiously and inform the Executive regularly as to its progress.
17.	The expiration or determination of this Agreement for any reason shall not affect the obligations entered into hereunder on the part of the Executive and expressed to operate or have effect thereafter.
18.	18.1      In this Clause 18 the expressions below have the meaning ascribed to them respectively below:
	“Competing Enterprise” shall mean any person, corporation, partnership, venture or other entity (“entity”) which engages either (i) in the business of managing, franchising, running, leasing, owning or joint venturing at least 50 hotels, or (ii) which purchases or take options on hotel rooms (“hotel booking”) and in the case of (i) and (ii) the entity's shares are publicly traded and such entity has a market capitalisation of not less than one billion pounds sterling (for these purposes “market capitalisation” shall be the aggregate market value of the ordinary shares of the entity);

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“Garden Leave Period” has the meaning given in sub-Clause 3.1;
“Relevant Period” means the period of six months beginning with the date the Executive's employment terminates but reduced by one day for each day of a Garden Leave Period;
“Restricted Activities” means executive, managerial, directorial, administrative, strategic, business development or supervisory responsibilities and activities relating to all aspects of hotel ownership, hotel management, hotel franchising, hotel joint-venturing or hotel booking but excluding (a) the Executive's employment by a unit of a Competing Enterprise which unit is not itself engaged in Restricted Activities, so long as the Executive's duties and responsibilities with respect to such employment are limited to the business of such unit, or (b) the Executive's employment by an entity which includes a Competing Enterprise where such Competing Enterprise produces revenues that account for less than 5% of the gross revenues of the entity and such Competing Enterprise is not a material part of the Executive's responsibilities.
18.2    The Executive agrees that during the Relevant Period he will not without the prior written consent of the Company:
	(i)      become associated with or engage in any Restricted Activities with respect to any Competing Enterprise whether as officer, employee, principal, partner, agent, executive, independent contractor or shareholder (other than as a holder of not in excess of 5% of the outstanding voting shares of any publicly traded company); and
	(ii)     solicit or attempt to solicit for employment with or on behalf of any corporation, partnership, venture or other business entity, any person who was a band 4 level or above employee of the Company or any other Group Company (including for this purpose any General Manager of any hotel owned by the Company or any other Group Company) and with whom the Executive had contact or dealings in performing the duties of his employment at any time during the period of 12 months ending on the date the Executive's employment terminated.
18.3    The Executive agrees that each of the paragraphs contained in sub-Clause 18.2 above constitute an entirely separate and independent covenant

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	on his part and the validity of one paragraph shall not be affected by the validity or unenforceability of another.
	18.4     The Executive agrees that he will at the request and cost of the Company enter into a direct agreement or undertaking with any Group Company whereby he will accept restrictions and provisions corresponding to the restrictions and provisions contained in sub-Clauses 18.1(i), and 18.2(ii) above (or such of them as may be reasonable and appropriate in the circumstances) in relation to such activities and such areas and for such a period as such company may reasonably require for the protection of its legitimate interests but provided that the duration of such restrictions and provisions are no greater than the Relevant Period.
	18.5     The Executive agrees that having regard to the facts and matters set out above the restrictive covenants contained in this Clause 18 are necessary for the protection of the business and confidential information of the Company and other Group Companies.
	18.6     The Executive and the Company agree that while the restrictions imposed in this Clause 18 are considered necessary for the protection of the Company and other Group Companies it is agreed that if any one or more of such restrictions shall either taken by itself or themselves together be adjudged to go beyond what is reasonable in all the circumstances for the protection of the Company's or any Group Company's legitimate interest but would be adjudged reasonable if any particular restriction or restrictions were deleted or if any part or parts of the wording thereof were deleted, restricted or limited in a particular manner then the said restrictions shall apply with such deletions, restrictions or limitations as the case may be.
19.	19.1     Upon termination of this Agreement howsoever arising the Executive will resign without claim for compensation from all offices (including directorships) held in any company within the Group (but without prejudice to any claim for compensation the Executive has or may have under this Agreement or otherwise) and will authorise the Company to appoint a person to execute any such resignation in his name.
	19.2     All equipment, records, papers and documents kept or made by or supplied to the Executive relating to the business of the Group shall be and remain the property of the Group and on the termination of the Executive's employment hereunder shall so far as they are in his possession be delivered up to the Company.

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20.	'Associated Company' is defined as any company which for the time being is:
	20.1     a company having an ordinary share capital (as defined in section 832 of the Income and Corporation Taxes Act 1988) of which not less than 10 per cent is owned directly or indirectly by the Company applying the provisions of section 838 of the Income and Corporation Taxes Act 1988 in the determination of ownership; and/or
	20.2     a holding company (as defined in section 736 of the Companies Act 1985) of the Company; and/or
	20.3     a subsidiary (as defined in section 736 of the Companies Act 1985) of any such holding company other than the Company; and/or
	20.4     any other company on behalf of which the Executive carries out duties at the request of the Company; and/or
	20.5     any other company to which any company in the Group renders managerial or administrative services in the ordinary course of its business.
21.	Notices may be given by either party by first class recorded delivery letter addressed to the other party at (in the case of the Company) its registered office for the time being and (in the case of the Executive) his last known address and any such notice shall be deemed to have been given at the time at which the letter would be delivered in the ordinary course of first class post.
22.	To the extent permitted by law, no person other than the parties to this Agreement and the Group shall have the right to enforce any term of this Agreement under the Contracts (Rights of Third Parties) Act 1999. For the avoidance of doubt, save as expressly provided in this clause the application of the Contracts (Rights of Third Parties) Act 1999 is specifically excluded from this Agreement, although this does not affect any other right or remedy of any third party which exists or is available other than under this Act.
23.	The offer letter from the Company to the Executive dated 22 January 2003 also contains terms and conditions of employment. In the event of a conflict between this Agreement and that letter this Agreement shall prevail.

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24. This Agreement shall be governed by and interpreted in accordance with English law and the parties hereby agree to submit to the exclusive jurisdiction of the English Courts.

AS WITNESS the hands of the parties the day and year first before written

RICHARD SOLOMONS
in the presence of:

SEBASTIAN    •   
Witness Name

Witness Occupation
Director

Witness Address
FLAT 3, 38 BELSIZE SQUARE
NW3 4HL LONDON
UK

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	InterContinental Hotels Group PLC 67 Alma Road Windsor Berkshire SL4 3HD
	17th November 2003

Mr Richard Solomons
8 Abbey View
Radlett
Hertfordshire
WD7 8LT

Dear Mr Solomons

InterContinental Hotels Group PLC (the “Company”)

Subject to the provisions of and so far as may be consistent with the Companies Act 1985 as amended by the Companies Act 1989, the Uncertificated Securities Regulations 2001 and every other statute for the time being in force concerning companies and affecting the Company, the Company hereby agrees that you shall be indemnified by the Company out of the Company's own funds against and/or exempted by the Company from all costs, charges, losses, expenses and liabilities incurred by you in actual or purported execution and/or discharge of your duties and/or the exercise or purported exercise of your powers and/or otherwise in relation to or in connection with your duties, powers or office including (without prejudice to the generality of the foregoing) any liability incurred by you in defending any proceedings, civil or criminal, which relate to anything done or omitted or alleged to have been done or omitted by you as an officer or employee of the Company and in which judgment is given in your favour (or the proceedings are otherwise disposed of without any finding or admission of any material breach of duty on your part) or in which you are acquitted or in connection with any application under any statute for relief from liability in respect of any such act or omission in which relief is granted to you by the court.

In witness whereof this letter has been executed as a deed on the date first stated above.

SIGNED as a DEED by
InterContinental Hotels Group PLC
acting by

Exec Directors Indemnity Letters.max

EX-4

Exhibit 4(c)(v)

SIX CONTINENTS PLC	Telephone:	+44 (0)20 7409 1919
20 North Audley Street	Facsimile:	+44 (0)20 7409 8507
London
W1K 6WN
www.sixcontinents.com

12^th February 2003

Sir Ian Prosser
230 Bickenhall Mansions
Bickenhall Street
London
W1H 3DD

Dear Sir Ian

Chairmanship

This document sets out the terms of your appointment as a non-executive director and Chairman of InterContinental Hotels Group plc (“the Company”) with effect from 6 July 2003 subject to the condition precedent set out below. Your position as director and Chairman are coterminous. You will be an office-holder and not an employee.

Condition Precedent
The appointment shall only come into effect if your employment with the Company terminates on 5 July 2003 by reason of your reaching your normal retirement date.

Appointment
You will hold this appointment in accordance with, and subject to, the Company’s Articles of Association as varied from time to time (the “Articles”) and in particular your appointment is subject to the provisions of the Articles dealing with retirement of directors by rotation, disqualification from office, or other vacation of office. Nothing in this letter shall be taken to exclude or vary the terms of the Articles as they apply to you as a director of the Company.

Duties
During the term of your appointment you will perform the duties expected of a non-executive Chairman of a UK public limited company whose shares are traded on the London Stock Exchange plc and in particular you will:

• seek to achieve the creation of a new hotel company as a successful independent entity (if the shareholders resolve to demerge the Company’s retail business);

• attend and chair meetings of the board of directors of the Company (the “Board”) and be responsible generally for the working of the Board and the effective operation of all committees of the Board;

Six Continents PLC
Registered in England Number 913450
Registered office: 20 North Audley Street London W1K 6WN

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• attend and chair any annual general meeting of the Company and any extraordinary or other general meeting of shareholders;

• provide support and guidance to the Company’s Chief Executive and ensure a smooth handover to your successor; and

• at all times act in the best interests of the Company and all Group Companies.

You will devote such time as is necessary to perform the above duties and it is anticipated that this is unlikely to be less than three days per week (other than reasonable holidays).

Term of Appointment
It is agreed that your appointment will automatically terminate on 31 December 2003. However, as noted the term of your appointment is subject to the Articles. Accordingly, it may be terminated before that date, without liability on the part of the Company, in accordance with the provisions of the Articles dealing with retirement by rotation, disqualification from office, or other vacation from office. In addition, it may be terminated without liability on the part of the Company by summary notice if you breach any of the terms of this letter.

Fees
Your gross fees will be at the rate of £400,000 per annum and will accrue from day to day. They will be payable monthly in arrears and subject to such deductions as the Company is required to make.

You and your spouse or partner are, of course, in receipt of private medical cover for your lifetime by reason of your previous employment with the Company. Nothing in this letter affects this.

Save as set out in this letter, no remuneration (including, but not limited to, pension, life assurance, shares, share options, bonuses and other incentive arrangements) will be provided as consideration for the performance of your duties.

Expenses
The Company will reimburse you in accordance with the Articles for all reasonable expenses you incur in performing your above duties. Expenses must be claimed monthly in arrears. You may be required to produce relevant receipts and vouchers as evidence of expenditure in accordance with the requirements of the Company.

Such expenses would include reasonable legal fees if circumstances should arise in which it was necessary for you to seek separate legal advice about the performance of your duties. In such a situation, you are required to discuss the issue in advance either with one of the Company’s non-executive directors or the Company Secretary.

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Resources
During the term of your appointment you will be provided with an office in London and a secretary for the performance of your duties. You will also be provided with a motor car and chauffeur for business and personal use.

Outside Interests
Careful observance of the law relating to Insider Dealing and of the UK Listing Authority Model Code for Securities is expected. You should inform the senior non-executive director of any proposed dealings in the Company’s securities and receive an acknowledgement before dealing. The Secretary may be consulted on these matters or used as a channel of communication.

All directors must be aware of the need not to hold positions on boards of other companies or have links with or any interest in such companies which might cause a significant conflict of interest. If any position arises which might lead to a conflict of interest it should be declared at the earliest opportunity. In particular, if at any time you are considering taking up a post with any other company in competition with the Company or any Group Company, you must first discuss the matter with the senior non-executive director and must not take up the post without prior Board approval. You agree that, on request, you will provide such information about your business activities as the Company may reasonably require.

Confidential Information
You must not (save only in so far as is reasonably necessary to perform your duties) use, divulge, or allow to be divulged, any trade secrets or other confidential information of the Company or any other Group Company which you have received (whether before or after the date of this letter) and in whatever capacity and you will use your best endeavours to prevent the publication or disclosure of such information by any third party. This provision will continue to apply after the termination of your appointment but will not apply to information which comes into the public domain otherwise than through unauthorised disclosure by you or information which you are required by law to disclose.

Covenants
For the purposes of paragraphs 1 to 5 below the expressions below have the meaning ascribed to them respectively below:

“Competing Enterprise” shall mean any person, corporation, partnership, venture or other entity (“entity”) which engages either in the business of managing, running, leasing, owning or joint venturing at least 50 hotels, the entity’s shares are publicly traded, and the entity has a market capitalisation of not less than one billion bounds sterling (for these purposes “market capitalisation” shall be the aggregate market value of the ordinary shares of such entity);

“Relevant Period” means the period of six months commencing on the date on which your appointment under this letter terminates;

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“Restricted Activities” means executive, managerial, directorial, administrative, strategic, business development or supervisory responsibilities and activities relating to all aspects of hotel ownership, hotel management, hotel franchising, or hotel joint-venturing but excluding (a) your employment by a unit of a Competing Enterprise which unit is not itself engaged in Restricted Activities, so long as your duties and responsibilities with respect to such employment is limited to the business of such unit, or (b) your employment by an entity which includes a Competing Enterprise where such Competing Enterprise produces revenues that account for less than 10% of the gross revenues of the entity and such Competing Enterprise is not a material part of your responsibilities.

1 You agree that during the Relevant Period you will not without the prior written consent of the Company:

(i)	become associated with or engage in any Restricted Activities with respect to any Competing Enterprise whether as officer, employee, principal, partner, agent, consultant, independent contractor or shareholder (other than as a holder of not in excess of 1% of the outstanding voting shares of any publicly traded company); and
(ii)	solicit or attempt to solicit for employment with or on behalf of any corporation, partnership, venture or other business entity, any Band 3 or above employee of the Company or any other Group Company (including for this purpose any General Manager of any hotel owned by the Company or any other Group Company).

2 You agree that each of the paragraphs contained in 1 above constitute an entirely separate and independent covenant on your part and the validity of one paragraph shall not be affected by the validity or unenforceability of another.

3 You agree that you will at the request and cost of the Company enter into a direct agreement or undertaking with any Group Company whereby you will accept restrictions and provisions corresponding to the restrictions and provisions above (or such of them as may be reasonable and appropriate in the circumstances) in relation to such activities and for such a period as such company may reasonably require for the protection of its legitimate interests.

4 You agree that having regard to the facts and matters set out above the restrictive covenants contained in 1 above are necessary for the protection of the business and confidential information of the Company and other Group Companies.

5 You and the Company agree that while the restrictions imposed in 1 above are considered necessary for the protection of the Company and other Group Companies it is agreed that if any one or more of such restrictions shall either taken by itself or themselves together be adjudged to go beyond what is reasonable in all the circumstances for the protection of the Company’s or any Group Company’s legitimate interest but would be adjudged reasonable if any particular restriction or restrictions were deleted or if any part or parts of the wording thereof were deleted,

4

restricted or limited in a particular manner then the said restrictions shall apply with such deletions, restrictions or limitations as the case may be.

D&O Insurance
The Company has made available to you a copy of the directors’ and officers’ liability insurance cover it has in place. It is the Company’s intention to maintain appropriate directors’ and officers’ liability insurance but subject to the approval of the Board and having regard to what is available in the insurance market and the cost thereof.

Miscellaneous
 Upon termination of your appointment, for whatever reason and howsoever caused, you agree that you will immediately:

• deliver to the Company any and all property in your possession or under your control relating to the business or affairs of the Company or any other Group Company (such property will include, but is not limited to, all papers of any description concerning business conducted by the Board and any copies); and

• resign from any office held at that time with the Company (including your directorship with the Company if it has not already terminated pursuant to a provision of the Articles) or with any other Group Company and you hereby irrevocably appoint any person who is a director of the Company at the relevant time as your attorney in your name and on your behalf to sign any document and perform any act necessary to effect each such resignation should you fail to do so.

As you are aware, the Company is required to make various disclosures and declarations under the Listing Rules. You will be required to provide such information as is necessary for the Company to comply with these requirements.

It is agreed that this letter supersedes any previous written or oral agreements with you concerning the matters dealt with in this letter, and that this letter contains the whole agreement between you and the Company relating to its subject matter at today’s date except for terms implied by law. By agreeing to the terms of this letter you acknowledge that you have not been induced to agree to the terms of this letter by any representation, warranty or undertaking not set out in it.

For the purposes of this letter “Group Company” means the Company, its ultimate holding company for the time being and any subsidiaries or associated companies for the time being of such companies. (Holding Company and subsidiary have the same meanings as in s736 of the Companies Act 1985 and associated company is a company having an ordinary share capital (as defined in section 832 of the Income and Corporation taxes Act 1988) of which not less than 10 per cent is owned directly or indirectly by the Company applying the provisions of section 838 of the Income and Corporation Taxes Act 1988 in the determination of ownership; and/or a holding company (as defined in section 736 of the Companies Act 1985) of the Company; and/or a subsidiary as defined in section 736 of the Companies act 1985) of any such holding company other than the Company; and/or any other company on behalf of

5

which the Executive carries out duties at the request of the Company; and/or any other company to which any company in the Group renders managerial or administrative services in the ordinary course of its business).

Please signify your agreement to the above by executing this document as a Deed.

Yours sincerely

For and on behalf of
InterContinental Hotels Group plc
SIGNED as a DEED by the
said in the presence of:
Witness’s signature
Name Address Occupation

6

EX-7

Exhibit 7

Ratio of earnings to fixed charges (unaudited)

Consolidated ratios of earnings to fixed charges calculated in accordance with UK GAAP and US GAAP for the 15 months ended December 31, 2003, for the three months ended December 31, 2002 and 12 months ended December 31, 2003, and the years ended September 30, 2002, 2001, 2000 and 1999 are as follows.

				Year ended September 30
	Three months ended December 31,	12 months ended December 31,	15 months endedDecember 31,
	2002	2003	2003	2002	2001	2000	1999
UK GAAP	8.9	(a)	(a)	2.0	2.4	2.1	1.5
US GAAP	8.0	(b)	1.1	2.2	2.1	1.7	(b)

(a)	Earnings calculated under UK GAAP were insufficient to cover fixed charges as follows:
	12 months ended December 31, 2003	£90 million
	15 months ended December 31, 2003	£35 million
(b)	Earnings calculated under US GAAP were insufficient to cover fixed charges as follows:
	12 months ended December 31, 2003	£33 million
	Year ended September 30, 1999	£13 million

The ratio of earnings to fixed charges was computed by dividing the amount of earnings by the amount of fixed charges. Earnings were calculated by adding:

•      consolidated income from continuing operations before taxes on income;

•      dividend income receivable from associated companies less than 50% owned; and

•      fixed charges;

and then deducting:

•      share of pre-tax income of companies less than 50% owned and

•      the pre-tax value of preferred share dividends payable by our subsidiaries.

Fixed charges are calculated by adding interest on all indebtedness and amortization of debt issues, and the element of rental expense which was deemed to be representative of interest.

	15 months ended December 31, 2003				Three months ended December 31, 2002				12 months ended December 31, 2003
			Adjustments			Adjustments						Adjustments
			from UK to			from UK to						from UK to
	UK GAAP		US GAAP	US GAAP	UK GAAP	US GAAP		US GAAP		UK GAAP		US GAAP	US GAAP
Income from continuing operations before income taxes	(35	)	51	16	55	(6	)	49		(90	)	57	(33	)
Add/(deduct):
Fixed charges	182		–	182	7	–		7	175			–	175
Earnings	147		51	198	62	(6	)	56		85		57	142
Fixed charges:
Interest expense	160		–	160	2	–		2		158		–	158
Estimate of interest with rent expense	22		–	22	5	–		5		17		–	17
Total fixed charges	182		–	182	7	–		7		175		–	175
Ratio of earnings to fixed charges	–			1.1	8.9			8.0		–			–
Deficiency in £	35			–	–			–		90			33

	Year ended September 30
			1999						2000					2001				2002
			Adjustments from UK to US GAAP						Adjustments from UK to US GAAP					Adjustments from UK to US GAAP				Adjustments from UK to US GAAP
	UK GAAP				US GAAP		UK GAAP				US GAAP		UK GAAP			US GAAP	UK GAAP		US GAAP
Income from continuing operations before income taxes	114		(124	)	(10	)	280		(106	)	174		383	(84	)	299	191	44	235
Less: Income related to equity method investees	(6	)	–		(6	)	(1	)	–		(1	)	–	–		–	–	–	–
Add/(deduct):
Fixed charges	211		–		211		257		–		257		283	–		283	196	–	196
Distributed income of equity method investees	3		–		3		–		–		–		–	–		–	–	–	–
Earnings	322		(124	)	198		536		(106	)	430		666	(84	)	582	387	44	431
Fixed charges:Interest expense	188		–		188		209		–		209		224	–		224	176	–	176
Estimate of interest with rent expense	23		–		23		48		–		48		59	–		59	20	–	20
Total fixed charges	211		–		211		257		–		257		283	–		283	196	–	196
Ratio of earnings to fixed charges	1.5				–		2.1				1.7		2.4			2.1	2.0		2.2
Deficiency in £	–				(13	)	–				–		–			–	–		–

EX-8

Exhibit 8

Name of Company	Country of Incorporation
220 Bloor Street West Partnership	Ontario, Canada
Airport Garden Hotel NV	Belgium
Alexandra Holding B.V.	The Netherlands
American Commonwealth Assurance Co. Ltd.	Bermuda
American Hotel B.V.	The Netherlands
B.V. Amstel Maatschappij	The Netherlands
Arabian Hotel Management Co. LLC	Oman
Asia Pacific Holdings Limited	England
Athenaeum Hotel & Touristic Enterprises S.A. (12.5%)	Greece
Austin Innkeepers Inc.	Texas, USA
Avendra LLC 4.50%	Delaware, USA
BIBOH	England
BBJV Investments Limited	England
BCH Hotel Investment, Pte Ltd (10%)	Singapore
BHMC Canada Inc.	Canada
BHMC Gen – Par LLC	Delaware, USA
BHMC Lim Par LLC	Delaware, USA
BHR Holdings B.V.	The Netherlands
BHR Luxembourg S.A.R.L.	Luxembourg
BHR Overseas (Europe) B.V.	The Netherlands
BHR Overseas (Finance) B.V.	The Netherlands
BHR Pacific Holdings, Inc.	Delaware, USA
BHR Services (France) S.A.S.	France
BHR Texas LP	Delaware, USA
BHR US Holdings B.V.	The Netherlands
BHTC Canada Inc.	Canada
Barclay Operating Corp.	New York, USA
Blackfriars Hotels Ltd. (33.3%)	England
Brascan Imobiliaria Hotelaria e Turismo S.A.	Brazil
Bristol Acquisition Beverage Company	Delaware, USA
Bristol Hospitality Beverage Company	Texas, USA
Bristol Hotel Beverage Company	Delaware, USA
Bristol Hotel Management Corp.	Delaware, USA
Bristol Hotels & Resorts	Delaware, USA
Bristol House Club	Texas, USA
Bristol HTS Company	Texas, USA
Bristol Hudson JV LLC (15%)	Delaware, USA
Bristol IP Company.	Delaware, USA
Bristol Kansas Beverage Company	Kansas, USA
Bristol Lodging Beverage Company	Texas, USA
Bristol Management LP	Texas, USA
Bristol Oakbrook Tenant Company	Delaware, USA
Bristol Plano Club	Texas, USA
Bristol SLC Management Company	Delaware, USA
Bristol Solo’s Club, Inc.	Delaware, USA
Bristol Texas Beverage Company	Texas, USA
Bristol W Tenant Company	Delaware, USA
Britannia Soft Drinks Ltd (50%)	England
British Vitamin Products Ltd.	England
Britvic Holdings Ltd. (90%)	England
Britvic Corona Ltd.	England
Britvic International Ltd.	England
Britvic Ltd.	England
Britvic Soft Drinks Ltd.	England
Brussels Europa S.A.	Belgium

BVH Hotelbesitzgesellschaft mbH & Co. Verwaltungs KG (67.5%)	Germany
BVH Hotelbesitzgesellschaft mbH (67.4%)	Germany
CA Hotel Guayana (14.05%)	Venezuela
CIMS L.P.	Illinois, USA
Café Barritz	N/A
Canabolas Caravan Motel Pty Ltd.	Australia
Carlton InterContinental (Cannes) SNC	France
Cavendish Technology Company Partnerships Ltd.	England
Cayo Largo Hotel Assoc. SNC por ASE	Georgia, USA
Centra Hotels Management Pty Ltd.	Australia
Centra Victoria Pty Ltd.	Australia
Centra (NT) Pty Ltd.	Australia
Centre Airport Hotel (London) Limited	England
Centre Hotels (Cranston) Limited	Scotland
Centro de Servicios Hoteleros S.A. de C.V.	Mexico
Centrum Finance (Guernsey) Ltd.	Channel Islands
Ceylan Holding A.S.	Turkey
Compania Inter-Continental de Hoteles El Salvador S.A.	Venezuela
Compania Hotelera Nuevos Horizontes	Venezuela
Compass Hotel Properties Ltd	England
Cooper Leasing Company Ltd	England
Corporaction Turistica Real	Mexico
Cosmostar Holdings Ltd.	British Virgin Islands
Covachas Festivas de America SA	Costa Rica
Crowne Plaza Amsterdam (Management) BV	The Netherlands
Crowne Plaza (Asia Pacific) Ltd.	Hong Kong
Crowne Plaza Hilton Head Holding Co.	Delaware, USA
Crowne Plaza Inc.	Tennessee, USA
Crowne Plaza LAX, LLC	Georgia, USA
Crowne Plaza (Puerto Rico) Inc.	Puerto Rico
Culross Finance Ltd.	Cayman/UK Branch
Culross (UK Branch)	England
Delaville SpA	Italy
Delta Hotels Limited	Scotland
Dessarrolladora Holiday Inn, S.A. de C.V. (99%)	Mexico
Dessarrolladora Siba, S.A. de C.V.	Mexico
Dorint/IC Management GmbH	Germany
EP Development Co.	Delaware, USA
Edinburgh George Hotel Ltd.	England
Epsilon Verwaltungs GmbH	Germany
Eurasia Hotel Ltd.	Hong Kong
FBM Dallas, Inc.	Delaware, USA
FBM Houston, Inc.	Delaware, USA
FBM I-10E, Inc.	Delaware, USA
FI Scottsdale, Inc.	Delaware, USA
FPS Leominster, Inc.	Delaware, USA
FelCor Lodging Trust Incorporated (12.2%/total Gp Int 17.1%)	Delaware, USA
Frankfurt Inter-Continental Hotels GmbH	Germany
GIAC Leasing Corporation	Tennessee, USA
Garden Court France SNC (90%)	France
General Innkeeping Acceptance Corporation	Tennessee, USA
Gestion Hotelera Gestel, C.A.(50%)	Venezuela
The GL Hotels Limited (12.6%)	India
Glenjohn Inc	Texas, USA
Grand Hotel du Congo SZARL (50%)	Rep of Congo, Zaire
Grand Hotel Inter-Continental Paris SNC	France

Greenbank Drinks Co. Ltd.	England
Guest Card LLC	North Carolina, USA
HB Mass Tenant LLC	Delaware, USA
HC International Holdings, Inc.	Delaware, USA
H.D. Rawlings Ltd.	England
HH France Holdings SARL	France
HH Hotels (EMEA) BV	The Netherlands
Egyptian Branch	Egypt
Russian Branch	Russia
HH Hotels (Romania) SRL	Romania
HH Hotels Tunisia	Tunisia
HI Hotels Australia Trust	Australia
HIA, Inc.	Tennessee, USA
HIA (T) Pty Ltd.	Australia
H.I (Burswood) Pty Ltd.	Australia
H.I. (Canada), Inc.	Tennessee, USA
H.I. (Canberra) Pty Ltd.	Australia
H.I. (Canberra) Trust	Australia
H.I. (Coogee) Pty Ltd.	Australia
H.I. (Coogee) Trust	Australia
HI East Houston, Inc.	Delaware, USA
HI Holdings Inc.	Tennessee, USA
HI (Ireland) Ltd.	Eire
HI Jackson, Inc.	Delaware, USA
HI Marietta, Inc.	Delaware, USA
H.I. (Melbourne) Pty Ltd.	Australia
H.I. (Melbourne) Trust	Australia
H.I. Mexicana Servicios, SA de CV	Mexico
H.I. (Newcastle) Pty Ltd.	Australia
H.I. (Newcastle) Trust	Australia
H.I. (Perth) Pty Ltd.	Australia
H.I. (Perth) Trust	Australia
H.I. (Potts Point) Pty Ltd.	Australia
H.I. (Potts Point) Trust	Australia
H.I. Ravinia, Inc.	Georgia, USA
H.I. Sara Hospitality Sdn Bhd (30%)	Malaysia
H.I. Soaltee Hotel Co. (P) Ltd. (26%)	Hong Kong
H.I. Soaltee Management Company Ltd (74%)	Hong Kong
H.I. Sugarloaf LLC	Georgia, USA
H.I. (Terrigal) Pty. Ltd.	Australia
H.I. (Terrigal) Trust	Australia
H.I. (Townsville) Pty Ltd.	Australia
H.I. (Townsville) Trust	Australia
HII International Holdings, Inc.	Tennessee, USA
HIM (Aruba) NV	Aruba
Hale International Ltd.	British Virgin Islands
Harvey Hotel Purchasing Co.	USA
Harvey’s Bar/Remington’s	N/A
HOB Hotelbesitz-und Verwaltungs GmbH (100%)	Germany
HOB Hotelbesitz-und Verwaltungs GmbH & Co; Objekt Graummansweg KG (99%)	Germany
Hochstrasse 3 Hotelgesellschaft mbH	Germany
Hofburg Kongresszentrum Betriebsgesellschaft mbH	Austria
Holiday Clubs International, Inc.	Georgia, USA
Holiday Hospitality Franchising, Inc.	Delaware, USA
Holiday Inn Aruba NV	Aruba
Holiday Inn (Basildon) Ltd.	England

Holiday Inn (Birmingham) Ltd.	England
Holiday Inn (Birmingham City) Ltd.	England
Holiday Inn (Birmingham M6 J7) Ltd.	England
Holiday Inn (Brentwood) Ltd.	England
Holiday Inn Cairns Pty Ltd.	Australia
Holiday Inn (Carlisle) Ltd.	England
Holiday Inn (Chester) Ltd.	England
Holiday Inn (Colchester) Ltd.	England
Holiday Inn (Coventry) Ltd.	England
Holiday Inn (Dijon) SARL	France
Holiday Inn (Edinburgh) Ltd.	England
Holiday Inn (Edinburgh North) Ltd.	England
Holiday Inn (Farnborough) Ltd.	England
Holiday Inn Finance Properties Ltd	England
Holiday Inn (Guildford) Ltd.	England
Holiday Inn (Hemel Hempstead) Ltd.	England
Holiday Inn (High Wycombe) Ltd.	England
Holiday Inn Hotelgesellschaft mbH	Germany
Holiday Inn (Ipswich) Ltd.	England
Holiday Inn (Lancaster) Ltd.	England
Holiday Inn (Leicester) Ltd.	England
Holiday Inn (London Gatwick) Ltd.	England
Holiday Inn (London Heathrow) Ltd.	England
Holiday Inn (London Heathrow Ariel) Ltd.	England
Holiday Inn (London Regents Park) Ltd.	England
Holiday Inn Limited	England
Holiday Inn (Maidenhead) Ltd.	England
Holiday Inn Mexicana S.A.	Mexico
Holiday Inn (Milton Keynes) Ltd.	England
Holiday Inn (Norwich) Ltd.	England
Holiday Inn Operadora Mexico S.A. de C.V.	Mexico
Holiday Inn (Reading) Ltd.	England
Holiday Inn (Southampton) Ltd.	England
Holiday Inn (Southampton Eastleigh) Ltd.	England
Holiday Inn (UK) Ltd.	England
Holiday Inn Worldwide Insurance Co. (see SCH Insurance Co) 75%	Vermont, USA
Holiday Inns B.V.	The Netherlands
UK Branch	England
Austria Branch	Austria
Holiday Inns Inc.	Delaware, USA
Holiday Inns NV	Belgium
Holiday Inns SpA	Italy
Holiday Inns (Abu Dhabi) Ltd.	Hong Kong
Holiday Inns of America, Inc.	Tennessee, USA
Holiday Inns of America (UK) Ltd.	England
Holiday Inns (Andina) Inc. (now SC (Andina) Inc.) 70%	Tennessee, USA
Holiday Inns Australia Pty Ltd.	Australia
Holiday Inns (The Bahamas), Inc.	Tennessee, USA
Holiday Inns (Beijing) Inc. (now SC Reservations (Philippines) Inc)	Tennessee, USA
Holiday Inns (Beijing) Ltd.	Hong Kong
Holiday Inns of Belgium NV	Belgium
Swedish Branch	Sweden
Holiday Inns of Canada Ltd.	Ontario, Canada
Holiday Inns (Casablanca) Ltd	Hong Kong
Holiday Inns (China), Inc.	Tennessee, USA
Holiday Inns (China) Ltd.	Hong Kong

Holiday Inns (Chongqing), Inc.	Tennessee, USA
Holiday Inns (Courtalin) Holdings SAS	France
Holiday Inns (Courtalin) SAS	France
Holiday Inns Crowne Plaza (Beijing), Inc.	Tennessee, USA
Holiday Inns Crowne Plaza (Hong Kong), Inc.	Tennessee, USA
Holiday Inns (Dalian), Inc.	Tennessee, USA
Holiday Inns von Deutschland GmbH	Germany
Holiday Inns (Dhaka) Inc.	Tennessee
Holiday Inns (Downtown Beijing) Ltd.	Hong Kong
Holiday Inns (Dubai) Ltd.	Hong Kong
Holiday Inns (Eindhoven) BV	The Netherlands
Austrian Branch	Austria
American Branch	South Carolina
Holiday Inns (England) Ltd.	England
Holiday Inns de Espana S.A.	Spain
Holiday Inns France et Cie SAS	France
Holiday Inns (Freeport) Inc.	Tennessee, USA
Holiday Inns Garden Court Ltd.	England
Holiday Inns Gatwick Crawley Ltd.	England
Holiday Inns (Germany) LLC	Tennessee, USA
German Branch	Germany
Holiday Inns (Guangzhou), Inc.	Tennessee, USA
Holiday Inns (Guilin), Inc.	Tennessee, USA
Holiday Inns Holdings (Australia) Pty Ltd.	Australia
Holiday Inns (Indonesia) Ltd.	Hong Kong
Holiday Inns (Indonesia) B.V.	The Netherlands
Holiday Inns International BV	The Netherlands
Belgium Branch	Belgium
Holiday Inns Investment (Nepal) Ltd.	Hong Kong
Holiday Inns (Jamaica) Inc.	Tennessee, USA
Jamaica Branch	Jamaica
Holiday Inns (Korea) Ltd.	Hong Kong
Holiday Inns (Kuwait) Ltd.	Hong Kong
Holiday Inns (Macau) Ltd.	Hong Kong
Holiday Inns (Malaysia) Inc.	Tennessee, USA
Holiday Inns (Malaysia) Ltd.	Hong Kong
Holiday Inns (Manama) Ltd.	Hong Kong
Holiday Inns Mexico Holdings, Inc.	Kentucky, USA
Holiday Inns (Middle East) Inc.	Tennessee, USA
Holiday Inns (Middle East) Ltd.	Hong Kong
Holiday Inns (Muscat) Ltd.	Hong Kong
Holiday Inns (Nepal) Ltd.	Hong Kong
Holiday Inns (The Netherlands) Inc.	Tennessee, USA
Dutch Branch	The Netherlands
Holiday Inns (Philippines), Inc.	Tennessee, USA
Philippines Branch	Philippines
Holiday Inns (Phuket) Ltd.	Hong Kong
Holiday Inns (Riyadh) Ltd.	Hong Kong
Holiday Inns (Salalah) Ltd.	Hong Kong
Holiday Inns (Saudi Arabia), Inc.	Tennessee, USA
Holiday Inns (Shanghai) Ltd.	Hong Kong
Holiday Inns (Singapore), Inc.	Tennessee, USA
Holiday Inns (South America) Inc.	Tennessee, USA
Holiday Inns (South East Asia) Inc.	Tennessee, USA
Singapore Branch	Singapore
Holiday Inns (Suisse) SA	Switzerland

Holiday Inns Switzerland Limited	England
Holiday Inns (Thailand) Ltd.	Hong Kong
Holiday Inns (UK), Inc.	Tennessee, USA
UK Branch	England
Malta Branch	Malta
Holiday Inns (Urumqi) Ltd.	Hong Kong
Holiday Inns (Xiamen) Ltd.	Hong Kong
Holiday Inns (Yemen) Ltd.	Hong Kong
Holiday Pacific Equity Corporation	Delaware, USA
Holiday Pacific Holding Company	Delaware, USA
Holiday Pacific LLC	Delaware, USA
Holiday Pacific Management Corporation	Delaware, USA
Holiday Pacific Partners, LP (12.7%)	Delaware, USA
Holidex (Belgium), Inc.	Delaware, USA
Holidex (UK), Inc.	Tennessee, USA
Homeprompt Ltd	England
Hooper Struve & Co. Ltd	England
Hospitality Network Corporation 35%	Japan
C.A. Hotel Guayana	Venezuela
Hotel del Lago C.A. (0.4%)	Venezuela
Hotel Distribution System LLC (see TravelWeb LLC)
Hotel Equities Fiji Ltd.	Fiji
Hotel Equities South Pacific Ltd.	Vanuatu
Hotel Forum (Holdings) Ltd.	England
Hotel Inter-Continental SAS	France
Hotel Inter-Continental London (Holdings) SAS	France
Hotel Inter-Continental London Ltd.	England
Hotelera el Carmen S.A.	Spain
Hotelera Holiday Inns Andina Limitada	Chile
Hoteles Y Centros Especializados S.A.
Hoteles Estelar de Colombia S.A. (4%)	Colombia
Hoteles Holiday Inn S.A. de C.V.	Mexico
Hoteles Y Turismo HIH Srl	Venezuela
Hotels Inns and Resorts (SA)(PTY) Ltd.
Houston Galleria, LP (now BHR Texas, LP)	USA
IC Loipersdorf Hotel Betriebs GmbH	Austria
IC US (Holdings) LP	Delaware, USA
ICOP Holdings BV	The Netherlands
IHC Buckhead LLC	Georgia, USA
IHC Edinburgh (Holdings) Ltd.	England
IHC Hopkins (Holdings) Corp.	Delaware, USA
IHC Hotel Ltd.	England
IHC Inter-Continental (Holdings) Corp.	Delaware, USA
IHC London (Holdings) Ltd.	England
IHC M-H (Holdings) Corp.	Delaware, USA
IHC May Fair (Holdings) Ltd.	England
IHC May Fair Hotel Ltd.	England
IHC Overseas (U.K.) Ltd.	England
IHC (Thailand) Ltd.	Thailand
IHC UK (Holdings) Ltd	England
IHC United States (Holdings) Corp.	New York, USA
IHC Willard (Holdings) Corp.	Delaware, USA
IHG (Brent Cross) Ltd.	England
IHG Customer Service Ltd	England
IHG Cyprus Limited	Cyprus
InterContinental Hotels Group Healthcare Trustee Ltd	England

IHG (Leeds) Ltd.	England
IHG (Strathclyde) Ltd.	England
IHG Systems Pty Ltd	Australia
IHG (Victoria Park) Pty Ltd	Australia
Idris Limited	England
Illinois Hotels Corp.	Delaware, USA
Indian Valley Realty Corp.	New York, USA
Inn Keeper Supply, S.A. de C.V.	Mexico
INNvest Realty Corp.	Tennessee, USA
InterContinental Hong Kong Ltd.	Hong Kong
InterContinental Hotels Group (Asia Pacific) Pte Ltd	Singapore
InterContinental Hotels Group do Brasil Ltda	Brazil
InterContinental Hotels Group (Canada) Inc.	Ontario, Canada
InterContinental Hotels Group Customer Services Ltd.	England
InterContinental Hotels Group (Espana) SA	Spain
InterContinental Hotels Group Finance (CI) Ltd.	Jersey
InterContinental Hotels Group (Japan) Inc.	Tennessee
Japan Branch	Japan
InterContinental Hotels Group Limited
InterContinental Hotels Group Operating Corp.	USA
InterContinental Hotels Group PLC	England
InterContinental Hotels Group Resources Inc	Delaware, USA
Guam Branch	Guam
InterContinental Hotels Group Services Company	England
Spanish Branch	Spain
InterContinental Hotels Group (UK) Ltd	England
InterContinental Hotels Group (USA) Franchising Inc.	Delaware, USA
Insurance Resource Services, Inc.	Delaware, USA
Intercontinental Hotels Corporation Limited	Bermuda
Saudi Branch	Saudi
Egypt Branch	Egypt
Intercontinental Hotels Limited	England
InterContinental Hotels Ltd	England
Intercontinental Hotels Services (Hong Kong) Ltd.	Delaware, USA
Inter-Continental Central Park South LLC	New York, USA
Inter-Continental de Colombia S.A.	Columbia
Inter-Continental D.C. Operating Corp.	Delaware, USA
Inter-Continental Europe Finance BV	The Netherlands
Inter-Continental Europe Holdings BV	The Netherlands
Inter-Continental Florida Investment Corp.	Delaware, USA
Inter-Continental Florida L.P.	Delaware, USA
Inter-Continental Florida Operating Corp.	Delaware, USA
Inter-Continental Florida Partner Corp.	Delaware, USA
Inter-Continental Holding (Germany) GmbH	Germany
Inter-Continental (Holdings) Canada Inc.	Canada
Inter-Continental Hospitality Corp.	Delaware, USA
Hospitality Corporation	Greece
Inter-Continental Hotel Betriebsgesellschaft mbH	Austria
InterContinental Hoteleira Limitada	Brazil
Inter-Continental Hotel Investment (S) Pte. Ltd.	Singapore
Inter-Continental Hotels Betriebsgesellschaft mbH	Germany
Inter-Continental Hotels Corporation	Delaware, USA
Branches: Cairo
Jordan	Jordan
Tel Aviv	Israel
Poland	Poland

Malaysia	Malaysia
Malta	Malta
Philippines	Philippines
Portugal	Portugal
Inter-Continental Hotels Corporation Pty Ltd.	Australia
Inter-Continental Hotels Corporation de Venezuela C.A.	Venezuela
Inter-Continental Hotels (Indonesia) B.V.	The Netherlands
Inter-Continental Hotels Italia, SrL	Italy
Inter-Continental Hotels Management GmbH	Germany
Inter-Continental Hotels (Montreal) Operating Corp.	Quebec, Canada
Inter-Continental Hotels (Montreal) Owning Corp.	Quebec, Canada
Inter-Continental Hotels (Ontario) Inc.	Ontario, Canada
Inter-Continental Hotels (Overseas) Ltd.	England
Inter-Continental Hotels of San Francisco Inc.	Delaware, USA
Inter-Continental Hotels Saudi Arabia Ltd.	Saudi Arabia
Inter-Continental Hotels (Singapore) Pte. Ltd.	Singapore
Inter-Continental Hotels (Toronto) Inc.	Ontario, Canada
Inter-Continental Jeddah Corp.	Delaware, USA
Inter-Continental Los Angeles Operating Corp.	Delaware, USA
Inter-Continental Management (Australia) Pty Limited	Australia
Inter-Continental Netherlands CV	The Netherlands
Inter-Continental Overseas Holding Corporation	Delaware, USA
Egyptian Branch	Egypt
Bermuda Branch	Bermuda
Intercora Limited (65%)	Bermuda
Inter-Continental Szalloda Budapest Rt.	Hungary
International Airport Hotel Ltd.	Ireland
Inthotel SA (92%)	Spain
Kensington PH Ltd.	England
Kenya Hotel Properties Ltd.	Kenya
Kumul Hotels Ltd. (18%)	Papua New Guinea
LIMNA Hotelbetriebsgesellschaft mbH (67.4%)	Germany
LIMNA Hotelbetriebsgesellschaft mbH Verwaltungs KG (67.5%)	Germany
Laper S.A. (to be liquidated)	Switzerland
Leased Hotels Ltd.	England
Lecheek Ltd.	England
London Essence Co. Ltd.	England
London Forum Hotel Ltd.	England
Louisiana Acquisitions Corp.	Delaware, USA
Maya Baiduri Sdn Bhd (50%)	Malaysia
Midland Hotel and Conference Centre Ltd. (56%)	England
Mifala Holdings (Vanuatu) Ltd.	Vanuatu
Moline Restaurant Inc.
NAS Centrum Ireland 2 Ltd.	Eire
NAS Cobalt No. 1 Ltd.	England
NAS Cobalt No. 2 Ltd.	England
National Inns Inc.
Netherlands International Hotels BV (17%)	The Netherlands
Nuevas Fronteras S.A. (23.66%)	Argentina
Omega Hotels Limited	Eire
Openworld Ltd. (5.97%)
Orbis Travel Bureau (12%)	New York, USA
Orchid Brands Ltd.	England
Orchid Drinks Ltd.	England
OSPR Pty Ltd.	Australia
PT Jakarta International Hotels & Development 0.5151%	Indonesia

PT SC Hotels & Resorts Indonesia	Indonesia
Panacon	Louisiana, USA
Parkroyal Motor Hotels Pty Ltd.	Australia
Pegasus Systems Inc.	Delaware, USA
Penrod Club Texas (Non Profit)	Texas, USA
Pendigo Hotel Ltd.	England
Pershing Associates (7.5%)	District of Columbia
Pins & Pockets Club, Inc.	Texas, USA
Point of Sale Television Ltd.	England
Pollstrong Ltd	England
Powell Pine, Inc.	Delaware, USA
Premier Hotels (Christchurch) Ltd.	New Zealand
President Hotel & Tower Co Ltd. (30%)
Priscilla Holiday of Texas, Inc.	Delaware, USA
Priscilla Pacific, Inc. (49%)	Texas, USA
RDP Royal Palm Hotel Ltd.	Delaware, USA
Red Devil Energy Drinks Ltd.	England
Rednor Inc.	Utah, USA
Rescom Services, Inc.	Delaware, USA
Resort Services International (Cayo Largo) LP SE	Delaware, USA
RH Resort Staff Co. Pty Ltd	Australia
Riverfront Investment Co., Inc.	Kentucky, USA
Robinsons Soft Drinks Ltd.	England
R. White & Sons Ltd.	England
St Lucia Management Services LLC	Delaware, USA
Santa Fe	Mexico
SC (Andina) Inc. (formerly Holiday Inns (Andina) Inc.70%	Tennessee, USA
Hotelera Holiday Inns Andina Ltd-Chile Branch	Chile
SC Car Leasing Ltd.	England
SC Cellars Ltd.	England
SC ESOP Trustee (Jersey) Ltd.	Jersey
SC Finance Investments Co.	England
SC Finance Investments Two Co.	England
SC Hotels International Services, Inc.	Delaware, USA
SC Hotels Management Services, Inc.	Delaware, USA
SC Hotels & Resorts (Asia Pacific) Pte Ltd.	Singapore
SC Hotels & Resorts (Australia) Pty Ltd.	Australia
SC Hotels & Resorts (Greater China) Ltd	Hong Kong
SC Hotels & Resorts (India) Private Ltd.	India
SC Hotels & Resorts (Jamaica) Ltd	Jamaica
SC Hotels Services (Guangzhou) Ltd.	China
SC Hotels (Singapore) Pte Ltd	Singapore
SC Hotels UK Pensions SARL	Luxembourg
SC Investment (Hotels) BV	The Netherlands
SC Investment Minorities Ltd.	England
SC Investments Number 2 Ltd.	England
SC Investments Number 3 Ltd.	England
SC IT Enabled Services (India) Private Limited	India
SC Leisure Group Ltd.	England
SC Luxembourg Investments SARL	Luxembourg
SC Minority Holdings Ltd.	England
SC NAS 2 Ltd.	England
SC NAS 3 Ltd.	England
SC QUEST Ltd	England
SC Racing Gilbraltar Ltd.	Gibraltar
SC Reservations (Philippines) Inc (formerly Holiday Inn (Beijing) Inc	Tennessee, USA
Philippines Branch	Phillippines

SC Retail Ltd. (now SC Minority Holdings Ltd.)	England
SC Southwick (UK) Ltd.	England
UK Branch of Southwick Ltd (Cayman Islands).
SC Trademarks Ltd.	England
SC Wine Bars Ltd.	England
SCH (Barbados) Ltd.	Barbados
SCH (China) Investments Ltd.	Hong Kong
SCH Insurance Company 75%	Vermont, USA
SCH Minority Holdings LLC	Delaware, USA
SCH Residence (France) SNC	France
SCH (UK) Ltd.	England
SCIH Branston 1	England
SCIH Branston 2	England
SCIH Branston 3	England
SFH Associates L.P.	California, USA
Spree Galerie Hotelbetriebsgesellschaft	Germany
Sharp Delight Investments Ltd.	Hong Kong
SIBA ATLAS	Mexico
SIBA ESTACIONAMIENTS	Mexico
Sienna Consulting Group Sp. Z.o.o.	Poland
Sienna Hotel Sp.Z.o.o.	Poland
SixCo Financing 1 Ltd.	England
SixCo Financing 2 Ltd.	England
SixCo Ltd.	England
SixCo North America, Inc.	Delaware
Six Continents Corporate Services Co	England
Six Continents Executive Pension Trust Limited	England
Six Continents Finance (CI) Ltd	Jersey
Six Continents Healthcare Trustee Ltd	England
Six Continents Holdings Ltd.	England
Six Continents Hotels (Asia Pacific) Pte Ltd.	Singapore
Six Continents Hotels do Brazil Ltda	Brazil
Six Continents Hotels (Canada) Inc	Canada
Six Continents Hotels Customer Service Centre Ltd	England
Six Continents Hotels de Espana	Spain
Six Continents Hotels Group Company	England
Spanish Branch	Spain
Six Continents Hotels and Holidays Ltd.	England
Six Continents Hotels, Inc.	Delaware
Six Continents Hotels International Ltd.	England
Six Continents Hotels (Japan) Inc.	Tennessee
Six Continents Hotels Limited	England
Six Continents Hotels Operating Corp.	Delaware
Six Continents Hotels (UK) Ltd.	England
Six Continents International Holdings BV	The Netherlands
Six Continents Investments Ltd.	England
Six Continents Leisure Ltd.	England
Six Continents (NAS) PLC	England
Six Continents Overseas Holdings Ltd.	England
Six Continents Pensions Ltd.	England
Six Continents PLC	England
Six Continents Profit Share Scheme Trustee Ltd.	England
Six Continents Resources, Inc.	Delaware, USA
Guam Branch	Guam
Six Continents Restaurants Ltd.	England

Six Continents (USA) Franchising Inc.	Delaware, USA
SNC de L’Hotel Inter-Continental Paris	France
Soaltee Hotel Ltd. (10%)	Nepal
Societe des Grands Hotels du Liban (2%)	Lebanon
Societe des Hotels InterContinental France SNC	France
Societe des Hotels Reunis SAS	France
Societe des Hotels Six Continents France SNC	France
Societe Immobiliere Kinoise SZARL (50%)	Rep of Congo, Zaire
Societe Nouvelle du Grand Hotel SA	France
Solo’s	N/A
Southern Pacific Hotel Corp. (BVI) Ltd.	British Virgin Islands
Southern Pacific Hotel Corp. Holdings Ltd.	Australia
Southern Pacific Hotel Corp. Ltd.	Australia
Southern Pacific Hotel Corp. (NZ) Ltd.	New Zealand
Southern Pacific Hotel Corp. Sdn Bhd	Malaysia
Southern Pacific Hotels (Indonesia) Ltd.	British Virgin Islands
Southern Pacific Hotels Ltd.	Australia
Southern Pacific Hotels Malaysia Ltd.	British Virgin Islands
Southern Pacific Hotels Operations Ltd.	British Virgin Islands
Southern Pacific Hotels Properties Limited	British Virgin Islands
Southern Pacific Hotels (Technical Services) Limited	British Virgin Islands
Southern Pacific Hotels (Vanuatu) Ltd.	Vanuatu
Southern Table Water Co. Ltd.	England
Southwick Ltd.	Cayman
SPH International Pty Ltd.	Australia
SPHC (Asia) Limited	Hong Kong
SPHC Australia Ltd.	Singapore
SPHC Equities Ltd.	New Zealand
SPHC (IP) Pty Ltd.	Australia
SPHC Group Pty Ltd.	Australia
SPHC Management Ltd.	Papua New Guinea
SPHC Nominees Pty Ltd	Australia
SPHC (NZ) Holdings Ltd.	New Zealand
SPHC Operations (NZ) Ltd.	New Zealand
Spirit Health and Fitness Ltd.	England
SSABCO Ltd. (liquidation candidate)	England
Starburst Hospitality Services Ltd.	Hong Kong
Stella Hotelentwicklungs GmbH (Essen)	Germany
Stella Hotels Holdings GmbH (50%)	Germany
Stranton Mill Trustee & Nominee Co. Ltd.	England
Sunfresh Soft Drinks Ltd.	England
TAK How Investment Limited (10%)	Hong Kong
THISCO	Delaware, USA
TH Management Ltd.	New Zealand
TLCI Limited	New Zealand/Cook Islands
Tahiti Bachcomber SA (15.8%)	Tahiti
Tape Systems Ltd.(85%)	England
The Dover Motel Limited	England
“The Londoner” (Hotel) Ltd.	England
The GL Hotels Ltd. (12.6%)	India
The Hotel Clearing Corp.	Delaware, USA
Tian An Hotels International Limited (50%)	Hong Kong
Top of the Cross Pty Ltd.	Australia
TotRusUs (Russian Branch of HH Hotels (EMEA) BV	Russia
Town Park Hotel Corporation	Tennessee,USA
Travel Holdings (Australia) Pty Ltd.	Australia

Travelodge Cook Islands Ltd. (See TLCI Limited)	New Zealand/Cook Islands
TravelWeb LLC
Travlex Systems Ltd.	Australia
Trent Technology Ltd.	England
Trifaith Investments Ltd.	British Virgin Islands
Union Leasing Company Ltd.	England
Universal de Hoteles SA	Colombia
Verkaja B.V.	The Netherlands
Victoria Hotels (Christchurch) Ltd.	New Zealand
VP Hotels Pty Ltd.(now IHG (Victoria Park) Pty Ltd	Australia
White Shield Insurance Company Ltd.	Gibraltar
R. White & Sons Ltd.	England
Willard Associates (15.47%)	District of Columbia
World Trade Center Montreal Hotel Corp. (74.11%)	Quebec, Ontario
Yokohama Grand Intercontinental Hotel Co. Ltd. (5%)	Japan

EX-12

Exhibit 12.1

CERTIFICATION

I, Richard C North, certify that:

1. I have reviewed this annual report on Form 20-F of InterContinental Hotels Group PLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 8, 2004	By:	/s/ Richard C North
	Name:	Richard C North
	Title:	Director and Chief Executive Officer

EX-12

Exhibit 12.2

CERTIFICATION

I, Richard Solomons, certify that:

1. I have reviewed this annual report on Form 20-F of InterContinental Hotels Group PLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: April 8, 2004	By:	/s/ Richard Solomons
	Name:	Richard Solomons
	Title:	Finance Director

EX-13

Exhibit 13.1

CERTIFICATION

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of InterContinental Hotels Group PLC, a company incorporated under the laws of England and Wales (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended December 31, 2003 (the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 8, 2004
	Name:	Richard C. North
	Title:	Director and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure document.

EX-13

Exhibit 13.2

CERTIFICATION

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of InterContinental Hotels Group PLC, a company incorporated under the laws of England and Wales (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended December 31, 2003 (the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 8, 2004
	Name:	Richard Solomons
	Title:	Director and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure document.